Analog Devices Inc. (NASDAQ: ADI) is getting a lot of love from Wall Street after its latest earnings report showed the AI boom is doing more than just lifting the usual suspects. The company's data center business is on fire, and analysts are scrambling to raise their price targets.
JPMorgan's Harlan Sur reiterated an Overweight rating and bumped the December 2027 price forecast to $500 from the prior December 2026 target of $450. The firm also called Analog Devices its top pick among broad-based diversified semiconductor companies. TD Cowen chimed in with a Buy rating and a $460 price target, noting that accelerating AI demand and a continued cyclical recovery could support further gains.
AI Data Center Business Accelerates
Here's the headline number: JPMorgan says Analog Devices' data center business now accounts for about 80% of Communications revenue and 13% of total company revenue. Optical and power sales grew more than 100% year over year. That's not a typo.
The firm expects data center revenue to nearly double to about $1.9 billion in fiscal 2026, with roughly 50% growth next year, potentially pushing revenue toward $3 billion. That's well above what JPMorgan believes Wall Street currently expects.
And the opportunity could get even bigger as data centers shift toward 800-volt architectures. JPMorgan said the company expects content per rack to grow by multiples through 2028 and beyond. Recent design wins that haven't generated revenue yet also support the longer-term outlook. TD Cowen estimates Analog Devices' broader AI data center revenue, including automatic test equipment, has already reached an annualized run rate above $3 billion.
Posts First $4 Billion Quarter
Analog Devices reported fiscal third-quarter revenue of $4.02 billion, up 40% year over year and above the $3.92 billion consensus estimate. That marked the company's first time topping $4 billion in a single quarter.
Breaking it down: Communications revenue surged 84% year over year. Industrial climbed 53%, while Automotive rose 16%. JPMorgan noted that China helped drive the automotive upside.
Pricing Could Drive Margins Higher
Looking ahead, Analog Devices guided fiscal fourth-quarter revenue to $4.3 billion, above the roughly $4.09 billion consensus estimate. The company expects gross margin of about 74%, up from 72.5% in the latest quarter.
JPMorgan said favorable product mix, fixed-cost absorption, and pricing are driving the margin improvement. Additional price increases are expected in September, which could help offset higher input costs and support margins near 74% into fiscal 2027. TD Cowen also sees room for margins to remain near current levels or move higher, while noting that customer inventories remain lean and meaningful restocking has yet to emerge.
Analog Devices Price Action
Analog Devices shares were up 1.21% at $377.77 at the time of publication on Thursday, according to market data.
