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.
Data Center and Energy Opportunity Expands
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.
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.
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.
Broad-Based End-Market Growth
- 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 Flow, Inventory and Capital Allocation
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.
Fourth-Quarter Outlook
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.
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.
