ADI Earnings Preview: Investors watch for progress in inventory issues
2min read Analog Devices (ADI) will report its Q4 FY24 results on November 26 before the market opens, with a call scheduled for 10:00 AM ET. Analysts expect adjusted EPS of $1.64, a year-over-year decline of 18%, and revenue of $2.41 billion, down 11% from the same period last year. These figures are within the guidance range ADI provided last quarter of $1.53-$1.73 for EPS and $2.30-$2.50 billion for revenue. Key metrics to monitor include sequential revenue growth trends, updates on customer inventory levels, and commentary on the industrial and automotive segments, which collectively account for over three-quarters of ADI’s annual revenue.
A major theme for this report is whether ADI's recovery momentum, fueled by improving inventory conditions and order flows, will persist into FY25. The company previously expressed optimism about a bottom forming in Q2 and sequential growth continuing in Q4. However, analysts expect challenges to remain, particularly in industrial markets, where demand trends have been uneven, and automotive, which has seen extended inventory digestion and production cuts. Guidance for Q1 FY25 will be critical in signaling whether ADI can maintain its recovery trajectory amid these headwinds.
ADI has also emphasized its strong position in AI-driven markets, with demand for power-efficient components serving as a tailwind. AI infrastructure investments continue to bolster ADI's communications and consumer electronics segments, which edged higher sequentially last quarter. In addition, management has highlighted opportunities in industrial automation, robotics, and sensing, which are poised to support growth over the next year. Investors will be looking for updates on these growth drivers, especially as broader semiconductor industry fundamentals show signs of softening.
Finally, while the company’s valuation remains elevated relative to its historical levels, analysts remain constructive on ADI's longer-term potential, citing its strong free cash flow generation and asset quality. Recent price action has shown support at August lows, and optimistic guidance could propel shares higher toward resistance levels around $235. However, a cautious outlook or signs of lingering demand weakness could lead to a retest of support levels, reflecting broader sector challenges. ADI’s commentary on FY25 revenue growth expectations will likely play a pivotal role in shaping investor sentiment.
Analog Devices (ADI) posted a solid Q3 FY24 performance, showcasing signs of recovery from the extended inventory rebalancing cycle that has weighed on the semiconductor sector. For Q3, ADI reported adjusted EPS of $1.58, surpassing the consensus estimate of $1.51, and revenue of $2.31 billion, above the $2.27 billion forecast. While these figures marked year-over-year declines of 36.5% and 24.8%, respectively, they represented sequential growth of 12.9% in earnings and 6.9% in revenue, indicating momentum as customer inventory levels improved and order momentum picked up across core markets.
Management expressed confidence that the worst of the inventory correction is behind them, projecting Q4 adjusted EPS between $1.53 and $1.73 and revenue in the range of $2.30 billion to $2.50 billion, both in line with consensus expectations. The midpoint of these forecasts signals another quarter of sequential growth, supported by recovery in the industrial and automotive verticals, which comprise the bulk of ADI's revenue. Additionally, AI demand continues to be a growth driver, as companies seek power-efficient components to bolster their AI infrastructure, a key strength in ADI's product portfolio.
Despite these positive signals, ADI acknowledged the challenges posed by global economic and geopolitical uncertainties, which may limit the pace of recovery. Automotive end-market weakness and prolonged industrial inventory corrections remain headwinds, as highlighted by peers like Texas Instruments and STMicroelectronics. However, with improved inventory levels, growing order momentum, and a strong position in AI, ADI is well-positioned for a cyclical recovery, which should keep investors optimistic heading into tonight's Q4 report. Key themes for the report include sequential growth trends, AI-related demand, and updates on automotive and industrial market dynamics.