Q4 2024 Earnings Summary
- ADI expects double-digit growth through the rest of the decade, supported by a double-digit increase in their opportunity pipeline year-over-year, and is well-positioned to capitalize on recovering markets in fiscal '25, particularly in industrial and communications sectors.
- In Automotive, strong demand in China due to EV volume growth, share gains, and content growth has led to improved bookings, with Battery Management Systems (BMS) expected to return to growth in fiscal year '25. ADI's wireless BMS solutions now account for 10% of total BMS.
- ADI's investments in software, including the launch of CodeFusion Studio, an open-source software development environment, and ADI Assure, a new security architecture, enhance their analog and mixed-signal offerings, making it easier for customers to adopt their solutions and differentiating ADI from competitors.
- ADI's Communications business declined over 30% in fiscal 2024, primarily due to an inventory digestion issue, and recovery depends on carrier CapEx investments in 5G, which remain uncertain.
- Half of ADI's Automotive business, consisting of standard products, was down about 10% in fiscal 2024, with expectations of similar declines in fiscal 2025, indicating ongoing weakness in this segment.
- ADI is still facing inventory headwinds in its Battery Management Systems (BMS) broadly, and despite some improvement in China, the overall recovery in BMS remains uncertain.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | -10% | The revenue of $2,443M declined due to softer industrial and communications markets, which continued the weakness seen in prior quarters, partially offset by automotive and consumer growth. This reflects broad-based inventory digestion and macroeconomic uncertainties. |
Industrial Segment | -30% | Driven by ongoing automation weakness and normalization in other sub-segments (e.g., ETM, healthcare), building on the demand slowdown and inventory corrections observed in prior quarters. Despite pockets of resilience in energy and ATE, the overall market remained subdued. |
Automotive Segment | +14% | Maintained strong momentum from previous quarters, propelled by electrification trends (battery management) and in-cabin connectivity. Although inventory digestion has been a recurring theme, rising EV adoption and increased silicon content contributed to YoY gains. |
Communications Segment | -9% | Continues to face slowing 5G deployments and timing issues in infrastructure rollouts, extending the weakness previously noted. However, improving inventory levels offered a modest sequential recovery, though not enough to offset the YoY drop. |
Consumer Segment | +40% | After consecutive declines in prior periods, portables and gaming rebounded strongly, driving year-over-year improvement. Better inventory management and broad market recovery underpinned this surge, marking the segment’s first meaningful YoY growth in some time. |
Operating Income (EBIT) | -10% | The drop stems from the lower revenue base and gross margin carry-over from earlier quarters. Cost controls (including reduced operating expenses) provided some offset, but market softness in key segments weighed on overall profitability. |
R&D Expense | -7% | Reflects continued focus on cost optimization following previous quarters’ lower variable compensation and employee-related expenses. This aligns with the company’s strategy to balance long-term innovation and short-term margin targets. |
Share Repurchases | -80% | Markedly lower repurchases compared to earlier quarters, as the company shifted capital allocation toward other uses (e.g., debt management, dividends). This follows a period of elevated buybacks, leaving remaining authorization available for future activity. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue | Q4 2024 | $2.4B ± $100M | No current guidance | no current guidance |
Operating margin | Q4 2024 | 41% ± 100 bps | No current guidance | no current guidance |
Tax rate | Q4 2024 | 11%–13% | No current guidance | no current guidance |
EPS | Q4 2024 | $1.63 ± $0.10 | No current guidance | no current guidance |
Industrial | Q4 2024 | Increase sequentially | No current guidance | no current guidance |
Consumer | Q4 2024 | ~10% sequential growth | No current guidance | no current guidance |
Communications | Q4 2024 | Flattish sequentially | No current guidance | no current guidance |
Automotive | Q4 2024 | Decrease by low single digits | No current guidance | no current guidance |
Revenue | Q1 2025 | No prior guidance | $2.35B ± $100M | no prior guidance |
Operating margin | Q1 2025 | No prior guidance | 40% ± 100 bps | no prior guidance |
Tax rate | Q1 2025 | No prior guidance | 12%–14% | no prior guidance |
EPS | Q1 2025 | No prior guidance | $1.53 ± $0.10 | no prior guidance |
Industrial | Q1 2025 | No prior guidance | Decline by low single digits | no prior guidance |
Automotive | Q1 2025 | No prior guidance | Decline by low single digits | no prior guidance |
