Analog Devices at JPMorgan U.S. All Stars: Strategic Growth Outlook

On Tuesday, 16 September 2025, Analog Devices (NASDAQ:ADI) presented at the JPMorgan U.S. All Stars Conference, offering a strategic overview that highlighted both challenges and opportunities. The company is navigating a cyclical upturn, expecting growth in automotive and consumer sectors, but facing inventory corrections and trade uncertainties.

Key Takeaways

• Analog Devices anticipates a revenue growth driven by industrial, automotive, and consumer sectors.
• The company is targeting a 70% gross margin for the current quarter, with potential to reach 74%.
• Plans to return 100% of its free cash flow to shareholders, achieving a 35% free cash flow margin.
• Inventory management strategies have reduced channel inventories to below six weeks.
• The company is on track to exceed 2024’s design win numbers in 2025.

Financial Results

• Revenue Growth: Analog Devices expects continued growth with a positive upturn in revenue, aiming for a 40% increase from the bottom.
• Gross Margin: Targeting 70% for the current quarter, with potential for 74% at higher revenue levels.
• Free Cash Flow: Capital expenditure reductions are creating a tailwind, with a 35% margin on a trailing 12-month basis.
• Capital Return: Committed to returning 100% of free cash flow to shareholders.
• Operating Expenses: Projected to rise in 2025 due to variable compensation.

Operational Updates

• Inventory Management: Channel inventories are running below the target of 7-8 weeks, currently less than six weeks. Backend cycle times have been optimized to around six weeks.

• End Markets:

- Industrial: Experiencing growth across all geographies and end markets.

- Automotive: Forecasting a correction in Q4 but tracking to a record year.

- Consumer: Noted four consecutive quarters of strong growth.

- Comms Infrastructure: Benefiting from AI-driven growth in power management and optical connectivity solutions.

Future Outlook

• Growth Targets: Aiming for a 7% to 10% compound annual growth rate (CAGR) in revenue and 10% to 11% CAGR in earnings per share (EPS), targeting $15 EPS by fiscal 2027.

• End Markets:

- Aerospace & Defense: Continued growth expected due to increased defense spending.

- AI/Data Center: Anticipated growth benefiting both industrial and wireline communications businesses.

- Automotive: Battery management systems expected to normalize by year-end, with growth resuming in 2026.

- Comms Infrastructure: Vertical power and optical module wins expected to ramp up in 2026.

• Macro Factors: Trade and tariff uncertainties are impacting visibility through 2026.

Q&A Highlights

• China Anti-Dumping Probe: Analog Devices has not been directly contacted, focusing on higher-end ASP bands in China.
• Design Win Pipeline: 2025 is on track to surpass 2024, with automotive as the heaviest area.
• Automotive Inventory Normalization: Most correction expected in Q4, with potential residual in Q1.
• AI Revenue Target: Expected to be between $500 million to $600 million this year.
• Ireland Fab: Supply issues resolved, aiming to return to 70% margin in Q4.

Analog Devices’ presentation at the JPMorgan U.S. All Stars Conference provided a detailed view of its strategies and outlook. For a deeper dive, readers are encouraged to refer to the full transcript below.

Full transcript - JPMorgan U.S. All Stars Conference:

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Good morning and welcome to JPMorgan’s US All-Stars Conference here in London. My name is Harlan Surr. I’m the Semiconductor and Semiconductor Capital Equipment Analyst for the firm. Very pleased to have Richard Puccio, Executive Vice President and Chief Financial Officer at Analog Devices, here with us this morning. For those of you that don’t know the Analog Devices team, leader in high-performance mixed-signal RF and analog semiconductor solutions, strong position in power management, very strong position in signal chain processing, both digital and analog, which is the technology that bridges the real world to the physical world to the digital world. Best-in-class gross operating free cash flow margin, strong capital return program, very, very diversified business, right? Industrial, automotive, comms infrastructure, 85% of total revenue. Rich, thank you very much for joining us this morning.

