ADI's Communications Segment Improves: Is the Momentum Sustainable?

Analog Devices’ ADI communications segment provides high-performance solutions for broadband, wireless, and Internet infrastructures widely used in cellular base station equipment, satellite and terrestrial broadband systems, microwave backhaul, optical and cable networking, and hyperscale data centers.

As the demand for higher speed, lower power, and more bandwidth-efficient data, video, voice, and machine-to-machine communications rises globally, ADI’s products play a central role in the signal processing chain, converting analog to digital and digital back to analog during data transmission and reception.

In the third quarter of fiscal 2025, communications contributed 13% of ADI’s total revenues, posting a striking 40% year-over-year improvement. Within this segment, wireline and data center applications, accounting for nearly two-thirds of communications revenues, delivered double-digit growth, fueled largely by soaring demand from AI-driven data center build-outs.

At the same time, wireless communications also expanded double digits, supported by continued investment in 5G and related infrastructure. ADI’s communications portfolio remains strategically critical. With deep domain expertise and decades of leadership in high-performance analog and mixed-signal ICs, the company is well-positioned to capture future growth opportunities.

How Competitors Fare Against Analog Devices

Analog Devices competes with Texas Instruments TXN and Broadcom AVGO in the Communications segment. Texas Instruments competes with ADI in analog/mixed-signal, RF front-ends, power amp/driver ICs, ADCs/DACs in infrastructure and wireless systems.

Broadcom is strong in networking, data center, broadband, Wi-Fi, Ethernet PHYs and switches. In the communications segment, Broadcom mainly competes with its high-speed connectivity, optical/wireline networking equipment, and cable or broadband IC portfolio.

Despite strong competition from Texas Instruments and Broadcom, Analog Devices has enough scope to grow in the communications space as new 5G technology is being introduced.

ADI’s Price Performance, Valuation and Estimates

Shares of ADI have gained 16.5% year to date compared with the Semiconductor - Analog and Mixed industry’s growth of 13.7%.

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From a valuation standpoint, ADI trades at a forward price-to-sales ratio of 10.13X, higher than the industry’s average of 7.72X.

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The Zacks Consensus Estimate for ADI’s fiscal 2025 and 2026 earnings implies year-over-year growth of 21.5% and 19.4%, respectively. The consensus estimate for fiscal 2025 and 2026 has been revised upward in the past 30 days.

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ADI currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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