tkal · Avnet Q1 FY27: The Suppliers Stayed, the Banks Came Too, and a Third of the Build Is Memory Price

Avnet Q1 FY27: The Suppliers Stayed, the Banks Came Too, and a Third of the Build Is Memory Price

Avnet made $3.63 of adjusted EPS and used $842.4M of operating cash doing it, the largest quarterly outflow in the five years we pulled. Our call: on January 2, 2027 total debt is above $4.50B and December-quarter operating cash flow is below −$400M, while leverage still falls, because earnings are outrunning the debt and the cash is not arriving. Operating cash flow at or above zero, or total debt at or below $4.17B, refutes it. Our September call came in partial: payables held at 95.9% of inventory instead of falling below 90%, and debt rose anyway.

Published November 4, 2026 · Post-print analysis · Avnet, Inc. · AVT · Nasdaq · Q1 FY27, 14 weeks ended October 3, 2026 · reported November 4, 2026 · figures from the Form 8-K Ex. 99.1 and earlier filings; the Q1 10-Q is not yet filed · Committed analyst read, not advice · For analysts covering component distribution, the semiconductor cycle, memory pricing and the working capital that funds them

The setup

Avnet reported $10.72B of sales against a guide of $9.00B to $9.30B, and adjusted EPS of $3.63 against $2.80 to $2.90. The stock fell 3.0% to $86.10 (unverified, market data), and it is 20.7% below the $108.63 it touched on October 2. A beat of $1,418.0M above the top of the range does not usually do that.

The tell is one line: operating cash flow of −$842.4M. That is larger than the −$645.1M of October 2022, which was the worst quarter of the last upcycle and until today the worst in the series we pulled back to 2021. Inventory rose $2,105.7M in one quarter, about 3.5 times the $607.0M added in June, which was itself the largest quarterly rise in five years. Total debt rose $955.1M, also the largest in the nine quarters on our balance chart. It isn't distress. It is a distributor buying ahead of its own guide with other people's money.

Our call: on January 2, 2027, total debt is above $4.50B and December-quarter operating cash flow is below −$400M, and at the same time debt over trailing adjusted operating income falls below today's 3.45x. Earnings outrun the debt. The cash does not arrive. Operating cash flow at or above zero, or total debt at or below $4.17B, says we are wrong.

First the grade, because the last page asked for one. On September 28 we wrote that payables would fall below 90% of inventory on October 3 with total debt above $3.21B, and that payables holding near inventory with positive operating cash flow would refute it. Neither happened. Payables were 95.9% of inventory, debt was $4.17B, and operating cash flow was −$842.4M. We said anything else would be a partial result, so we call it that: right that banks would come in, wrong that suppliers would leave.

Of $10,718.0M in sales, $9,644.0M is cost of sales. A 10.0% gross margin leaves $1,074.0M; SG&A takes $576.3M, interest and financing $91.9M, and $282.2M reaches net income. Rounding: below-the-line items sum to $192.6M against $192.5M. The quarter has 14 weeks; Avnet estimates the extra week at $654.0M of sales.

The numbers

Sales

$10.72B

+81.7% Y/Y · +29.2% Q/Q

Adjusted EPS

$3.63

from $0.84

EC operating margin

4.8%

from 2.9%

Operating cash flow

−$842.4M

from −$144.6M

Total debt

$4.17B

+$955.1M Q/Q

Payables ÷ inventory

95.9%

99.8% in June · 68.0% LY

The quarter had 14 weeks against 13 in both comparison periods. Avnet estimates the extra week at $654.0M of sales. Excluding it, sales grew 70.6% year over year and 21.3% sequentially. Every flow figure below is as reported, with the extra week in it.

