Arrow Electronics, Inc. (ARW) Income Statement

The sequential acceleration from 20.1% in 2025Q4 to 39.0% in 2026Q1 and then 31.8% in 2026Q2 indicates a robust cyclical recovery in electronics distribution. This growth appears broad-based, as gross profit expanded at a similar pace, suggesting volume-driven demand rather than pricing alone. However, the sustainability of this pace is uncertain given the industry's historical cyclicality, and investors should monitor whether growth normalizes as inventory restocking completes.

The stability in gross margin, despite significant revenue swings, suggests ARW maintains disciplined pricing in a competitive distribution market. Compared to peers, ARW's gross margin is higher than AVT's 10.4% and SNX's 7.0%, but lower than WCC's 20.2%, indicating a mid-tier position. The slight dip from 12.4% in early 2024 to current levels may reflect a mix shift or competitive pressure, but the recent stabilization implies that the company has adapted to the current demand environment.

The operating margin expanded from 2.3% in 2025Q3 to 3.8% in 2026Q2, indicating that fixed costs are being spread over a larger revenue base. SG&A as a percentage of revenue declined from 8.3% in 2025Q1 to 6.9% in 2026Q2, reflecting cost discipline. This leverage is a key driver of the earnings recovery, but it may reverse if revenue growth decelerates, as SG&A is likely to remain sticky in absolute terms.

The cost structure is heavily weighted toward product costs, typical for a distributor, leaving limited room for margin improvement without supplier pricing changes. SG&A, at $688.1M in 2026Q2, is the primary controllable cost, and its growth has been moderate relative to revenue, indicating expense discipline. R&D is negligible, as expected for a distributor, so the focus remains on working capital management and supplier relationships to protect margins.

The trough in 2025Q3, with net income of only $109.2M, appears to have been the low point of the downcycle, as subsequent quarters show accelerating revenue and margin expansion. This inflection was likely driven by inventory normalization and resumption of demand in end markets. The lasting impact is a more efficient cost base, as SG&A has not grown proportionally with revenue, suggesting that the company has emerged from the downturn with improved operating leverage.