アヴネット（AVT）2027年度第1四半期決算説明会：過去最高の売上高と第2四半期ガイダンス引き上げ

要点

• アヴネットが発表した2027年度第1四半期売上高は、前年同期比82%増、前四半期比29%増の107億ドルとなり、過去最高を記録しました。当四半期の追加の1週間を除いた場合、売上高はそれぞれ前年同期比71%増、前四半期比21%増となりました。
• 調整後希薄化後1株当たり利益（EPS）は過去最高の3.63ドルとなり、前年同期比での伸び率は売上高の成長率の4倍以上となりました。調整後営業利益率は4.7%に達し、2023年度以来の最高水準となりました。
• エレクトロニック・コンポーネンツ部門とファーネル（Farnell）部門はいずれも過去最高の売上高を記録しました。ファーネルの営業利益率は10.1%と二桁台に回復し、エレクトロニック・コンポーネンツ部門は4.8%に達しました。
• 経営陣は、データセンター、航空宇宙・防衛、ネットワーク、産業、輸送の各市場における広範な需要が寄与したと説明しました。メモリー価格の上昇は、前四半期比および前年同期比の売上成長のそれぞれ約3分の1をもたらしました。
• 2027年度第2四半期の業績見通し（ガイダンス）では、売上高を111億ドル〜114億ドル、調整後希薄化後EPSを3.90ドル〜4.10ドルと見込んでいます。
• 強力な成長に伴い、大幅な運転資金投資が必要となりました。アヴネットは当四半期中に約8億4,200万ドルの営業キャッシュを使用し、有利子負債は約9億5,000万ドル増加しました。

主要財務データ

事業および業績の動向

エレクトロニック・コンポーネンツ部門の売上高は前年同期比84%増、前四半期比30%増となりました。追加週を除くと、伸び率はそれぞれ73%と22%でした。営業利益は4億8,400万ドルに達し、営業利益率は4.8%に改善しました。

アジア地域は四半期売上高が過去最高の50億ドルとなり、3年連続の成長に入りました。データセンターと産業用途を筆頭に、すべての最終市場で需要が増加しました。EMEA（欧州・中東・アフリカ）地域は、産業および輸送需要に支えられ、4四半期連続で前四半期比および前年同期比の成長を達成しました。

南北アメリカ地域では、経営陣はデータセンター、航空宇宙・防衛、ネットワークを主要要因として挙げました。アヴネット・インテグレーテッド・ソリューションズは、AIインフラの拡張を含むエンタープライズ、ハイパースケール、クラウドデータセンターインフラの需要から恩恵を受けました。同事業はエレクトロニック・コンポーネンツ部門の平均よりも売上総利益率が低いものの、営業利益率の拡大に貢献しました。

ファーネルの売上高は前年同期比46%増、前四半期比17%増となりました。営業利益率は3年以上ぶりに10%を超えました。経営陣は、基板実装部品の売上好調と営業レバレッジを主な牽引要因として挙げました。

メモリー価格の上昇は、前四半期比および前年同期比の売上成長のそれぞれ約3分の1を占めました。メモリー以外の製品価格は当四半期に重大な影響を与えませんでしたが、経営陣は新暦年に入ってから部品の追加値上げが発生する可能性があると述べています。

経営陣の業績見通し（ガイダンス）

アヴネットによる2027年度第2四半期の見通しは以下の通りです。

売上高の見通しは、中間値で前四半期比約5%の成長を意味します。第1四半期の追加週を除いた比較可能なベースでは、中間値での成長率は約12%になると経営陣は説明しました。

このガイダンスは、現在の市場状況、安定した部品入手可能性、概ね横ばいのメモリー価格を前提としています。また、アヴネットは支払利息が第1四半期と同水準にとどまると予想しています。

経営陣は、エレクトロニック・コンポーネンツ部門の営業利益率が2027年度後半に5%に達すると予想しています。長期的には、同事業は6%に向けて推移し、ファーネルは10%台前半へと向かう可能性があるとみています。これらの成果は、成長や地域別ミックスの一部に依存します。

同社は、売上総利益に対する営業費用の比率が2027年度の残りの期間中に50%台前半に推移すると予想しています。また、成長が緩やかになるにつれて、年度後半には3倍のレバレッジ目標を達成し、年度末までにプラスのキャッシュフローを生み出すと見込んでいます。

