ADI

MD Sass, a boutique asset management firm, published its second-quarter investor update for its flagship, the "MD Sass Concentrated Value Strategy." The letter can be downloaded here. In the first half of 2026, AI infrastructure stocks led the market, with the Russell 1000 Value increasing by 16.3%, outpacing the S&P 500 (10.2%) and Russell 1000 Growth (5.3%). This growth was fueled by semiconductor, memory, and hardware companies benefiting from AI development, even though they are considered cyclical. These sectors, representing only 7.7% of the Russell 1000 Value at the start of the year, contributed nearly 70% of its returns. The portfolio gained 10.0% in the second quarter, net of fees, compared to 13.9% for the Russell 1000 Value Index. Year-to-date, the strategy returned 6.6%, net of fees, versus 16.3% for the Index. The portfolio faced challenges due to limited exposure to companies with the greatest upside from AI infrastructure investments. It also lacked exposure to the Energy sector, which returned about 20% in the first half amid geopolitical tensions with Iran that increased commodity prices, affecting performance. The firm recognizes the importance of adapting its strategies while maintaining core investment principles as it explores future opportunities in emerging technological themes. Also, check the fund’s top five holdings to see its best picks in 2026. In its second-quarter 2026 investor letter, MD Sass Concentrated Value Strategy highlighted Analog Devices, Inc. (NASDAQ:ADI). Analog Devices, Inc. (NASDAQ:ADI) is a US-based semiconductor company that engages in the design, manufacture, testing, and marketing of integrated circuits (ICs), software, and subsystem products and was added to the portfolio this quarter. On August 28, 2026, Analog Devices, Inc. (NASDAQ:ADI) closed at $361.78 per share. Over the past month, Analog Devices, Inc. (NASDAQ:ADI) returned -0.03%, while its shares have gained 43.96% in the last 52 weeks. Analog Devices, Inc. (NASDAQ:ADI) has a market capitalization of $175.31 billion, and its stock has traded within a 52-week range of $223.47 to $445.91. MD Sass Concentrated Value Strategy stated the following regarding Analog Devices, Inc. (NASDAQ:ADI) in its Q2 2026 investor letter: Analog Devices, Inc. (NASDAQ:ADI) is not on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 102 hedge fund portfolios held Analog Devices, Inc. (NASDAQ:ADI) at the end of the second quarter, which was 109 in the previous quarter. While we acknowledge the potential of Analog Devices, Inc. (NASDAQ:ADI) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock. In another article, we discussed Analog Devices, Inc. (NASDAQ:ADI) and noted that the stock is experiencing significant momentum as it approaches the next quarter. In addition, please check out our hedge fund investor letters Q2 2026 page for more investor letters from hedge funds and other leading investors. READ NEXT: 33 Stocks That Should Double in 3 Years and 15 Stocks That Will Make You Rich in 10 Years. Disclosure: None. This article is originally published at Insider Monkey.

Analog Devices delivered results for Q2 that were above Wall Street expectations, with management attributing broad-based growth to robust demand in data center and industrial markets. CEO Vincent Roche highlighted that the company’s grid-to-chip strategy and continued investment in R&D enabled Analog Devices to meet increasing customer needs for high-performance power management and optical solutions. The company also benefited from strong momentum in the energy and defense sectors, as well as operational improvements that enhanced supply chain agility and responsiveness. Is now the time to buy ADI? Find out in our full research report (it’s free). Revenue: $4.02 billion vs analyst estimates of $3.92 billion (39.6% year-on-year growth, 2.6% beat) Adjusted EPS: $3.45 vs analyst estimates of $3.34 (3.3% beat) Adjusted Operating Income: $2.01 billion vs analyst estimates of $1.93 billion (50% margin, 4.3% beat) Revenue Guidance for Q3 CY2026 is $4.3 billion at the midpoint, above analyst estimates of $4.08 billion Adjusted EPS guidance for Q3 CY2026 is $3.86 at the midpoint, above analyst estimates of $3.55 Operating Margin: 40.1%, up from 28.4% in the same quarter last year Inventory Days Outstanding: 134, down from 142 in the previous quarter Market Capitalization: $181.1 billion While we enjoy listening to the management’s commentary, our favorite part of earnings calls is the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention. Harlan Sur (JPMorgan) asked about the drivers behind the projected step-up in gross margins. CFO Richard Puccio explained that favorable mix, higher fixed cost absorption, and price adjustments are the primary drivers, with inflation and cost increases still being monitored. Vivek Arya (Bank of America Securities) questioned how much of recent growth is secular versus cyclical, and whether operating leverage could expand. CEO Vincent Roche and Puccio highlighted AI, defense, and Maxim synergy tailwinds, but noted macroeconomic volatility remains a risk. Stacy Rasgon (Bernstein Research) inquired about growth prospects for the communications segment, especially data center exposure. Management stated that data center is now the majority of communications revenue and expects strong double-digit growth in this area for years to come. Tore Svanberg (Stifel) asked if AI is lifting underlying analog industry growth rates. Roche noted that the analog sector could experience double-digit compounded growth, with rising sophistication and pricing power, especially in data centers. Matthew Prisco (Cantor) pressed on supply chain capacity and constraints. Management confirmed ongoing investments in manufacturing and external partnerships, with scenario planning to handle further demand acceleration. In future quarters, the StockStory team will be watching (1) the rate of adoption for Analog Devices’ AI and data center solutions, (2) the company’s ability to sustain high gross margins amid inflation and rising costs, and (3) how well supply chain and inventory management adapt to continued demand growth. Progress in energy storage and microgrid applications will also be important signposts for the company’s long-term growth trajectory. Analog Devices currently trades at $373.95, in line with $376.63 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free for active Edge members). ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI is taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies. Our AI system flagged Palantir before it ran 1,662% between October 2022 and February 2026. AppLovin before it ran 753% between February 2024 and February 2026. Nvidia before it ran 1,178% between January 2023 and February 2026. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE. Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.

Image source: The Motley Fool. Wednesday, Aug. 19, 2026 at 10:00 a.m. ET Chief Executive Officer and Chair - Vincent T. Roche Chief Financial Officer - Richard Puccio Senior Director, Investor Relations - Jeff Ambrosi Operator: Good morning, and welcome to the Analog Devices Third Quarter Fiscal Year 2026 Earnings Conference Call. Which is being audio webcast via telephone and over the web. I would now like to introduce your host for today's call, Mr. Jeff Ambrosi, of Investor Relations. Sir, the floor is yours. Jeff Ambrosi: Thank you, Danny, and good morning, everybody. Thank you for joining our third quarter fiscal 26 conference call. Joining me today are ADI CEO and Chair, Vincent T. Roche, and ADI CFO, Richard Puccio. For anyone who missed the release, you can find it at investor.analog.com. Along with related financial schedules. The information we are about to discuss includes forward-looking statements which are subject to certain risks and uncertainties as further described in our earnings release, periodic reports, other materials filed with the SEC. Actual results could differ materially from the forward looking information, as these statements reflect our expectations only as of the date of this call, We undertake no obligation to update these statements except as required by law. References to gross margin, operating and nonoperating expenses, operating margin, tax rate, earnings per share, and free cash flow in our comments today will be on a non-GAAP basis, Which excludes special items. When comparing our results to our historical performance, special items are also excluded from prior periods. Reconciliations of these non GAAP measures to their most directly comparable GAAP measures, and additional information about our non GAAP measures are included in today's earnings release, References to earnings per share are on a fully diluted basis. And with that, I will turn the call over to ADI CEO and chair, Vincent T. Roche. Vincent T. Roche: Thank you, Jeff, and a very good morning to you all. Well, as you have seen, third quarter revenue, margin and earnings all exceeded our outlook with growth across all of our end markets. Led by data center and industrial, propelling us to the first $4 billion quarter in ADI's history Demand for our solutions continues to grow. Supported by robust AI and defense spending, cyclical momentum, and underlying secular content growth across our diversified end markets. Through targeted R&D, we continue to extend the limits of technology performance, and accelerate the pace with which we are delivering more comprehensive solutions to our customers' toughest problems. In tandem, investments in our hybrid manufacturing network have enabled us to increase the agility and responsiveness of our supply chain and consistently capture above seasonal growth for more than 2 years. Now for the rest of my remarks, today, I will focus on how we are helping customers meet an unprecedented and still accelerating demand for AI infrastructure and energy systems. The fact that data center capacity is now measured in gigawatts rather than flops and tops underscores 1 of the most defining challenges of the AI era. Power availability has become the primary constraint to further AI progress. Solving this challenge more than simply adding more energy, however, it demands a grid-to-chip system level approach. That encompasses both improving the availability and delivery of energy and extracting the maximum computing power from every watt delivered. Now let me walk you through some of the key elements of our grid-to-chip strategy starting at the grid where the AI bottleneck begins. As