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ANALOG DEVICES INC (ADI)·Q2 2025 Earnings Summary

Executive Summary

  • ADI delivered Q2 FY25 revenue of $2.64B (+22% YoY, +9% QoQ) and adjusted EPS of $1.85, both above the high end of guidance and ahead of S&P Global consensus, supported by broad-based demand and strengthening bookings/backlog . Versus consensus: Revenue $2.641B vs $2.506B*, EPS $1.85 vs $1.69* (beats). Values retrieved from S&P Global.*
  • Guidance points to continued momentum: Q3 FY25 revenue $2.75B (±$100M), adjusted operating margin ~41.5% (±100 bps), adjusted EPS $1.92 (±$0.10); management expects Industrial and Consumer to lead, Communications up, Automotive down after tariff-aided pull-ins in Q2 .
  • End-market strength was broad, with double-digit YoY growth across Industrial (+17%), Automotive (+24%), Communications (+32%), and Consumer (+30%); adjusted gross margin expanded to 69.4% (+60 bps QoQ, +270 bps YoY) on higher utilization .
  • Stock reaction catalysts: accelerating AI-driven demand in ATE and data center power/optical control, improving industrial linearity/book-to-bill, and a clear narrative of cyclical upturn with lean channel inventories; counterbalance from auto normalization and tariff uncertainty .

What Went Well and What Went Wrong

What Went Well

  • Broad-based beat and growth: Revenue $2.64B and adjusted EPS $1.85 finished above the high end of guidance; bookings accelerated across all end markets/regions and backlog grew sequentially .
  • Margin execution: Adjusted gross margin 69.4% (up 60 bps QoQ), adjusted operating margin 41.2% (up despite variable comp) on higher utilization; CFO: “GDP [gross margin] up 60 bps sequentially, driven by higher utilization” .
  • Secular tailwinds: CEO emphasized AI-driven Intelligent Edge and rising content across ATE/data center, health wearables, robotics, and automotive connectivity/power as drivers of resilient growth; “revenues bottomed in 2024… returning to growth in fiscal ‘25” .

What Went Wrong

  • Automotive buoyed by tariff-related pull-ins: Management estimates high single-digit percentage pull-in impact in Q2, with normalization and a guided decline in Q3 .
  • Operating leverage muted: Variable compensation and annual salary increases temper near-term incremental operating margin leverage despite sequential revenue growth .
  • Tariff/macros add uncertainty: Management noted tariff-related customer decision volatility and a choppy buying backdrop; wireless remains a relative drag within Communications despite sequential improvement .

Financial Results

Key Financials vs Prior Quarters

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Billions)$2.443 $2.423 $2.640
GAAP Diluted EPS ($)$0.96 $0.78 $1.14
Adjusted Diluted EPS ($)$1.67 $1.63 $1.85
Gross Margin % (GAAP)58.0% 59.0% 61.0%
Adjusted Gross Margin %67.9% 68.8% 69.4%
Operating Margin % (GAAP)23.3% 20.3% 25.7%
Adjusted Operating Margin %41.1% 40.5% 41.2%

Actual vs S&P Global Consensus

MetricQ2 2025 ConsensusQ2 2025 ActualSurprise
Revenue ($USD Billions)$2.506*$2.640 +$0.134B / +5.3%
Primary EPS ($)$1.69*$1.85 +$0.16 / +9.4%
EBITDA ($USD Billions)$1.103*$1.180 [GetEstimates]*+$0.077B / +7.0%

Values retrieved from S&P Global.*

Segment Breakdown (Q2 FY25)

End MarketRevenue ($MM)% of RevenueYoY GrowthSeq Growth
Industrial$1,157.7 44% +17% +8%
Automotive$849.5 32% +24% +16%
Communications$315.1 12% +32% +5%
Consumer$317.8 12% +30% Flat
Total$2,640.1 100% +22% +9%

KPIs

KPIQ2 2025TTM
Operating Cash Flow ($MM)$819.5 $3,852.1
Capital Expenditures ($MM)$90.3 $558.5
Free Cash Flow ($MM)$729.2 $3,293.6
Cash Returned ($MM)$740.0 $2,482.0
Inventory Days (DOI)169 —
Net Leverage Ratio~1.0 —

Non-GAAP EPS Reconciliation (Q2 2025)

ComponentPer Share Impact
GAAP Diluted EPS$1.14
+ Acquisition-related expenses+$0.82
+ Special charges, net$0.00
– Tax related items–$0.12
Adjusted Diluted EPS$1.85