リスクと注目点

当四半期中に供給状況が緊迫化し、半導体、相互接続（インターコネクト）、受動部品、電子機械製品全般でリードタイムが長期化しました。受注残の未納も増加しました。経営陣は、これらの状況がアヴネットの成長や第2四半期ガイダンスを重大に制約したわけではないとしつつも、供給逼迫がサイクルの後半で課題を生む可能性があることを認めました。

部品構成表（BOM）に占めるメモリー比率が高い一部の顧客は、より大きな生産上の制約に直面しています。また、一部のパワー半導体、ディスクリート半導体、受動部品カテゴリーでも供給が緊迫しています。

運転資金需要は依然として高水準にあります。アヴネットは前四半期比で12億ドルの運転資金を投資しました。これには21億ドルの在庫増加が含まれますが、買掛金の18億ドル増加によって大幅に相殺されました。同社は、成長の支援や今後の満期負債の借換に必要な資金を適宜調達する見込みです。

アジアにおける旧正月の時期や影響により、第3四半期の季節的な見通しは不透明なままです。それにもかかわらず、経営陣は3月期の受注残および欧米での需要について健全であると説明しました。

アナリスト質疑応答の要点

• 需要の質：経営陣は、全地域でBBレシオが1を超えて維持されており、受注残が拡大し、需要が複数の技術や最終市場に広がっていることから、成長が単なる在庫補充にとどまらず、より広範なものであると述べました。
• 3月期の季節性：アヴネットは第3四半期の公式ガイダンスを公表しませんでしたが、経営陣は業績がアナリストの議論する通常の1%〜2%の前四半期比減少よりやや良くなる可能性があると述べました。旧正月が引き続き主な変動要因です。
• デマンドクリエーション：フルフィルメント関連のデータセンター売上高の増加ペースが速まったものの、デマンドクリエーション売上高は総売上高に占める割合として概ね安定して推移し、金額ベースでは増加しました。
• 在庫：経営陣はアヴネットの全体的な在庫水準を適正とみなしています。在庫回転日数は概ね横ばいまたは微減と予想しており、サプライチェーン・ソリューションズの在庫は今後数四半期でより安定するとみられます。
• 利益率の潜在力：経営陣は、規模、費用規律、製品ミックス、欧米市場での力強い業績に支えられ、長期的な利益率の潜在力はエレクトロニック・コンポーネンツ部門で5%超、ファーネルで10%超であると説明しました。

決算説明会文字起こし全文

決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Welcome to the Avnet First Quarter Fiscal Year 2027 Earnings Call. I would like to turn the floor over to Lisa Mueller, Director of Investor Relations for Avnet.

Lisa Mueller

Thank you operator. I'd like to welcome everyone to Avnet's First Quarter Fiscal Year 2027 Earnings Conference Call. This morning, Avnet released financial results for the first quarter of fiscal year 2027, and the release is available on the Investor Relations section of Avnet's website, along with the slide presentation which you may access at your convenience.

As a reminder, some of the information contained in the news release and on this conference call contain forward-looking statements that involve risks, uncertainties and assumptions that are difficult to predict. Such forward-looking statements are not a guarantee of performance, and the company's actual results could differ materially from those contained in such statements. Several factors that could cause or contribute to such differences are described in detail in Avnet's most recent Form 10-Q and 10-K and subsequent filings with the SEC.

These forward-looking statements speak only as of the date of this presentation, and the company undertakes no obligation to publicly update any forward-looking statements or supply new information regarding the circumstances after the date of this presentation. Please note, unless otherwise stated, all results provided will be non-GAAP measures. The full non-GAAP to GAAP reconciliation can be found in the press release issued today as well as in the appendix slide of today's presentation and posted on the Investor Relations website. Today's call will be led by Phil Gallagher, Avnet's CEO; and Ken Jacobson, Avnet's CFO.

With that, let me turn the call over to Phil Gallagher. Phil?

Philip Gallagher

Thank you, Lisa, and thank you, everyone, for joining us on our first quarter fiscal year 2027 earnings call. We are off to an outstanding start to the new fiscal year. Our first quarter results came in well above our expectations with record performance across all regions in both our Electronic Components and Farnell businesses. We achieved record sales of $10.7 billion, above the high end of our guidance and record adjusted earnings per share of $3.63, also well above our expectations. Importantly, the strength we saw at the top line translated into meaningful operating margin and earnings expansion, once again demonstrating the earnings power and operating leverage embedded in our business model as demand continues to strengthen.