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: Harlan, thanks for having me.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Why don’t we just start off with sort of where we are in the semiconductor cycle. At the same time last year, second half of your fiscal 2024, the team was in the second year of the industry’s cyclical downturn. You were driving about 18% year-over-year declines in the second half of 2024, but you did start to see sequential growth trends, which continued into this year. You drove the positive year-over-year inflection in the April quarter of this year. Expect to maintain that positive trajectory going forward. Take us through the dynamics over the past year and, more importantly, your view on the cyclical dynamics in your business sort of going forward.

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: Sure. If I rewind back to that Q2 2024 period for us, that was when we first called what we thought was our bottom of the cycle, after what was, in the words of our CEO, the deepest and longest down cycle he’d ever experienced, and also accompanied by one of the worst inventory corrections. At that point in Q2 2024, we thought we were largely through the inventory correction with our customers. We did think there might be a few pockets, and I’ll talk about that as we work through the trends. We did think we’d hit bottom, and we thought we would start to see some modest recovery in the back half of 2024, with some single-digit increases sequentially in revenue.

What we had thought at the time is as we start to see the broad market pick back up and some of the cyclical upturn happen, we would start to see some acceleration in 2025. I think if you go back and listen to Vince’s guide as we were exiting the year, we thought, I think he actually said 2025 could be a growth year for us. In fact, we have seen that happen, right? We started to see bookings trends improve, and we certainly had some parts of our business that were very resilient and held up well. At our core, industrial is 50% of our business, so it’s super important from a growth perspective for us. Early on, we had two parts of our industrial that were really, really doing well and had proven more resilient. That was our aerospace and defense piece.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Right.

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: Our ATE business, the aerospace and defense, obviously, you know, for us is a really important area. They require very high performance and have very high standards. Also, you’re seeing this now brought more broadly, the increase in defense spending that’s happening all over the place in the U.S. and around the world is continuing to create demand. That was an early leader and one we expect to continue to show growth. Similarly, on the ATE side, there appears to be no letup in the AI/data center CapEx spending patterns, which we also think, you know, helps us on the ATE side. As the year progressed, you know, we started to see the other parts of our industrial business pick up. We talked about automation was a real challenge. That was one of the areas where the inventory correction lasted a little bit longer.

In fact, you know, we had a couple of down quarters in 2024 on the automation front. We’ve now had two consecutive quarters of growth in automation. We feel like that part of the recovery is now underway. We’re also, you know, if we look at the results we just posted in Q3.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Yes.

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: We saw growth in all of our end markets inside of industrial across all of our geographies. We had said from the get-go, we thought, you know, if the recovery was real and the cyclical was going to happen, industrial would lead the way, and it has. That has been really important. If you just look a little broader, obviously automotive for us has been very strong. We’re on track to do a, you know, a third record year of auto revenue. Three of our last four years in auto have been record revenue levels. We are, you know, forecasting a little bit of a correction in the fourth quarter, but overall still tracking to a record year. You know, you look at our consumer business, for instance, which, you know, we’re relatively underweight there, but it’s a really strong business for us.

After going into the downturn, it’s come out with four, now we’ve had four straight quarters of very strong growth in consumer. That is reflective of a couple of things. One is our teams have done a really nice job diversifying our portfolio, so we aren’t as dependent on single sockets in that business. You know, look across the breadth of our portfolio, it’s now products in handsets, in hearables, wearables, gaming. The expansion there has helped fuel the consumer growth, and we think that helps continue for our growth into 2026. The final piece that you mentioned is the comms infrastructure space. That is an area where we’ve benefited tremendously from the AI drive, and we expect that will also continue to grow. That business benefits from the fact that, you know, all of those data centers are using our power management products and our optical connectivity solutions.

Those are two areas where we continue to see growth today. Those are also two areas where, when we talk about our new design wins, we’ve had the two design wins in that data center space around vertical power and optical switching that will start to generate revenue for us in 2026. If you look, the trends have been very positive. The other thing that we noticed, and I’ve talked about this a bunch, is we’ve been managing our inventory, and we’ll talk about that later. One of the things we watch for is what happens in the broad mass market industrial.

