Analog Devices, Inc.
ADI · Nasdaq
Next quarter
Reports Aug 19, 2026, before the open.
Consensus is $3.33 EPS for Jul 2026 across 8 estimates, ranging $3.30 to $3.41.
ADI Apr 2026
- 6.92%
- -3.48%
- $2.89
- $3.09
- —
- $3.62B
Reported results
- $3.62B
- 67.33%
- $1.38B
- 38.08%
- $1.18B
- $2.40
Highlights
- Earnings beat: Adjusted diluted EPS was $3.09 versus consensus of $2.89, a 6.92% surprise; GAAP diluted EPS was $2.40.
- Broad demand recovery: Revenue reached a record $3.62 billion, up 37% year over year and about 15% sequentially, with growth across all four end markets.
- Industrial led the print: Industrial revenue rose 56% year over year to $1.80 billion, representing 50% of total revenue; growth was strongest in test equipment and aerospace and defense.
- Communications accelerated: Communications revenue increased 79% to $554.7 million, supported by data-center demand tied to AI infrastructure investment.
- Operating leverage expanded: GAAP gross margin rose 630 basis points year over year to 67.3%, while operating margin increased 1,240 basis points to 38.1%.
- Bookings and outlook strengthened: Management reported record bookings across Industrial, Automotive and Communications and guided third-quarter revenue to $3.9 billion at the midpoint, with adjusted EPS of $3.30.
- Shareholder returns remained substantial: ADI returned $1.31 billion in the quarter through $773 million of repurchases and $536 million of dividends, and declared another $1.10 quarterly dividend.
- Cash generation was strong: Trailing-twelve-month operating cash flow was $5.11 billion and free cash flow was $4.57 billion, equal to 40% and 36% of revenue, respectively.
Analysis
Analog Devices delivered a materially better-than-expected fiscal second quarter, with adjusted EPS of $3.09 exceeding the $2.89 consensus by 6.92%. Revenue was $3.62 billion, up 37% from $2.64 billion a year ago and roughly 15% from $3.16 billion in the prior quarter. GAAP operating income more than doubled year over year to $1.38 billion from $677.9 million, while net income rose 106% to $1.18 billion from $569.8 million. Sequentially, operating income increased 38% and GAAP diluted EPS rose to $2.40 from $1.69.
The defining feature of the quarter was broad-based demand, led by Industrial and Communications. Industrial grew 56% to $1.80 billion, while Communications rose 79% to $554.7 million as AI-related data-center infrastructure supported demand. Automotive was comparatively stable, up 2% to $871.6 million, and Consumer increased 23% to $397.8 million. Higher factory utilization and favorable product mix lifted GAAP gross margin to 67.3% from 61.0% a year ago, while operating leverage drove adjusted operating margin to 49.0% from 41.2%. Management expects the momentum to continue, guiding to $3.9 billion of third-quarter revenue and $3.30 of adjusted EPS at the midpoint.
End-market demand
Revenue growth broadened across the portfolio, with management citing record bookings across its business-to-business markets. Industrial was the main contributor, while Communications was the fastest-growing end market.
- Industrial: Revenue was $1.80 billion, up 56% year over year and equal to 50% of company revenue. Management attributed the strongest growth to test equipment and aerospace and defense, alongside broad gains across Industrial sub-markets.
- Communications: Revenue was $554.7 million, up 79% and 15% of total revenue. The company specifically linked growth in the data-center portion of the market to AI-driven infrastructure investment.
- Automotive and Consumer: Automotive revenue increased 2% to $871.6 million, while Consumer rose 23% to $397.8 million. All four end markets grew year over year, although the mix shifted toward Industrial and Communications.
- Sales channels: Distributors generated $2.07 billion, or 57% of revenue, versus 56% a year earlier; direct-customer revenue was $1.52 billion, or 42%, versus 43%.
Margins and earnings
The revenue recovery converted strongly into profit as higher factory utilization and favorable product mix expanded gross margin, while operating expenses grew more slowly than sales. The quarter also benefited from the absence of special charges recorded in the year-ago period.
- Gross margin: GAAP gross margin was $2.44 billion, or 67.3%, up 630 basis points from 61.0%. Adjusted gross margin was 73.0%, up 360 basis points.
- Operating leverage: GAAP operating income rose 104% to $1.38 billion, lifting operating margin to 38.1% from 25.7%. Adjusted operating income increased 63% to $1.77 billion, with adjusted margin rising to 49.0% from 41.2%.
- Expense discipline: R&D increased 15% to $509.3 million but declined to 14% of revenue from 17%; selling, marketing, general and administrative expense rose 20% to $362.8 million but fell to 10% of revenue from 11%.
- Earnings conversion: Net income was $1.18 billion, up 106% year over year, and GAAP diluted EPS was $2.40 versus $1.14. Adjusted diluted EPS increased 67% to $3.09 from $1.85.
Third-quarter outlook
ADI expects the demand recovery to continue into the fiscal third quarter ending August 1, 2026. The midpoint of the outlook implies another sequential revenue increase, with profitability remaining near the second-quarter adjusted level.
- Revenue: Guidance is $3.9 billion, plus or minus $100 million, implying approximately 8% sequential growth from the second quarter.
- Margins: Reported operating margin is expected to be approximately 39.0%, plus or minus 150 basis points, while adjusted operating margin is expected to be approximately 49.0%, plus or minus 100 basis points.
- EPS: Reported EPS is forecast at $2.60, plus or minus $0.15; adjusted EPS is forecast at $3.30, plus or minus $0.15.
- Acquisition amortization: The difference between reported and adjusted guidance includes approximately $391 million of acquisition-related operating expense and $0.70 per share of related net adjustments.
Cash flow and returns
Cash generation supported an aggressive return of capital despite investment in inventory and continued spending on research and development. The company returned more cash than it generated in free cash flow during the quarter by using its balance sheet and existing liquidity.
- Cash generation: Quarterly operating cash flow was $872.0 million and free cash flow was $734.3 million after $137.7 million of capital expenditures. On a trailing-twelve-month basis, operating cash flow was $5.11 billion and free cash flow was $4.57 billion.
- Repurchases: ADI repurchased $772.9 million of common stock in the quarter, reducing shares outstanding to 487.1 million from 489.7 million at the start of fiscal 2026. The company had $8.5 billion remaining under its repurchase authorization.
- Dividends: The company paid $536.5 million in dividends and declared a further $1.10-per-share quarterly dividend, expected to total approximately $535.8 million.
- Capital spending: Fiscal 2026 capital expenditures are expected to remain approximately 4% to 6% of revenue.
Liquidity and working capital
The balance sheet remained liquid, although working capital expanded to support higher demand and debt due within the next year was reclassified as current.
- Liquidity: Cash, cash equivalents and short-term investments totaled approximately $3.4 billion at May 2, 2026, including $2.44 billion of cash and $1.00 billion of short-term investments.
- Debt: Total debt was $8.77 billion, including $550.2 million of commercial paper and $900 million of notes due in December 2026. ADI also had access to a $3.0 billion revolving credit facility.
- Inventory: Inventory increased 12% from the start of fiscal 2026 to $1.85 billion as the company built stock to support higher demand; days of cost of sales in inventory rose to 139 from 130.
- Receivables: Accounts receivable increased 43% to $2.05 billion, primarily reflecting higher sales and the timing of collections and billings.