I'm extremely proud of how our team is executing in this dynamic business environment and I want to thank them for their hard work and dedication. Our results show the strength and resilience of Avnet's position at the center of the technology supply chain, supported by our global scale, broad component line card diverse end markets, deep customer and supplier relationships, experienced and dedicated employees and the differentiated capabilities we offer across the business. And as we look across the market today, the environment continues to evolve in ways that play to those strengths. Supply conditions continued to tighten during the quarter, with lead times extending across most semi locker and IP&E, which is our interconnect passive electromechanical product categories as demand broadened across all of our end markets and applications.

Pricing increases also began to extend beyond memory with additional increases expected in the new calendar year. Given these dynamics, there has been considerable discussion across the industry about what is driving the recent acceleration in growth. The question we frequently get is whether our growth is from true underlying demand or just inventory replenishment. So let me take a few minutes to share our point of view on the question. From what we see in our business today, we believe underlying market conditions and demand are improving across all of our core end markets. There may always be some replenishment for changes in customer ordering patterns as markets tighten, but the breadth of the demand across geographies, technologies and end markets gives us confidence that we are experiencing is much broader than any one factor like inventory replenishment.

Our key demand indicators continue to support that view. Book-to-bills remain solidly above parity in all regions. Our backlog is healthy and growing. The amount of backlog delinquencies continue to increase as lead times extend. We are monitoring it closely. As investment in AI infrastructure increases, it drives demand for more latest processors. Those solutions require a wide range of other semiconductors and IP&E technologies. As those investments move through the technology supply chain, they create opportunities across Avnet's world-class fire line card and our diversified customer base. While we are seeing accelerated growth in the data center market and are experiencing the ripple effects of that growth in our business, the opportunity for Avnet extends well beyond direct AI-related data center sales. This is demonstrated by the breadth and quality of the demand we are seeing outside of the data center. That diversity continues to be one of Avnet's important strengths.

We have a globally scaled Electronic Components of line card. We operate across a broad set of higher growing end markets and maintain deep relationships across our customers and supplier base. And from Farnell, we engage with customers early in the product design process and support them from new product introduction through their journey to higher volume production.

Now with that, let me turn to the first quarter highlights for our businesses. Our Electronic Components business delivered another record quarter with stronger-than-expected sequential and year-over-year growth across all 3 regions. We saw profitable growth across all end markets, led by data center, aerospace and defense and networking. In Asia, the region is entering its third consecutive year of growth. with another record quarter of sales reaching $5 billion and demand was higher across all end markets year-on-year, led by data center and industrial. As a reminder, Asia is regionally led by Taiwan followed by China, Southeast Asia and Japan.

In the Americas, sales more than doubled year-over-year, resulting in another record quarter for the region. Demand was broad-based and highest in data center, aerospace and defense and networking. One contributor to the Americas regions, record performance was our Avnet Integrated Solutions business, which we discussed in our last earnings call. Integrated Solutions provides advanced systems integration and services for customers using purpose-built IT hardware. We have long served industries such as industrial and health care, and we are seeing strong demand from our customers serving enterprise, hyperscale and deal cloud data centers. AI infrastructure build-out is a key contributor to that demand. And as we scale the business, it is contributing to greater operating leverage and profitability in the region.

In EMEA, sales grew both sequentially and year-on-year for the fourth consecutive quarter reflecting continued improvement in the region. The region also achieved record sales during the quarter, which was led by demand across several verticals, including industrial and transportation. Across EC, we also continue to see strong momentum in the capabilities that differentiate Avnet well beyond fulfillment component distribution. Our demand creation activity remains healthy with new design registrations continue to provide a strong pipeline of future opportunities. Our higher-margin IPD business also continues to perform well nearing $1.7 billion in sales for the quarter or more than $6 billion of sales when annualized.

As we have said before, every simulator-based solution requires a complement of connectors, passives, sensors, power and other technologies around it and next-generation systems will require ever-increasing connectivity. The growth we are seeing in these complex systems plays directly into the full suite of solutions we provide our customers combining both semiconductors and IP&E. Momentum in our Supply Chain Solutions business continues to also grow as large OEMs increasingly rely on our capabilities to provide resiliency to complex and evolving supply chains. Our supply chain services engagements are expanding across a growing set of customers, particularly in data center infrastructure networking and transportation where demand trends remain favorable.

Now turning to Farnell. Farnell delivered a record sales quarter and returned to a double-digit operating margin benefiting from strong execution by the team and the broader market recovery. We are seeing improving demand across all regions while our PowerOne focus continues to create opportunities by combining Farnell's digital and high-service distribution capabilities and for our customer base with Avnet's global scale and customer and supplier relationships. Farnell's growth for 1 of the 4 components comprised of semiconductors and IP&E was similar to the growth we saw across the EC business. We are pleased with what the Farnell delivered this quarter. The results demonstrate the strength of the business and the operating leverage Farnell can achieve as it grows.

