Arrow Electronics (NYSE:ARW) reported second-quarter 2026 revenue of $10 billion, up 32% from a year earlier and 30% on a constant-currency basis, as broad-based demand, higher unit volumes, price inflation and value-added services supported growth across its businesses.
Non-GAAP diluted earnings per share rose 124% year over year to $5.45, exceeding the company’s guidance range. Non-GAAP operating income increased $188 million to $403 million, while operating margin expanded 120 basis points to 4% of sales.
Global Components Demand Builds
Arrow’s Global Components segment generated $7.4 billion in second-quarter sales, up $726 million sequentially, or 11% from the prior quarter. Segment non-GAAP operating income rose $32 million sequentially to $397 million. Operating margin was 5.4%, down 10 basis points sequentially but up 180 basis points from a year earlier.
Chief Financial Officer Raj Agrawal said book-to-bill ratios increased and remained above one in each of the company’s three regions, while backlog continued to build into the first half of 2027. He said approximately one-third of Global Components’ sequential revenue growth came from price inflation, with customer unit demand accounting for the remainder.
Growth was broad-based across geographies, verticals and customer segments, according to the company. Arrow identified aerospace and defense, industrial and transportation as its three largest Global Components verticals globally. Sales in the Americas were supported by aerospace and defense, industrial and transportation; EMEA was supported by transportation and aerospace and defense; and Asia benefited from industrial, transportation and data-center computing demand.
Rick Marano, president of Global Components, said the company views the market recovery as still being in its early stages. He distinguished between AI, which he described as an evolving market rather than a recovery, military and aerospace activity, and the company’s core distribution business.
Marano also said Arrow was seeing customers restore buffer inventory, but characterized the activity as disciplined rather than excessive. “I don’t see anything irrational from that perspective,” he said, adding that the company was not seeing panic-driven pre-positioning of inventory.
Interconnect, passive and electromechanical components, or IP&E, exceeded $1 billion in sales for the second consecutive quarter. Memory represented a low double-digit percentage of Global Components revenue, Agrawal said.
ECS Sales Rise, Though Contract Charge Pressures Margin
Global Enterprise Computing Solutions, or ECS, recorded second-quarter sales of $2.6 billion, an increase of $332 million, or 14%, from a year earlier. On a constant-currency basis, ECS sales rose 13%. Total ECS billings increased 14% to $5.9 billion, while backlog climbed more than 75% year over year to an all-time high.
Arrow said it saw demand across cloud, cybersecurity, data protection, data intelligence and infrastructure software. The company said on-premise storage and compute hardware remained constrained by limited supply, primarily due to memory and SSD shortages, which supported demand for software and public-cloud alternatives offered through its ArrowSphere platform.
ECS non-GAAP operating margin declined 100 basis points year over year after Arrow recorded a charge tied to underperforming multiyear contracts with one partner. Agrawal said the charge totaled $27 million and that ECS margins would have been above 4% without it.
The company terminated one key element of a beyond-distribution agreement with the partner and is working to restructure another element. Agrawal said Arrow expects additional charges in the second half of the year, though at a lower pace than in the second quarter. He added that the company still expects ECS to show its typically strong fourth-quarter margin profile as higher volumes leverage operating expenses.
During the question-and-answer session, Eric Nowak, president of ECS, said a mutually agreed contract loss would have no impact on ECS revenue, margins or profits. Austen said reports that the business involved $1.4 billion in revenue were inaccurate, placing the amount at roughly $700 million in revenue to Arrow.
Cash Flow, Debt and Outlook
Cash flow from operating activities was $318 million in the quarter, bringing year-to-date operating cash flow above $1 billion. Net working capital declined by about $100 million sequentially to $6.8 billion, while inventory increased $217 million to $5.9 billion.
Gross debt fell about $300 million from the prior quarter and about $650 million from a year earlier to $2.2 billion. Arrow’s adjusted leverage ratio improved to 1.75 times. The company repurchased $43 million of shares during the quarter.
For the third quarter, Arrow forecast total sales of $9.6 billion to $10.2 billion and non-GAAP diluted EPS of $4.83 to $5.03. At the midpoint, the sales outlook implies 28% year-over-year growth.
- Global Components sales are expected to be $7.5 billion to $7.9 billion, representing 5% sequential growth at the midpoint.
- ECS sales are expected to be $2.1 billion to $2.3 billion, up 2% year over year at the midpoint.
- Arrow expects a non-GAAP tax rate of 23% to 25% and interest expense of about $50 million.
Agrawal said Global Components is expected to perform at or above seasonal trends in all regions through the rest of the year, although Asia is expected to be seasonally strong in the third quarter while EMEA is typically weaker. He also said supply-chain services profit is expected to return to more normal levels in the third quarter.
Austen also announced that Dee Merriwether will join Arrow as president and chief operating officer in early September. Austen said he will remain interim CEO until the board completes its succession-planning process and appoints a permanent chief executive.
About Arrow Electronics (NYSE:ARW)
Arrow Electronics (NYSE: ARW) is a global provider of products, services and solutions to industrial and commercial users of electronic components and enterprise computing solutions. The company offers a broad portfolio of semiconductors, passives, connectors, electromechanical devices and embedded solutions, serving customers across diverse end markets including automotive, communications, computing, aerospace, defense and healthcare. Through its extensive supplier relationships, Arrow enables design engineers to identify and procure components required for the development of new electronic systems and devices.
In addition to component distribution, Arrow delivers value-added services such as design engineering support, supply chain management, global logistics and technical training.
