ADI sinks on earnings, Guides Q2 below expectations as inventory issues persist

Analog Devices, Inc. (NASDAQ: ADI) is a global semiconductor leader that bridges the physical and digital worlds to enable breakthroughs at the Intelligent Edge. The company combines analog, digital, and software technologies into solutions that help drive advancements in digitized factories, mobility, digital healthcare, combat climate change, and reliably connect humans and the world.

Analog Devices (ADI) reported its Q1 earnings for the fiscal year 2024, which ended in January, showing a decline in revenue of 22.7% year-over-year to $2.51 billion, compared to the estimated $2.5 billion. The company's earnings per share (EPS) of $1.73 exceeded expectations by 3 cents. Market participants were braced for the shortfall as the Texas Instrument (TXN) foreshadowed a weaker quarter for ADI. The ADI report suggests that the weaker environment will persist into the first quarter.

The company's forecast for the second quarter of fiscal 2024 indicates a decline in revenue to a range of $2.0 billion to $2.2 billion, falling short of the estimated $2.36 billion. ADI expects adjusted EPS of $1.16 to $1.36, compared to the estimated $1.56. 

Analog Devices also announced a quarterly cash dividend of $0.92 per outstanding share of common stock, up 7% from the previous dividend. 

In a statement, the company said, Consistent with our prior view, we expect customer inventory rationalization to largely subside in our second quarter, and thus enter the second half in a more favorable business backdrop. Importantly, we are well positioned to capitalize on the inevitable upswing given our replenished die banks, short lead times, and agile hybrid manufacturing model.

The company's shares are down about 1% in reaction to the report. While the revenue fell short of expectations, the company's EPS beat estimates and the outlook was not too far off expectations. The stock has been under pressure since the start of the year, falling about 17% over that period. 

In conclusion, Analog Devices reported a decline in revenue for the Q1 fiscal year 2024, but the company's EPS beat expectations. The company's forecast for the second quarter indicates a decline in revenue, but the adjusted EPS is still in line with expectations. The company's outlook for the second half of the year is positive, and the stock has upside potential according to analysts.

$ADI(ADI)