Farnell also gets added in an important position early in the product life cycles allowing us to engage engineers during the design phase and complementing our capabilities as customers move toward higher volume production. As I step back in the quarter, I think there are several points worth emphasizing. First, as we've been stating for some time now, we embrace our position at the center of the technology supply chain. We are primed to benefit from robust growth in the traditional markets we serve, including the powerful emerging megatrends driving electronic component demand, including drones, robotics and edge intelligence, which are still in the early stages of growth.

Second, our growth is broad based, and we believe it is sustainable. We are seeing improving market conditions and demand across all of our geographies and end markets and our book-to-bill, backlog and other leading indicators continue to support our confidence in the underlying demand environment and our current outlook. Finally, we also know the strong markets alone don't deliver results, execution matters. The capabilities, scale and infrastructure we have across Avnet allow us to support higher levels of revenue efficiency.

The margin expansion, EPS growth and return on working capital we delivered this quarter demonstrate the operating leverage and earnings power in our business model. We will continue to stay close to our customers and suppliers, manage inventory and expenses with discipline while still making investments and focus on delivering growth profitability and returns for all of our stakeholders.

So with that, I'll turn it over to Ken to dive deeper into our first quarter results. Ken?

Ken Jacobson

Thank you, Phil, and good morning, everyone. We appreciate your interest in Avnet. Our sales for the first quarter were $10.7 million, up 82% year-over-year. On a sequential basis, sales were higher by 29%. The first quarter had 14 weeks compared to a typical 13-week quarter. Normalizing the first quarter growth by excluding the impact of the extra week, sales grew 71% year-over-year and 21% sequentially. Foreign currency did not have a meaningful impact on our sales growth this quarter. Regionally, on a year-over-year basis, sales increased 19% in the Americas, 79% in Asia and 64% in EMEA. .

On a sequential basis, sales increased 39% in the Americas, 30% in Asia and 19% in EMEA. During the first quarter, sales from Asia represented 48% of total sales compared to 47% of sales last quarter and 49% of sales last year. From an operating group perspective, Electronic Components had record sales during the quarter, increasing 84% year-over-year and 30% sequentially. Normalized for the impact of the extra week, EC sales grew 73% year-over-year and 22% sequentially. Farnell also had record sales during the quarter, increasing 46% year-over-year and 17% sequentially.

From a pricing perspective, memory prices increased during the quarter at similar levels to last quarter. As a result, approximately 1/3 of both the sequential and year-over-year sales growth was attributable to pricing increases in the memory product category. We did not see a meaningful impact from pricing in other electronic component categories beyond memory during the quarter. Gross profit margin of 10% decreased about 40 basis points year-over-year and sequentially, primarily due to product and customer mix in the quarter.

Electronic Components gross profit margin was down about 30 basis points year-over-year and sequentially. EC gross margin declined primarily due to the growth in our Avnet Integrated Solutions business, which had a lower gross margin than the EC average, but contributed meaningfully to the operating margin expansion. Farnell gross margin increased about 200 basis points year-over-year and declined about 60 basis points sequentially. The year-over-year improvement in gross margin is primarily due to the growth of on-the-board components which come with a higher gross margin. Farnell's gross margins at the product category level remained stable.

Turning to operating expenses. SG&A expenses were $576 million in the quarter, up $112 million year-over-year and $29 million sequentially. The sequential increase in SG&A is primarily due to a combination of higher sales, annual pay increases for our employees that took effect in the new fiscal year, the impact of the extra week in the quarter and from an increase in stock-based compensation expense. As a percentage of gross profit dollars, operating expenses were 54%, exceeding our near-term target by approximately 600 basis points. We expect to continue to drive Avnet operating expense to gross profit dollar ratio to low 50s through the remainder of fiscal 2027.

Our EC business had a record low operating expense gross profit dollar ratio of 46% for the quarter compared to 69% last year and 56% last quarter. The Farnell operating expense to gross profit dollar ratio was 65% in the quarter, which is the lowest level since the first quarter of fiscal 2023. As we move through fiscal 2027, we will continue to maintain a high level of cost discipline, while still making the necessary investments in the business to enable profitable growth. For the first quarter, we reported adjusted operating income of nearly $500 million, and the Avnet adjusted operating margin was 4.7%, an increase of more than 200 basis points year-over-year and more than 80 basis points from last quarter. This represents the fifth consecutive quarter of adjusted operating margin expansion and the highest Avnet operating margin since fiscal 2023.

