安富利 (AVT) 2027财年第一季度财报电话会议：销售额创历史新高，上调第二季度业绩指引

核心要点

• 安富利公布2027财年第一季度销售额创历史新高，达到107亿美元，同比增长82%，环比增长29%。剔除本季度额外的一周，销售额同比和环比分别增长71%和21%。
• 调整后摊薄每股收益达到创纪录的3.63美元，同比增长速度是销售额增速的四倍多。调整后营业利润率达到4.7%，创2023财年以来的最高水平。
• 电子元件（Electronic Components）与Farnell部门均创下销售额历史新高。Farnell的营业利润率重回两位数达到10.1%，而电子元件部门则达到4.8%。
• 管理层将广泛的需求归因于数据中心、航空航天与国防、网络、工业和交通运输市场。存储器定价贡献了环比和同比销售额增长的大约三分之一。
• 2027财年第二季度业绩指引预计销售额为111亿美元至114亿美元，调整后摊薄每股收益为3.90美元至4.10美元。
• 强劲的增长需要大量的营运资金投资。安富利在本季度消耗了约8.42亿美元的经营现金，同时债务增加了约9.50亿美元。

关键财务数据

业务与运营表现

电子元件部门销售额同比增长84%，环比增长30%。剔除额外一周影响后，增长率分别为73%和22%。营业利润达到4.84亿美元，营业利润率提升至4.8%。

亚洲市场录得创纪录的50亿美元单季销售额，并迈入连续第三年增长。在数据中心和工业应用的带动下，所有终端市场的需求均有所增长。在工业和交通运输需求的支撑下，欧洲、中东和非洲地区（EMEA）连续第四个季度实现环比和同比双增长。

在美洲地区，管理层重点强调了数据中心、航空航天与国防以及网络市场。安富利集成解决方案（Avnet Integrated Solutions）受益于企业级、超大规模和云数据中心基础设施的需求，包括人工智能（AI）基础设施的建设。尽管该业务的毛利率低于电子元件部门的平均水平，但它对营业利润率的扩张作出了贡献。

Farnell销售额同比增长46%，环比增长17%。其营业利润率三年多来首次升至10%以上。管理层将板载元件的强劲销售和经营杠杆效应列为主要驱动因素。

存储器定价约占环比和同比销售额增长的三分之一。存储器以外的产品定价对本季度没有产生实质性影响，但管理层表示在新日历年中可能会出现额外的元件价格上涨。

管理层业绩指引

对于2027财年第二季度，安富利给出的业绩指引如下：

以中点计算，销售额展望意味着环比增长约5%。管理层表示，在剔除第一季度额外一周的可比基础上，中点增长率约为12%。

该指引基于当前市场条件、持续稳定的元件供应以及基本持平的存储器价格。安富利还预计利息支出将与第一季度基本相似。

管理层预计电子元件部门的营业利润率将在2027财年下半年达到5%。长期来看，管理层认为该业务将趋向6%，而Farnell可能进入低两位数（10%-13%）区间。这些结果在一定程度上取决于增长和区域组合。

公司预计在其2027财年剩余时间内，经营费用占毛利比例将降至50%出头的区间。公司还预计将在下半年达到3倍的杠杆率目标，并在增长趋缓的情况下于财年末实现正现金流。

风险与关注事项

本季度供应状况趋紧，半导体以及互连、无源和机电产品的交货期有所延长。积压订单逾期情况也有所增加。管理层表示，这些情况并未对安富利的增长或第二财季指引造成实质性制约，但承认供应趋紧可能会在周期的后续阶段带来挑战。

一些在物料清单中存储器比重较高的客户正面临更大的生产制约。特定电源、分立器件和无源元件品类的供应也趋于紧张。

营运资金需求维持在高位。安富利环比在营运资金上投资了12亿美元，其中包括21亿美元的库存增加，但这在很大程度上被18亿美元的应付账款增加所抵消。公司预计将根据需要筹集额外资金，以支持业务增长并为即将到期的债务再融资。

由于亚洲农历新年的时间及影响，第三财季的季节性展望仍存在不确定性。尽管如此，管理层仍将3月季度的积压订单和西方市场需求描述为健康。

分析师问答要点

• 需求质量：管理层表示，增长似乎比单纯补库存更为广泛，因为所有地区的订单出货比均保持在1以上，积压订单持续增长，且需求涵盖多种技术和终端市场。
• 3月季度季节性：安富利未发布正式的第三财季指引，但管理层表示，业绩可能会略好于分析师讨论的典型1%-2%的环比下滑。农历新年仍是主要变量。
• 需求创造：尽管与履约相关的数据中心销售额增长更快，但需求创造收入占总收入的比例大致保持稳定，且绝对金额有所增加。
• 库存状况：管理层认为安富利的整体库存状况适宜。预计库存周转天数将保持基本持平或小幅下降，而供应链解决方案库存应在未来几个季度更加稳定。
• 利润率潜力：管理层表示，在规模效应、费用纪律、产品组合以及西方市场更强劲表现的支撑下，电子元件部门的长期利润率潜力在5%以上，Farnell在10%以上。

业绩电话会议完整转录

完整财报电话会议逐字稿

管理层陈述

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.

分析师问答

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.