Arrow Electronics (ARW) is seeing improving demand and backlog trends, although Asia mix remains a headwind to margin upside, BofA Securities said in a note Wednesday.

The analysts said the company's fundamentals are improving, with backlog extending into Q2/Q3 and book-to-bill firmly above 1, pointing to a healthier demand environment partly supported by artificial intelligence and better near-term revenue visibility.

However, Asia is likely to stay a lower-margin headwind, while pull-forward activity and higher component costs could pressure end demand in H2 2026 and 2027, alongside market expectations that have already moved materially higher.

"We would become more positive if indicators emerge of more stable end market demand," the analysts added.

The analysts said they are raising revenue estimates for 2026 to $39.4 billion from $34.6 billion, for 2027 to $41.7 billion from $36.2 billion, and for 2028 to $43.2 billion from $39.2 billion. Earnings per share projections were also raised to $20.17 from $13.32, to $21.59 from $15.48, and to $24.31 from $16.83 for 2026, 2027, and 2028, respectively.

BofA upgraded Arrow Electronics to neutral from underperform and raised its price target to $233 from $122.

Price: 210.15, Change: +8.69, Percent Change: +4.31