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ANALOG DEVICES INC (ADI)·Q3 2025 Earnings Summary

Executive Summary

  • ADI delivered Q3 FY2025 revenue of $2.88B and adjusted EPS of $2.05, both above guidance and consensus; gross margin (adj) was 69.2% and operating margin (adj) 42.2% .
  • Industrial led the quarter with 45% of revenue and double-digit sequential and YoY growth; communications and consumer were strong; automotive grew YoY but softened sequentially amid China pull-ins .
  • Q4 FY2025 guidance: revenue $3.0B ±$0.1B, adjusted operating margin ~43.5% ±100 bps, adjusted EPS $2.22 ±$0.10; industrial, communications, consumer up; automotive down .
  • Stock reaction catalysts: broad-based cyclical recovery (industrial strength, ATE/AI tailwinds), path back to ~70% gross margin in Q4, and disciplined cash returns ($1.6B in Q3 via dividends/repurchases) .

What Went Well and What Went Wrong

What Went Well

  • Broad-based growth: Revenue up 9% sequentially and 25% YoY; double-digit YoY growth across all end markets; communications up 18% seq and 40% YoY; consumer up 16% seq and 21% YoY .
  • Industrial recovery: Industrial up 12% seq and 23% YoY; ATE fueled by AI investment; aerospace & defense had a record quarter; channel inventories remain lean (“under-shipping real consumption”) .
  • Strategic robotics/AI positioning: CEO emphasized humanoid robotics content opportunity (multi-thousand dollars per unit), NVIDIA collaboration on digital twin simulation, and broad sensing/power stack leverage: “Our content in a humanoid robot is likely to be several thousands of dollars…a 10x increase over today’s AMRs” .

What Went Wrong

  • Gross margin modestly below implied 70% target due to a one-time European fab utilization disruption; mix still constrained by 45% industrial share in Q3 (expected ~49% in Q4) .
  • Automotive sequential decline expected in Q4: Q3 benefited from China pull-ins; unwind anticipated in Q4; management adopting a more conservative near-term view amid tariff/EV credit risks .
  • Opex growth pressure from variable comp normalization vs trough year; FY2026 expected to see leverage improve as variable comp growth moderates, contingent on revenue growth .

Financial Results

Headline Results (GAAP and Non-GAAP)

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Billions)$2.42 $2.64 $2.88
Diluted EPS (GAAP) ($)$0.78 $1.14 $1.04
Adjusted Diluted EPS ($)$1.63 $1.85 $2.05
Gross Margin % (GAAP)59.0% 61.0% 62.1%
Gross Margin % (Adjusted)68.8% 69.4% 69.2%
Operating Margin % (GAAP)20.3% 25.7% 28.4%
Operating Margin % (Adjusted)40.5% 41.2% 42.2%

End-Market Revenue Mix

End Market ($USD Millions)Q1 2025Q2 2025Q3 2025
Industrial$1,077.9 $1,157.7 $1,285.0
Automotive$732.5 $849.5 $850.6
Consumer$322.9 $317.8 $372.2
Communications$289.9 $315.1 $372.5
Total Revenue$2,423.2 $2,640.1 $2,880.3

Cash Flow KPIs

KPI ($USD Millions)Q1 2025Q2 2025Q3 2025
Net Cash from Operations$1,126.8 $819.5 $1,165.1
Capital Expenditures$(148.98) $(90.27) $(79.15)
Free Cash Flow$977.8 $729.2 $1,086.0
TTM Op Cash Flow$3,841.0 $3,852.1 $4,162.2
TTM Free Cash Flow$3,184.0 $3,293.6 $3,678.4

Actuals vs Consensus and Guidance

MetricQ3 2025 Consensus*Q3 2025 ActualQ4 2025 Consensus*Q4 2025 Guidance
Revenue ($USD Billions)$2.76*$2.88 $3.02*$3.00 ± $0.10
Adjusted EPS ($)$1.95*$2.05 $2.23*$2.22 ± $0.10

Values retrieved from S&P Global.*

  • Q3 beat: Revenue +$0.12B (~4%) and adjusted EPS +$0.10 vs consensus. Q4 guidance midpoint is modestly below consensus on both revenue and EPS but within ranges .*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueQ3 2025$2.75B ± $0.10B Actual: $2.88B Beat vs guidance
Operating Margin (Adjusted)Q3 2025~41.5% ±100 bps Actual: 42.2% Beat
Adjusted EPSQ3 2025$1.92 ± $0.10 Actual: $2.05 Beat
RevenueQ4 2025N/A$3.0B ± $0.1B New
Operating Margin (Reported)Q4 2025N/A~30.5% ±150 bps New
Operating Margin (Adjusted)Q4 2025N/A~43.5% ±100 bps New
Non-op ExpensesQ4 2025~$55M ~$55–$60M Maintained
Tax RateQ4 202511%–13% 11%–13% Maintained
Dividend per ShareQ3/Q4 2025$0.99 (Q2 decree) $0.99 (Q3 decree; payable 9/16/25) Maintained