electricity networks become more complex, visibility, efficiency, and resilience are becoming critical challenges. Customers are turning to ADI's grid monitoring solutions to illuminate the flow of energy across the network. Providing real time insights into voltage, current, power quality, and system health. And our higher value solutions are helping utilities, energy operators and infrastructure providers to improve efficiency, reliability, and utilization. An increasingly essential part of the grid and 1 of the fastest growing sectors is energy storage. Here, customers choose ADI's industry leading battery management technology to help maximize usable energy improve system efficiency, extend battery life, enhance safety, and, of course, improve ROI. Expanding and modernizing the traditional grid alone, however, is not enough to keep pace with the speed of AI infrastructure deployment. To accelerate time to power hyperscalers are increasingly exploring dedicated microgrids, which are opening up additional avenues of growth for ADI. We believe this trend of localizing power will augment our $500 million plus energy business which began inflecting in 2025, and has been delivering accelerating growth this year also. Importantly, our strong and growing positions across both energy and data center make us a more critical AI ecosystem player spanning the entire electricity value chain from generation, transmission, and storage to distribution through rack power and ultimately processor power delivery, essentially the vascular system of the data center. Now once the grid makes contact with the data center, AI's extreme energy and information density requirements make ADI's deep expertise and innovation in high performance power management, sensing and telemetry, as well as optical connectivity even more critical. So let me start with our optical franchise. As I begin to unpack for you how we are growing our data center business and opportunity by helping our customers resolve the tremendous challenges of energy and information density. When we think about the journey of data through the infrastructure, there are 2 critical pathways. The data path of electro optics and the control path which guides, optimizes, and ensures the integrity of the data path. Our focus is on the control path. Where we have been setting and extending the industry performance envelope for decades. Today, the complexity, of efficiently moving data at ever higher speeds within and between racks. And across data center campuses is growing exponentially. Customers are increasingly relying on ADI to provide essential timing power management, data conversion. Monitoring, and control capabilities, that enable lasers and transceivers to operate with precision, reliably, efficiently, and at the necessary scale for AI workloads. And as customers seek further increase the amount of optical lanes, signal bandwidth, or both, to accelerate network speeds from 800 Gb to 3.2 Tb per second. We believe that we are very well positioned to benefit 3-fold. From unit growth in pluggables and coherent light modules increasing BOM content and greater share as these transitions unfold. As new architectures, such as optical circuit switching and co packaged optics, gain traction in next generation large scale AI clusters complexity expands even further. And our long term opportunity continues to grow. Based on current design wins and customer commitments, our OCS revenue is poised to approximately double this year and we are targeting a similar level of growth in 2027. In the nascent CPO space, which we view as a SEM expander, the criticality of ADI's precision control technology further increases as thermal and serviceability challenges rise. So in short, the combination of market growth, expanding content, increasing share and differentiated value creation across data center optics. Reinforces our confidence that this segment will remain a strong growth vector for ADI over the coming years. Now let me turn to our power franchise, the need for customers to convert and deliver precise increasing levels of power at the rack and compute layers efficiently and safely, is driving continued broad based growth across our portfolio. Customers are leveraging ADI's products and solutions to push for greater than 98% conversion efficiencies multi kilowatt power delivery with peak power levels up to 2x the rated load, and comprehensive protection telemetry, and fault recording capabilities that enhance system reliability and maximize uptime. To put just 1 of those differentiators in context, a 1% difference between 97% and 98% efficiency may not sound like very much, but a 97% conversion efficiency loses roughly 50% more energy through heat than a 98% solution. Over time, of course, that difference compounds. In terms of the need for additional cooling infrastructure, stress on equipment, and operating costs. And we believe our opportunity will continue to grow substantially as density demands of AI clusters continue to increase. The industry's architectural transition toward 800 volt DC power distribution, for example, plays directly into ADI's power management expertise and portfolio. And we are seeing a significant design-in uptick for our protection and 800 volt to intermediate power conversion technologies which can deliver 20 kilowatts of power at industry leading power densities, exceeding 2.5 kilowatts per cubic inch. And at the intermediate to core conversion layer, which is 1 of the fastest and largest growing analog opportunities in the AI era, our combination of advanced power conversion, intelligent system control, and real time telemetry is critical to achieving the necessary power density efficiency, and reliability requirements for next generation processors to operate at 6 thousand amps and sub 1 volt. Our Empower acquisition further enhances ADI's vertical power story. By enabling us to take power into the processor package itself, In large scale AI deployments, these architectural advantages can reduce compute power consumption and temperature, by approximately 10% to 15%, which equates to roughly $30 million in annual savings in a 1 GW data center. As with optical, our power pipeline is growing rapidly, and the direction and rate of our R and D investments reflects our belief in the size of the SAM opportunity before us. And our confidence that data center power can remain a strong growth vector for ADI over the coming years. So in summary, we believe the architectural shift underpinning the evolving AI era are increasing ADI's role as a critical partner across the grid to chip ecosystem and driving extraordinary opportunity. Our current assessment is that our 2030 data center and energy SAM has more than doubled from what we had envisioned just 1 year ago. This dramatic expansion is not simply a function of increased AI infrastructure CapEx. It reflects the impact of new markets and architectures that require orders of magnitude more analog content delivered via higher value solutions. Stepping back to frame this growth on the larger landscape of ADI's continued evolution, grid to chip, is but 1 facet of the 1st generation of AI. Characterized by applications largely focused on data centers. The ATE growth we have recently spoken to on these calls is yet another facet. As great as the impact of generation 1 AI has been so far for ADI, however, we continue to believe that the bigger prize may be in the 2nd generation as AI extends its reach from the data center to the physical world in the form of pervasive robotics, digital health, autonomous mobility, and so on and so forth. In this now emerging phase, AI must not only support higher level learning and analytics, but also real time sensing, inference, and responsiveness to complex real world signals. Our ability to tackle this challenge through our products and solutions based reasoning, informed by deep physical intelligence, will extend our AI value proposition across the entire addressable space. We are able to pursue this horizon of AI opportunity as a result of the tremendous optionality built into ADI's business model, which is designed to support both upside growth asymmetry as well as cyclical downside resiliency. This optionality is founded by leveraging our cutting edge technology stack, and domain expertise at the electrophysical interface as well as long term partnerships with our customers. Our success in AI to date is the latest proof point and I believe the best is yet to come. And with that, I will hand it over to Richard. Richard C. Puccio Jr.: Thank you, Vincent, and let me add my welcome to our third quarter earnings call. Revenue in the third quarter was $4.02 billion finishing above the high end of our outlook, and increasing 11% sequentially and 40% year over year. Growth was broad based across markets and regions. Industrial, which represented 49% of our third quarter revenue, finished up 10% sequentially and 53% year over year. We saw year over year growth across all our industrial businesses led by ATE, electronic test and measurement, aerospace and defense, and automation. Automotive represented 25% of revenue, finishing up 14% sequentially and 16% year over year. Our higher content and share positions globally continue to result in growth well above SAAR. We are seeing diversified strength across customers and products in key secular growth areas, including next gen ADAS, and infotainment systems and also in electric powertrains. Communications represented 16% of revenue, finishing up 18% sequentially and 84% year over year. Data center, which now accounts for 80% of our communications revenue, continued to accelerate with more than 100% year-over-year growth in both optical and power. In wireless, we delivered more than 25% year-over-year growth as we continue to against cyclical tailwinds. Lastly, consumer represented 10% of quarterly revenue, flat sequentially and up 6% year over year. Our diversified consumer business showed strong resilience despite memory driven challenges. We achieved year over year growth across smartphones, hearables, and wearables and saw accelerated growth in our B2B like prosumer franchise. Now on to the rest of the P&L. Third quarter gross margin was 72.5%, down 50 basis points sequentially and up 33 basis points on a year over year basis. Driven by higher revenue, utilization, and favorable mix. OpEx in the quarter was $907 million resulting in an operating margin at the high end of our outlook or 50%, is up 100 basis points sequentially and 780 basis points