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Arrow Electronics (ARW)
NYSE:ARW
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Arrow Electronics
(NYSE:ARW)
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Rating:60Neutral
Price Target:
$147.00
▲(4.34% Upside)
Action:ReiteratedDate:02/07/26
The score is driven primarily by mixed financial performance—improving revenue trend and a reasonable balance sheet are outweighed by sharply weaker cash flow and thinner margins. Technicals are supportive but appear overextended, while valuation is relatively reasonable. Earnings call commentary adds a positive tilt via strong Q4/Q1 momentum and ECS strength, tempered by working-capital-driven cash conversion risk and limited near-term visibility.
Positive Factors
ECS growth and backlog
Enterprise Computing Solutions (ECS) is showing durable, higher-quality demand tied to hybrid cloud, AI and cybersecurity. Record ECS profitability and a >75% YoY backlog increase signal sticky, multi-quarter revenue visibility and better earnings mix, supporting sustainable profit contribution.
Shift to value-added services
Growing value-added and software/service billings raises recurring revenue and average margins, reducing reliance on low-margin distribution. This structural mix shift improves earnings quality, predictability and cash visibility over the medium term, supporting a more resilient business model.
Improving leverage and capital efficiency
Moderate and improving leverage gives the company financial flexibility to fund working-capital cycles, invest in higher-margin services, and continue disciplined capital returns. A stronger equity base and lower gross debt in recent quarters reduce bankruptcy and liquidity risk over the medium term.
Negative Factors
Weak cash generation
Substantially reduced operating and free cash flow versus historical norms materially limits financial flexibility. If weak cash generation persists, the company may face tougher choices on debt reduction, capex, buybacks or servicing elevated working capital, increasing execution risk over coming quarters.
Compressed profit margins
Thin, compressed margins leave limited buffer to absorb cost inflation, customer mix shifts or pricing pressure. Distribution is cyclical; without sustained mix improvement to higher-margin services, profitability remains vulnerable and small shocks could materially erode earnings and returns.
Elevated working capital and visibility risk
Large inventory and working-capital absorption ties up cash and extends cash conversion, exacerbating already weak cash flow. Management notes limited visibility beyond ~90 days, so recovery timing is uncertain; prolonged absorption could force higher financing costs or curtail strategic spending.
Arrow Electronics (ARW) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$7.20B
Dividend YieldN/A
Average Volume (3M)478.53K
Price to Earnings (P/E)10.0
Beta (1Y)1.02
Revenue Growth3.16%
EPS Growth1.09%
CountryUS
Employees21,520
SectorTechnology
Sector Strength88
IndustryTechnology Distributors
Share Statistics
EPS (TTM)4.39
Shares Outstanding51,086,166
10 Day Avg. Volume537,189
30 Day Avg. Volume478,529
Financial Highlights & Ratios
PEG Ratio0.20
Price to Book (P/B)0.87
Price to Sales (P/S)0.18
P/FCF Ratio-153.41
Enterprise Value/Market Cap1.39
Enterprise Value/Revenue0.33
Enterprise Value/Gross Profit2.92
Enterprise Value/Ebitda10.35
Forecast
1Y Price Target
$108.00Price Target Upside-23.34% Downside
Rating ConsensusModerate Sell
Number of Analyst Covering3
EPS Forecast (FY)12.25
Revenue Forecast (FY)$31.88B
Arrow Electronics Business Overview & Revenue Model
Company DescriptionArrow Electronics, Inc. provides products, services, and solutions to industrial and commercial users of electronic components and enterprise computing solutions in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. The company operates in two segments, Global Components and Global Enterprise Computing Solutions. The Global Components segment markets and distributes semiconductor products and related services; passive, electro-mechanical, and interconnect products, including capacitors, resistors, potentiometers, power supplies, relays, switches, and connectors; and computing and memory products, as well as other products and services. The Global Enterprise Computing Solutions segment offers computing solutions, such as datacenter, cloud, security, and analytics solutions. This segment provides access to various services, including engineering and integration support, warehousing and logistics, marketing resources, and authorized hardware and software training. The company serves original equipment manufacturers, value-added resellers, managed service providers, contract manufacturers, and other commercial customers. Arrow Electronics, Inc. was founded in 1935 and is based in Centennial, Colorado.
How the Company Makes MoneyArrow primarily makes money by selling products it sources from technology manufacturers to OEMs, contract manufacturers, and other business customers, earning a gross margin on distribution at scale. A major revenue stream is its Global Components segment, where Arrow distributes semiconductors and passive/electromechanical components; revenue is driven by shipment volumes, product mix, and the company’s ability to manage inventory and logistics for customers. Arrow also generates revenue through its enterprise computing solutions activities by reselling and delivering IT infrastructure-related products and solutions (including hardware and associated offerings) to business customers, typically earning margins on product resale and on value-added services. Across both areas, earnings are supported by long-standing supplier authorizations and relationships with component and technology OEMs, and by services that can increase wallet share and stickiness—such as design-in/engineering support, supply-chain and logistics programs, and other customer enablement services—along with working-capital and inventory management that can affect profitability in different demand environments.
