Analog Devices, Inc. (ADI) Earnings & Analysis

Latest quarter

Analog Devices reported Q3 FY2026 revenue of $4.0 billion, compared with the consensus of $3.9 billion; revenue was 2.48% above the consensus. The company reported adjusted EPS, as the consensus counts it, of $3.45, versus the consensus of $3.33, or 3.60% above the consensus.

The filing shows revenue rose 39.6% from $2.9 billion in Q3 FY2025, which the company attributed to broad-based demand across end markets. The company said Industrial grew across all sub-markets, with test equipment and aerospace and defense delivering the highest growth, while Communications growth was led by data-center demand tied to artificial-intelligence infrastructure investments. Diluted EPS was $2.74, compared with $1.04 a year earlier. Gross margin was 67.3%, up from 62.1%, and operating margin was 40.1%, up from 28.4%; the filing attributed the gross-margin change primarily to higher manufacturing utilization and product mix. Free cash flow was $1.5 billion, compared with $1.1 billion a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

Chief Executive Officer Vincent Roche said third-quarter growth spanned all end markets, led by data center and Industrial, and said demand was supported by artificial-intelligence and defense spending, cyclical momentum and content growth. Roche described ADI’s grid-to-chip strategy as addressing energy availability, delivery and power efficiency for artificial-intelligence infrastructure.

Roche said the company expects its optical-circuit-switching revenue to approximately double during the year and is targeting similar growth in 2027, based on design wins and customer commitments. He said increasing optical lanes and signal bandwidth could create opportunities in timing, power management, data conversion, monitoring and control. Roche also said the Empower acquisition extends the company’s power capabilities into processor packages.

Chief Financial Officer Richard Puccio said Industrial represented 49% of third-quarter revenue, Automotive 25%, Communications 16% and Consumer 10%. Puccio said Data Center accounted for 80% of Communications revenue and posted more than 100% year-over-year growth in both optical and power. He said the company increased inventory to support accelerating demand, while distributor channel weeks fell below its six-to-seven-week target.

When analysts asked about gross margin, Puccio said the Q4 outlook reflected favorable mix, higher fixed-cost absorption and price adjustments. He said the full effect of announced price actions was not captured in Q4 and that inflation remained a factor, while the company expected gross margin to remain near its Q4 exit level if revenue and mix met expectations. Roche said the company would continue to balance growth investments with its financial model.

When analysts asked about the durability of data-center growth, Investor Relations head Jeff Ambrosi said Communications was expected to lead Q4 growth, driven by data center. Ambrosi did not provide multi-year numerical growth guidance for data center, while Roche said the company’s outlook was subject to macroeconomic conditions, geopolitical risk, interest-rate changes and potential slower artificial-intelligence capital spending.

On supply, Puccio said ADI was installing tools in available internal capacity, obtaining more external wafers and planning inventory through the channel. He said the company was scenario-planning for sustained demand growth but did not quantify future capacity additions.

Guidance

Analog Devices expects Q4 FY2026 revenue of $4.3 billion, +/- $100 million. The company expects reported EPS of $3.14, +/- $0.15, and adjusted EPS of $3.86, +/-$0.15. Analog Devices expects reported operating margin of 42.6%, +/-150 bps, adjusted operating margin of 52.0%, +/-100 bps, and gross margin of 74.0%. Puccio also guided to approximately $80.0 million of non-operating expenses and a tax rate of 12% to 14%. Ambrosi said Communications revenue is expected to rise about 10.0%, led by data center.