Analog Devices (ADI)

Investment Review After Q2 FY2026 Earnings (2026.05.20)

TL;DR

Analog Devices is the #2 global analog/mixed-signal semi — signal chain + power across industrial 50%, auto 24%, comms 15%, consumer 11%; 7-15yr product cycles, 4-5x industry ASPs. Q2 FY26 revenue $3.62B record (+37% YoY, +15% QoQ), GM 73%, OM 49% record, EPS $3.09 record — beat above high end of guide. Q3 FY26 guide $3.9B ±$100M (+38% YoY mid), OM 49% ±100bps, EPS $3.30 ±$0.15; Comms expected fastest grower (low-mid teens QoQ). Stock $387 at 47x P/E(ttm); 6/6 scorecard sustained, but premium prices in 2027+ Empower/AI-power tailwinds and the $20B 2030 vision.

Summary

Finding	Assessment
5-Year Stock Return	Stock currently $387, up 125% from $172 (5 years ago). TTM OP grew 134% ($2.1B→$4.9B incl Q3'26E). P/E(ttm) compressed from 67x to 47x through the cycle. Stock appreciation tracked earnings recovery + AI re-rating — ADI is the quintessential quality compounder in analog.
Business Model	STRONG. #2 global analog semiconductor company. Q2 FY26 revenue $3.62B record across Industrial (50%), Automotive (24%), Communications (15%), Consumer (11%). 100K+ products, 125K+ customers. GM 73%, OM 49%, FCF margin 36%. Hybrid fab model; internal capacity doubled vs pre-COVID.
Competitive Moat	WIDE Analog design expertise = deep, long-lived advantages (7-15yr industrial, 15-20yr A&D cycles). 100K+ products, high switching costs. No customer >10%. ASPs 4-5x industry avg; competitive substitution effectively zero per management.
Past 5-YR Drivers	Maxim acquisition revenue synergies, AI data center power + optical (+90% YoY Q2'26 data center), ATE for AI accelerators, A&D record (15-20yr cycles), gross margin recovery (57%→73%), 60+ years of analog design tenure.
Recent Stock Move	Stock at $387, +17% post-print from $318 Q2 close; +97% over 8 quarters from $197 trough (Apr 2024). Revenue reaccelerated from -34% to +37% YoY. TTM OP recovered from $2.1B to $4.24B (+102%). R40 at 75%. Perfect 6/6 scorecard for 4 quarters. Steady, quality-led appreciation.
Revenue Trend	FLAT Rev YoY: 37% (Q2'26) → 38% (Q3'26E).
Margin Trend	FLAT OM%: 38% (Q2'26) → 38% (Q3'26E).
TTM OP Trajectory	DECELERATING TTM OP QoQ: +20% (Q2'26) → +16% (Q3'26E). TTM OP $4,244M.
Key Opportunities	Empower Semiconductor IVR + silicon caps for AI XPU power (material 2027 ramp); industrial broadening (ATE/A&D/automation/ETM/energy/healthcare grew >40% in 1H FY26); data center comms +90% YoY (optical + power equal); A&D national-sovereignty multi-year tailwind.
Key Risks	Valuation at 47x P/E & 38% OM at top of historical range; cycle position with R40 75% approaching prior peak 78% (Q1'22); memory supply chokepoints flagged by mgmt; Q3 GM ~72.5% likely the local peak (utilization maxed).
Catalysts	Q3 FY26 earnings print (Aug 2026) at $3.9B / 49% OM / $3.30 EPS midpoint. Empower deal regulatory close + integration. Q4 FY26 typically up low single digits seasonal. 2027 Empower revenue inflection. Potential Investor Day if scheduled.
P/E(ttm) Valuation	ELEVATED at 47x (range 24x-68x). Counter-cyclical: low P/E at peak EPS (24x Q4'22), high P/E at trough (68x Q4'24). Current 47x at top of range even with accelerating TTM OP — prices in 2027+ Empower/AI-power tailwinds + $20B 2030 vision. Limited further expansion room.

Q2 FY2026 Key Data (Feb-Apr 2026), reported 2026.05.20

Revenue $3.62B record (+37% YoY, +15% QoQ). GM 73% (+360bps YoY), OM 49% record (+780bps YoY), EPS $3.09 record (+67% YoY). TTM OP $4.24B (+20% QoQ). Beat above high end of guide.
Industrial 50% (+56% YoY) led by A&D record, ATE, ETM. Comms 15% (+79% YoY); data center 75% of comms (+90%, optical+power equal). Auto 24% (+2% YoY, BMS-EV back). Consumer 11% (+23% YoY).
Q3 FY26 guide $3.9B ±$100M revenue (+38% YoY mid). OM 49% ±100bps; EPS $3.30 ±$0.15; GM ~72.5% (-50bps on no channel-repricing). Comms fastest grower (low-mid teens QoQ).

Key Takeaways from Earnings Call

Q2 record across the board, beat above the high end of guide. Revenue $3.62B (+37% YoY, +15% QoQ); GM 73% (+360bps YoY); OM 49% record (+780bps YoY); Non-GAAP EPS $3.09 record (+67% YoY). CEO Vincent Roche: "record demand for our products and solutions" despite geopolitical tensions. Industrial +56% YoY (record A&D + ATE + ETM) and Communications +79% YoY (data center 75% of comms, +90% YoY) led.
Industrial cycle broadening into auto/ETM/energy/healthcare — still well below prior-cycle highs. Industrial ex-ATE/A&D grew >40% in 1H FY26; mgmt: "below prior cycle highs with lean channel inventories." BMS-ESS +50% FY25 and growing in FY26; BMS-EV returned to YoY growth in Q2 (first time in 2 years) on China material pickup. Healthcare double-digit on outpatient wearables.
Capital return + capacity build supporting $20B 2030 revenue vision. $5B TTM returned to shareholders via dividends + buybacks (target 100% FCF return long-term; 40-60% dividend / remainder buybacks). TTM FCF $4.6B (36% of revenue); operating cash flow $5.1B trailing 12-month. Net leverage 0.8x; cash + ST investments $3.4B. Internal capacity doubled vs pre-COVID — comfortable supporting up to $20B revenue per CFO.
Empower Semiconductor acquisition pending — vertical power delivery for AI accelerators. IVR (integrated voltage regulator) + silicon capacitor technology shrinks data-center power footprint ~4x, cuts compute power consumption 10-15%, delivers ultra-fast transient response for AI workloads. Small rev at close; material 2027 ramp as design-ins convert. Awaiting regulatory approval. Expands TAM in AI accelerator space.

Key Segments and Revenue Mix (FY2025)

End Market	Revenue	% of Total	Key Details
Industrial	$4,929M	45%	ATE (record, +40%), A&D (record, >$1B ann.), automation, energy. +15% YoY. Still ~20% below FY2023 peak ex-ATE/A&D.
Automotive	$3,278M	30%	GMSL connectivity, ADAS power, BMS. +16% YoY. Record. China share gains. SAR expected flat FY2026.
Consumer	$1,435M	13%	Hearables/wearables (record), handsets, gaming, AR/VR. +19% YoY.
Communications	$1,378M	13%	Data center (+50%, crossed $1B run rate), wireless (recovering). +26% YoY. AI driving surge.

Business Model

SUPPLIERS

Internal fabs (US, Ireland)
TSMC, GlobalFoundries (foundry)
OSAT partners (packaging/test)
Silicon wafers & specialty materials

Wafers / Components →

ANALOG DEVICES

Data converters (ADC/DAC)
Amplifiers & power management
RF/microwave & optical signal chain
Sensors & edge processors
$13.4B TTM revenue, 73% non-GAAP GM, 36% FCF margin

Analog / Mixed-Signal ICs → $ Revenue

CUSTOMERS

Industrial equipment OEMs
Automotive Tier 1s (Bosch, Continental)
Data center operators (AI power/optical)
Aerospace & defense primes
Consumer electronics (Apple, Samsung)

Moat Assessment: WIDE

Analog design expertise creates long-lived advantages. Circuit-level design resists Moore’s Law commoditization. Data converters, amps, RF designed into 7-15yr industrial / 15-20yr A&D. High switching costs; ADI #1/#2 in most categories.
100K+ products and 125K+ customers diversify concentration risk. No single customer >10% of revenue. Q2'26 mix Industrial 50%, Auto 24%, Comms 15%, Consumer 11%. ASPs 4-5x industry per CEO; substitution effectively zero once designed in.
Maxim synergies + internal manufacturing drive cost advantages. Hybrid fab model (internal + TSMC/GF) gives flexibility. Internal capacity doubled vs pre-COVID; supports $20B 2030 vision. A&D new revenue record on national-sovereignty tailwind.