That did not come back as fast as the rest of the market, but we saw signs it was coming, and we’ve now had two straight quarters of the mass market part of our business growing, which again is just more confirmation that we think we are, you know, into the cyclical upturn. Now, you know, like anything else, the macros are still uncertain given where we are on some of the trade and tariff stuff. Getting full visibility out to 2026 is a bit challenging, just given those trends. We feel like from a market position across all of our end markets, we feel like we made a ton of progress, and you see it in the results we’ve been posting.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: We learned this past weekend talking about tariffs and geopolitical dynamics, right? We learned this past weekend that China’s Ministry of Commerce announced anti-dumping investigations targeting U.S. analog chips, alleging significant price declines between 2022 and 2024, which is kind of interesting because 2022 through 2024, by and large, a big part of that was the chip supply tightness in the industry where you and others were actually seeing stable to increasing prices. Nevertheless, there was this Ministry of Commerce out of China alleging these anti-dumping investigations. Has the Analog Devices team been notified by China officials of this probe? Like, what’s your view on that?

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: I’m unaware that we’ve been reached out directly on this probe, but just for context perspective, and Harlan hit it right, I’ve talked about this in other sessions. In 2022, a significant amount of the growth that ADI saw from a revenue perspective was price increases. Certainly we weren’t dropping prices.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Right.

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: 2023, we had incremental price increases, not nearly as significant as what we did in 2022. You’ve heard me say in 2024, our pricing was relatively stable, and we are expecting we’ll finish 2025 with prices relatively stable. Big swings in prices in the last two years have not been part of our go-to-market. We will continue to monitor. Obviously, we do sell into China, but we do tend to play, from a context perspective as well, we do tend to play in the higher end of the ASP bands in China because where we’re at our best is in the high-end, most complicated solutions where you need to have application-specific knowledge and outstanding portfolio of analog. We have a 60 years’ worth of built analog portfolio. I think that the fact that we play at that high end at the higher price points also is important context.

The sort of less than $0.50 ASP band in China is not a significant part of our business.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Yeah. Let’s talk about, you know, you gave us a great overview of the trends that you’ve been seeing from a shipment and revenue perspective in your business over the past year. Let’s talk about orders and bookings, which is a little bit more of a view on sort of the forward-looking trajectory of the business. Back last year when we hosted you, the team had already driven sequential order growth in three out of the prior four quarters. Those bookings trends continued into this year. I think including the July quarter, which you reported not that long ago, the team has now driven sequential order improvements in six out of the last seven quarters. You’re about midway through this quarter. Have overall order trends continued to improve, and how do you see order trends by end market or geography?

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: I tend not to do end-quarter updates to our booking trends, but I’ll go back and remind you what we talked about at the earnings call. We continue to see good bookings momentum. We saw relative linearity over the course of Q3 from a bookings perspective. If you remember back, we did talk about we had some anomalous booking trends in Q2 that normalized pretty quickly in Q3 over a four-week trail or a 13-week trail.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: I believe your turns business, which is, you know, orders that you get inside of the quarter through cycle, you know, has been about 15% of total sales. Typically, during the initial stages of an upturn, your turns business tends to be higher as more customers clear inventories, and then they find that they have to place orders within lead times. What did you see last quarter and so far this quarter in terms of turns order activities?

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: Last quarter we actually saw, as you described, as we saw the cycle upturn continue, we did see higher than normal turns business in the third quarter. Some of that’s reflected in us achieving over the high end of our guide, as we got a bunch more turns in the quarter. Our guide for Q4 anticipates a more normal level of turns, obviously on a continuing growing revenue number. I mean, if you think about, if you just look at where we are coming off of our bottom of our cycle, I think if you take our Q4 guide, we’re up almost 40% off the bottom.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Right.

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: It continues to be strong and, like I said, confirming that we’ve been in the up cycle here.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Team has done a good job of shipping below your customers’ channel consumption levels over the past six to seven quarters, right? You exited July with about 160 days of inventory on the balance sheet. How do you anticipate the trend on your inventory this quarter? You’ve been extremely disciplined on channel inventories, right? Keeping channel inventories below your target range of seven to eight weeks. Where do you see that trending this quarter and maybe over the next couple of quarters?

