Avnet Inc.AVT shares have soared 37.8% in the past six months, outperforming the Zacks Electronics - Parts Distribution industry and Zacks Computer and Technology sector's 25.4% and 19.4% growth, respectively.
AVT 6-Month Performance Chart
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Despite this outperformance, AVT stock is trading at a price-to-sales multiple of 0.21X, which is below the industry's P/S multiple of 0.33X. The undervaluation is further substantiated by its Zacks Value Score of A.
AVT Forward 12-Month Valuation Chart
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The stock's dynamics raise the question: Does it still have room to run, or is it time for investors to consider taking profits? Let's find out.
AI Demand Broadens Avnet's Top-Line Growth
Avnet ended fiscal 2026 on a strong note, with fourth-quarter sales reaching a record $8.3 billion, up 48% year over year and 17% sequentially. Growth was broad-based, with all end markets increasing double digits year over year and sequentially, led by data center, networking, aerospace & defense and industrial. Sales increased across Asia, the Americas and EMEA.
Artificial Intelligence (AI) remains an important catalyst, although management emphasized that the improving demand environment is broader than AI alone. Avnet benefits from data center applications and technologies supporting AI infrastructure, while AI investments are also increasing demand for power management, connectivity, automation and other enabling technologies across industrial markets.
The company is additionally seeing emerging demand from customers deploying AI at the edge, including applications such as robotics, drones and autonomous systems that require sensing, connectivity, embedded computing, power and thermal-management components. Avnet's direct exposure to data-center customers remains particularly meaningful in Asia-Pacific.
Avnet indicated that direct data-center business represents approximately 10-15% of total company sales, with a greater concentration in Asia-Pacific. At the same time, the AI ecosystem is creating indirect opportunities in industrial markets, as hyperscaler and data-center expansion drives demand for cooling, power and other infrastructure components.
The company is also benefiting from its higher-margin interconnect, passive and electromechanical (IP&E) portfolio. Fiscal 2026 IP&E sales reached approximately $4.6 billion compared with $4 billion in fiscal 2025. The IP&E benefited from AI infrastructure, industrial automation, robotics, drones and edge applications as these avenues require increasingly complete technology solutions.
Avnet's Operating Leverage is Strengthening Margins
Although Avnet operates in a competitive technology distribution market, this hasn't stopped it from increasing its top and bottom-line growth. AVT competes with global component distributors as well as broader IT distributors including Arrow ElectronicsARW, TD SYNNEXSNX and CDWCDW. However, the company has created a niche for itself, which helps to protect its margins.
Arrow Electronics competes head-to-head with Avnet in electronic component distribution, semiconductor supply, embedded computing and engineering services. Both Arrow Electronics and Avnet serve OEMs, industrial manufacturers, automotive suppliers, communications equipment vendors, and data center customers.
Avnet comes at a crossroad with CDW and TD SYNNEX as they form part of the AI infrastructure value chain. Avnet plays its role much earlier in the technology value chain by supplying electronic components directly to equipment manufacturers, making the overlap minimal with CDW and TD SYNNEX.
However, the demand environment points to continued momentum for Avnet. Lead times increased across most semiconductor and IP&E categories, while book-to-bill ratios were above parity in all regions and backlog remained healthy and extended, providing better visibility into fiscal 2027. Avnet is entering fiscal 2027 with significantly improved profitability.
Avnet's fourth-quarter adjusted operating income increased 122% year over year and 44% sequentially to $318 million, while adjusted operating margin expanded to 3.8% from 3.1% in the preceding quarter and 2.5% a year earlier. Electronic Components delivered a 4.1% operating margin, while Farnell reached 9.0%. This improvement reflects the operating leverage embedded in Avnet's model.
Fourth-quarter sales rose 48%, while adjusted operating income grew substantially faster. For the first quarter of fiscal 2027, Avnet expects sales of $9.0-$9.3 billion, implying approximately 10% sequential growth at the midpoint, alongside adjusted EPS of $2.80-$2.90. The Zacks Consensus Estimate for Avnet's upcoming quarter shows growth of 241% year over year. Estimates have been revised upward in the past 30 days.
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Conclusion: Buy AVT Stock Now
Avnet remains a compelling buy, supported by accelerating AI infrastructure demand, strong growth in networking and IP&E products, expanding margins and improving earnings outlook. Despite its sharp rally, the stock continues to trade at a valuation below the industry average, offering attractive upside as AI-driven component demand and industrial spending remain robust. AVT sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today's Zacks #1 Rank stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
