Can Avnet Sustain Its AI and Data Center Growth Momentum Ahead?

Avnet AVT is benefiting from strong demand in AI infrastructure and networking markets. AI-related demand is becoming a larger part of AVT’s business. In the third quarter of fiscal 2026, management stated that the company’s direct exposure to AI and data center customers has increased from around 5-7% to nearly 10-15%.Most of this business is tied to Asia, especially Taiwan, where demand from hyperscalers and server customers remains strong. The company is also benefiting from demand for components that support AI infrastructure. In the third quarter of fiscal 2026, the company reported revenues of $7.1 billion, up 34% year over year and 13% sequentially.AI buildouts are increasing demand for products tied to power management, cooling systems, connectors, capacitors, resistors and sensors. This helped AVT’s interconnect, passive and electromechanical (IP&E) business grow 25% year over year in the quarter. Since AI accelerators require surrounding IP&E products, creating additional sales opportunities beyond semiconductors.AVT expects current demand trends to continue in the near term. With growing backlog levels and book-to-bill ratios above parity across all regions, supported by rising lead times across several component categories as supply conditions tighten, AVT remains well-positioned to continue seeing strong business momentum in the near term.Furthermore, Avnet delivered record sales of $6.67 billion in its Electronic Components business, which increased 34.7% year over year. Avnet is entering an upcycle with demand improving across data center and AI builds, industrial, networking and aerospace/defense, driving better sales execution and operating margin expansion.How Competitors Fare Against Avnet StockAvnet operates in a competitive technology distribution market where it competes with global component distributors as well as broader IT distributors, including Arrow Electronics ARW and CDW CDW. 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 to a crossroads with CDW in the AI infrastructure value chain. Avnet plays its role much earlier in the technology value chain, making the overlap minimal with CDW.AVT’s Price Performance, Valuation and EstimatesAvnet shares have soared 70.9% in the year-to-date period, outperforming the Zacks Electronics - Parts Distribution industry’s 55.9% growth.AVT YTD Performance ChartImage Source: Zacks Investment ResearchDespite this outperformance, AVT stock is trading at a price-to-sales multiple of 0.25X, which is below the P/S multiple of industry’s P/S multiple of 0.38X. The undervaluation is further substantiated by Zacks Value Score of B.AVT Forward 12-Month Valuation ChartImage Source: Zacks Investment ResearchThe Zacks Consensus Estimate for AVT’s fiscal 2026 revenues is pegged at $25.59 billion, implying year-over-year growth of 15.2%. The estimate has remained unchanged for the past 30 days.Image Source: Zacks Investment ResearchAVT currently carries Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Beyond Nvidia: AI's Second Wave Is HereThe AI revolution has already minted millionaires. But the stocks everyone knows about aren't likely to keep delivering the biggest profits. AI’s second wave is moving from infrastructure to implementation and these companies are at the forefront of this transition, positioned to become what Amazon and Google were to the internet era.See Stocks Now >>This article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks