Overview
Since the Report + 12.4%
Revenue grew 40.0% year over year, EPS beat the estimate by 2.0%; the stock fell 0.9% in its first reaction.
- RevenueQ3
- $4.02B
- ▲ 40% YoY
- EPSAdjusted
- $3.45
- ▲ 68% YoY
Verdict
BUYAnalog Devices posted a record quarter: revenue rose 40% year over year to $4.02 billion on industrial demand and AI data-center needs, while adjusted EPS of $3.45 beat expectations. Even so, the stock slipped modestly during the session (−0.9% close to close) because the strong result was largely priced in. What matters next is whether the robust Q4 outlook of $4.3 billion confirms this momentum is durable.
Close on Report DayAug 19
$373.26▼ 0.9%Report-Day Move
- Market Cap(Today)
- ≈ $203 B
- 1Y Return(At Report)
- + 68%
- P/E(At Today's Price · $11.26 · Trailing 12M)
- 37.3
- Net Margin(Trailing 12M)
- 29.8%
Earnings Summary
In 30 Seconds- Revenue rose 40% year over year to a record $4.02 billion; adjusted EPS came in at $3.45.
- Communications grew 84% on AI data-center demand, and all four end markets grew at the same time.
- The stock slipped 0.9% close to close as investors felt the good news was already priced in.
The Numbers
Industrial Segment
$1.97B
▲ 53% YoY
Communications Segment
$654M
▲ 84% YoY
Adjusted Gross Margin
72.5%
Last Year 69.2%
Stock Reaction
▼ 0.9%
Close to Close
Quarterly Revenue ($ Billion)
2.87
Q3 25 · $2.87 B
3.08
Q4 25 · $3.08 B · QoQ + 7.1%
3.16
Q1 26 · $3.16 B · QoQ + 2.7%
3.62
Q2 26 · $3.62 B · QoQ + 14.6%
4.02
Q3 26 · $4.02 B · QoQ + 11.1% · YoY + 40.0%
4.2–4.4
Q4 26E · 4.2–4.4 · QoQ + 6.9% · YoY + 39.8%
- Q3 25
- Q4 25
- Q1 26
- Q2 26
- Q3 26
- Q4 26E
Q4 FY2026 Company Guidance
- Revenue4.2 – 4.4 billion4.2 billion4.4 billion
Midpoint $4.3BMidpoint 5.4% Above Estimate ▲
- Adjusted EPS3.71 – 4.01 $3.71 $4.01 $
Midpoint $3.86Strong Increase · 70.8% YoY ▲
- Adjusted Operating Margin51% – 53%51%53%
Last Quarter 50.0%2.0 pt Expansion ▲
How to Read the Chart
The blue band is the company's low-high range; its length shows how much room the company left itself. The black triangle and the line beneath it mark where the market expected, and the notch in the band is the range's midpoint. The triangle appears only where a market expectation is known. When the company gave a single number rather than a range and no market expectation is known, that row gets no band at all: there is no length to measure and no position to compare. Axis is ±5.9% around the midpoint.
Segment and KPI Data
Revenue by Segment
- Industrial$1.97 BShare 49.0%▲ 53.0% YoY
- Automotive$998 MShare 24.8%▲ 16.0% YoY
- Communications$655 MShare 16.3%▲ 84.0% YoY
- Consumer$397 MShare 9.9%▲ 6.0% YoY
Key Metrics
Free Cash Flow
$1.46 B
8-K
Trailing 12-Month Free Cash Flow
$4.94 B
8-K
Share Repurchases
$1.16 B
8-K
Dividends Paid
$535 M
8-K
Inventories
$1.93 B
8-K
Shares are computed over the segment total: $4.02 B. Source: 8-K.
Metrics come only from the company's own filings; each one names the document it was taken from.
“ADI delivered a strong third quarter, exceeding the midpoint of our revenue, margin, and earnings outlook as we capitalized on broad-based demand.”
- Broad-based Demand
- Record Quarter
- Above-consensus Guidance
Summary and Review
Summary
Analog Devices' third-quarter revenue climbed 40% year over year to a record $4.02 billion. Growth was led by the industrial segment, about half of revenue, at $1.97 billion, up 53%. The communications segment jumped 84% to $654 million on power and connectivity demand from AI data centers. Automotive grew 16% and consumer 6%; all four end markets moved higher at once. Adjusted EPS of $3.45 (up 68%) topped expectations. Adjusted gross margin widened to 72.5%, adjusted operating margin to 50%.
Despite the strong figures, the stock fell roughly 0.9% close to close on the day. The main reason was already-high expectations. The shares had gained about 68% over 12 months, pricing in much of the good news. The analog cycle recovery was already widely discussed, so even a 'record quarter' struggled to surprise. Investors also questioned how long the double-digit valuation multiple can hold. They also asked whether some demand reflects early ordering, or inventory build.
