Fitch Ratings has kept Avnet Inc.’s long-term credit rating at BBB-, which is the lowest investment grade, but it has changed the company’s outlook from stable to negative. The agency said it is worried that Avnet’s high debt levels may stay elevated until at least 2027.

As of June 28, 2025, Avnet’s debt load compared to its earnings (known as EBITDA leverage) was 3.7 times. This is above Fitch’s warning level of 3.0 times and also above Avnet’s own goal of keeping it closer to 2.5 times. The higher debt is the result of two difficult years after the COVID boom, when semiconductor companies were left with too much inventory and sales slowed.

Avnet has already made changes to its financial agreements, giving itself room to hold leverage above 4.0 times until 2026. Fitch said this shows that even though there are some early recovery signals, such as rising orders and better book-to-bill ratios, the company’s financial pressure may not ease quickly.

Another point of concern is how Avnet has been using its cash. Fitch noted that the company bought back a large number of its own shares in the past two years, even while debt was climbing. This suggests management may be flexible in its financial discipline in the short term, even if they say they remain committed to keeping investment grade ratings over time.

Avnet is one of the largest distributors of electronic parts in the world, serving over a million customers in 140 countries, with revenues above $22 billion in 2025. Fitch said this global scale and reach make it very difficult for new competitors to challenge Avnet. The company also benefits from strong positions in industries such as manufacturing, transportation, defense, and aerospace, all of which are expected to grow as digitization, AI adoption, and defense budgets expand.

However, competition in the distribution sector is intense, which keeps Avnet’s profit margins thin. Its EBITDA margin has already slipped to 3.3% from more than 4% in better times. Fitch expects margins to improve slowly, reaching 3.5% in 2026 and then moving above 4% once inventories return to normal and sales in Western markets pick up.

Even with these improvements, Fitch still believes Avnet’s debt ratio will stay higher than 3.0 times until 2027, which is why the outlook was cut to negative.