ANALOG DEVICES INC (ADI)·Q4 2024 Earnings Summary

Executive Summary

• Q4 FY24 revenue $2.44B and non‑GAAP EPS $1.67 finished above the guided midpoints; sequential growth across all end markets, though revenue fell 10% YoY and adjusted operating margin was 41.1% .
• Orders improved through the quarter, led by Automotive; management struck a cautiously optimistic tone for FY25 with guidance that Q1 FY25 revenue of $2.35B (±$100M) and adj. EPS $1.53 (±$0.10) would mark YoY growth on a normalized comp, and a recovery thereafter from a seasonal Q1 dip .
• Mix hurt gross margin versus expectations (Consumer and Auto strength, softer Industrial), but utilization ticked up and management reiterated a path to improve through FY25; GM reaching ~70% likely requires revenue ≥$2.7B and mix tailwinds .
• Capital returns/FCF: FY24 free cash flow $3.12B (33% of revenue) and $2.4B returned to shareholders; ADI plans to revert to returning ~100% of FCF in FY25; CapEx to normalize to 4–6% of revenue aided by U.S./EU investment tax credits .

What Went Well and What Went Wrong

What Went Well

• Sequential growth across all end markets with revenue above the midpoint of guidance; non‑GAAP EPS above midpoint and operating execution remained disciplined (adj. op margin ~41%) .
• Automotive improved sequentially (up 4%) with stronger China demand and content/share gains; management expects BMS to return to growth in FY25; “bookings started to improve… with stronger demand in China” .
• Data‑center and AI‑adjacent exposure strengthening: AI SoC/HBM test content, optical module controllers, and new hot‑swap solutions for AI servers; also strategic software/security initiatives (CodeFusion Studio, ADI Assure) to speed edge development .

What Went Wrong

• YoY declines persisted: total revenue down 10%, Industrial down 21%, Communications down 18% as broad inventory digestion and macro headwinds weighed; Consumer strength partly offset .
• Gross margin came in below internal expectations due to mix (strong Consumer/Auto vs. softer Industrial); Q1 gross margin expected slightly lower seasonally before improving with revenue/utilization .
• Industrial recovery slower than hoped: growth was modest as ADI reduced channel inventory (below 7–8 week target), leading to outsized impact on Industrial sell‑in; Industrial expected down low‑single‑digits in Q1 before resuming growth through FY25 .

Financial Results

Headline P&L and Cash Flow (USD Millions)

Notes: Q4 EPS and margins finished above guided midpoints; YoY revenue –10% and adj. EPS –17% vs Q4 FY23 .

End‑Market Revenue (USD Thousands)

Q4 YoY: Industrial –21%, Communications –18%, Automotive –2%, Consumer +31% .

KPIs and Balance Sheet Highlights

Guidance Changes

Reference prior quarter guidance (for context): Q4 FY24 was guided to revenue $2.40B ± $0.10B, GAAP OM ~22.3% (±180 bps), adj. OM ~41% (±100 bps), GAAP EPS $0.85 (±$0.10), adj. EPS $1.63 (±$0.10) .

Earnings Call Themes & Trends

Management Commentary

• “ADI’s revenue, profitability, and earnings per share all finished above our guided midpoint… we maintained operating margins north of 40%… enter 2025 as an even stronger enterprise” – Vincent Roche, CEO .
• “Orders picked up steadily throughout the fourth quarter, particularly in the Automotive end market… cautiously optimistic for a strong growth year in fiscal 2025” – Richard Puccio, CFO .
• “In the AI‑related SoC and high‑bandwidth memory test market… content per tester stretches into the hundreds of thousands of dollars” – Vincent Roche (prepared remarks) .
• “Gross margin was lower than we had expected due to mix… Q1 slightly lower given normal factory shutdowns and seasonal revenue… likely need revenue in the $2.7B+ range to start seeing 70%” – Richard Puccio .
• “We expect to revert to our targeted return of 100% free cash flow in fiscal ’25… CapEx to normalize to 4–6% of revenue; investment tax credits provide tailwinds” – Richard Puccio .

Q&A Highlights

• Automotive strength and China: Bookings improved late Q3 and through Q4 driven by China EV volumes, share and content gains; BMS inventory headwinds easing, with wireless BMS now ~10% of total BMS; broader pricing stable given high‑performance positioning and inflationary cost backdrop .
• Industrial trajectory: Q4 below internal expectation due to deliberate channel inventory reduction; Industrial has grown sequentially two quarters from Q2 trough; guided down LSD in Q1 with recovery thereafter as undershipment vs. demand (~20%) normalizes through FY25 .
• Gross margin outlook: Mix drove shortfall vs plan in Q4; Q1 seasonally lower; path to 70% tied to mix/utilization and revenue ≥$2.7B; sequential improvement expected as FY25 progresses .
• Seasonality / bookings: “Normal” Q2 seasonality typically low‑ to mid‑single digit up for total company; book‑to‑bill slightly below 1 entering seasonally lower Q1; bookings up in all regions ex‑Americas (seasonal Consumer decline) .
• Data‑center power/AI: Increasing traction across on‑board power and control (hot‑swap/supervisory), optical control up to 1.6T, and broader energy solutions from grid to chip via ecosystem partnerships .
• Utilization: Two quarters of modest sequential increases; flexible hybrid manufacturing allows swinging capacity back to internal fabs; utilization expected to rise with revenue in FY25 .

Estimates Context

• Wall Street consensus (S&P Global) for Q4 FY24 and Q1 FY25 could not be retrieved due to a system rate‑limit error at the time of analysis. As a result, beat/miss versus consensus cannot be quantified here. Values would typically be sourced from S&P Global; data unavailable at time of request.

Key Takeaways for Investors

• Cycle turning: Sequential growth across all end markets for two consecutive quarters from a Q2 trough, with Q1 FY25 guide implying YoY growth and a path to broader recovery through FY25, albeit with macro caution .
• Mix watch: Consumer and Auto outperformed in Q4, but sustained improvement in Industrial (largest mix) and wireline is key to lift GM back toward 70%; management cites ~$2.7B+ quarterly revenue as a threshold with better mix .
• Auto seculars intact: China EV, BMS, and connectivity (GMSL/A2B, functional‑safe power) support FY25 growth despite prior digestion; BMS expected back to growth in FY25 .
• AI‑adjacent leverage: Content expansion in AI test, optical module controllers, and server power control provide incremental growth vectors tied to data‑center capex .
• FCF and returns re‑accelerate: FY24 FCF $3.1B (33% margin) with intent to return ~100% of FCF in FY25; CapEx normalizing to 4–6% and tax credits as FCF tailwinds .
• Channel discipline a near‑term headwind but long‑term positive: Intentional inventory actions pressured Industrial sell‑in, but leave ADI better positioned for sustained recovery as end‑demand normalizes .
• Watch milestones: Industrial reacceleration in 1H FY25, wireline trajectory, BMS growth resumption, and margin progression toward high‑60s as utilization improves and mix shifts .

Appendix: Additional References and Cross‑Checks

• Q4 FY24 press release and detailed financial tables (P&L, balance sheet, cash flow, end‑market revenue, GAAP→non‑GAAP) .
• Q4 FY24 8‑K furnishing press release and exhibits (guidance reconciliation) .
• Q4 FY24 earnings call transcript (prepared remarks and Q&A detail across segments, margins, utilization, capital returns) .
• Prior quarters for trend analysis: Q3 FY24 press release (outlook for Q4 FY24 and segment data) ; Q2 FY24 press release (outlook for Q3 FY24 and segment data) .