Arrow Electronics (ARW -0.99%), a global distributor of electronic components and enterprise computing solutions, released its earnings for the second quarter of fiscal 2025 on July 31, 2025. The company reported GAAP sales of $7.58 billion, ahead of consensus GAAP estimates of $7.16 billion. Non-GAAP earnings per share reached $2.43, beating the $2.07 non-GAAP estimate. Revenue (GAAP) increased 10.0% year-over-year, and Net income attributable to shareholders (GAAP) reached $188 million, up 73.0%. Despite surpassing analyst expectations, profitability metrics painted a mixed picture. Operating income (GAAP and non-GAAP) and earnings per share (GAAP and non-GAAP) both fell compared to Q2 2024. The quarter showcased strong performance in Arrow’s Global Enterprise Computing Solutions segment, and mixed progress on margins and cash flow.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $2.43 | $2.07 | $2.78 | (13.0%) |
| Revenue | $7.58 billion | $7.16 billion | $6.89 billion | 10.0 % |
| Net Income | $188 million | $109 million | 72.5 % | |
| Operating Income | $191 million | $212 million | -9.9% | |
| Global Components Revenue | $5.28 billion | $5.03 billion | 5.0% | |
| Global ECS Revenue | N/A | $1.86 billion | N/A |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
Business Overview and Recent Focus Areas
Arrow Electronics provides products and solutions for industrial, automotive, telecommunications, and consumer electronics sectors. It operates two core segments. The Global Components segment supplies electronic and electrical components such as semiconductors, passives, and connectors. The Global Enterprise Computing Solutions (ECS) segment offers value-added distribution of enterprise and midrange computing products, including data center hardware, software, and services.
In recent years, the company has emphasized maintaining a broad and diverse customer and supplier base to hedge against market volatility. Its business strategy prioritizes strong supply chain execution, expansion of its digital cloud marketplace platform called Arrowsphere, and continuous investment in technological solutions that help customers manage complex information technology needs. Efficient inventory management and capital allocation are also critical success factors.
Second Quarter 2025 Performance Highlights
The quarter's top-line growth was driven in large part by a 23.3% increase in Global ECS revenue (GAAP) to $2.295 billion. This segment specializes in enterprise-level IT products and services, including servers and cloud solutions. Americas ECS sales (GAAP) were up 9.2% and EMEA (Europe, Middle East, and Africa) sales climbed 38.5% year over year (GAAP), as demand for IT-as-a-Service offerings and the Arrowsphere cloud marketplace accelerated. Global ECS billings, a key metric capturing all invoiced sales, rose 15% year over year to $5.14 billion. Gross profit in the ECS segment (GAAP) increased by 16.1% year-over-year to $257 million, but operating income (GAAP) fell by 5% to $97 million. Operating margin as reported narrowed to 4.2%, down from 5.5% in the previous year.
The Global Components segment, which distributes electronic parts such as semiconductors and connectors, achieved GAAP revenue growth of 5.0% to $5.28 billion. The Americas and Asia-Pacific regions saw increases of 8.6% and 6.5% respectively in GAAP sales, while EMEA slipped by (0.9%) (GAAP). However, segment operating income fell (11.0%) to $187 million. Non-GAAP operating margin dropped from 4.3% in Q2 2024 to 3.6%. Gross margin (non-GAAP) was 11.2%, but remained below historical highs recorded in recent years.
Company-wide, net income (GAAP) reached $188 million, an increase of 73.0% from the same period last year. Despite the revenue beat and jump in net income, operating earnings (GAAP) declined 11%, reflecting rising expenses and tighter profitability.
Cash flow from operations (GAAP) was negative at ($205.9 million). Arrow repurchased $50.7 million in shares, totaling $110.1 million for the first half of FY2025.
Management continued to call out growing adoption of digital platforms such as Arrowsphere -- Arrow's marketplace for cloud-based IT solutions. The ECS segment backlog and IT-as-a-Service pipeline remained robust. The company noted a minor boost to global components second-quarter sales from recently implemented tariffs, adding about 1% to sales. Management stated that these tariff effects could continue to impact sales figures in the coming quarters, as discussed in management commentary during the Q1 2025 earnings call, though the longer-term implications for costs and profits are uncertain.
Looking Ahead: Guidance and Investor Focus Points
For Q3 FY2025, Arrow expects consolidated sales (GAAP) between $7.30 billion and $7.90 billion. Global Components (GAAP) is projected at $5.30 billion to $5.70 billion, while ECS (GAAP) is forecast at $2.00 billion to $2.20 billion. Non-GAAP earnings per share are expected in the range of $2.16 to $2.36, which points to sequentially lower profitability despite the strong top-line outlook in the prior quarter. Management anticipates a normalized tax rate of 23% to 25% and interest expense of about $65 million. Currency trends are expected to increase sales by approximately $135 million and add $0.11 to earnings per share on a diluted basis compared to the prior year.
Investors may want to watch ongoing trends in segment margins, operating efficiency, inventory levels, and working capital movements as demand patterns shift. Areas of focus include the pace of adoption of the Arrowsphere cloud platform and ongoing performance in both geographic and product segments. Arrow Electronics (ARW -0.99%) does not currently pay a dividend.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
