• Consolidated Sales: $6.8 billion, exceeding guidance range, down 2% year-over-year, flat on a constant currency basis.
• Global Component Sales: $4.8 billion, above guidance range, down 1% versus prior quarter, flat sequentially in constant currency.
• Enterprise Computing Solutions Sales: $2 billion, above guidance range, 18% higher year-over-year, 19% higher in constant currency.
• Non-GAAP Gross Margin: 11.3%, down 120 basis points year-over-year, down 40 basis points sequentially.
• Non-GAAP Operating Expenses: $593 million, grew $13 million sequentially, $25 million lower year-over-year.
• Non-GAAP Operating Income: $179 million, 2.6% of sales.
• Non-GAAP Diluted EPS: $1.80, above guided range.
• Cash Flow from Operations: $352 million.
• Gross Balance Sheet Debt: $2.8 billion.
• Share Repurchase: $50 million repurchased, $275 million remaining authorization.
• Q2 Sales Guidance: $6.7 billion to $7.3 billion.
• Q2 Global Component Sales Guidance: $4.8 billion to $5.2 billion.
• Q2 Enterprise Computing Solutions Sales Guidance: $1.9 billion to $2.1 billion.
• Q2 Non-GAAP Diluted EPS Guidance: $1.90 to $2.10.

• Warning! GuruFocus has detected 5 Warning Sign with ARW.

Release Date: May 01, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Arrow Electronics Inc (NYSE:ARW) reported consolidated and segment sales, as well as earnings per share, that exceeded the high end of their guidance ranges.
• The global components business saw stronger sales than anticipated, with all three regions performing ahead of typical seasonality.
• The enterprise computing solutions business delivered year-over-year billings growth with solid operating leverage.
• The ECS backlog grew by more than 50% year over year, reflecting alignment to higher growth demand trends across enterprise IT.
• Arrow Electronics Inc (NYSE:ARW) generated positive cash flow from operations for the seventh consecutive quarter, amounting to $352 million in Q1 2025.

Negative Points

• Consolidated non-GAAP gross margin was down approximately 120 basis points versus the prior year, driven primarily by overall mix in both global components and ECS.
• Non-GAAP operating expenses grew $13 million sequentially to $593 million, although they continue to decline year over year.
• The company faces uncertainty due to rapidly evolving trade policies and tariffs, which could impact near-term demand trends.
• Inventory levels remain somewhat elevated, with pockets of excess inventory still present, although the aging profile is improving.
• Interest and other expenses were $56 million in the first quarter, contributing to financial pressures.

Q & A Highlights

Q: Can you clarify the 2% to 4% increase in component sales not included in the guidance? Does this relate to tariffs and potential risks to EBIT? A: Sean Kerins, President and CEO, explained that the 2% to 4% increase represents surcharges or price uplifts due to tariffs. The company has mechanisms to mitigate margin risk, including intelligent sourcing and routing. Rajesh Agrawal, CFO, added that the 2% to 4% is an incremental benefit to the top line of global components, not included in the baseline guidance, which reflects the core business performance.

Q: How do customer inventory trends relate to Arrow's inventory levels? A: Sean Kerins noted that Arrow's inventory levels are in line with current sales levels and historical ranges. While there are still pockets of excess inventory, the aging profile is improving. The company is prepared to support growth as the market recovers, indicating a normalization of inventory levels with demand signals.

Q: Is the current inventory level the correct long-term target, or is it still elevated? A: Sean Kerins stated that while there are still some excess pockets, the inventory profile has improved, and the company is close to the desired level. Rajesh Agrawal added that inventory levels have decreased by about $1 billion from their peak, and as the business grows, working capital will be deployed where needed.

Q: Was there any order acceleration in the ECS business due to tariffs? A: Sean Kerins confirmed that the ECS business outlook does not reflect any order acceleration due to tariffs. The company continues to see strong momentum in cloud and infrastructure software, with no significant impact from tariff-related order pull-ins.

Q: Is visibility improving for the second half of 2025? A: Sean Kerins indicated that visibility is improving, with industry-wide inventory levels decreasing and book-to-build ratios improving. Backlog is growing in both magnitude and time, providing better visibility into the third and fourth quarters.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.