Adjusted operating income also grew approximately 3x greater than sales compared to last year and approximately 2x greater than sales compared to last quarter. This is consistent with our continued expectation of driving operating income growth at least twice the rate of sales growth. By operating group, Electronic Components operating income was $484 million and EC operating margin was 4.8% in the first quarter, a 71 basis point sequential increase. Similar to last quarter, the sequential improvement in the EC operating margins was led by the Americas, including both the core and Avnet Integrated Solutions business with all regions increasing their operating margin over 45 basis points sequentially and even more year-over-year.

We expect EC operating margin to reach a near-term goal of 5% in the second half of fiscal 2027. Farnell operating income margin of 10.1% was the highest operating margin in more than 3 years. Farnell operating income margin grew by over 100 basis points sequentially, achieving our near-term target of returning the business to a double-digit operating margin. We expect to continue to expand Farnell operating margin beyond 10% as they continue to grow and the product mix of only components improves.

Turning to expenses below operating income. First quarter interest expense was $92 million, a sequential increase of $25 million, mainly due to higher debt levels to support working capital investments for stronger-than-expected sales growth. The increase in interest expense negatively impacted adjusted diluted earnings per share by $0.23 quarter-over-quarter. Our adjusted effective income tax rate was 23%, consistent with expectations. Adjusted diluted earnings per share of $3.63 was a quarterly record for Avnet and was well above the high end of our guidance. Adjusted diluted earnings per share grew 4.1x greater than sales compared to last year and grew 2x greater than sales compared to last quarter.

Turning to the balance sheet and liquidity. During the quarter, we invested $1.2 billion in working capital sequentially to support our profitable sales growth. Of this increase, approximately $2.1 billion came from inventories, substantially offset by $1.8 billion increase in accounts payable. Accounts receivable increased by approximately $900 million, which was the primary driver for the use of operating cash flow during the quarter. The increase in inventory was driven by a few factors. Roughly 1/3 of the inventory increase was due to memory-related pricing. Another 1/3 was attributable to increases specific to supply chain services engagement. The final 1/3 was primarily due to a combination of sales growth as well as the timing of inventory set near quarter ended October 3, which is later than the quarter end of many of our suppliers.

Inventory continues to be a key driver for our business and helped enable us to achieve record sales and earnings during the quarter. We are positioning ourselves appropriately from an inventory perspective so that we can capitalize on the numerous opportunities we see in the markets we serve. Inventory days remained relatively flat sequentially. Our accounts payable and accounts receivable days improved quarter-over-quarter. Overall, working capital days decreased 5 days quarter-over-quarter to 64 days. We continue to focus on disciplined inventory and working capital management, which is contributing to the improvement in our return on working capital. Our return on working capital improved by approximately 600 basis points sequentially to 25%, which is the highest level of returns in the past 10 years.

The increase in working capital led to an increase in debt of approximately $950 million and an approximate $842 million use of cash from operations for the quarter. Because we expect strong sales growth in the coming quarter, we also anticipate using cash to support that growth. As growth moderates, we expect cash generation to catch up, and we are currently expecting to generate positive cash flow by the end of fiscal 2027. During the quarter, we raised additional capital, primarily through various debt instruments and facilities to support these increased working capital requirements. We expect to continue to raise additional capital over the coming quarters as we support the anticipated growth through the remainder of fiscal 2027 and beyond. We ended the first quarter with a gross leverage of 3.1x, down from 3.2x in the fourth quarter and approximately $1.2 billion of available committed borrowing capacity. We anticipate reaching our target of 3x leverage by the second half of fiscal 2027. Cash used for capital expenditures was $24 million during the quarter as expected.

With regard to our capital allocation strategy, we continue to prioritize supporting our profitable growth while maintaining a strong and flexible balance sheet. We also increased our quarterly dividend by approximately 6% to $0.37 per share this quarter. Over the past decade, we have more than doubled the dividend with the average annual increase exceeding 10%. During that same time, we have also returned approximately $1 billion to shareholders through these dividends. We also expect to continue to explore potential tuck-in M&A opportunities that equip us with the capabilities needed to further advance our strategic priorities and provide a strong risk-adjusted return on capital. Finally, as cash generation improves, we'd also expect to revisit our share buyback program, which still have $226 million of authorization remaining.