Avnet Q1 FY27 · $ millions unless stated

Line	Q1 FY27	Q4 FY26	Q1 FY26	Y/Y
Sales
Sales	10,718.0	8,295.4	5,898.6	+81.7%
Electronic Components	10,134.7	7,795.3	5,499.7	+84.3%
Farnell	583.3	500.1	398.9	+46.2%
Americas	2,861.8	2,060.7	1,369.9	+108.9%
EMEA	2,737.5	2,298.9	1,665.9	+64.3%
Asia	5,118.7	3,935.8	2,862.8	+78.8%
Profit
Gross profit	1,074.0	865.0	614.8	+74.7%
Gross margin	10.0%	10.4%	10.4%	−40 bps
Adjusted operating income	498.1	317.9	150.7	+230.5%
EC operating income	484.5	317.2	159.0	+204.7%
Farnell operating income	58.6	44.8	17.1	+242.7%
Interest and financing	91.9	66.5	59.8	+53.7%
Net income	282.2	126.6	51.7	+445.3%
Adjusted diluted EPS ($)	3.63	2.28	0.84	+332.1%
Cash and balance sheet
Operating cash flow	−842.4	−290.7	−144.6	worse
Receivables	7,758.0	6,883.0	4,503.5	+72.3%
Inventories	8,175.1	6,069.4	5,420.9	+50.8%
Accounts payable	7,842.4	6,054.3	3,688.9	+112.6%
Total debt	4,167.9	3,212.8	2,985.2	+39.6%

Source: Avnet Form 8-K Ex. 99.1, November 4, 2026 (unaudited), and prior filings. Total debt = short-term + long-term debt. The Q1 Form 10-Q is not yet filed. Notes ↓

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The headline numbers are above. The 12 sections below carry the mechanism, the peer read, the valuation work, and the dated tests that decide it.

Five years: the level before the delta
The $2,422.6M, taken apart
Segment by segment
What flat inventory days means
The grade, in full
The funding stack
Connecting the dots
The December bar
Valuation
The strongest case against this read
What we'd watch
Bottom line