year over year driven by improved gross margin and execution discipline. Non operating expenses were $69 million and the tax rate for the quarter was 13.1%. All told, EPS finished at the high end of our outlook for a record $3.45 up 12% sequentially and 68% year over year. I would like to highlight a few items from our balance sheet and cash flow statements. Cash and short term investments decreased to $2.3 billion driven by the successful closing of our Empower Semiconductor acquisition on July 7, where we paid $1.5 billion in an all-cash transaction. Our net leverage ratio now sits at point 9. We increased inventory $83 million sequentially as we continue to build strategic dive bank to support accelerating demand. We exited fiscal Q3 with record balance sheet inventory and increased inventory at our distributors. Despite the increases, our days declined to 156 and channel weeks fell below our 6- to 7-week target. Over the trailing 12 months, operating cash flow and CapEx were $5.5 billion and $600 million respectively, We continue to expect fiscal 2026 CapEx to be within our long term model of 4% to 6% of revenue. Free cash flow over the trailing 12 months was a record $4.9 billion or 36% of revenue. Over that same period, returned more than 100% to shareholders through dividends and share repurchases. As a reminder, the durability and strength of our financial model allows us to target a 100% free cash flow return over the long term. Aiming to use 40 to 60% to support our annual dividend and the remainder for share count reduction. Now moving on to our fourth quarter outlook. Revenue is expected to be $4.3 billion plus or minus 100 million Operating margin at the midpoint is expected to be 52% plus or minus 100 basis points. We expect nonoperating expenses of approximately 80 million and a tax rate of 12% to 14%. Based on these endpoints, adjusted EPS is expected to be $3.86 ±$0.15. In closing, our record results and outlook underscore our ability capitalize on cyclical and secular tailwinds across the AI ecosystem, defense, core industrial, and automotive markets. We will continue to balance execution discipline with strategic growth investments to navigate a dynamic macro and geopolitical environment while delivering on our attractive financial model. With that, I will give it back to Jeff for Q&A. Jeff Ambrosi: Thank you, Richard. Now let's get to our Q&A session. We ask that you limit yourself to 1 question in order to allow additional participants on the call this morning. If you have a follow-up, please re queue and we will take your question if time allows. With that, operator, can we have our first question, please? Operator: If your question has been answered and you wish to be removed from the queue, Our first question comes from Harlan Sur with JPMorgan. Your line is open. Harlan Sur: Good morning and congratulations on the continued solid execution On the strong operating margin guidance and therefore strong implied gross margins, I am sort of rolling up to about 73.5% gross margin for October, a 100-basis-point improvement. Your utilizations are already at high levels. You have talked about mix in volume. As the primary drivers going forward. Are these 2 dynamics driving most of the 100-plus-basis-point step up in gross margins in October, or is the team implementing more price increases beyond the actions that you took at the beginning of the year? And this is also maybe contributing to the strong gross margin profile as well. Richard C. Puccio Jr.: Thanks for the question, Harlan. I will take this 1. So, you know, as we described for Q3, gross margin came in as expected. We are actually expecting a gross margin increase of about a 150-bps to about 74% and you were spot on. This is driven by favorable mix Higher fixed cost absorption, obviously, following the higher revenue and our price adjustment. So if we look to sort of medium term, I would remind you that we do have a seasonal shutdown coming up in our first quarter, which does create some drag on gross margin and we are expecting more cost in increases coming. You know, inflation is still a persistent factor. That said, the full extent of our price action, which has been announced is not captured in Q4. So we will get a full quarter of shipments in Q1 with some trailing impact as we review contracts. So, overall, we see gross margin hanging in at the Q4 exit level. As long as we maintain the revenue and mix that we expect. Jeff Ambrosi: Thank you, Harlan. We will move to our next question, please. Operator: Thank you. Our next question comes from Vivek Arya with Bank of America Securities. Your line is open. Vivek Arya: Thanks for taking my question. Vincent, I am very interested to hear your thoughts about fiscal 2027. If I look over the last 2 years, ADI's top line has accelerated, I think, almost every quarter on an year-on-year basis. And how much of that do you think has been kind of secular? How much of that has been cyclical? How much of that has been pricing? And if I were to just take your Q4 outlook midpoint and just assume normal seasonality, it suggests at least, like, a 20% or so-plus growth year into fiscal 27. So just curious to hear what your high-level thoughts are. are there any areas of constraints? And if I could sneak in something related to that, is there more operating leverage left if indeed your top line were to grow 20%? Thank you. Vincent T. Roche: We will take the rest of the call, Vivek, to answer those questions. So what I will say is let me unpack a little bit of the story and then Richard can add some of his own commentary as well. So, you know, since we called the in the second quarter of 24, we have seen our particular strengths manifest through the following kind of areas. So we are clearly a beneficiary of the defense and the AI supercycles, which I think will persist for many, many years to come. You know, who knows what the trajectories will look like, but you know, the right now, the aerospace and defense the APE and data center businesses, they are about 30% of ADI. And their portfolio is exposed and, I think, poised for greater growth and more content and more share gains. Although, of course, we are gaining share right across the spectrum of the car types--the combustion as well as EVs. Also in consumer, you know, we turned the corner in consumer 2 or 3 years ago, and we are seeing both content and share gains there. Right across the high end mid to high end smartphone, gaming, hearables, wearables, and so on and so forth. I have mentioned several times before as well, the Maxon synergies. So we had said our expectation when we announced the acquisition of that we would generate a billion dollars worth of synergies while we are well on track. We will generate about $700 million this year. And I expect that we will hit a billion plus in 2027 as well. So, you know, I think as well, the overall cyclical tailwind, I think, is also very, very strong. Across the board. And given the breadth of our portfolio, that lifts the, you know, all the bolts aside from the, the asymmetric tailwinds that we have, And as rich talked a little bit about as well, the we have got a very favorable backdrop in terms of pricing. And so I think we have capitalized on the vectors of growth, and I think our portfolio is more critical than ever to our customers. I will point out as well that, you know, our lead times are in good shape. As Rich said, we are sitting on record inventories, but at the same time, our inventories are very intentionally placed built in place. And that is thanks to the manufacturing agility that we have built in with our hybrid model and that we continue to extend the score. So, Richard, maybe you will want to add a little more color. Richard C. Puccio Jr.: Yeah. I guess, Vivek, what I would add is, you know, as we have been talking about this, the inventory position, the important piece to consider is you know, with the significant demand we are seeing, we still think that we have not seen really any restocking activity from inventory from our customers. They continue to run very lean. And I think that our work over the last 2 years to balance out the inventory both on our balance and in the channel has really been helpful. So we you know, obviously, look into the next quarter we will continue to stage more inventory in the channel given the acceleration going there. So I think there is still a lot of opportunity. And then if you look at where we are from a from a consumption pattern, as Vincent described, those 3, 3 big secular drivers that are specific to our business, you know, we can see real end demand. Right? We are seeing the massive increase in AI infrastructure spend. We are seeing the aerospace and defense business grow. So if you extract those pieces out and then look at the broader parts of our business, most of our business is still shipping well below historical consumption levels. So we think we are still have room here on both the cyclical part of the upturn when we look at the broader markets I just described, and we continue to see strength across, obviously, the aerospace defense, ATE, and data center businesses. Vincent T. Roche: So I think in summary, you know, we are we believe we are very, very well positioned as a company. But, you know, I think the things that are under our control, I think we are executing well on. But there is a lot of things that can happen with the macro. there is heightened geopolitical risk. And rate hikes, of course. there is a lot of volatility as we all know in the financial markets. Perhaps AI CapEx could slow or decrease. But all that said, our expectation is that we will have a brisk growth year in 2027. Jeff Ambrosi: Alright. Thank you, Vivek. We will move to our next caller, please. Operator: Thank you. Our next question comes from Stacy Rasgon with Bernstein Research. Your line is open. Stacy Rasgon: Hi, guys. Thanks for taking my question. On the data center side, I you said that 80% of your comms business was now data center. Which I found interesting. And, I mean, that data center piece is I know it is doubling. Know, ish growing 100%. Is that the kind of growth rate I ought to be thinking about now for at least the comm segment next year, 2027, given the vast majority of it is data center. Do you think that comm segments should be growing, you know, close to 100% year-over-year as I start to think about 2027. I guess maybe within that question, if you could give us any color on what you are expecting for the segments, at least in the near