Record Revenue and Earnings
Revenue of $3.62B (record) — +15% sequential, +37% year-over-year. Adjusted EPS $3.09 (record) — +26% sequential, +67% year-over-year.
Analog Devices
· ADI
May 20th, 2026
Summary
- Earnings Call Date:
- 2026-05-20
- Change Since:
- +4.08%
- Next Earnings Date:
- 2026-08-26
Earnings Call Sentiment
PositiveThe call communicated strong, broad-based demand and record financial results (revenue, EPS, margins) driven by industrial and data center momentum, robust cash generation and strategic moves (Empower) to capture AI-related power opportunities. Management acknowledged near-term risks including macro/geopolitical tensions, supply-chain choke points, elevated inventory days, a modest near-term gross margin headwind (~50 bps) and that the Empower acquisition will not be materially accretive in the immediate quarter. On balance the positives — strong growth, margin expansion, cash flow and capacity resilience — substantially outweigh the cautions.
Company Guidance
Management guided third-quarter fiscal 2026 revenue of $3.9 billion ± $100 million, operating margin at a 49% midpoint ±100 basis points, a tax rate of 12%–14% and adjusted EPS of $3.30 ± $0.15, and they expect Q3 gross margin to be roughly 50 basis points lower than Q2’s 73% (reflecting the absence of a prior one‑time channel repricing benefit) with channel inventory weeks expected to remain flat in the 6–7‑week range. They reiterated fiscal‑year CapEx in the 4%–6% of revenue long‑term model; at quarter end cash and short‑term investments were $3.4 billion, net leverage ~0.8, days of inventory 168, trailing‑12‑month operating cash flow $5.1 billion, TTM CapEx $0.5 billion, free cash flow $4.6 billion (36% of revenue) and $5.0 billion returned to shareholders over the past 12 months.
Strong Profitability Expansion
Gross margin 73% (+180 bps sequential, +360 bps YoY). Operating margin 49% (+350 bps sequential, +780 bps YoY). Operating expense $872M and tax rate 11.8%.
Broad-Based Segment Strength
Industrial (50% of revenue) +20% sequential, +56% YoY. Communications +22% sequential, +79% YoY; data center ( >75% of comms) +90% YoY. Automotive 24% of revenue +8% sequential, +2% YoY. Consumer +23% YoY.
Robust Cash Generation and Returns
Trailing 12 months operating cash flow $5.1B; CapEx $0.5B. Free cash flow $4.6B (36% of revenue). Returned $5B to shareholders over trailing 12 months; net leverage 0.8.
Strategic Acquisition to Expand Power TAM
Planned acquisition of Empower Semiconductor to add IVR and silicon capacitor IP — claims to shrink customer power footprint up to 4x and reduce data center compute power consumption ~10–15%. Expected to expand TAM in AI accelerators with meaningful revenue contribution anticipated in 2027 after close and regulatory approval.
Industrial and End-Market Momentum
Collective industrial markets (automation, ETM, energy, health care, broad market) up >40% in H1 FY26. BMS demand grew >50% in FY25 and BMS returned to YoY growth in Q2; health care showing double-digit growth.
Supply Chain and Capacity Resilience
Company more than doubled internal capacity since pre-COVID and reports strong external partner relationships; management states capacity to support up to $20B (2030 vision) with built-in geographic and external optionality.
Operator
Good morning, and welcome to the Analog Devices Second Quarter Fiscal Year 2026 Earnings Conference Call, which is being audio webcast via telephone and over the web. I'd now like to introduce your host for today's call, Mr. Jeff Ambrosi, Head of Investor Relations. Sir, the floor is yours.
Jeff Ambrosi
Thank you, Jonathan, and good morning, everybody. Thank you for joining our second quarter fiscal 2026 conference call. Joining me today is ADI's CEO and Chair, Vincent Roche; and ADI's CFO, Richard Puccio. For anyone who missed the release, you can find it at investor.analog.com, along with related financial schedules. The information we're about to discuss includes forward-looking statements, which are subject to certain risks and uncertainties as further described in our earnings release, periodic reports and other materials filed with the SEC. Actual results could differ materially from the forward-looking information as these statements reflect our expectations only as of the date of this call. We undertake no obligation to update these statements, except as required by law. References to gross margin, operating and nonoperating expenses, operating margin, tax rate, earnings per share and free cash flow in our comments today will be on a non-GAAP basis, which excludes special items.
When comparing our results to our historical performance, special items are also excluded from prior periods. Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures and additional information about our non-GAAP measures are included in today's earnings release. Referen...
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