Turning to the second quarter guidance. We're guiding sales in the range of $11.1 billion to $11.4 billion and adjusted diluted earnings per share in the range of $3.90 to $4.10. Our second quarter guidance assumes current market conditions and electronic component availability, including in the memory product category for SIT. Our guidance implies a sequential sales increase of 5% at the midpoint. Adjusted for the extra week in Q1, Q2 sales are expected to increase 12% sequentially at the midpoint on a comparable basis. This guidance also assumes similar interest expense compared to the first quarter, an effective tax rate of between 21% and 25% and 87 million shares outstanding on a diluted basis.

In closing, we're optimistic about the strong start to the fiscal year and the continued momentum we see in our leading indicators for fiscal 2027. Our first quarter results and second quarter guidance demonstrate that our team continues to deliver profitable growth on the value proposition we bring to our customers and suppliers.

With that, I will turn it over the operator to open it up for questions. Operator?

Operator

[Operator Instructions] Our first question is from Mr. William Stein with Truist Securities.

質疑応答

William Stein

Congrats on the great results and outlook. I'm hoping you can talk to us a bit about lead times. We know they're stretching, you cited it in your prepared remarks. I'm wondering if challenging your ability to grow to deliver products and grow? And if so, maybe quantify any impact from that?

Philip Gallagher

Yes. Thanks, Will. Thanks for your comments. I appreciate it. This is Phil. Yes. So we did comment on that. And we are seeing we kind start to lap more, I would say, more broadly. It's -- we know what's happening in memory and the likes. We're starting to now see it power -- well, power has been out, start to season passes, MLCC discrete. So it's much more broad controllers. But I can't say -- and with that, as we also talked about, we're starting to see some additional inflation in pricing as well with ASP starting to get impacted again, probably most of that probably starting in the new calendar year.

To date, I want to say -- well, to date, we've not seen that directly inhibiting our growth currently through the quarter or in our guidance tough to call into next year yet as things tighten up. So right now, I would say, not a lot. Are some customers struggling, particularly there heavy concentration of memory in their bomb. They're having a tougher time. Yes, we have some customers that maybe aren't producing maybe as many tables as they were before or things along those lines. So I talk to measures, I mean, they're done or just slowed down, but it's not really broad-based at this point. But of course, we're watching it because we know -- we know what has happened in previous cycles where lead times go out. we started to get into some challenges there. But to date, again, we're not seeing that as an impact to the growth or forecast guidance.

William Stein

Great. I appreciate that. As a follow-up, I'd like to ask about guidance and maybe going out a little bit further. You gave us a great December quarter guide, even considering the extra week that I think you just had in September, the December guide is still, I think, points above typical seasonality. And understanding you're not guiding further than a quarter. When we look to March, I think normal seasonality is approximately down 1% or 2%. Would that be an appropriate way to think about growth in this part of the cycle? Or considering the strength that we're seeing, should we expect stability or sequential growth into March?

Philip Gallagher

Yes. Well, let me take a shot at that and I'll pass over to KJ for some comments. Yes, we don't guide out that far. So you're right. So thanks for saying that. But as far as we look out -- the March quarter has kind of been a wildcard over the last several years, if you look at it with the Lunar New Year last year did not have much of an effect that before it bid. You write typical, which is a word we don't use much anymore because it's typical. March would be down more dramatically in Asia Pac to the Lunar New Year and the West would come back up. And it would almost offset, but you're down 1% or 2%.

Right now, as we look at it, again, we're not guiding in the wildcard being little New Year, we feel the West is going to still be pretty strong into the March quarter. And just looking at the backlog, which I'm looking at as we speak, the backlog looks good for March quarter overall. So the book-to-bills, we talk about, continue to be positive. So we're -- I'll just say we're optimistic about the March quarter, maybe even be a little bit better than what you called out as typical seasonality. Ken?

Ken Jacobson

Yes, Will. I'd just add that I think at that kind of growth rate you described, let's say, a typical seasonal, that would that also imply, call it, 20 to 40 basis point uplift in gross margin because of the mix shift to the West. And so I think the West is looking good. the wildcard is the impact of Lunar year in Asia. So the count of that is would be if you have higher growth than that above seasonal, that's likely because Asia isn't declining as much to in the year or holidays, similar to the last couple of years.

Operator

Our next question is from Ms. Melissa Fairbanks with Raymond James.