Stock vs. Earnings — 5-Year Performance

Stock currently $387, +125% from $172 (5 years ago); TTM OP grew 134% from $2.1B to $4.9B (incl Q3'26E). Maxim acquisition ($21B, Oct 2021) made ADI the #2 global analog vendor; recovery + AI re-rate drives current premium.
Weathered a -34% drawdown $197 (Q2'24) → $202 (Q2'25) during the analog downturn (FY24 rev -23% from $12.3B FY23 peak). Recovery has been steep: -34% YoY trough → +37% YoY in Q2'26, led by Comms +79% (AI data center) and Industrial +56%.
R40 >40% for 6 consecutive quarters and >65% for 3 — strongest in our analog coverage. Rev +30-37% + OM 35-38% yields R40 65-76%. Perfect 6/6 for 4 straight quarters; Q3'26E rolls to 5/6 only on TTM OP QoQ accel +20%→+16%.

Past 5-Year Key Drivers

Maxim acquisition anchors the power franchise driving AI wins. $21B deal (Oct 2021) added power, auto connectivity, consumer analog. 48V/54V data-center power-mgmt cross-sell is now a key synergy; Empower adds vertical power delivery for AI XPUs.
AI data center is a structural growth vector beyond the analog cycle. Q2'26 Comms +79% YoY; data center >75% of comms (+90%, optical+power equal). ATE at record run rate testing AI accelerators. Empower adds material 2027 IVR revenue.
Gross margin 57%→73% reflects operating leverage on the recovery. Non-GAAP GM +1,600bps from cycle trough; Q2'26 GM 73% is the local peak per mgmt. Q3 guided ~72.5%. Further upside requires more outsourcing or mix shift.

Quarterly Key Metrics

USD	Q2'24	Q3'24	Q4'24	Q1'25	Q2'25	Q3'25	Q4'25	Q1'26	Q2'26	Q3'26E
Quarter End	Apr 24	Jul 24	Oct 24	Jan 25	Apr 25	Jul 25	Oct 25	Jan 26	Apr 26	Jul 26
Stock Price	$197	$225	$230	$212	$202	$238	$246	$271	$318	$387
Stock QoQ	+2%	+15%	+2%	-8%	-5%	+18%	+3%	+10%	+17%	+22%
Rev YoY	-34%	-25%	-10%	-4%	+22%	+25%	+26%	+30%	+37%	+38%
OM%	18%	22%	23%	26%	26%	29%	31%	35%	38%	38%
R40 (Rev YoY + OM%)	-15%	-3%	13%	22%	48%	53%	57%	65%	75%	76%
TTM OP ($M)	2,851	2,390	2,101	2,102	2,386	2,696	3,072	3,546	4,244	4,912
TTM OP QoQ	-21%	-16%	-12%	+0%	+13%	+13%	+14%	+15%	+20%	+16%
FCF/OP ttm	107%	123%	149%	151%	138%	136%	139%	129%	108%	105%
Debt/EBITDA	1.5x	1.7x	1.7x	1.7x	1.5x	1.7x	1.6x	1.5x	1.3x	1.3x
P/E(ttm)	43x	62x	68x	64x	52x	58x	52x	48x	46x	47x

Recent Stock Performance & Drivers

Stock $387 vs $318 Q2'26 close vs $271 Q1'26 close. +22% post-print, +97% from $202 Apr 2025 trough. Q2 OM 49% record and Empower deal announcement provided the catalyst.
TTM OP $2.1B (Q4'24 trough) → $4.24B (Q2'26): +102% in 6 quarters. Comms +79% YoY (data center +90%) and Industrial +56% YoY lead. FCF/OP at 108% as AR build matches accelerating revenue; still >100%.
P/E(ttm) compressed from 68x (Q4'24 cycle trough earnings) to 47x as earnings surged. R40 >65% for 3 quarters — strongest in our analog coverage. 6/6 scorecard for 4 quarters; rolls to 5/6 Q3'26E only on TTM OP QoQ accel +20%→+16%.

