Analog Devices' Q4 2025 Earnings Call: Contradictions in Industrial Growth, Gross Margins, and Automotive Outlook

Date of Call: November 25, 2025

Financials Results

• Revenue: $3.08B, up 26% year-over-year and up 7% sequentially
• EPS: $2.26 per diluted share, up 35% year-over-year and up 10% sequentially
• Gross Margin: 69.8%, up 60 basis points sequentially and up 190 basis points year-over-year
• Operating Margin: 43.5%, up 130 basis points sequentially and up 240 basis points year-over-year

Guidance:

• Revenue for Q1 FY'26 expected to be $3.1 billion ± $0.1 billion.
• Operating margin at the midpoint expected to be 43.5% ± 100 basis points.
• Tax rate expected to be 12%–14%.
• Adjusted EPS for Q1 expected to be $2.29 ± $0.10.
• Guidance assumes sell‑in roughly equals sell‑through and reflects modest above‑seasonal Q1.

Business Commentary:

• Revenue Growth and Earnings Expansion:
• Analog Devices reported revenue of $3.08 billion for Q4 2025, up 7% sequentially and 26% year-over-year.

• The growth was driven by continued business recovery, cyclical improvements in industrial and communications sectors, and strong execution of Maxim revenue synergy targets.

• Industrial and Communications Sector Growth:

• Industrial segment contributed 46% of Q4 revenue, increasing by 12% sequentially and 34% year-over-year, while communications segment was 13%, up 4% sequentially and 37% year-over-year.

• This growth was fueled by strong demand in AI infrastructure, high-performance compute, and increased CapEx in data centers, leading to a record quarter for the ATE business.

• Automotive Market Dynamics:

• Automotive revenue accounted for 28% of Q4 revenue, finishing up 1% sequentially and 19% year-over-year.

• The growth was driven by advances in autonomous driving and cabin digitalization, with significant new design wins in connectivity solutions like GMSL and A2B.

• Financial Performance and Cash Flow:

• Earnings per share increased by 35% year-over-year, with record free cash flow of over $4 billion or 39% of revenue.
• This performance was supported by strong operating results, reduced CapEx, and significant returns to shareholders through dividends and share repurchases.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted a return to meaningful growth, FY'25 revenue up 17% to just over $11B, record free cash flow >$4B (39% of revenue), FY'25 EPS +22% to $7.79, and Q4 results above the midpoint; guidance shows continued growth and strong margins (Q1 revenue ~$3.1B, op margin ~43.5%).

Q&A:

• Question from Vivek Arya (BofA Securities): I had a near and a medium term. On the near term, I think you're guiding Q1 slightly up, which is a little bit above seasonal. So I was hoping you could give us some color by segment where you're seeing the strength because I do think industrial was slightly below what you had thought in Q4. So just any dynamics going into Q1. And then if we zoom out, when -- say, I mean, if I were to just annualize Q1 guidance, that suggests a very strong kind of 12%, 13% sales growth year in fiscal '26. And I was really hoping to get your perspective as you start the new fiscal year on what you're seeing from a broader macro perspective and whether this kind of growth rate is possible in fiscal '26?
  Response: Q1 is expected slightly above seasonal with sell‑in = sell‑through; industrial up mid‑single digits, auto down mid‑single digits, comms up ~10% and consumer down low double digits; management expects broad‑based FY'26 growth led by industrial and communications despite macro uncertainty.

• Question from Joseph Moore (Morgan Stanley): Great. Speaking of autos, I think you guys had indicated when you guided the quarter that you'd be slightly down, you ended up slightly up. Can you talk about what's coming in a little bit better? And you guys have been pretty good about helping us understand pull forwards and things like that. Any sign of any activity now?
  Response: Auto demand has been more resilient than expected with secular content and share gains (notably in China); some prior pull‑ins tied to tariffs were possible but did not meaningfully unwind—bookings are normal and visibility remains low, so management remains cautiously optimistic.

• Question from Stacy Rasgon (Sanford C. Bernstein & Co., LLC.): I wanted to ask about gross margins. You sort of talked about being at 70% gross margins around $3 billion. So you're sitting over there and you're still -- I mean, even in the quarter, you came in a little below 70%. As far as I can tell, the guidance implies gross margins relatively flattish around that 70% range, you can let me know if that's right or not. But I'm just wondering why we're not seeing more leverage on the gross margin line, especially as utilizations are going up and everything else. Like why shouldn't we expect that more leverage on gross margins?
  Response: Gross margin is constrained by mix and seasonality—stronger auto results reduced expected industrial mix so we didn't hit 70%; Q1 factory shutdowns are seasonally dilutive but higher industrial mix should offset and keep gross margin roughly flat; capacity expansions mean more revenue is needed to push above ~70%.