term, into Q4, that would be helpful as well. Richard C. Puccio Jr.: Yes. Stacy, maybe we will start with the near term stuff and kind of the end market outlook. And then we can maybe pass it to Vincent for the AI Outlook or the data center. Great. Thank you. Who would this be? Yeah. So yeah. I guess I can take that 1. So, basically, at the midpoint of our outlook, you know, we are expecting industrial to be up high single digits Communications lead the growth, obviously, led by data center up about 10%, consumer up high single digits, and automotive to be up low single digits. Operator: And then as for the growth and kinda how to model data center, which is basically your question on a on a longer term basis, You know, at a high level, there is many growth vectors. Vincent T. Roche: You know, first of all, the market's strong. The end market's growing double digits. If you look at CapEx, what have you, then importantly, as Vincent talked to you on his call, right, the analog content increasing significantly, particularly as we transition to 800 volts, etcetera. And, obviously, we are the investments we are making, we are targeting to increase share in a lot of Right? So at a high level, we expect strength in data center for multiple years to come. Yeah. So I think, Stacy, rather than give you a number for, you know, 2027, You know, we are almost 2x on a pace to 2x in 2026. And my sense is that we will see an extended runway to at least 2030 for strong double digit growth across the data center market as well as the energy space, by the way, which today is about $500 million revenue for ADI. I think by the end of the decade, that business will double. Jeff Ambrosi: K. Stacy? We will move to our next question, please. Operator: Thank you. Our next question comes from Tore Svanberg with Stifel. Your line is open. Tore Svanberg: Yes, thank you. Vincent, I had a bit of a longer term question for you as it relates to analog. So I mean, it is industry that historically has grown high single digits. But with analog now benefiting, you know, significantly more from AI infrastructure and then to your point, eventually also from physical AI, Should we assume that the underlying growth of the analog industry is clearly shifting upwards here. Both from a units and a pricing perspective? Thank you. Vincent T. Roche: Yeah. I think it is. Tore, thanks for the question. You know, I think it is possible for the analog business to be in the double digit zone compounded for several years to come. And you know, you just look at data center alone. If I just take data center, you know, there is expected to be 100 GW-equivalent in you know, infrastructure built for data centers between now and kind of 2031. Each gigawatt generates $1 billion to $1.5 billion analog SAM. And the problems are becoming more complicated in data centers, so you know, it is going to increase the sophistication and the pricing capabilities of the solution. So yeah, my sense is it is not unreasonable. You know, we had in our earnings day, which was, what, 2021, I think it was. We had said we thought our business could grow 5% to 7%. You know, we are we are contemplating something higher in the out years from here. Jeff Ambrosi: Thank you so much. Thank you. Operator: Our next comes from Mark Lipacis with Evercore. Your line is open. Analyst: Hi, great. Thanks for taking my And maybe if I could follow-up on that. And Vincent, thanks for, putting a number out there and a double digit range. The last the last time ADI revenues were above that long-term 5-7% trend line, was, you know, back in the late nineties to your early 2000s. And there were, know, similar arguments being made about know, the build out of the Internet and, you know, there is telecom deregulation. I am wondering, Vincent, if you could if you could just you know, go back in time and compare know, what is the difference between, you know, the secular dynamics you see today and what you know, many people saw back then, which ends up bringing analog, revenues, not just yours, but the industry back down to that 5% to 7%. Thank you. Vincent T. Roche: Yeah. I think first off, because I looked through that myself, the concentration was much you know, was quite high at the time. What I am seeing now mean, if you look at the industry in the intervening period of time, more and more intelligence has been brought into the world of information technology. More edge, more intelligent edge. And that is increased. Think just the SAM the TAM and the SAM for the analog sector with every bit of information that is been processed, the value of that content has increased. With every bit, with every watt. And know, so what we are seeing on if you look at ADI just as a company, the portfolio the breadth of our portfolio, the depth of our portfolio the number of places in which we play is far, far greater. So as I said in my prepared remarks, what we have built into this company's business model is optionality. We get to we get to pick where the markets choose us, for the asymmetries. And then we have these compounding businesses that make the company extremely resilient. So I think from our perspective, the industry is just it is broader. it is deeper. Analog is much, much more important. And, you know, the whole we think over the next 25, 50 years, a lot of economic growth is gonna be built on externalized intelligence. The gravity field of AI pulling everything with it. But I think the pervasiveness of what the analog industry offers now in general is much, much greater, and we have got this gravity field irrespective of what might happen from a cyclical perspective, you know, in the in the coming years. My sense is we have never ever had a cycle like we have now got. Just it is breadth, its depth, and this gravity field of AI to pull it along. Jeff Ambrosi: Thank you, Mark. Appreciate the thoughts. We will take our next question, please. Operator: Thank you. Our next question comes from Blayne Curtis with Jeff. Your line is open. Analyst: Hey, good morning, guys. Thanks for taking my question. I wanted to ask, just going back to the data center, but I guess you in the past referred to AI exposure that includes ATE. I was trying to as you look at the growth calculus, and you have the data center part growing triple digits, curious how to frame the opportunity for ATE, and I do not know if you are willing to break out how big that was. Richard C. Puccio Jr.: Yeah, Blayne. So in the in the past, you are right. We have talked about this AI exposure as ATE plus our data center business combined. Those are 20% of ADI. You know, without giving numbers for forward, you know, years of growth. I mean, I think clearly, we have got a lot of confidence, which importantly is backed up by our design and activity. Right? it is not just hopes and dreams. If we look at our pipeline, the design activity with customers is strong in ATE as well as across data center, not just in power, but optical as well. Right? You heard Vincent on the prepared remarks. So at a high level, I mean, that 20% of ADI has got a really strong growth tailwind behind us, and we feel like it is multiyear. Right? And that is and again, that is confidence because of our design activity because of our backlog, our pipeline, and the bookings momentum. Jeff Ambrosi: Okay. Thank you. Thanks, Blayne. We will take our next question, please. Operator: Thank you. Our next question comes from Matthew Prisco with Cantor. Your line is open. Matthew Prisco: Yes, guys. Thanks for taking the question. So lots of talk about this really strong demand backdrop for years to come. So how do we think about ADI's supply capabilities today as these revenues continue to tick higher? At what point do we need to start thinking about capacity additions? And are there any constraints arising in supply chain today or any areas that you see potential pressure in as we move forward? Thank you. Richard C. Puccio Jr.: Yeah. Well, clearly, Richard, Yeah. Sure. I will start, Matthew, and then Vincent maybe can talk some more about the longer term piece. But you know, from our perspective, we really are executing well from a supply chain. As we have talked about, we have been able to deliver above seasonal growth for 9 straight quarters. And we are guiding to a 10th. We are continuing to build inventory, reflecting our ability to expand our internal capacity as we have talked about. We continue to install new tools in available spaces as we are and we are also getting more wafers externally. So we have we feel like we are very, very well positioned for the for the near and medium term demand. And, obviously, across the industry, there is some soft spots, and, lead times have started to extend. But we are working really hard to keep them keep them in check. Obviously, this demand acceleration is pretty unprecedented in recent memory, but you know, we are we think we are very well positioned. You know, we have a book to bill as we have talked about that is above 1. Or not in that sort of unusually high space from a book to bill perspective. You know, we are also and this helps us from a manufacturing efficiency perspective. Are getting a bit better visibility You know, we have some more orders coming in a bit longer term. Now, frankly, we asked our customers to help us by doing that. It gives us the ability to be more precise in leveraging the capacity we have. So we think, like, we are we feel like we are in a good position. We do continue to add capacity as we go, And then, you know, and I will I will give my 2 cents. You know, we are scenario planning what the world could look like for if this kinda growth sustains. And how we would balance across our hybrid manufacturing with additional external wafers, but also whether we need to add capacity beyond what we are already doing and have been doing for the last 3 to 4 years. Vincent T. Roche: Yeah. I think in addition, not only do we look to continue to increase the scope of our internal manufacturing capabilities, we have a number of great partners externally as well that we work with both on the front ends and back ends. So we are, I would say, jointly planning with our partners to take a long view to how we support all the various nodes that are critical to ADI from you know, the lithographically insensitive nodes, if you like, kind of 6 micrometers that kind of level right down to 5 nanometers and 3 nanometers. So that is what we did during the COVID cycle, just that we continued to extend the capability of that hybrid manufacturing system that