Opportunities

Empower IVR + silicon capacitors for AI XPU vertical power delivery. Shrinks data-center power footprint 4x; cuts consumption 10-15%. Material revenue ramp 2027 as design-ins move to production. Expands TAM in hyper-growth AI accelerator space.
Industrial broadening — ATE/A&D/automation/ETM/energy/healthcare. Ex-ATE/A&D markets +40% in 1H FY26 with lean inventory; sub-segments still below prior-cycle highs. A&D set new revenue record on national-sovereignty tailwind.
Data center comms +90% YoY with optical + power equal contributors. Data center >75% of comms revenue. Mgmt expects comms fastest sequential grower in Q3 (low-mid teens QoQ). Empower layers on top of organic data-center growth from 2027.

Challenges

Valuation: 47x P/E(ttm) and 38% OM at top of historical ranges. Q3 GM guided ~72.5% (-50bps) on absence of channel re-pricing; mix slight tailwind, utilization neutral. Mgmt called Q2's 73% the local GM peak. Multiple prices in 2027+ Empower ramp.
Cycle position: R40 at 75% approaches prior-cycle peak (78% Q1'22). Historical pattern after R40 peaks shows multi-quarter compression. TTM OP QoQ accelerated for 5 straight quarters (peak +20% Q2'26) and rolls off to +16% Q3'26E.
Memory supply choke points flagged by mgmt. CEO Roche noted memory choke points in the semi supply chain affecting consumer customers forced into trade-offs. Could ripple cross-segment if AI memory shortages persist into 2027.

Next 12 Months

Q3 FY26 guide $3.9B ±$100M rev, OM 49% ±100bps, EPS $3.30 ±$0.15. +38% YoY at mid. Segments: Industrial + Auto mid-high single-digit QoQ; Comms low-mid teens (fastest); Consumer down. Q4 seasonally up low single digits.
Empower deal close + integration; regulatory approval pending. Small revenue at close per CFO; first material revenue ramp in 2H 2027 as design-ins move to production. ADI scale + go-to-market reach targets faster commercialization.
Auto record bookings, positive book-to-bill, China L3 ADAS by year-end. BMS-EV back to YoY growth in Q2 (first time in 2yrs); sustains on European + Chinese EV penetration. GMSL + A2B + safe-power content underpin double-digit compounding.

Next 12-24 Months

2027 inflection: Empower IVR ramp + data-center power + auto content. Mgmt flagged 2027 as the year Empower revenue becomes material. Combined with AI data-center demand and auto content, FY27 could mark the next leg above the cyclical baseline.
$20B 2030 revenue target on track; internal capacity supports. CFO confirmed internal capacity (doubled vs pre-COVID) + external partnerships comfortable to support up to $20B. Geographic diversity provides resilience customers explicitly value.
A&D national-sovereignty tailwind; 15-20yr life-cycle stickiness. A&D set new revenue record this quarter. 60-year design tenure + long product cycles (7-15yr industrial, 15-20yr A&D) compound design-ins; substitution effectively zero.

