Arrow Electronics CFO Says Price Increases Drove Most Components Growth — 'We Would Have Sold More'
Arrow's fourth-quarter outlook leans on unit volume, with components sales guided to $8.15 billion to $8.55 billion.
Most of Arrow Electronics' components revenue growth last quarter came from price increases, CFO Raj Agrawal told analysts on the company's Thursday earnings call, with memory the category he named first. Arrow, which distributes electronic components and enterprise computing products, saw its shares fall 9.72% to $182.94 in Thursday trading, from a prior close of $202.63.
Price, not just volume
Asked by an analyst from Truist about memory, Agrawal said prices were "up quite a bit" in the third quarter and that "Most of our revenue growth in the components business was driven by price increases." He added that demand remains "extremely strong" and that "If we had gotten our hands on more product, we would have sold more."
Interim CEO Bill Austen and Agrawal both said unit-volume demand held steady in the prepared remarks. Agrawal said "pockets of limited capacity" are producing price inflation in certain component categories, "most notably memory," and that higher prices help both revenue and profit dollars.
A Raymond James analyst asked whether suppliers are holding product back, as in the COVID era. Global Components President Rick Marano called it "business as usual and extended lead times," and said lead times have not expanded as they did in the COVID period.
A record quarter, then a guide
Third-quarter sales reached a record $10.7 billion, up 39% from a year earlier. Adjusted earnings were $6.22 a share, up 158%, above the company's own guidance range of $4.83 to $5.03. Global components sales rose 8% from the prior quarter to $7.9 billion, and management said the backlog now extends into mid-2027.
For the fourth quarter, Arrow guided sales to $11.55 billion to $12.15 billion and adjusted earnings of $7 to $7.20 a share. Components sales are guided to $8.15 billion to $8.55 billion, about 5% sequential growth at the midpoint. Agrawal said that growth should come mainly from unit volume because most supplier price increases took effect in the third quarter, and the outlook assumes little further memory inflation.
The stock after an 84% run
Arrow splits its business into global components, about 70% of 2025 sales, and enterprise computing solutions, about 30%. The shares had already fallen about 12.7% over the past month, even after an 84% gain since the start of the year.
In enterprise computing, Agrawal said more hardware in the fourth-quarter mix will weigh on margins reported on a net-sales basis, while margins on billings should stay about flat from a year earlier. Austen also said ECS President Eric Nowak plans to retire, and Rodney Clark will succeed him on January 1.
Austen said Clark joins Arrow on November 9, the same day new Chief Information and Technology Officer Anuj Gore starts.
Sources
- Arrow Electronics: Q3 Earnings Snapshot – WTOP News — wtop.com
- Here's What Key Metrics Tell Us About Arrow Electronics (ARW) Q3 Earnings — Yahoo Finance
- Arrow Electronics (ARW) Q3 Earnings and Revenues Surpass Estimates — Yahoo Finance
- ARW to Report Q3 Earnings: What's in the Cards for the Stock? — Yahoo Finance
- Arrow Electronics (ARW) Could Be 14% Undervalued Following Its NetApp Keystone Push — Yahoo Finance
