Analog Devices, Inc. (ADI) on Q4 2024 Results - Earnings Call Transcript
Operator: Good morning, and welcome to the Analog Devices Fourth Quarter Fiscal Year 2024 Earnings Conference Call, which is being audio webcast via telephone and over the web. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would like to now introduce your host for today's call, Mr. Michael Lucarelli, Vice President of Investor Relations and FP&A. Sir, the floor is yours. Michael Lucarelli: Excellent. Good morning, everybody. Thank you for joining our Fourth Quarter Fiscal 2024 Conference Call. Joining me on the call today are ADI's CEO, Vincent Roche, and ADI's CFO, Rich Blue Shield. All of our materials can be found at investor.analog.com. Onto disclosures: Information about this discussion includes forward-looking statements, which are subject to certain risks and uncertainties as further described in our filings with the SEC. Actual results could differ materially from the forward-looking information as these statements reflect our expectations only as of this call. We undertake no obligation to update these statements except as required by law. In terms of gross margin, operating and non-operating expenses, operating margin, tax rate, EPS, and free cash flow, comments today will be on a non-GAAP basis, which excludes special items. When comparing our results and historical performance, special items are also excluded from prior periods. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures and additional information about our non-GAAP measures are included in today's earnings release. Please note, references to EPS are on a fully diluted basis. And with that, I will turn it over to ADI's CEO and Chair, Vincent Roche. Vincent Roche: Thanks very much, Mike, and a very good morning to you all. Our first quarter results reflected the continued steady recovery from our second quarter cyclical bottom with revenue, operating margin, and earnings per share all finishing above the midpoint of our outlook. For the full fiscal year 2024, revenue finished at $9.4 billion with earnings per share of $6.38. The headwinds we faced in fiscal 2024 were most notably pronounced post-pandemic inventory digestion and the challenging macro backdrop muting demand recovery. Despite the external challenges, however, our business model and disciplined execution delivered an impressive 41% operating margin for the year and a free cash flow margin of 33%, up from 29% in fiscal 2023. Importantly, we continued investing in key value generation and capture initiatives to better position ADI to solve our customers' most difficult challenges at the Intelligent Edge. In R&D, which is our first call on capital, we continue to strengthen our world-class analog foundation while extending the scope of our innovation capabilities with investments in digital software and AI. Those investments resulted in, for example, last month's launch of ADI's new CodeFusion Studio software development platform, creating a resource-rich hub and ensuring a programming environment for embedded co-development in support of our analog mixed signal power and digital franchises. To better secure the increasingly connected intelligent edge, we also launched the ADI Assure Trusted Edge Security Architecture, which will enable cybersecurity capabilities on ADI products. The addition of new tech stack capabilities to our tremendous analog foundation enables us to deliver ever more sophisticated innovations for our customers. Our intense focus on R&D is reflected in the double-digit growth of our design win pipeline during fiscal 2024. That growth was enhanced by momentum in our Maxim revenue synergies pipeline across such areas as GMSL, healthcare, and data center power, putting us firmly on a path to achieving our goal of $1 billion in revenue synergies by 2027. Now, to accelerate pipeline growth and conversion, we continue to evolve our digital customer engagement platforms to support a greater range of technical expertise and customer needs. We also expanded our cadre of field engineering experts to provide world-class support and service to our global customer base. Our customers value our thought leadership, the breadth and depth of our cutting-edge technology stack, the strength and resilience of our supply chain, and our service and support integrity. Let me share a few examples with you now. In Industry 4.0, semiconductor content as a percentage of CapEx investments continues to expand rapidly as factories integrate IT and OT to connect and software-define the factory floor. This is creating tremendous growth for ADI's sensor-to-cloud automation solutions, with a large number of customers leveraging our sensing, power control, and deterministic Ethernet technologies. On the factory floor, our intelligent motion and positioning solutions are being designed into robotic systems by several large customers, expanding our content per robot by three times. In our Instrumentation and Test business, ADI's cutting-edge analog signal and power capabilities are the foundation for the leadership position we've established in the AI-related SoC and high-bandwidth memory test market, where our content per tester stretches into the hundreds of thousands of dollars. Now looking ahead, we're developing additional mixed signal and digital capabilities to further reduce test time and power requirements, which we believe will result in more than 20% additional ADI content per test. Within the healthcare sector, our precision signal processing and real-time connectivity solutions are critical to the rapidly expanding surgical robotics market. And in the fast-growing continuous glucose monitoring space, we have won multiple opportunities across several customers. Our unique digitally enabled analog front-end solutions increase the accuracy and power efficiency of sensors and enable a better patient experience by extending battery life from days to weeks. Aerospace and defense has remained our most resilient industrial segment during this downturn, with stellar design win pipeline growth. We expect revenue growth to accelerate to a double-digit level next year due to increasing global defense budgets and the proliferation of space communication systems that rely on our higher value integrated RF modules and subsystems. Within automotive, the performance advantages of our battery management systems are driving substantial pipeline growth among OEMs. In addition, we're also seeing momentum for these solutions in electrical grid storage systems. These trends, combined with recent wins, give us confidence that