Communications | Q1 2025 | No prior guidance | Decline by low single digits | no prior guidance |
Consumer | Q1 2025 | No prior guidance | ~15% decline | no prior guidance |
CapEx spend | Q1 2025 | No prior guidance | 4%–6% of revenue | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Revenue | Q4 2024 | $2.4B ± $0.1B | $2.443B | Met |
Operating Margin | Q4 2024 | 41% ± 1% | ~23% (derived from Operating Income of 569,392 ÷ Revenue of 2,443,205) | Missed |
Tax Rate | Q4 2024 | 11%–13% | ~2% (approx. from Net Income vs. Pre-Tax Income) | Missed |
EPS (Basic) | Q4 2024 | $1.63 ± $0.10 | $0.97 | Missed |
Industrial Segment | Q4 2024 | Expected to increase sequentially | Decreased from $1,058.7M in Q3 2024 to $1,043.9M | Missed |
Consumer Segment | Q4 2024 | Increase ~10% sequentially | Increased from $316.6M in Q3 2024 to $369.0M (~16%↑) | Surpassed |
Communications Segment | Q4 2024 | Flattish sequentially | Increased slightly from $266.6M in Q3 2024 to $270.6M (~1.5%↑) | Met |
Automotive Segment | Q4 2024 | Decrease by low single digits sequentially | Increased from $670.3M in Q3 2024 to $759.7M (~13%↑) | Missed |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Industrial Sector Performance | Q3: 46% of revenue, fastest B2B recovery emerging. Q2: bottom of the cycle, expected to grow in 2H. Q1: down 31% YoY, but signs of stabilization. | 44% of revenue, up 2% sequentially, but down 21% YoY. Second straight quarter of sequential growth; expected to lead recovery in 2025. | Consistently mentioned; sentiment has improved from trough to growing optimism. |
Automotive Segment | Q3: Flat sequentially, down YoY, with inventory digestion but strong secular drivers. Q2: Expanded BMS share in China & Europe. Q1: Growth in BMS, GMSL, safe power offset inventory challenges. | BMS poised to return to growth in FY25; strong GMSL and functional safe power. China demand for EV solutions up. | Recurring topic; near-term softness transitioning to optimistic FY25 outlook. |
Gross Margins & Utilization | Q3: 67.9% margin, partially aided by higher revenue and better mix. Q2: bottomed out near 67%, expected upward trajectory. Q1: ~69%, impacted by mix, volume, and lower utilization. | Gross margin at 67.9%, flat sequentially; product mix offset modest utilization gains. Utilization remains below normal, improving gradually. | Consistent focus; sentiment modestly improved but remains below prior peaks. |
Inventory Correction & Under-Shipping | Q3: Lean channel inventory, under-shipping sets stage for recovery. Q2: Believed Q2 was bottom; under-shipping created healthy backlog. Q1: Under-shipping and inventory reduction to align with lead times. | Undershipping demand for 18 months (~20% below normal). This creates pent-up demand, especially in Industrial. | Ongoing theme; now increasingly confident about rebound. |
Record Design Win Pipeline & 2025 Growth | Q3: Highlighted record pipeline and strong bookings momentum heading into 2025. Q2: General optimism for brisk 2025 growth, though no explicit mention of “record pipeline”. Q1: No reference to record pipeline [N/A]. | Double-digit design win growth in 2024, supporting 2025 expansion. Automotive connectivity & industrial AI test wins drive optimism. | Heightened emphasis; emerged strongly in Q3/Q4, poised for future impact. |
China Bookings | Q3: Double-digit booking growth in several segments, offset by consumer weakness. Q2: Not specifically discussed. Q1: Improving bookings, though still weakest geography. | Bookings improved with EV and BMS demand rising. No direct mention of earlier booking shifts. | Mentioned intermittently; recent stance highlights gradual improvement. |
Consumer Revenue | Q3: 14%, up 29% sequentially. Q2: 11%, down 9% YoY. Q1: 11%, down 22% YoY. | Consumer at 16% of revenue, up 22% sequentially and 31% YoY, aided by wearables, premium handsets, gaming. | Consistent updates; shows marked improvement in Q4. |
Data Center Power & Optical Solutions | Q3: No specific mention [N/A]. Q2: Vertical power solutions for AI compute, 800G → 1.6T optical modules. Q1: Brief note on multiphase power design win. | Focus on ecosystem partnerships, 1.6 terabit optical solutions, and high-end power architectures. | Key growth driver; re-emerged in Q4 after Q2 details. |
Software & Security (CodeFusion, Assure) | Q3, Q2, Q1: No prior mentions [N/A]. | New CodeFusion Studio (open-source dev environment) and ADI Assure (trusted edge security) introduced. | New topic in Q4; potential to enhance solution breadth. |
Capacity Expansion & Mfg Resiliency | Q3: Hybrid model with CapEx of ~$700M in FY24. Q2: Over $2.5B invested; internal + external foundry strategy. Q1: Doubling front & back-end capacity by 2025. | Invested $2.7B since Maxim; expanded TSMC partnership, targeting 70% swing capacity. Focus on global resiliency. | Ongoing initiative; consistently mentioned for long-term supply stability. |
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Gross Margin Outlook
Q: What's the outlook for gross margins into Q1 and beyond?