• Question from Christopher Danely (Citigroup Inc.): Just to follow-up on Stacy's question. Has the relative gross margin levels, have those changed at all between the end markets? Have any of them gone up or down versus the corporate average, I guess, just to cut to the chase, is -- have the auto gross margins gotten a little worse relative to the corporate average over the last like 2, 3 years or anything else changed?
  Response: No meaningful change — end‑market gross margin relationships versus the corporate average have remained broadly consistent.

• Question from Timothy Arcuri (UBS Investment Bank): Vincent, you talked about Maxim revenue synergies. Can you update us on that? I know you said you're on track, but maybe you can give us a sense of where that stands. And then Rich, can you tell us sort of what your sense of like a normal fiscal Q2? It seems like normal seasonal in fiscal Q2 is up like mid-singles. Is that sort of how you think about a typical fiscal Q2? And then maybe like what are the puts and takes as you kind of head into fiscal Q2?
  Response: Maxim synergies have accelerated—from tens of millions in 2024 to hundreds of millions in 2025—on track toward a $1B target by 2027 (possibly sooner); Q2 is typically the seasonally strongest quarter, up mid‑single digits.

• Question from Christopher Muse (Cantor Fitzgerald & Co.): Vince, in your prepared remarks, you talked about ADO drivers led by AI in the data center. And I was hoping you could perhaps speak a bit more to a framework that we should be thinking about across both industrial and comms. Obviously, you dominate semi test analog. You've got some real design wins on the optical and power side. And then you also spoke about energy strength. So is there kind of a percentage of mix that we should be thinking about that should be growing significantly faster than the rest of your business? And if there's kind of numbers around that, that would be very helpful.
  Response: Data center grew ~50% in FY'25 (~$1B run rate) and ATE grew ~40% (~$800M run rate); both are expected to continue double‑digit growth driven by 800G/1.6T electro‑optical interfaces, power delivery/protection, vertical power adoption and HBM4 transitions.

• Question from Harlan Sur (JPMorgan Chase & Co): One of the other strong dynamics among several, which separates ADI from peers is obviously the strong exposure to aerospace and defense. This has been a growth area for ADI during this last downturn. I think the business is now driving well over $1 billion of annualized run rate revenues or roughly greater than 10% of your total revenues. It grew strongly double digits in fiscal '25. Does the team anticipate continued strong double-digit growth in fiscal '26? And maybe help us understand like what are some of the ADI-specific product cycles here that's going to continue to drive the strong growth profile going forward?
  Response: Aerospace & defense growth is driven by RF/microwave, high‑performance conversion and power management (strengthened by Hittite, LTC and Maxim); global defense demand and higher ASPs support continued strong growth and potential to more than double the business by decade end.

• Question from Joshua Buchalter (TD Cowen): Congrats on the strong results. I wanted to follow up on the comments about fiscal 2Q being a seasonal plus mid-single-digit percent. Could you maybe speak to what's driving the confidence in the visibility there? Any metrics you're able to give on lead times? And then bigger picture, how is your visibility looking forward changed as the mix has changed? Like do you think compared to a couple of years ago, there's more of your exposure tied to ADO drivers like aerospace and defense and data center, and that's increasing your visibility? I'd just be curious to hear because you mentioned there was some uncertainty on the shape of the year in the press release, I'd be curious to hear how you're feeling about visibility.
  Response: Visibility beyond the current quarter plus one remains limited because most product lead times are under 13 weeks and many orders are short‑lead; while mix has shifted toward ADO areas, that hasn't materially improved multi‑quarter visibility.

• Question from Tore Svanberg (Stifel, Nicolaus & Company, Incorporated): Yes. So Vince, ADI has been always very thoughtful about allocating R&D dollars and the economy is changing in the front of eyes structurally quite significantly here. So how are you thinking about prioritizing your R&D spend right now? And are there any areas you would like to double down in and perhaps areas you would like to deemphasize as a company?
  Response: R&D will prioritize core analog advances (signal processing, data conversion, high‑speed), double down on power management, and invest selectively in digital/ML capabilities (low‑power, low‑latency compute, algorithmic enhancements) to accelerate customer time‑to‑market.