our BMS revenues should return to growth in fiscal 2025 with meaningful contributions from our higher value wired solution. The proliferation of higher content vehicles that use more power management connectivity and an increasing number of sensor platforms is expanding our content across all vehicle types, combustion engines, hybrids, and indeed full EVs. This trend drove our GMSL and A2B connectivity and functionally safe power franchises to new high watermarks in fiscal 2024, and with a record design win pipeline, we expect this growth to persist. Michael Lucarelli: Notably, we added to our portfolio of connectivity solutions by launching our Ethernet to the Edge bus solution, or U2B, which is an enabler of the software-defined vehicle vision. And out of the gate, we have design wins with several major OEMs, including BMW. In communications, we've seen a positive inflection in the wireline market and expect that growth to continue in FY 2025 and beyond. Our confidence is based on significant new wins, including a high precision controller for the optical module and the high-performance compute leaders' AI systems, and our next-gen power solutions, which will begin shipping later in 2025. We're also experiencing tremendous demand from leading data center customers for our new innovative hot swap solution, which significantly extends power and control capabilities for AI-based servers. In consumer, new wins coming to market are driving strong growth. We expect this momentum to continue in the years ahead, given new wins across power, audio, optical, and touch in portable applications at multiple key customers. We've also seen growth in wearables. For example, our VSM platform's superior accuracy at lower power is becoming ever more critical for customers seeking to differentiate by capturing and processing more biomarkers. We've seen design momentum accelerate and content opportunities expand at wearable market leaders as well as in disruptors bringing miniaturized form factors to market. In wearable acoustic systems, our combination of ultra-low power and neural processing with application-specific audio processing algorithms is enabling next-generation noise cancellation and hearing augmentation. We're leveraging these technology innovations in several B2B markets. In addition, turning now to manufacturing, we've invested $2.7 billion in CapEx since acquiring Maxim to increase our capacity and enhance resiliency. We also expanded our foundry partnership with TSMC earlier this year to secure additional 300-millimeter fine-pitched technology capacity at their Japan fab. These investments enable a more flexible hybrid manufacturing model, further insulating our supply from regional shocks and increasing our swing capacity to around 70% of revenue in the coming years. This unique ability helps us to capture the upside in strong demand backdrops and better protect our gross margins during more challenging times. So in closing, I'm very proud of how ADI has managed through one of the worst inventory digestion cycles our industry has ever seen. While the macro backdrop presents challenges, I'm confident in our continued recovery in fiscal 2025. And with that, now I'll pass it over to Rich. Richard Puccio: Thank you, Vince. And let me add my welcome to our fourth quarter earnings call. I'll start with a brief recap of fiscal 2024 results. Revenue of more than $9.4 billion, down from the record fiscal 2023, driven by broad-based inventory digestion and sluggish end demand. Gross margin of 67.9% reflects lower revenue factory utilization and mix headwinds. Decline in revenue and gross margins were partially offset by lower operating expenses, which resulted in an operating margin of 40.9% and EPS of $6.38. Moving to fourth quarter results, revenue of $2.44 billion came in above the midpoint of our outlook for a 6% sequential increase, a 10% decline year over year. Industrial represented 44% of our fourth quarter revenue, finishing up 2% sequentially and down 21% year over year. Continued strength in AI-related test, aerospace and defense, and a return to sequential growth in automation more than offset slower end demand driven by a weaker macro backdrop. For the full year, industrial decreased 35% from a record 2023, with every major application declining double digits except aerospace and defense, which significantly outperformed the rest of industrial. Automotive represented 29% of quarterly revenue, finishing up 4% sequentially and down 2% year over year. This was notably better than our original expectation due to steadily improving demand from China throughout the quarter. For the year, automotive declined 2% from a record fiscal 2023 as double-digit growth across our functionally safe power and leading A2B and GMSL connectivity franchises were offset by broad-based inventory digestion and production headwinds. Communications represented 11% of our quarterly revenue, finishing up 4% sequentially and down 18% year over year. Stronger demand from data center customers for our solutions drove low double-digit sequential growth in our wireline business, which more than offset the decline in wireless. For the year, communications decreased 33%, and similar to the fourth quarter, we saw a relative outperformance in our wireline business over wireless. Lastly, consumer represented 16% of quarterly revenue, finishing up 22% sequentially and 31% year over year, driven by higher share in wearables, premium handsets, and gaming applications. For the year, consumer decreased just 1% with double-digit growth in portable applications, balancing double-digit declines in our prosumer business, which is more industrial-like in nature. Now on to the rest of the P&L. Fourth quarter gross margin was 67.9%, flat sequentially as product mix headwinds offset modestly higher utilization rates. OpEx in the quarter was $655 million, up approximately $35 million sequentially, driven primarily by merit increases, which resulted in an operating margin of 41.1%. Non-operating expenses finished at $55 million, and the tax rate for the quarter was 12.1%. All told, EPS was $1.67, which finished above the midpoint of our outlook. Despite a tough year, we took decisive action to strengthen our financial position, and I'd like to call out a few results from our balance sheet and cash flow statement. We ended the quarter with approximately $2.4 billion in cash, short-term investments, and a net leverage ratio of 1.2. Inventory finished approximately $20 million higher than the third quarter, while days of inventory decreased to 167. Channel inventory