Avnet: The Cycle Is Turning, But Margins Still Hold The Stock Back
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Emmanuel Onwusah371 FollowersFollow5ShareSavePlay(7min)CommentsSummaryAvnet Inc. posted a Q1 FY26 revenue turnaround, but margin improvement remains elusive, supporting a continued hold rating.Farnell delivered double-digit revenue and margin growth, yet its small scale limits its impact on AVT's consolidated profitability.Gross and operating margins remain under pressure, with no near-term signs of operating leverage or upward re-rating potential.AVT trades at low multiples, reflecting thin margins and muted earnings quality; further upside depends on meaningful margin expansion. Willie B. Thomas/DigitalVision via Getty Images Avnet Inc. (AVT) has been unspectacular over the last few quarters, but Q1 FY26 has given me a revenue turn I’ve been looking for. The numbers are up, as is its book-to-bill ratio. Conversely, it doesn’t lookThis article was written byEmmanuel Onwusah371 FollowersFollowI’m Emmanuel Onwusah—a financial analyst, writer, and recovering engineer. I hold FMVA® and BIDA® certifications from the Corporate Finance Institute, and I spend most of my time creating pitch decks, building models, analyzing companies, and trying to make sense of where value meets narrative. My background is in petroleum and gas engineering, but I moved into finance because I’ve always been drawn to how businesses grow, how markets react, and how data tells stories. I focus on tech, infrastructure, and internet services, with a bias for companies that pair strong fundamentals with real potential.I write here to think in public, share investment ideas, and connect with other investors who care about long-term returns, not just short-term noise. If you enjoy thoughtful breakdowns and real conversation around stocks, you’re in the right place. There’ll be charts, jokes, and hopefully, some profitable ideas.Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.Quick InsightsWhat limits Avnet's (AVT) potential for a near-term re-rating?Despite revenue growth, AVT's margins remain thin and show no improvement, capping valuation multiples and precluding a near-term re-rating.How significant is Farnell's performance to AVT's overall profitability?Farnell's strong growth is positive, but at only 7% of total revenue, it cannot offset the weak margin structure of AVT's core Electronic Components segment.What would drive a more favorable outlook or rating upgrade for AVT?A sustained increase in consolidated gross margins to 11.5–12% and improved operating leverage would enhance earnings power and could justify a higher rating.Recommended For You