Contradiction Point 1

Industrial Growth Expectations

It involves differing expectations for industrial growth, which is a critical segment for the company's revenue and strategic focus.

Could you provide more details by segment on where the strength is coming from? - Vivek Arya (BofA Securities)

2025Q4: Industrial is expected to be up mid-single digits above seasonal, auto down mid-single digits below seasonal, comms up 10% above seasonal, and consumer seasonally down low double digits. - Richard Puccio(CFO)

Are you shipping above consumption in industrial markets? How long will industrial growth sustain? - Timothy Arcuri (UBS)

2025Q3: Industrial has been growing sequentially every quarter, especially the last two quarters. We expect it to grow in the low to mid-teens in Q4. - Richard Puccio(CFO)

Contradiction Point 2

Gross Margin Targets and Utilization Rates

It involves changes in financial forecasts, specifically regarding gross margin targets and utilization rates, which are critical indicators for investors.

Given guidance suggests gross margins will remain around 70% at $3 billion in revenue, why isn't there more leverage in gross margins as utilization increases? - Stacy Rasgon (Bernstein)

2025Q4: Q1 gross margin expected to be flat due to higher industrial mix offsetting seasonal pressures. - Richard Puccio(CFO)

Did the Q3 gross margin fall short of the expected 70% due to lower-than-expected utilization? Will this trend continue into Q4? - Harlan Sur (JPMorgan)

2025Q3: We had an unexpected lower utilization in Q3, which affected gross margin growth. However, utilization is back on track, and we expect to reach a 70% margin in Q4 at the midpoint. - Richard Puccio(CFO)

Contradiction Point 3

2025Q4 Segment Growth Projections vs. 2025Q1 Outlook

It involves changes in financial forecasts and growth expectations for key segments, which are critical indicators for investors and analysts.

Can you provide details by segment showing strength, given your Q1 guidance is slightly above seasonal norms? - Vivek Arya (BofA Securities, Research Division)

2025Q4: Industrial is expected to be up mid-single digits above seasonal, auto down mid-single digits below seasonal, comms up 10% above seasonal, and consumer seasonally down low double digits. - Richard Puccio(CFO)

Can you provide the revenue breakdown by primary segments for the quarter? - Analyst (Question 1)

2025Q1: The strong revenue performance in Q1 was broad-based across all segments. We saw particular strength in our high-growth segments like industrial automation, automotive, and communications. These segments all grew double digits year-over-year. - Vincent Roche(CEO)

Contradiction Point 4

Automotive Market Performance

It reflects differing perspectives on the automotive market performance, which is crucial for understanding the company's growth and revenue expectations in a key sector.

You forecasted a slight auto decline but reported an increase. Can you explain the better performance and any signs of activity now? - Joseph Moore (Morgan Stanley)

2025Q4: We did see some resilience in the auto segment...But our Q1 outlook assumes we're down mid-single digits in the auto segment. - Richard Puccio(CFO)

What factors are driving the 16% sequential growth in automotive, and is there any tariff-related pull-forward or mitigation impacting this growth? - Joseph Moore (Morgan Stanley)

2025Q2: We've got results that were notably stronger than we had expected in Q2...We think maybe it's like an 80%, 90% component of pull-in activity. - Rich Puccio(CFO)

Contradiction Point 5

Gross Margin Expectations and Impact of Mix

It involves changes in financial forecasts, specifically regarding gross margin expectations and the impact of mix on these margins, which are critical indicators for investors.

Your guidance suggests gross margins remain stable at 70%. Why isn't there more leverage in gross margins despite rising utilization rates? - Stacy Rasgon (Sanford C. Bernstein & Co., LLC., Research Division)

2025Q4: We expect gross margins to decline slightly from their current levels in the next couple of quarters but will remain within the targeted range driven by mix at the lower end of the long-term outlook while we stabilize automotive. Full-year gross margins are expected to be in the low 70s. - Richard Puccio(CFO)

None (Introduction) - Analyst (Question 1)

2025Q1: Our gross margin was 57.3%, up 130 basis points year-over-year. And we expect our Q2 gross margin to be in the range of 57.5% to 58%. - Rich Puccio(CFO)