Melissa Dailey Fairbanks

So we heard from one of your suppliers earlier this morning. they noted that channel inventories are pretty tight across most geographies, which I think is pretty consistent with what you're seeing as well. but actually exceptionally low in Asia. I know that you've -- Asia has been a very strong market for you for several quarters now. Just wondering what you're seeing in terms of your ability to address upside demand in Asia and what your own inventories in Asia look like today?

Philip Gallagher

Yes. Thanks, Melissa. I think I know what you're referencing there. Anyway, so Again, right now, again, as you saw, we grew inventories, I'm sure we'll give you a breakout on where that growth was in inventory. We're comfortable. We're very confident with our inventory position now. But at these times go out, we're going to invite punishing appropriately. I'm looking at our Asia inventory actually grew sequentially quarter-to-quarter in total dollars in Asia Pac and the inventory days actually went up about a day, 1.5 days or so.

So again, right now, we're feeling pretty good about the inventory position we have, again, it can change quickly based on the market and Will's previous questions, but right now, we feel pretty good about it. Now as you need [indiscernible]. It's a broad question, right? The sort of so certain areas in power and discrete and power caps and things like that those lines anything around power where I don't get a lot tighter than some other products. So inventories, so I give you a broad answer to a broad question, you really need to break it down by commodity and see where we're appropriately pipeline and where we have the inventory positions we need. So there could be some pockets that were shorter than we need to be. But in total, our inventory is in pretty good shape.

Melissa Dailey Fairbanks

Okay. Great. I would be happy to break it down by component. If you want to give me that data. So -- look at those sheets, I want to zoom in -- so you mentioned that demand creation activity remains healthy. How much with as much as your mix or just the market mix in general is pivoting to data center, aerospace and defense, networking kind of some of these higher touch areas? How much is that impacting your demand creation business? Are you able to engage with customers? Are they reaching out to you earlier in the design cycle?

Philip Gallagher

Well, it's a really good question because some of that, obviously, what we're dealing directly into the data center. So that might be more just fulfillment. So when it would have demand creation tied to it in many cases, particularly if it's a hyperscale because a lot of that's probably don't direct and we're doing the fulfillment and supply chain piece for that. However, again, good question because you would think with the growth that we had and fulfillment increasing in that space and maybe it's not all the it's not on demand creation, you think the percentage of demand creation would come down as a percentage of our sales. And it's actually flat, which is really good news.

Demand creation revenue, yes, as a percentage of our total revenues actually stayed roughly flat as a percentage, dollars were up, obviously, it had to be up to keep pace to stay flat as a percentage of total sales. So we're really pleased with that, frankly, because it's critical -- well, it's critical [indiscernible], it's credit our suppliers, and it helps the margin profile as well.

Operator

Our next question is from Mr. Ruplu Bhattacharya with Bank of America.

Ruplu Bhattacharya

First question is on inventory. Ken, I think you said of this $2 billion sequential increase. There was 1/3 was due to chain services. How much revenue did supply chain services account for in the quarter? And how should we think about the impact of this going forward? And what inventory days are you targeting? And I have a follow-up.

Ken Jacobson

Yes. Roughly 1/3 of the inventory growth came from inventory build for Supply Chain Services. And again, the revenue there is more of a services revenue. So you're not going to see a lot on the top line, but we'd see it in the gross margin. I don't think we'd expect it to build meaningfully in the next couple of quarters from there from a supply chain services perspective. That business is growing pretty well, Ruplu. I would say the rest of the business is growing pretty hard as well. So I think it's contributing overall. I think from an overall inventory days, I think we expect things to continue to be flattish or down slightly. I think we feel pretty good about the days overall.

The returns for the quarter, really good and the Supply Chain Services business really helps on the returns side of things as well. So we are continuing to ramp that business, especially in data center and automotive type customers, but we wouldn't expect the inventory to continue to build much from here but be more stable from a supply chain services perspective. Overall, I would say we grew $2.4 billion from last quarter, you're going to need some more inventory. And some of that was timing differences at the end of the quarter as well.

And then the last piece that we referenced was the pricing that some of the memory related products, we had a pricing increase during the quarter and the inventory we had at the end of the quarter reflects that price inflation.

Ruplu Bhattacharya

Got it. Can I ask a follow-up on operating margins. So obviously, great performance in both pre-Farnell as well as the EC business. You're already at 4.8%. And I think on the call, you said you can get to 5% in the second half of fiscal '27. What drives the ceiling or what is the ceiling and operating margins for that business? How should we think about the puts and takes there? And the same question, I guess, for Farnell, I mean, you're already at double-digit margins. Is there a ceiling to this? Can you get back to like the 14, the mid-teens kind of operating margins over time to we continue to think, 50, 100 basis points every quarter. So can you just give us how we should think about like where the seeding is for these 2 businesses in terms of operating margin?