finished slightly below the low end of our seven to eight-week target as we continue to prudently manage our supply. Operating cash flow for the quarter was more than $1 billion and more than $3.8 billion for fiscal 2024. CapEx was $165 million for the quarter and $730 million for the year, resulting in fiscal 2024 free cash flow of more than $3.1 billion or 33% of revenue. During the year, we returned $2.4 billion to shareholders via $1.8 billion in dividends and $600 million in repurchases. Now moving on to guidance for the first quarter. Revenue is expected to be $2.35 billion, plus or minus $100 million. Notably, this implies year-over-year growth when compared to a normalized 13-week first quarter of fiscal 2024, a good indication that we're past the trough and in gradual recovery. We expect sell-in to be roughly equal to sell-through in this quarter. At the midpoint, we are expecting a seasonal decline on a sequential basis as noted last quarter. Industrial, automotive, and communications are each expected to decline by low single digits, with consumer down around 15%. Operating margin is expected to be approximately 40%, plus or minus 100 basis points. Our tax rate is expected to be 12 to 14%. And based on these inputs, EPS is expected to be $1.53, plus or minus 10 cents. I'll conclude by noting a few items as we begin the new fiscal year. As Vince mentioned, we made great progress building a more agile and resilient hybrid manufacturing model. As such, we expect our CapEx spend will moderate back to our long-term model of 4 to 6% of revenue in fiscal 2025. We expect this normalized CapEx level and planned receipt of investment tax credits tied to both the US and European CHIPS Acts will provide tailwinds to fiscal 2025's free cash flow. Importantly, while we have delivered on our commitment to return 100% of free cash flow since our Maxim acquisition, fiscal 2024's return was lower due to our decision to increase balance sheet cash during this period of macroeconomic uncertainty and to help us extinguish $400 million of debt coming due in fiscal 2025. That said, investors can expect us to revert to our targeted return of 100% of free cash flow in fiscal 2025. I'm now going to turn it back to Mike for Q&A. Michael Lucarelli: Thanks, Rich. Let's get to the Q&A session. I ask that you limit yourself to one question to allow for additional participants on the call this morning. If you have follow-up questions, please re-queue. The waiting question time allows. With that, we have our first question, please. Operator: Thank you. For those participating by telephone, dial in. If you have a question, if your question has been answered and you wish to be removed from the queue, please press star one one again. If you're listening on a speakerphone, please pick up the handset when asking your question. We'll pause just for a moment to compile the Q&A roster. And I show our first question comes from the line of Chris Danley from Citi. Go ahead. Chris Danley: Hey. Thanks, guys. Just a little color on the auto strength. Can you talk about how big China is as a percent of your auto business? And then within that, how much of the strength was from, say, EV versus ICE or all these EV startups that we're hearing about from China? Thanks. Richard Puccio: So I'll give you a little bit of the perspective, Chris, on the auto near term. So on the last call, we expected the sequential decline in Q4 given the drop we talked about in bookings during Q3. An adjustment to production for multiple of our OEMs. However, toward the end of Q3, bookings started to improve and that continued throughout our Q4, with stronger demand in China reflecting EV volume growth, share gains, and content growth. As for the other geos, we saw broad weakness, but upside in the U.S., which returned to sequential growth driven mainly by our BMS and wireless BMS portfolio. Secular demand for ADAS and next-gen infotainment continues to drive strength globally for our functionally safe power, audio, and video solutions. Content and share growth in these areas have helped offset broad inventory headwinds resulting in a shallower correction in other end markets. I'd also note that while BMS is still facing inventory headwinds broadly, we saw a strong uptick in China reflecting the expanded share we talked about on our Q2 call compounded by volume growth in the region. BMS also improved in the U.S., including growth for our higher content wireless solution, which is now 10% of total BMS. And as Vince mentioned, design win activity was strong in 2024, giving us confidence that BMS will return to growth in fiscal year 2025. Vincent Roche: A little more color, Chris, than what Rich has just said. So you know, we've got a really high-performance portfolio. We've got many, many different SKUs, if you like, in that portfolio. And, you know, we're playing the high-performance game with the big players in China for merit. So that's the same business there. Michael Lucarelli: And they've got some comments on the US-China kind of relative what's the mix of China. Our China business looks a lot like ADI enterprise where industrial are more of the two biggest percent of our revenue in China. I think about 80% of the China business. Comms is in the teens, consumers below 5%. Chris Danley: Thank you. Operator: And I show our next question comes from the line of CJ Muse from Cantor Fitzgerald. Please go ahead. CJ Muse: Yeah. Good morning. Thank you for taking the question. Vince, you talked about a number of company-specific drivers that should allow you to outperform in calendar 2025. So I was hoping you could kind of use that as a backdrop and then maybe layer in kind of your thoughts on how the cycle will kind of emerge from today's trough. And you know, what your kind of thoughts are in terms of pushing, you know, business through 2025 and 2026. Thank you. Vincent Roche: Yeah. Thanks, CJ. So yeah, obviously, we've already stated our first quarter will be down, so we expect to start getting back to a positive growth trajectory in the second quarter. I think during 2025, if I were to kind of rank the market recoveries, you know, I think it'll be led by industrial. We have very healthy customer inventories. The channel is below seven weeks, and that's a big part of the supply chain into the industrial sector. You know, you couple that with the green shoots that we've mentioned already in areas like AI, tests, and aerospace and defense, which I called out in the script. So I think the compare is easier overall. And, you know, as a result, I think industrial, given the signs we