is our strategy going ahead. And, you know, just remember a couple of years ago, it was expected that the semi industry in totality might reach $1 trillion by 2030. Well, that is kind of in the wake at this point. And we are looking to something much, much bigger. So the industry has a big, big task to get ahead of what we now think the new growth trajectory is. Including ADI. Jeff Ambrosi: Thank you. Operator: We will take our last question, please. Thank you. And our last question comes from Joshua Buchalter with TD Cowen. Your line is open. Joshua Buchalter: Hey, guys. Congratulations on the very strong results and guidance. Thanks for squeezing me in. The 74% gross-margin outlook, you know, is pretty staggering, and we are back to those 2022 peak levels. it is also coming without all that much incremental utilization torque. I guess bigger picture, through cycle, is that a number that you think you can sort of hold and grow off of? And I guess as we think longer term, can you speak to how you are prioritizing revenue growth versus margins if you are? Like, is this low- to mid-70% level 1 that you intend to manage to long term, I guess? Thank you. Richard C. Puccio Jr.: Sure. So I do think as a previously mentioned, Joshua, we can continue to grow, let's say, continue to maintain that sort of roughly 74% level. And we will continue to focus, and I said this in the in the last call, we will continue to on growth investments. Which some of them may put some pressure on margins as we expand revenue growth dollars. When you look at the balance of our portfolio and the parts of the portfolio that continue to grow, the opportunity to maintain that margin exists. We are getting, as you mentioned, a ton of benefit by running the factories at the higher utilizations, which we expect will sustain throughout this upcycle. So you know, we feel pretty good. We are going to balance the investments we need to make to grow with maintaining that you know, relatively maintaining that margin. I said this last quarter, and I will repeat it here. I do not think, for instance, there is a ton of room to get more margin accretion out of utilization. But we are you know, we are still only in a 49% industrial mix, So if the mix shifts, there is potential for upside or at least to be able to offset any potential headwinds. Because the other thing that is going to happen is we expect that the inflationary environment will continue. Now we will we will continue to monitor and track and focus on that as we have historically, but I do think we are in a pretty balanced position for the medium and long term here. Vincent T. Roche: Yeah. I think just 1 other comment. I mean, the origin of the high gross margin structures is the innovation premium that we attract. So our job is to keep that premium moving, and then, you know, the cycles help get the efficiencies in manufacturing and some support. So those 2 things. 1 is obviously very strategic, the other operational. But those 2 parts we see having a lot of legs for a lot of years to come. Our customers are asking us to tackle more difficult problems, take on more of the work, so to speak. And the breadth and the depth of the high performance portfolio has positioned us well to continue to make that you know, that early stage, the origin of the gross margin a continuing critical part of ADI's value proposition. Joshua Buchalter: Thank you both, and congrats again. Jeff Ambrosi: Thank you. Thanks, Joshua. Operator: Thank you. This concludes the question and answer session. I would now like to turn it back to Jeff Ambrosi for closing remarks. Jeff Ambrosi: Thanks, everyone, for joining us. A copy of the transcript will be available on our website. And all available reconciliations and additional information can also be found in the quarterly results section of our Investor Relations website. Investor.analog.com, Thank you for your continued interest in Analog Devices, and have a good day. 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This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Analog Devices (ADI) Q3 2026 Earnings Call Transcript was originally published by The Motley Fool

Analog Devices, Inc. ADI used its fiscal third-quarter call to frame AI infrastructure power and connectivity as multiyear growth engines, alongside broader cyclical recovery. Results topped the Zacks Consensus Estimate on adjusted earnings and revenues, but management focused on expanding data center content, fourth-quarter momentum and fiscal 2027 growth. Vincent Roche, CEO and chair, said power availability has become a central AI infrastructure constraint. ADI is targeting opportunities from grid monitoring and energy storage through rack and processor power. Roche said ADI’s 2030 data center and energy serviceable addressable market has more than doubled from its assessment a year ago. The energy business exceeds $500 million. In optics, Roche said optical circuit switching revenue is positioned to approximately double this year, with similar growth targeted in fiscal 2027. Empower also extends ADI’s power capabilities into processor packages. Richard Puccio, executive vice president and CFO, guided fiscal fourth-quarter revenues to $4.3 billion, plus or minus $100 million. Adjusted operating margin is expected at 52%, plus or minus 100 basis points, and adjusted earnings per share at $3.86, plus or minus 15 cents. Fiscal third-quarter adjusted earnings were $3.45 per share comapred with the Zacks Consensus Estimate of $3.33. Revenues were $4.02 billion versus the $3.92 billion consensus, rising 40% year over year and 11% sequentially. Analog Devices, Inc. price-consensus-eps-surprise-chart | Analog Devices, Inc. Quote Puccio expects adjusted gross margin to rise about 150 basis points to roughly 74% in the fourth quarter, driven by favorable mix, fixed-cost absorption and pricing. Some announced pricing actions will have a fuller impact in the fiscal first quarter. Puccio said communications revenues rose 84% year over year, with data center now accounting for 80% of that business. Data center optical and power revenues each grew more than 100%. A Bernstein analyst asked whether communications could approach that pace in fiscal 2027. Jeff Ambrosi, head of investor relations and senior director, declined to provide a specific long-term rate and emphasized rising analog content and targeted share gains. Roche said data center is on pace to nearly double in fiscal 2026, with strong double-digit growth expected through at least 2030. Ambrosi told Jefferies that ATE plus data center represents about 20% of ADI. A BofA Securities analyst pressed management on secular growth, cyclical recovery and pricing. Roche said aerospace and defense, ATE and data center together represent about 30% of ADI. Roche expects Maxim-related synergies of about $700 million this year and more than $1 billion in fiscal 2027. Puccio said customers remain lean on inventory, without meaningful restocking activity. Puccio added that much of the broader business remains below historical consumption levels. Roche expects solid fiscal 2027 growth while flagging macroeconomic and geopolitical risks, rate increases, financial-market volatility and lower AI capital spending. A Cantor Fitzgerald analyst asked about supply constraints. Puccio said ADI has delivered above-seasonal growth for nine consecutive quarters and is guiding to a 10th while adding internal tools and external wafer supply. Puccio said management is planning for further capacity if growth persists. Roche added that ADI is jointly planning with external partners to extend its hybrid manufacturing model across a broad range of process nodes. A TD Cowen analyst questioned the durability of roughly 74% gross margin. Puccio said that level can be maintained with expected revenue and mix, while Roche linked the margin structure to ADI’s innovation premium. Management paired investment in AI-related power, optics and energy with operating discipline. Puccio said ADI will balance growth spending with margin management as demand expands. Roche emphasized portfolio breadth and manufacturing flexibility as tools for capturing secular and cyclical growth while keeping macroeconomic and geopolitical risks in view. The call centered on ADI’s ability to scale supply, defend margins and convert rising AI infrastructure complexity into broader content opportunities over the coming years. ADI carries a Zacks Rank #2 (Buy), a favorable earnings-estimate-revision signal in Zacks’ one-to-three-month framework. Its Value Score is D, Growth Score is C, Momentum Score is D and VGM Score is D. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Zacks’ framework favors combining a Zacks Rank #1 or 2 with Style Scores of A or B. ADI’s weaker Style Scores temper the otherwise favorable Rank signal. The Zacks Rank can change as estimates are revised following the just-reported results. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Analog Devices, Inc. (ADI) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Analog Devices, Inc. ADI used its third-quarter fiscal 2026 call to emphasize a widening AI infrastructure opportunity, with power availability, optical connectivity and energy systems central to its long-term growth strategy. The company also entered the fiscal fourth quarter with a record outlook after revenues of $4.02 billion and adjusted earnings of $3.45 per share exceeded the Zacks Consensus Estimate of $3.92 billion and $3.33, respectively. Analog Devices, Inc. price-consensus-eps-surprise-chart | Analog Devices, Inc. Quote Executive vice president and CFO Richard Puccio guided fiscal fourth-quarter revenues of $4.3 billion, plus or minus $100 million, with an adjusted operating margin of 52%, plus or minus 100 basis points. Adjusted earnings are expected to be $3.86 per share, plus or minus $0.15. Puccio added that communications should lead sequential growth, with data center revenues rising 10%. Puccio said that industrial and consumer are expected to rise in the high single digits sequentially, while automotive is projected to increase in the low single digits. CEO and chair Vincent Roche centered his remarks on a grid-to-chip strategy designed around AI infrastructure's rising energy and data-density requirements. Roche said that ADI's opportunity spans grid monitoring, energy storage, rack and processor power, telemetry, and optical control. The company's 2030 data center and energy serviceable market opportunity has more than doubled from its estimate a year ago. Roche