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueQ2 FY25$2.50B ± $100M Actual $2.64B Raised/Beat
Adjusted EPSQ2 FY25$1.68 ± $0.10 Actual $1.85 Raised/Beat
RevenueQ3 FY25N/A$2.75B ± $100M New
Operating Margin (Reported)Q3 FY25N/A~27.2% ±150 bps New
Operating Margin (Adjusted)Q3 FY25N/A~41.5% ±100 bps New
Nonoperating ExpensesQ3 FY25N/A~$55M New
Tax RateQ3 FY25N/A11%–13% New
Adjusted EPSQ3 FY25N/A$1.92 ± $0.10 New
Dividend per ShareOngoing$0.92 (Q4 FY24) $0.99 (raised 8%; Q1 FY25/paid Q2) Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 FY24)Previous Mentions (Q1 FY25)Current Period (Q2 FY25)Trend
AI/ATE & Data CenterPreparing for recovery; bookings picked up esp. Auto Strong growth expected in memory/HPC test; 1.6T optical control shipping; vertical power production 2H25 Continued acceleration; ATE content “hundreds of thousands” per tester; rising power/optical demand Strengthening
Industrial RecoverySequential growth across all end markets Industrial up 1% seq; broad-market pickup; shipping to sell-through; lean channel Industrial up 8% seq, +17% YoY; book-to-bill >1 across subsectors Improving
Tariffs/MacroMacro uncertainty limits recovery pace Normalization; caution on macros; dual-sourcing strategy Tariff-related pull-ins in auto; choppy behavior but normalized; uncertainty weighs on customers Mixed Risk
AutomotiveSequential growth; rising content Strong China EV exposure; multi-product content (GMSL, A2B, BMS) Record revenue; pull-ins (high single-digit %); guide decline in Q3; SAAR expected down in 2H Near-term Normalize
Hybrid Manufacturing/Foundry DiversityCapacity and resiliency investments Dual-sourcing to ≥95% of products by ’26/’27 2× internal capacity; flexible swing; added fine-pitch 300mm capacity (TSMC Japan) Strategic Strength
ConsumerQ4 FY24 +31% YoY Seasonal decline; multi-customer design wins Flat seq; +30% YoY; diversified apps Stabilizing
Robotics/AutomationEmerging opportunities noted Automation wins (software-defined I/O) Tactile robotics content potential “order of magnitude more” over 5–10 years Secular Upside

Management Commentary

  • CEO: “Second quarter results exceeded our expectations… revenue growth was broad-based with double-digit year-over-year growth across all end markets… we’re ever more confident that our revenues bottomed in 2024 and that we’re returning to growth in fiscal ’25” .
  • CFO: “Second quarter bookings accelerated across all end markets and all regions, resulting in continued sequential backlog growth” .
  • CEO on AI/ATE: “Testing demand for GPUs, XPUs and high-bandwidth memory continues to increase, giving us confidence in a long runway for growth” .
  • CEO on manufacturing resiliency: “We… secured additional 300-millimeter fine pitch technology capacity at TSMC’s Japan subsidiary… quickly swing production across geographies” .

Q&A Highlights

  • Automotive pull-ins and Q3 normalization: Management estimates high single-digit pull-in impact tied to tariff news; guides Automotive down Q3; underlying trend seasonally flat when adjusted .
  • Industrial shipping vs demand: ADI has been undershipping industrial; expects to ship to end demand in Q3 with ~10% growth at midpoint; book-to-bill >1 across subsectors .
  • Operating leverage: Variable comp and salary increase temper leverage near term; gross margin expected ~70% at $2.75B revenue as Industrial leads .
  • SAAR outlook: Management expects lower SAAR in 2H; content gains offset some unit headwinds .
  • Back-half trajectory: More confident in exiting FY25 at high end of prior 7–10% growth view, with caution on tariffs .

Estimates Context

  • Q2 FY25 beats vs consensus: Revenue $2.640B vs $2.506B*, EPS $1.85 vs $1.69*, EBITDA $1.180B vs $1.103B*. 24 revenue and EPS estimates contributed to the consensus*.
MetricQ1 2025 ConsensusQ1 2025 ActualQ2 2025 ConsensusQ2 2025 Actual
Revenue ($MM)2,359.6*2,423.2 2,506.0*2,640.1
Primary EPS ($)1.54*1.63 1.69*1.85
# of EPS Estimates26*—24*—

Values retrieved from S&P Global.*

Implications: Consensus likely moves higher on FY25 EPS/revenue given sustained broad-based demand, stronger margins, and Q3 guide at $2.75B and $1.92 .

Key Takeaways for Investors

  • Broad-based beat and accelerating bookings/backlog support a cyclical upturn narrative, with lean channel inventories and improving industrial linearity as key drivers .
  • AI infrastructure and ATE remain powerful secular tailwinds, with rising content and visible roadmaps (optical control at 1.6T, vertical power in 2H25) that can sustain multi-quarter growth .
  • Margin outlook constructive: Adjusted gross margin ~70% at Q3 guide as mix shifts toward Industrial; caution that variable comp and salary increases mute near-term operating leverage .
  • Automotive normalization expected in Q3 after tariff-related pull-ins; medium-term content growth remains intact across connectivity (GMSL, A2B), power and BMS .
  • Capital returns robust and rising: Dividend raised 8% to $0.99 and TTM FCF at 34% of revenue; management targets 100% of FCF returned long term .
  • Manufacturing resiliency and dual-sourcing mitigate geopolitical risk and tariffs, preserving supply optionality and customer confidence .
  • Near-term trading setup: Strong Q3 guide and AI/Industrial momentum vs tariff uncertainty and auto normalization; beats vs consensus and backlog growth favor positive estimate revisions [GetEstimates]*.

Values retrieved from S&P Global.*