A: Gross margins are expected to be slightly lower in Q1 due to seasonal factors and lower revenue. We believe that as revenue grows beyond $2.7 billion, gross margins will improve and approach 70%. Recovery in industrial revenue and better utilization rates in the back half of fiscal 2025 will support this improvement. -
Industrial Market Recovery
Q: When will industrial growth exceed seasonal trends?
A: Industrial bookings have grown sequentially for two quarters since the trough in Q2. We expect growth to resume after the Q1 seasonal decline, driven by normalization of undershipped demand, which we estimate at about 20%. The recovery's pace will depend on macroeconomic conditions, but we're confident in returning to growth in fiscal 2025. -
Attainability of Prior Peak Revenue
Q: Is the prior fiscal '23 peak revenue attainable?
A: We believe our portfolio and customer relationships are stronger than ever. With a double-digit growth opportunity pipeline, we expect to resume double-digit growth throughout the rest of the decade. We anticipate solid performance in fiscal '25, setting us on the path to reach and surpass previous peak levels. -
Automotive Strength in China and EVs
Q: How significant is China and EVs in Auto growth?
A: Stronger demand in China, driven by EV volume growth, share gains, and content growth, boosted our Auto segment. Industrial and Automotive make up about 80% of our China revenue. Wireless BMS now represents 10% of total BMS, with growth in China reflecting expanded share. -
Automotive Pricing and Orders
Q: How are orders and pricing in Auto growth areas?
A: Pricing remains stable as we focus on high-end products where performance is valued over price. Growth areas like GMSL, A2B, and functional safe power grew over 10% in fiscal '24, comprising about half of our Auto revenue. We expect similar growth in fiscal '25, with BMS returning to growth as well. -
Utilization Rates and Margins
Q: How will utilization rates trend in fiscal 2025?
A: Utilization rates have modestly increased from the lows in Q2 due to our agile manufacturing. As revenue picks up in fiscal '25, we expect utilization to continue increasing, supporting margin improvement. -
Data Center Power Opportunities
Q: What's the medium-term opportunity in data center power?
A: We have strong traction with power solutions for computing chips and server infrastructure, as well as optical control solutions up to 1.6 terabits. We're focusing on high-end solutions that make a significant impact in energy efficiency, partnering with processor companies and data center operators. -
Seasonal Trends and Book-to-Bill
Q: What is normal seasonal growth in fiscal Q2?
A: Seasonal Q2 growth is typically low to mid-single digits, driven by mid-single-digit increases in Industrial and Auto. Book-to-bill is slightly below 1, which is normal and reflects the seasonally lower Q1 outlook. -
Software Strategy and AI Differentiation
Q: How does ADI differentiate in AI and software?
A: We're advancing from our analog base by using software to drive innovation and ease of use for customers. We've released CodeFusion Studio, an open-source development environment, and ADI Assure, a security architecture that ensures data integrity from hardware to cloud. -
Cycle Emergence and Drivers
Q: Thoughts on cycle emergence and 2025 drivers?
A: We expect to return to positive growth in the second quarter. Industrial is set to lead the recovery, followed by Consumer and Communications. Automotive will see continued momentum, with BMS returning to growth in fiscal '25.