added that optical circuit-switching revenues are positioned to roughly double this year, with a similar growth target for fiscal 2027, backed by design wins and customer commitments. Puccio said that data center now represents 80% of communications revenues, while both optical and power revenues grew more than 100% year over year in the quarter. A Bernstein analyst pressed management on whether that pace could extend into fiscal 2027. Roche declined to provide a specific annual growth rate but said that he expects strong double-digit data center growth through at least 2030. A Stifel analyst asked whether the analog industry's growth profile is shifting higher. Roche stated that the analog business could compound at double-digit rates for several years as AI raises analog content and solution complexity. A JPMorgan analyst focused on the expected step-up in the gross margin. Puccio expected the fiscal fourth-quarter gross margin to rise 150 basis points to 74%. Puccio attributed the improvement to a favorable mix, higher fixed-cost absorption and pricing actions. He added that the full effect of announced pricing will not be captured until first-quarter fiscal 2027. A TD Cowen analyst asked whether roughly 74% can be sustained. Puccio stated that the level can be maintained with the expected revenues and mix, while flagging seasonal shutdowns, inflation and growth investments as offsets. A Cantor Fitzgerald analyst asked whether supply capacity could constrain continued growth. Puccio said that ADI has delivered above-seasonal growth for nine straight quarters and is guiding to a 10th. Puccio informed that management is adding tools internally, securing more external wafers and building inventory. He said that book-to-bill remains above 1, while lead times have begun to extend in parts of the industry. Roche stated that ADI is jointly planning with external manufacturing partners across process nodes and continues to expand its hybrid manufacturing model to support longer-term demand. During Q&A, a Bank of America analyst asked about fiscal 2027. Roche said that management expects a brisk growth year, citing AI, defense, cyclical recovery, pricing and Maxim-related synergies. Roche also identified macro conditions, geopolitical risks, potential rate hikes, financial-market volatility and a slowdown in AI capital spending as factors that could alter the trajectory. Puccio's closing emphasis remained on balancing execution discipline with targeted growth investment as ADI moves into fiscal 2027, with record quarterly revenues and a fiscal fourth-quarter outlook. Analog Devices currently carries a Zacks Rank #2 (Buy), which indicates favorable earnings-estimate-revision trends over the Zacks Rank's one- to three-month horizon. However, its Value Score of D, Momentum Score of D and VGM Score of D are weaker than the A or B grades favored alongside top Zacks Ranks. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Its Growth Score of C is comparatively stronger but still below the preferred A or B range. The combination points to a positive Rank signal moderated by weaker Style Scores, and the Zacks Rank can change as analysts revise estimates following the just-reported results. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Analog Devices, Inc. (ADI) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Analog Devices ADI reported third-quarter fiscal 2026 non-GAAP earnings of $3.45 per share, which beat the Zacks Consensus Estimate by 3.6%. The company reported earnings of $2.05 per share in the year-ago period. Analog Devices’ earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with an average surprise of 9.6%. Analog Devices’ third-quarter fiscal 2026 revenues of $4.02 billion surpassed the Zacks Consensus Estimate by 2.5%. The top line increased 40% from the year-ago quarter’s revenues of $2.88 billion. Analog Devices, Inc. price-consensus-eps-surprise-chart | Analog Devices, Inc. Quote Industrial: Revenues from this segment were $1.97 billion, representing 49% of total revenues and reflecting 53% year-over-year growth. Automotive: Revenues reached $998.2 million (or 25% of total revenue), up 16% year over year. Communications: Revenues came in at $654.5 million, accounting for 16% of total revenues and rising 84% year over year. Consumer: The segment generated $397.2 million (or 10% of revenues), marking a 6% increase compared with the same quarter last year. The adjusted gross margin expanded 330 basis points to 72.5%, while the adjusted operating margin was 50%, up 780 basis points year over year. As of Aug. 1, 2026, cash and cash equivalents were approximately $2.17 billion, down from $2.44 billion as of May 2, 2026. The company also held $159.1 million in short-term investments during the third quarter. Long-term debt was $6.77 billion compared with $7.24 billion at the end of the previous quarter. Analog Devices generated $1.6 billion in operating cash flow and $1.46 billion in free cash flow during the third quarter of fiscal 2026. In the fiscal third quarter, the company returned $1.7 billion to shareholders, comprising $535 million in dividends and $1.16 billion in share repurchases. For the fourth quarter of fiscal 2026, management expects revenues to be $4.3 billion (+/- $100 million). The Zacks Consensus Estimate for the same is pegged at $4.02 billion, indicating year-over-year growth of 30.8%. The company projects a reported operating margin of approximately 42.6% (+/-150 bps) and an adjusted operating margin of about 52% (+/-100 bps). Reported earnings are anticipated to be $3.14 (+/-$0.15) per share, while adjusted earnings are expected to be $3.86 (+/-$0.15) per share. The consensus mark for the same is pinned at $3.46 per share, indicating year-over-year growth of 53.1%. Currently, ADI carries a Zacks Rank #2 (Buy). Some other top-ranked stocks worth considering in the broader Zacks Computer and Technology sector are Lumentum LITE, Lam Research LRCX and NVIDIA NVDA, each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. The Zacks Consensus Estimate for LITE’s fiscal 2027 earnings is pegged at $18.71 per share, up by 1.2% over the past seven days, indicating an increase of 115.8% year over year. Lumentum shares have surged 229.2% year to date (YTD). The Zacks Consensus Estimate for Lam Research’s fiscal 2027 earnings has moved northward by 17.8% to $9.32 per share over the past 30 days and calls for a year-over-year jump of 60.4%. Lam Research shares have soared 80.3% YTD. The Zacks Consensus Estimate for NVIDIA’s fiscal 2027 earnings has moved upward by 1.6% to $8.90 per share in the past 60 days, implying a year-over-year improvement of approximately 86.6%. NVIDIA shares have risen 24.8% YTD. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Analog Devices, Inc. (ADI) : Free Stock Analysis Report NVIDIA Corporation (NVDA) : Free Stock Analysis Report Lam Research Corporation (LRCX) : Free Stock Analysis Report Lumentum Holdings Inc. (LITE) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

This article first appeared on GuruFocus. Revenue: $4.02 billion, up 11% sequentially and 40% year over year, exceeding the high end of the outlook. Gross Margin: 72.5%, down 50 basis points sequentially and up 330 basis points year over year. Operating Margin: 50%, up 100 basis points sequentially and 780 basis points year over year. Operating Expenses: $907 million. Earnings Per Share (EPS): Record $3.45, up 12% sequentially and 68% year over year. Industrial Revenue: Represented 49% of revenue, up 10% sequentially and 53% year over year. Automotive Revenue: Represented 25% of revenue, up 14% sequentially and 16% year over year. Communications Revenue: Represented 16% of revenue, up 18% sequentially and 84% year over year. Consumer Revenue: Represented 10% of revenue, flat sequentially and up 6% year over year. Data Center Revenue: Accounts for 80% of communications revenue, with more than 100% year-over-year growth in both optical and power. Cash and Short-Term Investments: Decreased to $2.3 billion, driven by the $1.5 billion all-cash Empower Semiconductor acquisition. Operating Cash Flow: $5.5 billion over the trailing 12 months. Capital Expenditures (CapEx): $0.6 billion over the trailing 12 months. Free Cash Flow: Record $4.9 billion or 36% of revenue over the trailing 12 months. Fourth Quarter Revenue Outlook: Expected to be $4.3 billion, plus or minus $100 million. Fourth Quarter Operating Margin Outlook: Expected to be 52%, plus or minus 100 basis points. Fourth Quarter Adjusted EPS Outlook: Expected to be $3.86, plus or minus $0.15. Warning! GuruFocus has detected 6 Warning Signs with ADI. Is ADI fairly valued? Test your thesis with our free DCF calculator. Release Date: August 19, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Analog Devices Inc (NASDAQ:ADI) delivered record revenue of $4.02 billion, exceeding guidance with growth across all end markets, led by data center and industrial. The company's data center business is accelerating, with more than 100% year-over-year growth in both optical and power, and the OCS revenue is poised to approximately double this year. ADI's gross margin is expected to improve to approximately 74% in Q4, driven by favorable mix, higher fixed cost absorption, and price adjustments. The company is seeing strong secular tailwinds from AI infrastructure and defense spending, with its 2030 data center and energy SAM more than doubling from prior estimates. ADI's financial model remains robust, with record free cash flow of $4.9 billion and a strong balance sheet, allowing for continued shareholder returns. The company is successfully executing on its hybrid manufacturing strategy, enabling it to capture above-seasonal growth for nine consecutive quarters and build strategic inventory to support accelerating demand. Analog Devices Inc (NASDAQ:ADI) faces potential headwinds from a persistent inflationary environment, which could pressure margins and increase costs. The company's inventory levels are at a record high, and channel weeks have fallen below the target, indicating potential supply chain tightness. There is heightened geopolitical risk and volatility in financial markets, which could impact the macroeconomic environment and AI CapEx spending. The company's gross margin improvement is partly dependent on maintaining current revenue and mix levels, which could be challenged by seasonal shutdowns in Q1. ADI's growth is increasingly concentrated in the data center and AI sectors, which could be vulnerable to a slowdown in AI infrastructure