Arrow Electronics Key Performance Indicators (KPIs)
Arrow Electronics Earnings Call Summary
Earnings Call Date:Feb 05, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:Apr 30, 2026
Earnings Call Sentiment Positive
The call communicated materially positive operational and financial momentum: strong Q4 results (20% revenue growth and 48% EPS growth), record ECS profitability, sustained backlog increases, and deliberate progress shifting mix toward higher‑margin, value‑added services. These positives are tempered by margin pressure from regional/customer mix, a weak full‑year cash conversion performance, elevated working capital and inventory build, and lingering visibility and macro/geopolitical uncertainty. Management provided constructive Q1 guidance and reiterated a disciplined capital allocation approach, but emphasized the recovery remains gradual and variable by region and end market.Q4-2025 Updates
Positive Updates
Strong Q4 Revenue and EPS Beat
Fourth quarter sales of $8.7 billion, up 20% year-over-year (16% organic cc), exceeded guidance; fourth quarter non-GAAP diluted EPS rose 48% year-over-year to $4.39 driven by favorable sales mix, higher value-added services mix and lower interest expense.
Solid Full-Year Top-Line Growth
Full‑year 2025 revenue of $30.9 billion, up 10% versus prior year (9% on a constant currency basis); global components revenue up 8% and ECS revenue up 18% for the year (7% and 15% cc, respectively).
ECS Outperformance and Secular Tailwinds
Global ECS Q4 sales $2.9 billion (up ~16% YoY; ~11% cc); total ECS billings $7.1 billion, up 16% YoY. ECS delivered record gross profit and operating profit in Q4 and backlog grew over 75% year-over-year to an all-time high, benefiting from demand for hybrid cloud, AI, cybersecurity and data-protection solutions.
Recovery Signals in Global Components
Global components Q4 sales $5.9 billion (up $1.1 billion YoY), book-to-bill above parity, backlog increased for four consecutive quarters, lead times modestly expanding and inventory turns normalizing—consistent with an early, gradual cyclical upturn.
Value‑Added Services Driving Margin Expansion
Strategic shift toward higher-margin value‑added offerings is showing results: value‑added services grew to roughly 30% of total company operating income in 2025 (from <20% historically); recurring revenue ≈1/3 of ECS billings; ~75% of ECS billings are software and services—supporting higher gross margins and earnings quality.
Improving Capital Efficiency and Shareholder Returns
Return on working capital increased 170 bps YoY to 18%; return on invested capital rose 190 bps YoY to 11.1%. Working capital as a percent of sales declined to ~21% and cash conversion cycle improved by 7 days. Arrow repurchased $50 million of stock in Q4 ($150 million in 2025) and has returned about $3.6 billion since 2020; gross debt declined $44 million in Q4 to $3.1 billion.
Encouraging Q1 Guidance
Q1 2026 sales guidance of $7.95B–$8.55B (midpoint up ~21% YoY) with non‑GAAP diluted EPS guidance of $2.70–$2.90, indicating management expects momentum to continue into the new year while remaining cautious.
Negative Updates
Gross Margin Pressure from Mix Dynamics
Consolidated fourth quarter non‑GAAP gross margin was 11.5%, down 20 basis points year‑over‑year, with headwinds attributed to regional and customer mix within global components despite improving demand.
Weak Full‑Year Operating Cash Flow and Working Capital Build
Operating cash flow was $200 million in Q4 but only $64 million for the full year 2025, reflecting elevated working capital needs; net working capital rose ~ $180 million sequentially to $7.4 billion and inventory ended Q4 at $5.1 billion, indicating continued working capital absorption during the recovery.
Ongoing Visibility and Recovery Uncertainty
Management emphasized that visibility beyond ~90 days remains 'cloudy'; inventory normalization is still in progress, and macro and geopolitical uncertainty could affect regional and end‑market recovery pacing and linearity of results.
Rising OpEx and Interest Expense Variability
Non‑GAAP operating expenses increased $53 million sequentially to $669 million (driven by variable costs and ECS seasonality), and interest expense remains somewhat unpredictable—Q1 interest expense guidance ~ $60 million—dependent on the timing of working capital investment and cash flows.
Leadership Transition Still Underway
Company continues with an interim CEO while the Board's search for a permanent CEO remains ongoing, which may introduce short‑term leadership and execution uncertainty until a permanent appointment is made.