Ken Jacobson

Yes. Maybe I'll comment this way. I think it's higher than 5% for EC and higher than 10% for Farnell. And we'll continue to drive steady progress there. I think the 50 to 100 basis points you mentioned was more of a Farnell commentary versus EC. EC was a little bit more modest. But look, we're continuing to drive efficiency. You can see the expenses didn't go up very much. This quarter, the guidance would imply further improvement from our OE to GP perspective, I think we're going to be in the low 50s, right, and we continue to drive that lower. And so that will help continue to drive the operating margin improvement.

So I think we want to hit those near-term goals and then reset a little bit. But again, I think Farnell in the low teens over time and then EC trending towards 6% over time. But part of it depends on the growth, part of it depends on regional mix, but we'll continue to drive efficiency with the expense model and the working capital model to continue to drive the returns up 25% this quarter, but continue to make traction there as well.

Philip Gallagher

Yes. Ruplu, this is Phil. Thanks for the comment. We're proud of the team thus far. But we're not planning on stopping that progression, okay? So Farnell is listening on the call and plan is to get that to continue to increase quarter-on-quarter. We will come back to exactly what Ken just said, the regional mix as Europe gets stronger, that helps all our businesses, frankly, is the higher margin profile and then the commodity mix as we expand along both components, with Farnell that one of the higher margin than the traditional test measurement and single-board computer. So constantly driving that and same thing on the core, okay? And the key through all this upside, if you will, to manage tightly our expenses while making the investments we need to make to drive the growth efficiencies. So it's a manacle focus on that.

Ruplu Bhattacharya

Can I just ask, going forward, do you think regional mix remains a bigger contributor to margins or a bigger factor for margins versus product mix or supplier programs or other investments?

Ken Jacobson

I think it goes back to the seasonality more so than, let's say, a fundamental mix shift. And Asia is performing pretty well. They're well positioned. You can see the growth over the last 3 years. So we don't see Asia slowing down, although in the third quarter with Lunar New Year, they could have a little bit lower sales just because of less shipping days. But I think the mix where Asia is roughly high 40s to 50% of our mix kind of continues into the foreseeable future, but we're still going to continue to drive operating margin expansion in the West. So I think it's hard to say, Ruplu, exactly where the regional mix lands. But I think for the time being, we should think about it being flattish absent seasonality trends.

Operator

Our next question is from Mr. Joe Quatrochi with Wells Fargo and Company.

Joseph Quatrochi

Yes. Maybe just following up on that line of thinking. If if Asia is stronger than seasonal into the March quarter, do you think you can get EC margins back to that 5% in the second half?

Ken Jacobson

Yes. Yes. I don't think that's going to be constrained. I think either way, we'll get it through growth or we'll get it through gross margin expansion from the mix.

Joseph Quatrochi

And as a follow-up, and I think you heard you say expect to raise capital over the coming quarters to fund growth. Can you just kind of maybe share some more color on that? Are you expecting to raise some more debt?

Ken Jacobson

Yes. I mean I think with the growth we've seen $3.6 billion in the past 6 months, we just needed to have more borrowing capacity to kind of fund those receivables and the inventory. So we think it starts to normalize a little bit, but we've done notes. We've done term loans. We've done upsizing to our revolve line of credit, and we've done more securitization. So we'll see to tackle those things and we'll have some maturities coming due that we'll have to refinance. Interest rates aren't most favorable right now, but we'll be thoughtful about taking some of those notes out and extending them.

Joseph Quatrochi

So maybe if I could sneak one more in. What's embedded in the guide from just a memory pricing perspective in terms of like the benefits to revenue growth you've seen over the last 2 quarters?

Ken Jacobson

The guide would imply very modest improvements in pricing. It's just kind of flattish pricing. I think Phil gave some commentary. We're seeing more announced in the new calendar year. So we expect maybe a little bit more impact there. We're still digesting that. But we're kind of going on a guide of flattish pricing and consistent availability.

Operator

Gentlemen, there are no further questions at this time. I will now turn it back to Phil Gallagher for closing remarks.

Philip Gallagher

Great. Thank you very much. And I want to thank everyone for attending today's earnings call. We look forward to speaking to you again at our second quarter fiscal year 2027 earnings report in early February. Have a great rest of the day.

Operator

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.