Analog Devices reported a third quarter built on stronger-than-expected sales and profitability, and projected a fourth-quarter outlook that outpaces consensus estimates as investments in AI computing bolster demand for its power-management and data-movement chips.
The Wilmington, Massachusetts-based chipmaker posted third-quarter revenue of $4.02 billion, a 40% increase from the year-ago period and above analysts' estimates of $3.92 billion. Adjusted earnings per share for the quarter were $3.45, beating the $3.33 expected by analysts.
CEO Vincent Roche said the company saw broad-based demand in the quarter and noted that investments in innovation, customer relationships and manufacturing capabilities leave Analog Devices well-positioned to pursue opportunities arising in the AI era.
For the fourth quarter, Analog Devices provided guidance that exceeds Wall Street forecasts. The company expects revenue of $4.3 billion, plus or minus $100 million, versus an LSEG-compiled analyst average of $4.07 billion. It also projected fourth-quarter adjusted EPS of $3.86, above the consensus estimate of $3.54.
Analog Devices' components are used across data centers, factory automation equipment and modern vehicles, areas the company says are seeing heightened demand as AI investments ramp up. That dynamic has increased the need for chips that regulate power and move large volumes of data.
On the market, shares of the chipmaker had gained about 39% year to date through the reporting period, though they were flat in premarket trading following the results and guidance.
Summary
Analog Devices beat expectations on third-quarter revenue and adjusted EPS, and issued a fourth-quarter revenue and earnings forecast that is higher than analysts' estimates. The company attributes the strength to broad demand across data centers, industrial automation and modern vehicles as AI-driven computing investment increases the need for power-management and data-movement chips.
Key points
- Third-quarter revenue: $4.02 billion, up 40% year over year, above the $3.92 billion analysts expected.
- Third-quarter adjusted EPS: $3.45, surpassing the $3.33 consensus estimate.
- Fourth-quarter guidance: revenue expected at $4.3 billion, plus or minus $100 million, and adjusted EPS of $3.86, both ahead of analysts' averages.
Sectors impacted - Semiconductor suppliers, data center operators and industrial automation and automotive technology markets.
Risks and uncertainties
- The company's outlook depends on sustained demand for power-management and data-movement chips as AI investments continue.
- Guidance carries a $100 million revenue range, indicating uncertainty within the quarter's forecast.
- Market response may be muted despite strong year-to-date share performance, as evidenced by flat premarket trading following the results.
Analog Devices' quarter and guidance underscore the company's exposure to trends in AI-driven computing, while also reflecting the usual near-term uncertainty embedded in quarterly forecasts.