investment. The company is still in the early stages of capturing the full benefit of its price increases, with some trailing impact expected as contracts are reviewed. Q: Can you provide your high-level thoughts on fiscal 2027 growth, breaking down secular versus cyclical drivers, and whether more operating leverage is available if revenue grows 20%?A: Vincent Roche (CEO & Chair) stated that ADI is a clear beneficiary of defense and AI super cycles, which should persist for years. Aerospace & defense, ATE, and data center businesses now represent about 30% of ADI. He highlighted Maxim synergies, expecting to exceed the $1 billion target in 2027, and noted strong cyclical tailwinds and a favorable pricing backdrop. CFO Richard Puccio added that customers are still running lean on inventory with no restocking activity, and most of the business is shipping below historical consumption levels, leaving room for cyclical growth. CEO concluded that ADI expects a "brisk growth year" in 2027. Q: With data center now 80% of communications revenue and growing over 100% year-over-year, should we model the comm segment growing close to 100% in 2027? What is the near-term segment outlook?A: Jeff Ambrosi (Head of IR) provided Q4 guidance: industrial up high single digits, communications leading growth (up about 10% sequentially) driven by data center, consumer up high single digits, and automotive up low single digits. For the longer term, he noted the end market is growing double digits, analog BOM content is increasing significantly (especially with the 800-volt transition), and ADI is targeting share gains. CEO Vincent Roche added that while 2026 is on pace to double, he sees an extended runway for strong double-digit growth in data center through at least 2030, and expects the energy business (currently ~$500 million) to double by the end of the decade. Q: The 74% gross margin outlook is back to 2022 peak levels. Is this a level you can hold and grow from, and how are you prioritizing revenue growth versus margins?A: CFO Richard Puccio confirmed ADI can maintain the roughly 74% gross margin level, benefiting from higher factory utilization sustained through the upcycle. He noted there isn't much room for further margin accretion from utilization, but with industrial mix only at 49%, there is potential for upside if mix shifts. He acknowledged inflationary pressures will continue but believes ADI is in a balanced position. CEO Vincent Roche added that the origin of high gross margins is the "innovation premium" ADI attracts, and the company's job is to keep that premium moving by tackling more difficult problems for customers. Q: Given the strong demand backdrop, how should we think about ADI's supply capabilities? At what point do capacity additions become necessary, and are there any supply chain constraints?A: CFO Richard Puccio stated ADI has delivered above-seasonal growth for nine straight quarters (guiding to a tenth) by expanding internal capacities, installing new tools, and securing more external wafers. While some industry lead times are extending, ADI is working to keep them in check. The company has a book-to-bill above one and is getting better visibility with longer-term orders. CEO Vincent Roche added that ADI is jointly planning with external partners to support critical nodes from 6 micrometers down to 3 nanometers, extending the hybrid manufacturing strategy used during COVID. He noted the industry's growth trajectory is now much bigger than the previously expected $1 trillion by 2030. Q: With the strong operating margin guidance implying about 73.5% gross margins for October, are mix and volume the primary drivers, or are there additional price increases beyond those taken at the beginning of the year?A: CFO Richard Puccio confirmed the Q4 gross margin increase of about 150 basis points to ~74% is driven by favorable mix, higher fixed cost absorption from increased revenue, and price adjustments. He noted the full extent of announced price actions is not yet captured in Q4, with a full quarter of shipments at new prices coming in Q1. He expects gross margin to hang in at the Q4 exit level as long as revenue and mix are maintained, despite a seasonal shutdown in Q1 and ongoing inflation. Q: Should we assume the underlying growth of the analog industry is shifting upwards from the historical high single digits, given the benefits from AI infrastructure and eventually physical AI?A: CEO Vincent Roche affirmed that it's possible for the analog business to be in the double-digit growth zone compounded for several years. He cited that 100 gigawatts of data center infrastructure is expected to be built between now and 2031, with each gigawatt generating $1 billion to $1.5 billion in analog SAM. He noted ADI previously guided to 5%-7% growth at its 2021 earnings day but is now contemplating something higher in the out years. Q: How does the current secular dynamic differ from the late 1990s/early 2000s Internet build-out, which ultimately brought analog revenues back down to the 5%-7% growth range?A: CEO Vincent Roche explained that the concentration was quite high during the dot-com era, whereas now the industry is broader and deeper with more intelligence brought to the edge. He emphasized ADI's portfolio breadth and depth, and the "optionality" built into the business model that allows the company to benefit from asymmetries while remaining resilient. He stated that analog is much more important now, with economic growth over the next 25-50 years built on externalized intelligence, and that ADI has never seen a cycle with this breadth, depth, and the "gravity field" of AI pulling it along. Q: Can you frame the opportunity for ATE as part of the AI exposure, and are you willing to break out how big that business is?A: Jeff Ambrosi (Head of IR) noted that combined ATE plus data center represents 20% of ADI. He expressed strong confidence in the growth trajectory, backed by design activity, backlog, pipeline, and bookings momentum across both ATE and data center (power and optical). He characterized the growth tailwind as multi-year. Q: What drove the record Q3 results, and what is the Q4 outlook?A: CFO Richard Puccio reported Q3 revenue of $4.02 billion, up 11% sequentially and 40% year-over-year, with growth across all end markets. Industrial was up 10% sequentially (53% YoY), Automotive up 14% sequentially (16% YoY), Communications up 18% sequentially (84% YoY), and Consumer flat sequentially (up 6% For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Achieved the first $4 billion revenue quarter in company history, driven by broad-based growth across all end markets with specific leadership in data center and industrial segments. Management attributes performance to a 'grid-to-chip' strategy, positioning ADI as a critical vascular system for AI data centers by managing power from generation through to the processor core. The 2030 data center and energy SAM (Serviceable Addressable Market) is now estimated to have doubled compared to projections from one year ago, reflecting new architectures requiring higher analog content. Operational agility through a hybrid manufacturing network has allowed the company to capture above-seasonal growth for 10 consecutive quarters while maintaining supply responsiveness. Strategic focus on the 'control path' of optical connectivity is driving growth as network speeds transition from 800 gig to 3.2 terabits per second, increasing bill-of-materials content. The Empower acquisition is being integrated to move power management directly into the processor package, which management claims can reduce compute power consumption by 10% to 15%. Q4 revenue guidance of $4.3 billion assumes continued momentum in communications and industrial markets, with data center expected to lead growth at approximately 10% sequentially. Management anticipates a 'brisk growth year' in fiscal 2027, supported by cyclical tailwinds and the realization of $1 billion in cumulative synergies from the Maxim acquisition. Gross margin is expected to expand to approximately 74% in Q4, driven by favorable product mix, higher fixed cost absorption, and the trailing impact of price adjustments. Long-term growth framework assumes the analog industry could shift toward double-digit compounded growth, fueled by the 'gravity field' of AI extending from data centers to edge robotics and autonomous mobility. Inventory strategy involves maintaining record balance sheet levels to support accelerating demand, while intentionally keeping channel weeks below the 6-to-7-week target to prevent overstocking. Completed the $1.5 billion all-cash acquisition of Empower Semiconductor in July, impacting short-term cash reserves but enhancing the vertical power management portfolio. Management flagged persistent inflationary factors and upcoming seasonal factory shutdowns in Q1 as potential headwinds to the current gross margin trajectory. Geopolitical risks, interest rate volatility, and potential fluctuations in AI CapEx spending are identified as external variables that could impact the pace of the current upcycle. Net leverage ratio sits at 0.9 following recent M&A, maintaining a balance sheet that supports the target of 100% free cash flow return to shareholders over the long term. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management confirmed the 150 basis point margin step-up is driven by mix and utilization, noting that the full impact of recent price actions will not be realized until Q1. While utilization is near peak, management believes the 74% level is sustainable through the cycle as long as revenue and high-value industrial mix remain stable. Management stated they have not yet seen significant restocking activity; customers continue to run lean despite accelerating end-market demand. ADI is intentionally staging more inventory in the channel to prepare for further acceleration in consumption patterns. CEO Vincent Roche argued that unlike the late 90s, the current cycle is broader and deeper, with AI acting as a 'gravity field' for the entire analog sector. Management suggested the historical 5% to 7% growth model for analog may be outdated, with double-digit growth possible due to increased complexity in power and sensing. Current lead times are stable, but management is scenario-planning for sustained high growth, including potential additions to internal capacity beyond the current hybrid model. Visibility is improving as customers provide longer-term orders to help ADI manage manufacturing efficiency.

