Global electronics components and solutions distributor Arrow Electronics (NYSE: ARW) beat Wall Street’s revenue expectations in Q4 CY2025, with sales up 20.1% year on year to $8.75 billion. On top of that, next quarter’s revenue guidance ($8.25 billion at the midpoint) was surprisingly good and 9.3% above what analysts were expecting. Its non-GAAP profit of $4.39 per share was 23.1% above analysts’ consensus estimates.

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Company Overview

Founded as a single retail store, Arrow Electronics (NYSE: ARW) provides electronic components and enterprise computing solutions to businesses globally.

Revenue Growth

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Regrettably, Arrow Electronics’s sales grew at a weak 1.5% compounded annual growth rate over the last five years. This was below our standards and is a tough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Arrow Electronics’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 3.5% annually.

We can better understand the company’s revenue dynamics by analyzing its most important segments, Components and ECS, which are 67.3% and 32.7% of revenue. Over the last two years, Arrow Electronics’s Components revenue (electronic component sales) averaged 6.6% year-on-year declines. On the other hand, its ECS revenue (computing solutions and services) averaged 10.4% growth.

This quarter, Arrow Electronics reported robust year-on-year revenue growth of 20.1%, and its $8.75 billion of revenue topped Wall Street estimates by 6.6%. Company management is currently guiding for a 21.1% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 3.3% over the next 12 months. Although this projection indicates its newer products and services will fuel better top-line performance, it is still below average for the sector.

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Operating Margin

Arrow Electronics was profitable over the last five years but held back by its large cost base. Its average operating margin of 4.1% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.

Looking at the trend in its profitability, Arrow Electronics’s operating margin decreased by 1.9 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Arrow Electronics’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

This quarter, Arrow Electronics generated an operating margin profit margin of 3.4%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Arrow Electronics’s EPS grew at an unimpressive 7.1% compounded annual growth rate over the last five years. This performance was better than its flat revenue but doesn’t tell us much about its business quality because its operating margin didn’t improve.

We can take a deeper look into Arrow Electronics’s earnings to better understand the drivers of its performance. A five-year view shows that Arrow Electronics has repurchased its stock, shrinking its share count by 32.2%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Arrow Electronics, its two-year annual EPS declines of 19.7% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q4, Arrow Electronics reported adjusted EPS of $4.39, up from $2.97 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Arrow Electronics’s full-year EPS of $11.03 to grow 6.7%.

Key Takeaways from Arrow Electronics’s Q4 Results

We were impressed by Arrow Electronics’s optimistic EPS guidance for next quarter, which blew past analysts’ expectations. We were also excited its revenue outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this was a good print with some key areas of upside. The stock traded up 2.1% to $144.04 immediately following the results.

Indeed, Arrow Electronics had a rock-solid quarterly earnings result, but is this stock a good investment here? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here (it’s free).