Analog Devices Q2 Earnings Call Highlights

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Analog Devices (NASDAQ:ADI) reported record fiscal second-quarter 2026 results, with revenue, profitability and earnings per share exceeding the high end of the company’s prior guidance, executives said on the company’s earnings call.

Chief Executive Officer and Chair Vincent Roche said the quarter reflected “record demand” for the company’s products despite geopolitical and macroeconomic challenges. He attributed the results in part to Analog Devices’ hybrid manufacturing model and investments in supply chain flexibility, research and development, software and artificial intelligence.

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“It’s at times like these when our dynamic hybrid manufacturing model performs,” Roche said, adding that the company has increased the scale and optionality of its supply chain in recent years.

Revenue Hits Record $3.62 Billion

Chief Financial Officer Richard Puccio said second-quarter revenue was a record $3.62 billion, up 15% sequentially and 37% year over year. He said growth was led by the company’s industrial and data center businesses.

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Industrial represented 50% of quarterly revenue and grew 20% sequentially and 56% from a year earlier. Puccio said all industrial businesses increased both sequentially and year over year, led by aerospace and defense, automated test equipment, electronic test and measurement and the broad market.

Automotive accounted for 24% of revenue, rising 8% sequentially and 2% year over year. Puccio said Analog Devices continued to see content and share gains in next-generation advanced driver-assistance systems and infotainment systems, citing demand for GMSL, functionally safe power and A2B technologies. He also said battery management system solutions for electric vehicles returned to year-over-year growth for the first time in two years.

Communications represented 15% of revenue, up 22% sequentially and 79% year over year. Puccio said data center products now account for more than 75% of communications revenue and grew more than 90% year over year, driven by both optical and power portfolios. Wireless demand also increased more than 35% year over year.

Consumer made up 11% of revenue, remaining flat sequentially and increasing 23% year over year. Puccio said performance reflected exposure to high-end consumer markets and cyclical tailwinds in the company’s “B2B-like prosumer” business.

Margins Improve as Earnings Reach New High

Analog Devices reported second-quarter non-GAAP gross margin of 73%, up 180 basis points sequentially and 360 basis points year over year. Puccio said the improvement was driven by favorable mix, higher utilization and pricing.

Operating expenses were $872 million, and non-GAAP operating margin was 49%, up 350 basis points sequentially and 780 basis points year over year. Non-operating expenses were $57 million, and the tax rate was 11.8%.

Non-GAAP earnings per share were a record $3.09, up 26% sequentially and 67% year over year.

Puccio said cash and short-term investments ended the quarter at $3.4 billion, while the company’s net leverage ratio remained 0.8. Inventory increased by $81 million sequentially as Analog Devices built strategic die bank and finished goods buffers to support demand. Channel inventory weeks declined and remained within the company’s six-to-seven-week range.

Over the trailing 12 months, operating cash flow was $5.1 billion, capital expenditures were $500 million and free cash flow was $4.6 billion, or 36% of revenue. The company returned $5 billion to shareholders through dividends and share repurchases over the same period.

Industrial Demand Remains Broad-Based

Roche said Analog Devices’ industrial business is benefiting from both cyclical recovery and secular demand trends. Excluding automated test equipment and aerospace and defense, he said industrial areas such as automation, electronic test and measurement, sustainable energy, healthcare and the broad market collectively grew more than 40% in the first half of fiscal 2026.

Roche said automation demand is being supported by trends including onshoring of advanced manufacturing and changing labor dynamics. He highlighted opportunities in digital factories, robotics, automated semiconductor fabrication, biopharma, data centers and other manufacturing environments.

In energy, Roche said electrification and high-performance computing are putting pressure on legacy electrical grids. He said Analog Devices provides monitoring, metering, edge intelligence, connectivity and power management solutions across the grid, while also applying its battery management platform to energy storage systems. Demand from energy storage system customers remains strong in 2026, he said, after growing more than 50% in fiscal 2025.

Roche also said the company is seeing double-digit revenue growth in healthcare, driven by advanced imaging, patient monitoring, surgical robotics and wearable solutions for outpatient management of cardiopulmonary and metabolic conditions.

Empower Acquisition Targets AI Power Opportunity

Roche discussed Analog Devices’ planned acquisition of Empower Semiconductor, saying the deal would add integrated voltage regulator technology and silicon capacitors to the company’s power portfolio.

He said Empower’s technology would help Analog Devices offer vertical power delivery and address power density and efficiency demands in AI data centers. Roche said the technology can reduce customers’ power footprint by up to four times and lower data center compute power consumption by an estimated 10% to 15%.

During the question-and-answer portion of the call, Roche said the acquisition fills a gap in Analog Devices’ portfolio and that “time is of the essence” as customers seek solutions closer to XPUs, GPUs and CPUs. Puccio said Empower is expected to contribute some revenue after closing, though not a material amount, and Roche said the company expects to see “significant revenue” in 2027.

Third-Quarter Outlook Calls for Further Growth

For the fiscal third quarter, Analog Devices guided for revenue of $3.9 billion, plus or minus $100 million. The company expects non-GAAP operating margin of 49%, plus or minus 100 basis points, a tax rate of 12% to 14% and adjusted earnings per share of $3.30, plus or minus $0.15.

Puccio said the company expects above-seasonal sequential growth in industrial, automotive and communications. He said industrial and automotive are expected to grow in the mid-to-high single digits sequentially, while communications is expected to be the fastest grower, up low-to-mid teens. Consumer revenue is expected to decline by single digits sequentially.

On customer demand and supply, Roche said the environment is generally calm, though there are concerns about choke points in parts of the semiconductor supply chain, including memory. He said Analog Devices’ lead times are “in pretty good shape” and that the company has more than doubled internal capacity compared with levels before the COVID cycle.

Puccio said Analog Devices is comfortable that it has capacity to support the company’s stated 2030 vision of up to $20 billion in revenue, while continuing to evaluate internal capacity and external partnerships.

“We continue to see constructive demand signals in our order book and backlog, particularly in industrial, AI-related applications, and automotive,” Puccio said.

About Analog Devices (NASDAQ:ADI)

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.

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