Analog Devices (ADI) came out with quarterly earnings of $3.45 per share, beating the Zacks Consensus Estimate of $3.33 per share. This compares to earnings of $2.05 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +3.60%. A quarter ago, it was expected that this semiconductor maker would post earnings of $2.89 per share when it actually produced earnings of $3.09, delivering a surprise of +6.92%. Over the last four quarters, the company has surpassed consensus EPS estimates four times. Analog Devices, which belongs to the Zacks Semiconductor - Analog and Mixed industry, posted revenues of $4.02 billion for the quarter ended July 2026, surpassing the Zacks Consensus Estimate by 2.49%. This compares to year-ago revenues of $2.88 billion. The company has topped consensus revenue estimates four times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Analog Devices shares have added about 38.9% since the beginning of the year versus the S&P 500's gain of 12.4%. While Analog Devices has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Analog Devices was favorable. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #2 (Buy) for the stock. So, the shares are expected to outperform the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $3.46 on $4.02 billion in revenues for the coming quarter and $12.42 on $14.75 billion in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Semiconductor - Analog and Mixed is currently in the top 13% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Semtech (SMTC), another stock in the same industry, has yet to report results for the quarter ended July 2026. The results are expected to be released on August 25. This chipmaker is expected to post quarterly earnings of $0.62 per share in its upcoming report, which represents a year-over-year change of +51.2%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. Semtech's revenues are expected to be $328.37 million, up 27.5% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Analog Devices, Inc. (ADI) : Free Stock Analysis Report Semtech Corporation (SMTC) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Interested in Analog Devices, Inc.? Here are five stocks we like better. Record quarterly performance: Analog Devices reported fiscal Q3 revenue of $4.02 billion, up 11% sequentially and 40% year over year, while adjusted EPS reached a record $3.45. Growth was broad-based across industrial, automotive, communications and consumer markets. AI infrastructure opportunity expands: ADI expects strong double-digit growth in data-center and energy markets through at least 2030, driven by demand for power management, optical networking, monitoring and control technologies. The company also expects optical circuit-switching revenue to roughly double this year and again in 2027. Strong Q4 outlook: ADI forecast fiscal Q4 revenue of $4.3 billion, adjusted operating margin of 52% and adjusted EPS of $3.86. Management called fiscal 2027 a “brisk growth year,” while flagging macroeconomic, geopolitical and AI-spending risks. 3 AI Stocks With Moats That Could Outlast Summer Volatility Analog Devices (NASDAQ:ADI) reported fiscal third-quarter results that exceeded its outlook, with record revenue of $4.02 billion as growth accelerated across its industrial, automotive, communications and consumer markets. CEO and Chair Vincent Roche said the company’s first $4 billion quarter was supported by demand tied to artificial intelligence infrastructure, defense spending, cyclical momentum and increasing semiconductor content across its end markets. Revenue increased 11% sequentially and 40% from a year earlier. On a non-GAAP basis, gross margin was 72.5%, operating margin was 50%, and diluted earnings per share reached a record $3.45, up 12% sequentially and 68% year over year. CFO Richard Puccio said the company’s results reflected higher revenue, improved factory utilization, favorable product mix and execution discipline. → Looking Beyond CrowdStrike? 3 AI Security Stocks Stand Out Analog Devices Provides Much-Needed Pullback: How Low Can It Go? Roche emphasized ADI’s strategy to serve AI infrastructure from the electrical grid through data-center processors. He said power availability has become a primary constraint on AI expansion, increasing the need for technologies that improve energy generation, storage, delivery, conversion, monitoring and computing efficiency. ADI said its energy business, which exceeds $500 million in annual revenue, began inflecting in 2025 and has delivered accelerating growth in fiscal 2026. The company supplies grid-monitoring and battery-management technology and sees increasing opportunities as hyperscale customers explore dedicated microgrids to shorten time to power. → 3 Robotics Stocks Under $10: Value, Momentum, or Bet? AI Is Reviving an Overlooked Chip Category—and These 3 Names Are Riding the Demand Wave Within data centers, Roche said customers are using ADI products for timing, power management, data conversion, monitoring and control in optical systems. The company expects to benefit as networking speeds move from 800 gigabits per second to 3.2 terabits per second through higher module volumes, rising bill-of-materials content and share gains. Based on design wins and customer commitments, ADI expects revenue from optical circuit switching, or OCS, to approximately double this year and is targeting similar growth in 2027. Roche also described co-packaged optics as a developing market that expands the company’s served available market because of growing requirements for precision control as thermal and serviceability challenges increase. → Michael Burry Is Betting Against Palantir Again—Should Investors Care? In power, ADI is seeing higher demand for technologies supporting the industry’s transition toward 800-volt DC distribution. Roche said the company’s power products can support conversion efficiencies above 98%, multi-kilowatt power delivery and telemetry and protection functions. He said ADI’s acquisition of Empower Semiconductor extends its capabilities into processor-package power delivery and could reduce compute power consumption and temperature by roughly 10% to 15% in large AI deployments. Roche said ADI’s assessment of its 2030 data-center and energy served available market has more than doubled from its view one year earlier, reflecting new architectures that require substantially more analog content. He added that the company expects data-center and energy markets to support strong double-digit growth through at least 2030, while the energy business could double by the end of the decade. Industrial: Revenue, representing 49% of total sales, rose 10% sequentially and 53% year over year. Growth occurred across industrial businesses and was led by automated test equipment, electronic test and measurement, aerospace and defense, and automation. Automotive: Revenue, representing 25% of sales, increased 14% sequentially and 16% year over year. Puccio cited strength in next-generation advanced driver-assistance systems, infotainment and electric powertrains. Communications: Revenue, representing 16% of sales, grew 18% sequentially and 84% year over year. Data center accounted for 80% of communications revenue and posted more than 100% year-over-year growth in both optical and power. Wireless revenue grew more than 25% year over year. Consumer: Revenue, representing 10% of sales, was flat sequentially and up 6% year over year, with growth in smartphones, hearables, wearables and the company’s prosumer business. During the question-and-answer session, Roche said ADI’s combined exposure to data center and automated test equipment represents about 20% of company revenue. He said the company’s growth outlook is supported by its design activity, backlog and bookings momentum in those businesses. Cash and short-term investments declined to $2.3 billion after ADI completed its $1.5 billion all-cash acquisition of Empower Semiconductor on July 7. The company’s net leverage ratio stood at 0.9. ADI increased inventory by $83 million sequentially as it built strategic die-bank inventory to meet accelerating demand. Puccio said the company exited the quarter with record balance-sheet inventory and higher inventory at distributors, though inventory days declined to 156 and channel weeks fell below ADI’s six-to-seven-week target. Over the trailing 12 months, ADI generated $5.5 billion in operating cash flow and $4.9 billion in free cash flow, equal to 36% of revenue. The company returned more than 100% of free cash flow to shareholders through dividends and share repurchases during that period. For fiscal fourth quarter, ADI forecast revenue of $4.3 billion, plus or minus $100 million, and non-GAAP operating margin of 52%, plus or minus 100 basis points. The company expects non-GAAP diluted EPS of $3.86, plus or minus $0.15, with non-operating expenses of about $80 million and a tax rate of 12% to 14%. Puccio said ADI expects gross margin to rise by roughly 150 basis points sequentially to about 74% in the fourth quarter, driven by favorable mix, higher fixed-cost absorption and price adjustments. He said the company expects to maintain roughly that level over the medium term if expected revenue and mix persist, while noting that seasonal factory shutdowns and continued inflation could create pressure. Roche said the company expects fiscal 2027 to be a “brisk growth year,” while acknowledging risks including macroeconomic conditions, geopolitics, interest rates, financial-market volatility and a possible slowdown in AI capital spending. Analog Devices, Inc (NASDAQ: ADI) is a multinational semiconductor company that designs, manufactures and markets a broad portfolio of analog, mixed-signal and digital signal processing integrated circuits. Founded in 1965 by Ray Stata and Matthew Lorber, the company has grown into a leading supplier of components that convert, condition and process real-world signals for electronic systems. Analog Devices is headquartered in Massachusetts and serves customers around the world across multiple end markets. The company's product lineup includes data converters (ADCs and DACs), amplifiers, power management ICs, radio-frequency (RF) and microwave components, sensors and MEMS devices, signal chain and isolation products, timing and clocking solutions, and embedded processors and software for system-level design. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Analog Devices Q3 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.