Company Guidance
For Q1 2026 Arrow guided consolidated sales of $7.95 billion to $8.55 billion (midpoint $8.25B, +21% year‑over‑year at the midpoint), with global components sales of $5.75B to $6.15B (midpoint $5.95B, ~1% sequential growth at the midpoint) and ECS sales of $2.20B to $2.40B (midpoint $2.30B, ~13% year‑over‑year at the midpoint); they expect non‑GAAP diluted EPS of $2.70 to $2.90 (midpoint $2.80), an effective tax rate of 23%–25%, and interest expense of about $60 million, note that Q1 includes four additional shipping days (four fewer in Q4) that primarily affect ECS, and foreign currency impacts are detailed in the earnings release.Arrow Electronics Financial Statement Overview
Summary
Mixed fundamentals: TTM revenue has returned to growth and leverage is moderate/improving, but profitability is thin versus prior years and cash generation deteriorated sharply (TTM operating cash flow and free cash flow both ~$64M), increasing execution and liquidity risk if sustained.Income Statement
TTM (Trailing-Twelve-Months) revenue returned to growth (+4.98%), and profitability is positive (gross margin ~11.1%, EBIT margin ~2.5%, net margin ~1.6%). However, margins have compressed meaningfully versus 2021–2023 (when net margin was generally ~2.7%–3.8%), and 2024 showed a notable revenue decline (-15.7%). Overall: improving top-line momentum in TTM, but profitability is thin and down from prior peaks.58
Neutral
Balance Sheet
Leverage looks moderate with TTM debt-to-equity at ~0.49 (improved versus 2022–2024 levels that were closer to ~0.59–0.68). Equity has also increased versus 2024, supporting balance sheet resilience. Returns on equity are positive but have stepped down materially from the very strong 2021–2022 levels (TTM ~7.8% vs. ~21%–26% historically), suggesting weaker earnings power relative to the capital base.66
Positive
Cash Flow
Cash generation weakened sharply in TTM (operating cash flow and free cash flow both ~$64M, down ~61.9% in free cash flow growth), which is a major red flag versus the much stronger cash flow profile in 2020–2021 and 2024. While free cash flow remains positive and is fairly close to reported earnings (free cash flow to net income ~0.88 in TTM), the very low level of operating cash flow relative to the scale of the business increases execution and liquidity risk if the weakness persists.34
Negative
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 30.85B | 27.92B | 33.11B | 37.12B | 34.48B |
| Gross Profit | 3.33B | 3.29B | 4.15B | 4.84B | 4.20B |
| EBITDA | 1.07B | 1.12B | 1.67B | 2.26B | 1.76B |
| Net Income | 571.27M | 392.07M | 903.50M | 1.43B | 1.11B |
Balance Sheet | |||||
| Total Assets | 29.08B | 21.76B | 21.73B | 21.76B | 19.54B |
| Cash, Cash Equivalents and Short-Term Investments | 306.47M | 188.81M | 218.05M | 176.91M | 222.19M |
| Total Debt | 3.09B | 3.39B | 3.81B | 3.77B | 2.63B |
| Total Liabilities | 22.42B | 15.93B | 15.85B | 16.15B | 14.19B |
| Stockholders Equity | 6.58B | 5.76B | 5.81B | 5.55B | 5.28B |
Cash Flow | |||||
| Free Cash Flow | -37.20M | 1.04B | 622.16M | -111.91M | 335.93M |
| Operating Cash Flow | 64.05M | 1.13B | 705.45M | -33.08M | 418.98M |
| Investing Cash Flow | 23.60M | -94.44M | -72.32M | -57.71M | -60.12M |
| Financing Cash Flow | -206.14M | -956.83M | -666.22M | 109.78M | -463.30M |
Arrow Electronics Technical Analysis
Neutral
140.89
Price Trends
136.79
Positive
124.27
Positive
124.34
Positive
Market Momentum
-0.28
Positive
45.52
Neutral
59.19
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ARW, the sentiment is Neutral. The current price of 140.89 is below the 20-day moving average (MA) of 147.32, above the 50-day MA of 136.79, and above the 200-day MA of 124.34, indicating a neutral trend. The MACD of -0.28 indicates Positive momentum. The RSI at 45.52 is Neutral, neither overbought nor oversold. The STOCH value of 59.19 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for ARW.
Arrow Electronics Risk Analysis
Arrow Electronics disclosed 25 risk factors in its most recent earnings report. Arrow Electronics reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Arrow Electronics Peers Comparison
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
74 Outperform | $1.47B | 17.40 | 9.37% | 1.02% | 3.19% | -4.91% | |
71 Outperform | $4.91B | 16.25 | 4.22% | 2.77% | -2.30% | -29.75% | |
71 Outperform | $12.47B | 15.05 | 9.94% | 1.15% | 6.95% | 19.19% | |
67 Neutral | $763.84M | 12.95 | 8.14% | ― | -4.88% | 2.57% | |
61 Neutral | $37.18B | 12.37 | -10.20% | 1.83% | 8.50% | -7.62% | |
60 Neutral | $7.20B | 9.99 | 9.05% | ― | 3.16% | 1.09% | |
59 Neutral | $2.47B | 16.31 | 9.79% | ― | -6.69% | -51.74% |
* Technology Sector Average
ARW
Arrow Electronics
140.89
31.95
29.33%
AVT
Avnet
60.01
11.93
24.81%
NSIT
Insight Enterprises
79.67
-76.77
-49.07%
CNXN
PC Connection
58.39
-3.64
-5.86%
SCSC
ScanSource
35.56
-1.61
-4.33%
SNX
TD SYNNEX Corporation
154.72
24.53
18.85%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.