see, will recover briskly in 2025. I've been in consumer, we have a much more diversified business than we've ever had. We've better portfolio than we've ever had. Inventory is normalized and we're already seeing the benefits. We saw it in our in our 4Q results, three and 4Q results, the strength of our consumer business. I think next is the comms business. You know, it declined by over 30% in 2024. And I think that was really an inventory digestion too. So we feel at this point that we're through the worst of the supply normalization. And as we talked about in the scripts, we're beginning to see steady demand improvement, particularly in wireline. Driven by the build-out of these new externalized intelligence systems. And you know, the AI infrastructure. So we're not seeing much on the wireless side. We've I think at a low point in wireless during 2024. So I think it'll all depend on the carrier CapEx investments in 5G moving ahead. Last but not least, the automotive sector. We expect to see continued momentum in areas of function, we say power, the connectivity things that I spoke about, and, essentially, it's globally to be driving share and penetration across all the different types of platforms. So you know, we've had a tough year in 2024 in BMS. 2025, we had expect to see that get back to a better shape, get back to a growth pattern. And you know, given that all of us down just 2% in 2024, it's a tough compare moving ahead. But overall, we feel that we'll be on a solid growth path as well. So that's the ranking, CJ, it's a long answer to a simple question. Thanks, CJ. CJ Muse: Thank you. Operator: And I show our next question comes from the line of Vivek Arya from Bank of America Securities. Please go ahead. Vivek Arya: Thanks for taking my question. My question is on Q4 Industrial and then how it sort of shaped fiscal 2025. I think for Q4 industrial, if I'm not mistaken, you had expected sales to grow high single digit. I think they went up only modestly. And then you're guiding Q1 Industrial down again sequentially. So Vince, my question is Industrial really out of the woods, what helps it grow above seasonal? Because just assuming seasonal growth for the rest of fiscal 2025 may not be sufficient, right, to really grow fiscal 2025 at a strong pace. So just maybe help us you know, understanding what's happening in the industrial market and when do you expect it to start growing above seasonal trends next year? Richard Puccio: So, Vivek, I'll take that and so Q4, as you mentioned, was a bit lower than we expected. Driven largely by weakness in the broad market and our decision to reduce channel inventory during the quarter. Now as you know, reducing channel inventory has an outsized impact on our industrial business. At the same time, we did see continued strength in ADAS instrumentation and test and a return to sequential growth in automation. If you remember, in the prior two quarters, we've seen significant declines in automation. So to see that return to sequential growth was a very positive sign. You know, taking a step back, we've grown industrial sequentially now for two quarters. Of what we said was our trough in Q2 of 2024. So we feel pretty good that the recovery is still unfolding for us. And now we're gonna wait and give a bit to see what the macros do. But if I look to 2025, you know, one of the important signals for us continues to be we have been under shipping demand for the better part of 18 months. You know, and if you just normalize that for even our historical patterns, or the market patterns, you know, it would indicate we've under shipped something like 20%. Which is how we get confidence in coming out of Q1's seasonal down, we will start to see growth again in industrial in the remainder of 2025. Obviously, the slope of that will be covered a bit by the macro backdrop. Vivek Arya: Thank you. Operator: And I show our next question comes from the line of Joe Moore from Morgan Stanley. Please go ahead. Shane: Hi. Thank you for letting me ask a question. This is Shane from Morgan Stanley on behalf of Joe Moore. Just on your automotive business, how have customer orders and pricing discussions tracked for the growth areas of your portfolio, such as A2B, GMSL, and functional safe power? And then how have they progressed for the sort of other half of the automotive business? Richard Puccio: So I don't break that into two pieces, I guess. I'll talk about pricing first. So from a pricing perspective so far with customers, it's been largely as expected and continuing to exhibit the stability that we've talked about previously. Right? We continue to focus on the high end where our customers value performance versus price. You know, we can commend ASPs for X the industry average. And that has continued to grow over the cycle. You know, as particularly as we, you know, look across our broad large customers, you know, we're becoming more and more important moving from a essentially, a tier two contracting with tier ones to actually partnering with the OEMs at the early stages of design. You know, and we've talked about before prices set at the design in. Tend to stay pretty fixed throughout a long period of time. So sometimes over a decade on average. Although, there is some volume discounts that come through, so we trade off incremental volume for small decreases in price. And then we do look to mitigate those discounts with our vintage increases on our older products. The other thing that's helping on the pricing stability is we are clearly broadly across costs in our business experiencing inflationary environments, which supports continued stability on the pricing side. Michael Lucarelli: And your company, guys, well, love the pieces of the automotive business. You're right we break it down. We got two One, we call it, like, the growth areas. Vince outlined a bunch of those, GMSL, A2B, functionally safe power, and BMS. They make up about half our revenue in auto. Those grew in 2024 over 10%. The other part of the business, the other 50%, is really more standard product portfolio that goes across all the OEMs all customers, and really goes up and down in production. That piece was down about 10% in 2024. And you fast forward to 2025, I think it was be more or the same? Or we see a lot of growth come from those GMSL, A2B, functionally safe portfolio. And we said a couple of times, I called BMS and returned to growth as well. Vincent Roche: Go next question, please. Operator: Thank you. And I show our next question comes from the line of Tore Svanberg from Stifel. Please go ahead. Tore Svanberg: Yes. Thank you. Vince, I had a sort of bigger picture question, especially as we embark on this new cycle. So as I navigate your website, I just see some more software products. And I'm just wondering as AI continues to move to the edge, what do you see as a differentiation here for Analog Devices? Especially in relation to some of your other analog signal peers? Vincent Roche: Yeah. Thanks, Tore. Well, software is not particularly new to ADI in the sense that, you know, for many decades, now, we've had a vibrant DSP franchise. With a lot of, you know, tool chain capability, a lot of algorithmic capability, but we've begun really, I think, over the last decade, taking a more application view to the world across all our core markets, industrial, automotive, communications, etcetera, etcetera. And, you know, we've begun moving up the stack from the core base of analog signal power technologies. So we use, I would say, more algorithmic technology to kind of, at the copilot, so to speak, with the core franchise. So everything we do in software is essentially supports the cutting-edge strength that we have in the analog mix signal and power solutions. And you know, it's increasingly important for our ADI to present our solutions to our customers in a way that makes us easier and more enjoyable for them to use our solution that could complexity and sophistication of what we bring to them. So, you know, over the last couple of months, we announced two new parts to our software story. One is what we call CodeFusion Studio. And, essentially, what that is is an open-source software development environment that includes software development kits, tools, debuggers, and so on and so forth. And that enables our customers to get access. Know, to be able to embed ADI's analog and digital technology into their end system solutions. And the second piece is, it goes without saying, cybersecurity is top of mind for everybody. So we've released what we call the ADI Assure platform. And, essentially, what it is, it's a new security architecture that enables us to provide a root of trust from the hardware rights into the cloud, so to speak, and to understand the movement the creation and movement of data across that spectrum. So you know, we are spending more on software than we've done. But we're taking a very holistic view and I'd say using software to drive the innovation system of the company, the innovation within our products around our products, and making it easier for our customers to access our solutions. That's it in a nutshell, I think. Operator: Thank you. And I show our next question comes from the line of Stacy Rasgon from Bernstein. Please go ahead. Stacy Rasgon: Guys. Thanks for taking my question. I wanted to ask about gross margins. What are your thoughts on gross margins into Q1 as revenue declines? And do you think the Q1 is the bottom as it does seem like you do think revenue grows off of there? Like, how do we think about the trajectory off of that gross margins in the next year, what does it take to get them back into the 70% plus range? Richard Puccio: Stacy, I'll take that one. So Q4 gross margin was lower than we'd expected due to mix. So with consumer and auto being so much stronger while industrial was weaker, you know, that created some downward pressure because then we had talked about a slight sequential increase, which we didn't see. For Q1, we expected slower slightly lower gross margin given sort of normal factory shutdowns around the holidays. As well as the seasonally lower revenue. You know, if we think about the when will we see sort of the 70% this is gonna continue to be driven by mix and utilization as we grow revenue. Right now, industrial is pretty low mix. And utilization, while no longer decreasing and coming off of our low points back in Q2, remain sort of well below optimal levels. Know, if you wanna think about it from a longer-term perspective, from a revenue view, we'd likely, you know, need revenue in the $2.7 billion plus to start seeing 70%. From a 2025 sort of sequential perspective, as we do, as we mentioned, expect revenue to recover to growth coming out of the Q1 seasonality. We would expect to see gross margin improvement as we work through the back half of the year. And then, obviously, as we've talked about the back half macros will determine how much revenue growth we get and how much incremental margin we see. Michael Lucarelli: Thank you. Operator: And I show our next question comes from the line of Timothy Arcuri from UBS. Please go ahead. Timothy Arcuri: Thanks a lot. Rich, you just mentioned that fiscal Q2 is gonna be up. I'm wondering what you consider normal seasonal to be in fiscal Q2. It seems like it's up about three to four. So that's the first part of my question. And then the second part is, you sort of strip out autos, I wonder, like, how is book to bill if you could sort of, you know, strip out autos versus normal? Is it trending pretty much as you would? Thanks. Michael Lucarelli: Yes, sir. So I'll grab the first question and then go to the book and build question. I was like, I lost the bet to myself. I thought the two key question me with the top three questions were number seven. So yep. That's what that'll go sometimes. But you're right. We keep on seasonality strength. What does seasonal mean into you? It's been a while since seasonality. Usually, you see industrial and auto up. About mid-single digits in Q2. Communication's up some, not as much. Maybe flat up slightly. Well, consumers down a little bit. So overall, you're up about to mid-single digits in a portal company level. Again, that's seasonal trends. There's a wide band. On that, typically how we think about Q2 for a seasonal perspective. Richard Puccio: Yeah. On the booking side, so as we talked about after the decline in Q3 in auto, total bookings returned to growth driven by continued growth in industrial and a rebound in auto. Overall book to bill was below one, which we would say is pretty normal at this point. Reflecting our seasonally lower Q1 outlook. You know, regionally, bookings were up everywhere, excluding the Americas. And that largely reflects the seasonal decline in consumer. Timothy Arcuri: Thanks, Tim. Thank you. Operator: And I show our next question comes from the line of Ross Seymore from Deutsche Bank. Please go ahead. Ross Seymore: Hi, guys. Thanks for letting me ask a question. Vince, a bit of a longer-term question for you. Cycle to cycle, you know, the good news is it sounds like you found the bottom especially on the industrial side. And you mentioned that it was kind of