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Sources

Notes. Days use closing balances: receivables ÷ sales, and inventory or payables ÷ cost of sales, times 91 days (98 for Q1 FY27). Avnet's reported 72 inventory days use the average balance. Total debt = short-term debt + long-term debt as reported. Free cash flow = operating cash flow less purchases of property, plant and equipment. Revolver and securitization balances on October 3 are derived: June balances of 557.0 and 500.0 plus Q1 net flows of +648.9 and −474.6, in $ millions. Debt ÷ trailing adjusted operating income is our ratio, not the covenant's. Quarterly operating cash flow is derived from year-to-date figures.
Avnet, Inc. — "Avnet Reports First Quarter 2027 Financial Results" (Form 8-K, Exhibit 99.1), November 4, 2026 — primary source for every reported figure unless marked. Quarter ended October 3, 2026 vs September 27, 2025, $ thousands: sales 10,717,980 / 5,898,572; cost of sales 9,644,004 / 5,283,807; gross profit 1,073,976 / 614,765; SG&A 576,304 / 464,442; restructuring, integration and other 22,936 / 8,291; operating income 474,736 / 142,032; other expense (11,239) / (5,466); interest and other financing (91,854) / (59,762); income tax 89,471 / 25,059; net income 282,172 / 51,745; diluted shares 86,005 / 84,462. Balance sheet October 3 vs June 27: cash 236,780 / 155,396; receivables 7,758,037 / 6,882,965; inventories 8,175,066 / 6,069,419; short-term debt 861,451 / 733,952; accounts payable 7,842,394 / 6,054,326; long-term debt 3,306,435 / 2,478,864; equity 5,283,967 / 5,022,503. Cash flow: operating (842,408) / (144,584); receivables (893,321); inventories (2,121,749); payables 1,810,176; depreciation and amortization 19,249; lease amortization 16,860; deferred taxes 13,700; stock compensation 18,888; other 7,016; notes 545,551; securitization (474,600); credit facility 648,897; bank and other (27,686); term loans 375,000 and (88,946); repurchases (138,308) a year earlier; dividends (30,424); financing 950,771; capex (24,262). Adjusted operating income 498,064; annualized 1,885,529; average working capital 7,494,383; average inventory 7,122,242; return on working capital 25.2% / 19.2% / 9.8%. Extra week 654,000 of sales; organic sales 10,063,980. Segments ($ millions): EC sales 10,134.7 / 5,499.7, gross profit 904.9 / 507.1, operating income 484.5 / 159.0; Farnell sales 583.3 / 398.9, gross profit 169.1 / 107.7, operating income 58.6 / 17.1. Guide: sales $11.1B to $11.4B, adjusted EPS $3.90 to $4.10, GAAP EPS $3.80 to $4.05, 87 million shares, tax rate 21% to 25%.
Avnet — Form 8-K (Items 1.01, 2.03), October 15, 2026, and Exhibit 10.1, Amendment No. 3 dated October 13, 2026 — commitments up 1,000,000,000 to 2,750,000,000; additional request capacity 1,000,000,000; Section 7.10 leverage covenant 5.00x through March 2026, 4.50x for June 2026, 4.00x from September 2026.
Avnet — Q4 FY26 results (Form 8-K, Exhibit 99.1), August 5, 2026 — sales 8,295,377; gross profit 865,032; operating income 231,019; net income 126,579; adjusted operating income 317,890; EC operating income 317.2; Farnell operating income 44.8; Q1 FY27 guide sales $9.00B to $9.30B and adjusted EPS $2.80 to $2.90.
Avnet — Form 10-K for fiscal 2026 — transferred and de-recognized receivables $1.98B vs $1.56B; agent components about 7% of inventories; one supplier above 10% of sales; price protection language; revolver $557.0M and securitization $500.0M at June 27; convertible notes $650M, 1.75%, about $91 test over 20 of 30 trading days; securitization limit raised to $700.0M in July 2026; $375M term loan August 12, 2026, due July 2028.
Avnet — prospectus supplement (424B2), August 2026 — $550M notes due 2031; credit facility $1.575B and securitization $700.0M at August 18, 2026.
Avnet Forms 10-Q and 10-K, SEC XBRL companyfacts, September 2021 to June 2026 and earlier earnings 8-Ks (Q1 FY25 to Q3 FY26) — quarterly sales, gross profit, operating income, operating cash flow and quarter-end balances for the charts; October 2022 sales $6,750.1M and operating cash flow −$645.1M; December 2023 inventory $6,116.0M; April 2023 operating income $313.6M; fiscal 2024 operating cash flow $690.0M, fiscal 2025 $724.5M.
Avnet Q1 FY27 earnings call transcript (third-party) — memory pricing about a third of sales growth; inventory split into thirds; about $1.2B committed capacity; further capital raises; gross leverage 3.1x from 3.2x with a 3x target; $0.23 EPS effect of interest; operating expenses 54% of gross profit; Integrated Solutions mix; EC above 5% and towards 6%, Farnell to the low teens; positive cash flow by the end of fiscal 2027. unverified pending the official transcript.
Robinhood market data — close $88.73 (November 3, 2026), last regular trade $86.10 (November 4), 52-week high $108.63 (October 2); daily closes August 21 to October 2 for the convertible test; unverified market data, not filing figures.
SEC XBRL balance series, quarter ends September 28, 2024 to June 27, 2026, $ billions: inventories 5.61, 5.25, 5.27, 5.24, 5.42, 5.29, 5.46, 6.07; receivables 4.58, 4.42, 4.10, 4.33, 4.50, 5.24, 5.50, 6.88; payables 3.59, 3.63, 3.32, 3.49, 3.69, 4.34, 4.63, 6.05.
tkal — Avnet Q4 FY26, the open call graded here; Arrow Q2 2026 ($318M operating cash, 5.4% components margin), WPG Q2 2026 (+82.2% revenue), TD SYNNEX Q3 FY26 (−$976M free cash flow), Micron Q4 FY26 ($12.3B deposits), SK hynix 3Q26 (₩104.6T, 80% margin) for the rope figures.

Avnet Q1 FY27: The Suppliers Stayed, the Banks Came Too, and a Third of the Build Is Memory Price

The setup

The numbers

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