Analog Devices Q3 Earnings Call Highlights AI Power Growth Runway

ADI Expands Its Grid-to-Chip AI Focus

Vincent Roche, CEO and chair, said power availability has become a central AI infrastructure constraint. ADI is targeting opportunities from grid monitoring and energy storage through rack and processor power.

Roche said ADI’s 2030 data center and energy serviceable addressable market has more than doubled from its assessment a year ago. The energy business exceeds $500 million.

In optics, Roche said optical circuit switching revenue is positioned to approximately double this year, with similar growth targeted in fiscal 2027. Empower also extends ADI’s power capabilities into processor packages.

Analog Devices Sets a Higher Q4 Bar

Richard Puccio, executive vice president and CFO, guided fiscal fourth-quarter revenues to $4.3 billion, plus or minus $100 million. Adjusted operating margin is expected at 52%, plus or minus 100 basis points, and adjusted earnings per share at $3.86, plus or minus 15 cents.

Fiscal third-quarter adjusted earnings were $3.45 per share comapred with the Zacks Consensus Estimate of $3.33. Revenues were $4.02 billion versus the $3.92 billion consensus, rising 40% year over year and 11% sequentially.

Puccio expects adjusted gross margin to rise about 150 basis points to roughly 74% in the fourth quarter, driven by favorable mix, fixed-cost absorption and pricing. Some announced pricing actions will have a fuller impact in the fiscal first quarter.

ADI Sees Data Center Strength Extending

Puccio said communications revenues rose 84% year over year, with data center now accounting for 80% of that business. Data center optical and power revenues each grew more than 100%.

A Bernstein analyst asked whether communications could approach that pace in fiscal 2027. Jeff Ambrosi, head of investor relations and senior director, declined to provide a specific long-term rate and emphasized rising analog content and targeted share gains.

Roche said data center is on pace to nearly double in fiscal 2026, with strong double-digit growth expected through at least 2030. Ambrosi told Jefferies that ATE plus data center represents about 20% of ADI.

Analog Devices Frames FY27 Growth Drivers

A BofA Securities analyst pressed management on secular growth, cyclical recovery and pricing. Roche said aerospace and defense, ATE and data center together represent about 30% of ADI.

Roche expects Maxim-related synergies of about $700 million this year and more than $1 billion in fiscal 2027. Puccio said customers remain lean on inventory, without meaningful restocking activity.

Puccio added that much of the broader business remains below historical consumption levels. Roche expects solid fiscal 2027 growth while flagging macroeconomic and geopolitical risks, rate increases, financial-market volatility and lower AI capital spending.

ADI Addresses Supply and Margin Durability

A Cantor Fitzgerald analyst asked about supply constraints. Puccio said ADI has delivered above-seasonal growth for nine consecutive quarters and is guiding to a 10th while adding internal tools and external wafer supply.

Puccio said management is planning for further capacity if growth persists. Roche added that ADI is jointly planning with external partners to extend its hybrid manufacturing model across a broad range of process nodes.

A TD Cowen analyst questioned the durability of roughly 74% gross margin. Puccio said that level can be maintained with expected revenue and mix, while Roche linked the margin structure to ADI’s innovation premium.

Analog Devices Keeps Discipline in Focus

Management paired investment in AI-related power, optics and energy with operating discipline. Puccio said ADI will balance growth spending with margin management as demand expands.

Roche emphasized portfolio breadth and manufacturing flexibility as tools for capturing secular and cyclical growth while keeping macroeconomic and geopolitical risks in view.

The call centered on ADI’s ability to scale supply, defend margins and convert rising AI infrastructure complexity into broader content opportunities over the coming years.

What Zacks Signals Say About ADI

ADI carries a Zacks Rank #2 (Buy), a favorable earnings-estimate-revision signal in Zacks’ one-to-three-month framework. Its Value Score is D, Growth Score is C, Momentum Score is D and VGM Score is D. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zacks’ framework favors combining a Zacks Rank #1 or 2 with Style Scores of A or B. ADI’s weaker Style Scores temper the otherwise favorable Rank signal. The Zacks Rank can change as estimates are revised following the just-reported results.

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