Segment directional Q4 guide: Industrial, communications, consumer increasing; automotive declining .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q3 2025)Trend
Industrial recoveryQ1: sequential growth in industrial; bookings improving . Q2: bookings accelerated across all end markets and regions; cyclical upturn .Industrial up 12% seq/23% YoY; record A&D; strength broad-based; under-shipping consumption .Strengthening
AI/ATE/data center demandQ2: improving demand signals; AI-driven intelligent edge positioning .ATE and wireline/data center strong on AI demand; comms +18% seq/+40% YoY .Strengthening
Robotics & NVIDIA collaborationQ1: Innovation/customer wins; resilient supply chain .Humanoid robotics content 10x AMR; multi-modal sensing + AI; NVIDIA digital twin collaboration .Accelerating
Gross margin trajectoryQ2: adj GM ~69.4% .One-time fab utilization issue held GM to 69.2%; guide to ~70% in Q4 .Recovering to target
Automotive dynamicsQ1: Automotive sequential growth . Q2: Auto up 24% YoY .China pull-ins aided Q3; unwind expected in Q4; cautious near-term view .Moderating
China trendsQ1/Q2: Competitive market; recovery led by China (implied via bookings) .Outside auto: industrial end markets in China well below prior peaks but improving; multi-year runway .Improving off lows
Tariffs/macroQ1/Q2: Tariff/trade volatility highlighted in releases .Monitoring tariff impacts; optionality from diversified hybrid manufacturing .Ongoing headwind

Management Commentary

  • CEO: “Our third-quarter revenue and earnings per share exceeded the high end of our expectations… demand for ADI’s products remains robust… positioned to capitalize on the growth of the intelligent physical edge” .
  • CEO on robotics: “Our content in a humanoid robot is likely to be several thousands of dollars… basically a 10x increase over… AMRs… collaborating with NVIDIA… to substantially shorten our customers’ innovation timelines” .
  • CFO: “Backlog growth and healthy bookings trends, notably in the Industrial end market… strong results and outlook for continued growth… position us well to finish fiscal 2025 from a position of strength” .
  • CFO on Q4 guide: “Industrial, communications and consumer to increase… automotive is expected to decline… adjusted EPS $2.22 ± $0.10; tax rate 11–13%” .

Q&A Highlights

  • Industrial vs auto: Industrial strength broad-based and not pull-forward; auto benefited from China pull-ins in Q3 and will unwind in Q4; cautious near-term stance given tariffs/EV credit dynamics .
  • Gross margin/utilization: One-time European fab issue constrained GM; utilization back on track; expect ~70% GM in Q4 as mix shifts toward industrial (~49% mix exit) .
  • Supply constraints: Aerospace & defense experiencing surging demand and is supply-limited; tools being deployed in Q3/Q4 to alleviate constraints; rest of industrial in good supply shape .
  • OpEx/variable comp: FY2025 OpEx higher from variable comp normalization; FY2026 expected leverage as variable comp growth moderates, assuming revenue growth .
  • China: Premium positioning supports ASPs; industrial end markets still 35–50% below prior peaks, implying medium-term runway; auto strong in China .

Estimates Context

  • Q3 FY2025: Revenue $2.88B vs $2.76B consensus; adjusted EPS $2.05 vs $1.95 consensus. Both beats; narrative supported by industrial strength and AI-related ATE/comms tailwinds .*
  • Q4 FY2025: Guidance revenue midpoint $3.0B vs $3.02B consensus; adjusted EPS $2.22 vs $2.23 consensus—slightly below midpoints but within ranges; segments guided up (industrial/comms/consumer) with auto down .*

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Broad-based cyclical recovery with industrial as the anchor (record A&D, strong ATE/data center), supporting multi-quarter momentum into Q4 and FY2026 .
  • Margin expansion back toward ~70% GM in Q4 as utilization normalizes and industrial mix rises—watch for execution on utilization and mix to confirm durability .
  • Near-term risk: automotive unwind after Q3 China pull-ins and tariff/EV credit uncertainty—expect sequential auto decline in Q4 per guide .
  • Strategic long-term upside: humanoid robotics content opportunity (10x vs AMRs) and NVIDIA collaboration could materially expand ADI’s SAM/ASP over 3–5 years .
  • Cash return discipline remains intact: $1.6B returned in Q3; dividend maintained at $0.99; FCF robust at 35% of TTM revenue—supporting buybacks/dividends through cycle .
  • Trading implications: Q4 print likely driven by industrial upside and margin trajectory; watch commentary on auto normalization and tariff impacts for volatility cues .
  • Estimate revisions: Expect upward adjustments to industrial/communications models; modest caution for automotive near-term; margin forecasts likely to tighten around ~70% GM in Q4 .