The overall picture is strong. The company guided Q4 to $4.3 billion (±$100 million) in revenue and $3.86 in adjusted EPS. Both are above market expectations. ADI generated $4.94 billion in free cash flow over the past 12 months (36% of revenue) and returned $1.69 billion to shareholders this quarter. Our score is high: broad-based growth, margin expansion and above-consensus guidance. The one caveat is that the stock had largely priced the result in; operationally, ADI clearly beat expectations.
Full Review
Industrial and data center drive growth.
Analog Devices' third-quarter revenue climbed 40% year over year to $4.02 billion, the highest quarterly revenue in the company's history. The industrial segment, about half of total revenue (49%), reached $1.97 billion and grew 53% year over year. It was the largest contributor of the quarter. It was followed by the communications segment ($654 million), up 84% on rising power and high-speed connectivity needs from AI data centers. Automotive grew 16% to $998 million and consumer grew 6% to $397 million. As a result, all four end markets turned higher year over year at the same time. That signals a broad-based recovery that does not depend on a single customer or theme. Management noted on the call that the demand is also visible in order bookings. In the analog semiconductor cycle, this kind of simultaneous growth is often read as a sign that the inventory-digestion phase has ended.
Margins sit near a peak.
Adjusted gross margin widened to 72.5% from 69.2% a year earlier, and adjusted operating margin reached 50%. That margin structure ranks among the sector's best. This is the classic result of operating leverage, as fixed costs spread over a larger revenue base while revenue grows. On a GAAP basis, gross margin was 67.3% and operating margin 40.1%. GAAP EPS nearly tripled to $2.74. The company's Q4 guidance takes adjusted operating margin to a 51%–53% range, roughly 52%. That implies margin expansion continues. High margins are also the main reason for ADI's strong cash generation: free cash flow over the past 12 months was $4.94 billion, or 36% of revenue. However, as margins approach historical highs, the additional contribution from here is naturally limited. Future profit growth will depend more on revenue growth.
Guidance signals durable momentum.
ADI guided Q4 to $4.2–4.4 billion (midpoint $4.3 billion) in revenue and $3.71–4.01 (midpoint $3.86) in adjusted EPS. Both figures came in above market expectations. During the session they prompted comments that the outlook was 'as strong as the results'. The midpoint revenue implies roughly 7% sequential growth over the third quarter, meaning the company keeps growing from peak to peak. The guided adjusted EPS is about 60% higher than a year ago. The 51%–53% adjusted operating margin guide points the same way. This outlook supports the thesis that the recovery is an ongoing trend rather than a one-quarter jump. That is why our score for the quarter is high: broad-based growth across every end market, margin expansion and above-consensus guidance all land on the same report card.
Valuation had priced the beat in.
The stock gained about 68% over the past 12 months and entered the record quarter already at a high multiple. That is why, despite strong results and above-consensus guidance, it slipped roughly 0.9% close to close in the session, a 'sell-the-news' type reaction. Analysts' average 12-month target is around $459, implying roughly 23% upside from the current price. The target range is wide, though, at $365 to $550. The valuation sits at a double-digit revenue multiple; if growth eventually slows, the stock is exposed to a pullback. Even so, this concerns only where the price started, not the operational quality of the quarter. The near-term reaction does not break the story; it simply shows the good news was priced in. Two lines to check in the November Q4 report: whether revenue holds the $4.3 billion midpoint and whether adjusted operating margin reaches roughly 52%.
Looking Ahead
Strengths and Risks
5 Strengths · 5 RisksStrengths
5- All four end markets (industrial, automotive, communications, consumer) grew year over year at the same time.
- Communications revenue jumped 84% year over year on AI data-center demand.
- Adjusted gross margin of 72.5% and operating margin of 50% rank among the sector's best.
- $4.94 billion in free cash flow over the past 12 months$1.69 billion returned to shareholders this quarter.
- Q4 guidance came in above market expectations on both revenue and earnings.
Risks
5- The stock is up ~68% over the past 12 monthsMuch of the good result appears already priced in.
- In the analog cycle, part of the demand may stem from early ordering (inventory build).
- Automotive (16%) and consumer (6%) growth lagged the other segments.
- The double-digit revenue multiple is exposed to a pullback if growth slows.
- Tariffs and supply-chain uncertainty pose sector-wide risks.
What to Watch
3- Q4 FY2026 results will be reported ~Nov 2026 along with full-year figures.
- Next payment of the $1.10 per-share quarterly dividend.
- AI data-center investment pace and customer order backlog to watch.
Upcoming Earnings
To Understand This