the worst downturn from an inventory perspective in a long, long time. I guess my question is the prior peak, I guess, in your fiscal 2023 is that attainable? And what are the puts and takes to get to that? Because I guess from a big picture question, was that overinflated or was that a realistic target that we should look forward to? And if so, at what time? Vincent Roche: Yeah. Thanks, Ross. Well, I think, you know, first and foremost, our portfolio is in better position than it's ever been. I would say ADI's connection with our customers, big and small, is better than it's ever been. You know, we're investing in believe, in the right areas in the R&D sector. Our pipeline coming out of 2024, it grew double digits year over year. Opportunity pipeline. So I think the company is well positioned. We've also been very, very I would say, taking a very almost purest view to how we flush inventory. So my sense is you know, we've got a supply chain that is well capable of meeting what we believe will be good demand during 2024. To get back to the kind of the 2023 levels, you know, we believe that our business is capable of growing double digits. So, you know, through the rest of the decade here, given the position we've got, the demand that we see, the opportunity pipeline. So and I think know, we will see a good down payment on that future prospect. During 2025. Operator: Thank you. And I show our next question comes from the line of William Stein from Truist Securities. Please go ahead. William Stein: Oh, great. Thanks for taking my question. Vince, I think you mentioned data center power management in the prepared remarks, but I'm hoping you can dig into this a little bit. There's been quite a bit of all very know, what some people call charismatic design win up opportunities in that end market. I know that at least one of the companies you acquired, Maxim, had a significant effort in 48-volt PMEC, and I suspect Linear had something there as well. I wonder if you can comment as to the medium-term opportunity as you all see it and maybe any comment on design win traction there. Thank you. Vincent Roche: Yeah. Thanks, Will. So you know, first off, if you just put the entire data center business in ADI perspective, you know, we have really two elements to our power story. I think one is the power solutions that go around the computing chips, and the rest of the, you know, the server infrastructure. The second piece is the control units, things like hot swapping, supervisory, so on and so forth. We've had good traction of that business a long, long time. We've got some new products coming to market. That will continue to boost us in terms of ASP, share, and so on and so forth. We're also getting good traction with our optical control solutions right up to 1.6 terabits. So that's kind of the landscape of products and technologies that we have. You know, if you're going to win anything in this in these this data center business you've gotta play an ecosystem game. So we play with the processor companies. We're playing with the data center companies themselves. And, you know, again, we're picking our places very, very carefully. We're going for the highest end solutions where we can make a big difference in the energy space. By the way, we're even attaching energy solutions at, you know, kind of the more between the grid and the data sector. So we view this power is just merely part of the an energy solution, and we're looking at that from the intersection with grid right down to the chip. Richard Puccio: Thanks, Will. Can we get to our last question, please? Operator: Thank you. And I show our last question comes from the line of Joshua Buchalter from TD Cowen. Please go ahead. Joshua Buchalter: Hey, guys. Thanks for squeezing me in. Wanted to ask about utilization rates. I think you might be the only company in broad-based semis that called out higher utilization rates this quarter. How should we think about how you're thinking about that trending into fiscal 2025? Are you you know, it sounds like sell-in is matching sell-through. Should we just think about that ramping basically directionally and linearly with your revenue or any other puts and takes we should keep in mind as we think about the impact of margins? Thank you. Richard Puccio: Yeah. So I guess I would start with, you know, from a utilization perspective. We've talked about our agile. You know, one of the reasons we've been able to bring utilization levels up is our ability to swing capacity back into our internal fabs. So I think as I've mentioned, we're still not at anywhere near a normalized utilization rate. Our ability to swing during the downturn has allowed us to continue to grow off the drop that we talked about in Q2. So we have seen two quarters of sequential modest I would say modest sequential increases in utilization and as the revenue picks up as we work our way through best fiscal year 2025, I expect that utilization to continue increase to continue. Michael Lucarelli: Alright. Thank you, Josh, and thanks everyone for joining us this morning. A cockpit transcript will be available on our website. Thanks again for joining the call. Have a great Thanksgiving. Operator: Thank you. This concludes today's Analog Devices conference call. You may now disconnect.
Analog Devices Shares Jump 6% on Q1 Beat and Strong Outlook
Analog Devices (NASDAQ:ADI) saw its shares surge over 6% intra-day today after delivering better-than-expected first-quarter earnings and issuing an optimistic outlook for the second quarter.
For Q1, the semiconductor company posted earnings per share of $1.63, surpassing analyst expectations of $1.54. Revenue fell 4% year-over-year to $2.42 billion, but still came in ahead of the $2.36 billion consensus forecast.
Margins also exceeded estimates, with an adjusted gross margin of 68.8%, compared to the 67.8% projection, while its adjusted operating margin reached 40.5%, slightly above the expected 40.2%.
Management highlighted an improving demand cycle and strong execution across key business segments, positioning Analog Devices for a gradual recovery despite macroeconomic and geopolitical challenges.
For Q2 2025, the company forecasts earnings per share of $1.68, plus or minus $0.10, slightly exceeding the $1.66 analyst consensus. Revenue guidance of $2.5 billion, plus or minus $100 million, also landed above the $2.457 billion Wall Street estimate.
Analog Devices, Inc. (NASDAQ: ADI) Reports Strong Q1 Fiscal Year 2025 Earnings
- ADI's earnings per share (EPS) of $1.63 surpassed the estimated $1.54, marking an earnings surprise of 5.84%.
