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Analog Devices Inc. (ADI) is having a moment. The semiconductor company's shares ticked up in Wednesday's premarket trading after it delivered third-quarter numbers that beat Wall Street's expectations and offered a fourth-quarter outlook that came in stronger than anyone predicted.
Let's get into the numbers, because they're pretty good.
Analog Devices reported adjusted earnings of $3.45 per share, comfortably ahead of the $3.33 analysts were looking for. Revenue jumped 40% year over year to $4.02 billion, also beating the $3.92 billion consensus. Adjusted earnings were up 68% from the same period last year, a sign that demand is strengthening across the company's businesses.
It's not just the top line that's improving. Adjusted gross margin expanded by 330 basis points year over year to 72.5%, while adjusted operating margin climbed 780 basis points to 50%. That's a big deal for a chipmaker, showing pricing power and operational efficiency.
Cash flow is also looking healthy. The company generated $1.60 billion in operating cash flow during the quarter, up from $1.17 billion a year earlier. Free cash flow came in at $1.46 billion.
CEO and Chair Vincent Roche said demand strengthened broadly in the third quarter, which helped the company exceed the midpoint of its revenue, margin, and earnings outlook. He also pointed to continued investment in innovation, close customer relationships, and manufacturing flexibility as key factors that position Analog Devices to capture opportunities tied to artificial intelligence.
CFO Richard Puccio echoed that sentiment, noting that demand improved across the company's product portfolio and geographic markets. He called it a record fourth-quarter outlook and said disciplined execution and targeted growth investments should help the company finish the fiscal year strong and carry that momentum into fiscal 2027.
For the fourth quarter, Analog Devices expects adjusted earnings of $3.71 to $4.01 per share, with the midpoint above the analyst consensus of $3.54. Revenue is projected at $4.20 billion to $4.40 billion, again beating the $4.07 billion consensus at the midpoint.
On a GAAP basis, the company sees earnings of $2.99 to $3.29 per share, compared with Wall Street's estimate of $2.72. As of Aug. 1, Analog Devices held $2.32 billion in cash and cash equivalents.
Shares rose 1.32% to $381.60 in Wednesday premarket trading.
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