Core Metrics Scorecard

	Q4'21	Q1'22	Q2'22	Q3'22	Q4'22	Q1'23	Q2'23	Q3'23	Q4'23	Q1'24	Q2'24	Q3'24	Q4'24	Q1'25	Q2'25	Q3'25	Q4'25	Q1'26	Q2'26	Q3'26E
Quarter End	Oct 21	Jan 22	Apr 22	Jul 22	Oct 22	Jan 23	Apr 23	Jul 23	Oct 23	Jan 24	Apr 24	Jul 24	Oct 24	Jan 25	Apr 25	Jul 25	Oct 25	Jan 26	Apr 26	Jul 26
R40 > 40%	✅	✅	✅	✅	✅	✅	✅								✅	✅	✅	✅	✅	✅
R40 accelerate	✅	✅	✅	✅								✅	✅	✅	✅	✅	✅	✅	✅	✅
TTM OP QoQ > 10%		✅	✅	✅	✅										✅	✅	✅	✅	✅	✅
TTM OP QoQ accelerate	✅	✅	✅									✅	✅	✅	✅		✅	✅	✅
TTM FCF/OP > 60%	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅
Debt/EBITDA < 3.5	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅
Total passes	5	6	6	5	4	3	3	2	2	2	2	4	4	4	6	5	6	6	6	5
Stock QoQ	-3%	+5%	-6%	-12%	-5%	+17%	+21%	-1%	-10%	+10%	+2%	+15%	+2%	-8%	-5%	+18%	+3%	+10%	+17%	+22%
P/E(ttm)	67x	79x	55x	39x	24x	23x	26x	26x	25x	32x	43x	62x	68x	64x	52x	58x	52x	48x	46x	47x

Current 6/6 scorecard sustained 4 consecutive quarters (Q4'25 through Q2'26); Q3'26E drops to 5/6 only because TTM OP QoQ accel rolls off +20%→+16%. R40 >65% for 3 straight quarters; Rev +37% + OM 38% is the strongest analog profile we cover. Stock +57% during this 6/6 streak.
Historical: 6/6 in Q1+Q2 2022 preceded a -75% TTM OP decline by Q4'24. Q1-Q2 2022 had 6/6 scorecards but R40 was rolling over from +78% peak. Current 6/6 differs — R40 still climbing toward a new peak alongside AI demand. Empower + data center provide a structural growth bridge.
Worst stretch was 2/6 readings Q3'23 through Q2'24 (deep trough); stock bottomed at $197 in Q2'24. R40 was -3% to -15%, TTM OP fell 12-21% QoQ. Only FCF/OP + Debt/EBITDA kept passing. The 2→6 transition (Q1'25→Q2'25) was the inflection that preceded the +97% recovery to $387.

Chart: R40 vs Stock Price (Since 2020)

Chart: Scorecard Total Passes vs Stock Price (Since 2020)

Q1 FY2026 Key Data (Nov 2025-Jan 2026), reported 2026.02.18

Revenue +30% YoY, OM 35%, TTM OP $3.55B (+69% over 4 quarters); R40 +65%. FCF/OP 129%, Debt/EBITDA 1.5x. Communications +63% YoY led; Industrial accelerating to +38% YoY. GM expanded 57% → 71%.
AI data center revenue at $2B+ run rate (20% of total). Power management (48V/54V conversion) + optical signal chain (800G/1.6T) are essential AI infrastructure. ATE revenue $800M+.
Q2 FY2026 guided $3.5B ± $100M (+11% QoQ vs 4-5% seasonal); 47.5% non-GAAP OM. Industrial +20% QoQ (~50% YoY); Communications ~+60% YoY. 22nd consecutive dividend increase.

Key Takeaways from Earnings Call

FY2026 framed as a potential "banner year" with all end markets re-accelerating. Q2 guided well above seasonal at $3.5B with 47.5% non-GAAP OM near all-time highs. Industrial broad-market still ~20% below prior peak — recovery is incomplete, leaving additional upside. Scorecard at 6/6 for 4 straight quarters; R40 above 65% for two consecutive quarters.
AI data center + ATE + A&D + Maxim synergies are the structural growth pillars. AI data center at $2B+ run rate (20% of total) — power management and optical signal chain. ATE at $800M+ testing AI accelerators. A&D >$1B; capacity doubling by end of decade. Maxim synergies driving "hundreds of millions" of incremental revenue with the pipeline extending through FY2027+.
Cyclicality + auto tariff pull-in + China are the bear case. FY2024's -23% peak-to-trough decline shows even high-quality analog companies are cyclical; industrial non-ATE/A&D still ~20% below prior peak. Auto book-to-bill fell below 1 in Q1 as customers pulled orders pre-tariff; H1 FY2026 auto guided flat-to-down QoQ. China at 26% of revenue creates trade/export-control exposure.

Source: SEC EDGAR annual and quarterly filings, company earnings conference calls and presentations.

Disclaimer: This report is for educational purposes only. NO investment advice.