- Revenue for the quarter was approximately $2.42 billion, exceeding estimates and driven by a resurgence in chip demand.
- The company's financial metrics, including a P/E ratio of approximately 68.51 and a low debt-to-equity ratio of 0.22, underscore its market position and investor confidence.
Analog Devices, Inc. (NASDAQ: ADI) is a prominent player in the semiconductor industry, specializing in high-performance analog, mixed-signal, and digital signal processing technology. The company is known for its innovative solutions that cater to various sectors, including consumer electronics, automotive, and industrial applications. ADI competes with other semiconductor giants like Texas Instruments and NXP Semiconductors.
On February 19, 2025, ADI reported its earnings for the first quarter of fiscal year 2025, showcasing a strong performance. The company reported earnings per share (EPS) of $1.63, surpassing the estimated $1.54, marking an earnings surprise of 5.84% as highlighted by Zacks. Despite this achievement, the EPS was slightly lower than the $1.73 reported in the same quarter last year, indicating some challenges in maintaining growth.
ADI's revenue for the quarter was approximately $2.42 billion, exceeding the estimated $2.36 billion by 2.79%. This positive performance was driven by a resurgence in chip demand, particularly within the consumer segment, which saw a 19% increase to $322.9 million. The growing adoption of AI-driven devices, premium smartphones, and smart home products contributed to this surge, as noted by Chief Executive Vincent Roche.
Despite the success in beating estimates, ADI faced year-over-year declines, with revenue slightly down from the $2.51 billion reported in the previous year. However, the company has consistently exceeded consensus EPS and revenue estimates over the last four quarters, demonstrating its resilience and strong performance in the semiconductor industry.
ADI's financial metrics reflect its market position and investor confidence. With a price-to-earnings (P/E) ratio of approximately 68.51, investors are willing to pay $68.51 for every dollar of earnings. The company's low debt-to-equity ratio of 0.22 indicates a strong financial position, while a current ratio of 1.84 suggests a robust ability to cover short-term liabilities. These metrics highlight ADI's stability and potential for future growth.
Analog Devices, Inc. (NASDAQ:ADI) Sees Positive Analyst Sentiment Amid Industry Challenges
- ADI's consensus price target has been on an upward trend, indicating growing analyst optimism about the company's stock performance.
- The company's focus on expanding product offerings and strengthening its market position in sectors like automotive and high-performance analog segments is seen as a positive move.
- Despite a high valuation at 33.64 times earnings and a modest stock price increase of 0.4% since the last earnings report, the potential growth in AI and EV battery management sectors could justify the current market sentiment.
Analog Devices, Inc. (NASDAQ:ADI) is a key player in the semiconductor industry, specializing in data conversion, signal processing, and power management technologies. The company designs and manufactures integrated circuits and subsystems for various markets, including automotive, communications, and industrial sectors. ADI competes with other semiconductor giants like Texas Instruments and NXP Semiconductors.
Over the past year, ADI has seen a positive trend in its consensus price target, reflecting growing analyst optimism. Last month, the average price target was $250, up from $240 last quarter and $239.33 last year. This upward trend suggests confidence in ADI's stock performance, likely driven by its strategic focus on expanding product offerings and strengthening its market position.
Despite challenges in the semiconductor industry, ADI has shown resilience with sequential revenue growth, particularly in the automotive and high-performance analog segments. The company's valuation is high at 33.64 times earnings, but anticipated growth in AI and EV battery management could justify this. Morgan Stanley, however, has set a more conservative price target of $178.
ADI's stock price has increased modestly by 0.4% since its last earnings report 30 days ago. This slight uptick raises questions about the sustainability of this trend. Investors should monitor upcoming earnings announcements and industry developments to assess future stock performance and potential growth opportunities.
In summary, ADI's positive price target trend and strategic initiatives in expanding its product offerings and market presence contribute to analysts' optimism. However, the high valuation and modest recent stock price increase suggest a cautious approach, with attention to future earnings and industry trends being crucial for investors.
Analog Devices Inc. (NASDAQ:ADI) Bullish Price Target Amid Upcoming Earnings Report
- David Williams from Williams Trading has set a bullish price target of $245 for NASDAQ:ADI, indicating a potential increase of approximately 14.16%.
- Despite an anticipated 11% decline in earnings per share and a 6.2% decrease in revenues for Q1, the consensus EPS estimate has remained stable over the past 30 days.
- ADI's current stock price of $214.61 reflects an increase of approximately 2.52%, with a trading volume highlighting active investor interest.
Analog Devices Inc. (NASDAQ:ADI) is a prominent player in the semiconductor industry, known for its innovative solutions in analog and digital signal processing. The company designs and manufactures a wide range of products, including integrated circuits and sensors, which are used in various applications such as automotive, communications, and industrial sectors. ADI competes with other major semiconductor companies like Texas Instruments and NXP Semiconductors.
On February 14, 2025, David Williams from Williams Trading set a bullish price target of $245 for ADI. At the time, the stock was trading at $214.61, suggesting a potential increase of approximately 14.16%. This optimistic outlook comes as ADI prepares to release its Q1 earnings report. Analysts project earnings of $1.54 per share, an 11% decline from the same quarter last year. Despite this, the price target indicates confidence in ADI's future performance.
