Arrow Electronics Q3 Sales Rise 39% as Components Growth Drives Record Results

Arrow Electronics (NYSE: ARW) reported record quarterly revenue and earnings per share for its fiscal third quarter, supported by broad-based growth in Global Components and higher sales in Enterprise Computing Solutions. Consolidated sales rose 39% year over year to $10.72 billion, while non-GAAP diluted earnings increased 158% to $6.22.

For the quarter ended October 3, GAAP net income was $318 million, or $6.17 per diluted share, compared with $109 million, or $2.09 per share, a year earlier. Non-GAAP net income climbed to $321 million from $126 million.

GAAP operating income increased 140% to $430 million, and the operating margin expanded 170 basis points to 4.0%. On a non-GAAP basis, operating income more than doubled to $436 million, with the margin rising 130 basis points to 4.1%.

The improvement reflected operating leverage as revenue increased faster than expenses. Non-GAAP operating expenses rose 17% to $719 million but declined to 6.7% of sales from 8.0% a year earlier. Consolidated non-GAAP gross margin remained unchanged year over year at 10.8%, though it fell 50 basis points from the second quarter.

Components growth spans regions and customer markets

Global Components generated sales of $7.94 billion, up 43% year over year and 8% sequentially. Growth was broad-based across regions, verticals and customer types, with book-to-bill ratios well above parity in all regions, according to the presentation. Arrow also said its backlog was providing improved visibility, while lead times remained below levels seen during the shortage environment.

Americas Components sales increased 58% to $2.70 billion, led by aerospace and defense, industrial, transportation and computing demand. EMEA revenue rose 41% to $2.04 billion, supported by aerospace and defense and networking. Asia-Pacific sales advanced 33% to $3.20 billion, with industrial, networking and transportation among the leading categories.

Non-GAAP operating income for the segment rose to $413 million from $199 million, while the operating margin expanded to 5.2% from 3.6%. The margin was below the second quarter’s 5.4%, even as operating income increased from $397 million.

Management highlighted expansion in core markets, particularly in Western regions, as well as improvement in the mass market. Interconnect, passive and electromechanical product sales exceeded $1 billion for a third consecutive quarter. Arrow also said value-added services made a meaningful profit contribution, while operational productivity supported earnings leverage. Sustained unit demand and limited capacity were producing an increasing pricing benefit, the company added.

Infrastructure demand supports ECS results

Enterprise Computing Solutions sales reached $2.78 billion, an increase of 29% year over year and 6% from the preceding quarter. Americas ECS revenue rose 27% from a year earlier to $1.30 billion and increased 15% sequentially. EMEA sales advanced 30% year over year to $1.47 billion but declined 1% from the second quarter.

The segment’s non-GAAP operating income increased to $99 million from $65 million, with its operating margin improving to 3.6% from 3.0%. Arrow attributed the performance in part to strong backlog conversion and demand associated with artificial-intelligence investment and broader infrastructure modernization. The company reported strength across compute, business applications, storage, security, cloud and hybrid-cloud categories.

Fourth-quarter outlook points to further sales growth

For the fourth quarter of fiscal 2026, Arrow expects consolidated sales of $11.55 billion to $12.15 billion. The forecast includes Global Components sales of $8.15 billion to $8.55 billion and Global ECS sales of $3.40 billion to $3.60 billion.

The company projects GAAP diluted earnings of $6.25 to $6.45 per share and non-GAAP diluted earnings of $7.00 to $7.20. Interest and other expense, net, is expected to be approximately $50 million, while the outlook assumes an average tax rate of 23% to 25%.

Foreign-currency movements are expected to reduce fourth-quarter sales by about $88 million and diluted EPS by $0.14 compared with the fourth quarter of 2025. Relative to the third quarter of 2026, currency changes are expected to reduce sales growth by $86 million and diluted EPS by $0.07.

Arrow ended the third quarter with gross debt of $2.8 billion and adjusted net leverage of 1.9 times. It repurchased $93 million of shares during the period. Non-GAAP return on working capital rose 1,060 basis points year over year to 22.6%, while non-GAAP return on invested capital increased 780 basis points to 15.1%; the company primarily attributed both gains to higher Global Components operating income.

Operating cash flow was negative $441 million, while net working capital stood at approximately $7.7 billion. Management’s stated priorities include expanding higher-margin value-added services, improving profitability, reinvesting in organic growth, pursuing strategic acquisitions, returning excess capital to shareholders and maintaining an investment-grade credit rating.

Arrow cautioned that its outlook remains exposed to economic conditions, foreign-exchange movements, tariffs and trade restrictions, supply-chain disruptions, changes in product supply and customer demand, margin pressure, supplier relationships, management transitions, information-system failures and the company’s ability to generate positive cash flow.