The company's anticipated revenues for Q1 are $2.36 billion, marking a 6.2% decrease from the previous year. Despite these declines, the consensus earnings per share (EPS) estimate has remained unchanged over the past 30 days. This stability in estimates suggests that analysts have not revised their initial projections, which can be a positive sign for investors. Revisions to earnings estimates are crucial as they can significantly influence investor actions and the short-term price performance of a stock.
Currently, ADI's stock is priced at $214.61, reflecting an increase of approximately 2.52% or $5.27. During the trading day, the stock reached a low of $210.64 and a high of $215.15. Over the past year, ADI has seen a high of $244.14 and a low of $182.57. The company's market capitalization stands at approximately $106.47 billion, indicating its significant presence in the market.
Today's trading volume for ADI is 3,938,608 shares, highlighting active investor interest. As highlighted by Benzinga, the stock's performance and the upcoming earnings report are key factors to watch. The strong correlation between trends in earnings estimate revisions and stock price movements underscores the importance of these projections for investors.
Analog Devices Inc. (NASDAQ:ADI) Upgraded by Wells Fargo Amid Earnings Challenges
- Wells Fargo upgraded Analog Devices Inc. (NASDAQ:ADI) to an "Overweight" rating, indicating a positive outlook despite anticipated earnings declines.
- ADI's Q1 earnings report is expected to show an 11% decline in earnings per share and a 6.2% decrease in revenues, yet consensus EPS estimates have remained stable.
- The stock's recent trading range reflects market anticipation of the upcoming earnings announcement, with a significant market capitalization of approximately $106.47 billion.
Analog Devices Inc. (NASDAQ:ADI) is a prominent player in the semiconductor industry, specializing in the design and manufacturing of analog, mixed-signal, and digital signal processing integrated circuits. These components are crucial in a wide range of applications, from consumer electronics to industrial automation. ADI competes with other major semiconductor companies like Texas Instruments and NXP Semiconductors.
On February 14, 2025, Wells Fargo upgraded ADI to an "Overweight" rating, signaling a positive outlook on the stock. At the time, ADI's stock price was $214.61, reflecting a 2.52% increase or $5.27. This upgrade was part of a new coverage initiation, as highlighted by Benzinga, and suggests confidence in ADI's future performance despite upcoming earnings challenges.
ADI is preparing to release its Q1 earnings report for the quarter ending January 2025. Analysts expect earnings of $1.54 per share, an 11% decline from the previous year. Revenues are projected at $2.36 billion, a 6.2% decrease. Despite these anticipated declines, the consensus earnings per share (EPS) estimate has remained stable over the past 30 days, indicating no revisions by analysts.
This stability in EPS estimates is significant for investors, as changes in earnings estimates often influence short-term stock price movements. As the earnings announcement nears, investors will watch for any revisions to these estimates, which could impact ADI's stock price. The stock's recent trading range, with a low of $210.64 and a high of $215.15, reflects market anticipation.
ADI's market capitalization is approximately $106.47 billion, with a trading volume of 3,938,608 shares on the NASDAQ exchange. Over the past year, ADI's stock has seen a high of $244.14 and a low of $182.57. These figures highlight the stock's volatility and the potential impact of upcoming earnings on its market performance.
Analog Devices Named Citi's Top Pick in U.S. Semiconductors Amid Lower Risk in Automotive Sector
Analog Devices (NASDAQ:ADI) has been named Citi’s new top pick in the U.S. semiconductor sector. The analysts moved Analog Devices to the top position due to its lower downside risk in the automotive sector compared to other analog semiconductor companies, especially after recently announcing earnings. Meanwhile, Broadcom and AMD continue to hold the second and third spots, with both remaining top picks for AI-related investments, though there are concerns about potential margin pressures in their AI segments.
Citi also upgraded Texas Instruments to fourth place, citing expectations of rising gross margins, despite concerns over the fourth-quarter 2024 guidance. Any potential share-price weakness is seen as a buying opportunity. Micron was downgraded to fifth, with Citi expecting lower consensus estimates in the near term, but the firm believes the ongoing DRAM inventory correction will end within a few quarters. Microchip remains in the last position among Citi’s Buy-rated semiconductor stocks, pending further catalysts for growth.
Analog Devices Stock Gains 5% on Q2 Beat
Analog Devices (NASDAQ:ADI) saw its shares rise by more than 5% in pre-market today following better-than-expected Q2 results and guidance.
For Q2, the company reported earnings per share (EPS) of $1.40, exceeding the Street estimate of $1.26. Revenue was $2.16 billion, above the consensus forecast of $2.1 billion.
The adjusted gross margin for the quarter was 66.7%, slightly below the projected 67.1%, while the adjusted operating margin was 39%, surpassing the expected 37.7%.
Looking ahead to Q3/24, Analog Devices projects EPS between $1.40 and $1.60, significantly higher than the Street expectation of $1.35. Revenue is anticipated to be between $2.17 billion and $2.37 billion, compared to the consensus of $2.16 billion.
CEO and Chairman Vincent Roche noted that despite ongoing macroeconomic and inventory challenges, the company delivered second-quarter revenue above the midpoint of its outlook. He attributed the strong performance to a resilient business model and disciplined cost control, which resulted in higher-than-expected profitability and EPS.
Roche also expressed optimism about the future, citing stabilizing inventory rationalization and improving new orders as indicators of a potential cyclical recovery starting in the third quarter.