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: All right, that’s a lot to unpack. I’ll start with the balance sheet inventory. One of the things we’ve talked about during the supply shortage, we found it was a significant advantage to have more of the inventory in our balance sheet than in the channel. It gave us more flexibility in how we address customers. There are two things happening. One is we spent a significant amount of time, a better part of a year, reducing our balance sheet inventory because we had gotten up to, you know, a number of days that was very anomalous for us, and we drove that down. If you remember about three quarters ago, I started to signal that we would start to put more inventory dollars on our balance sheet. We were well positioned to capture the upturn in the cycle.

We have added inventory dollars, but given the revenue growth we’re seeing, you’ve seen the inventory days come down. I think depending on how you calculate it, roughly 160 days of inventory on our balance sheet. I do expect in Q4 we will add additional inventory, but probably days will stay relatively flat. Part of that is we start to see the increase in bookings and demands, whether for turns or for next quarters, is having sufficient inventory on hand to be able to turn quickly and fulfill those orders. We will keep more. We’ve also learned we can run our channel much leaner given the backend improvements we’ve made in what we’ve now got for backend cycle times. We can keep less inventory in the channel. I actually don’t think we ever get back to the seven to eight model.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: No.

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: We just don’t feel like we need that. We have very good relationships with our distribution channel, and I actually meet with our biggest partner quarterly to make sure we are delivering what they need to satisfy our customers. We’ve been successful doing that at a lower level given the improvements we’ve made in our ability to fulfill. We’ve been running less than six weeks in the channel. If we continue on this growth pattern, we probably need a little bit more than six weeks in the channel as you think out medium term. Currently, we feel pretty good about where we’re running. I think that it matters, it’s been something we’ve been super aggressive about and it positions us well going into the next year.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: I guess one of the benefits of keeping a very tight control and lean inventories within the channel is that you can get almost real-time feedback from your customers, right, in terms of inflections up or inflections down. Is that part of the reason why you’re wanting to keep inventories relatively lean relative to your target levels?

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: As I said, we’ve moved off the seven days because of the improvement, but the lean has largely been so that we can keep more control on inventory on our balance sheet. Should there be challenges to, you know, the next supply chain challenge, we have more control. Inventory, once it’s in the channel, we don’t have the same ability to move it to a different geography, et cetera. Having more of that on our balance sheet is important. Now, look, we’re going to continue to be super prudent about the balance in both places, right? I don’t expect we’re going to see growth in our days because we’re continuing to grow revenue. I think having it on our balance sheet gives us flexibility in dealing with customers.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Your ability to move very quickly, you guys put a lot of your inventory in die bank, right? Is that correct?

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: Yep.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: From die bank to finished goods is a relatively short cycle.

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: Yeah, our backend cycle times now run around six weeks.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Six weeks.

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: Yeah.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Okay. Putting everything together, given your 13-week lead times, roughly, the team had qualitatively described a forward view that the January quarter was likely to be a seasonal type quarter, right? Revenues down low single digit sequentially, with the seasonal pickup in the April quarter. Is that how the team still sees the business profile as you move into next year?

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: The majority of our products are now at sort of sub-13 week lead times. As you mentioned, we’re getting a lot of turns. We still sit in that same position where our visibility really is only a quarter out, which is why we guide a quarter and not beyond. I actually think what we said coming out of the quarter, to help folks think about it, was, look, we don’t have enough data in our backlog or our numbers to give a hard look at what the next quarter would look like. Typical seasonality would be as described. That continues to be the best way to think about it at this point, which for us typically that fourth quarter is down seasonally in the sort of low to mid-single digits.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Yeah.

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: That’s a little different by end market. As you can expect, it’s a bigger drop in the consumer market %‑wise given all of the inventory build that goes into the consumer season in the calendar Q4. We would typically also see down across the other businesses. If you think about what happens, we take a shutdown. Many of our customers have a shutdown, so not unexpected to see that seasonal pattern. We do think that allows us to get back into a more normalized seasonal pattern going forward.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Let’s step back and take a look at the longer-term view and the longer-term profile and trajectory of ADI’s business, right? If I look back over the last 20 years, you’ve grown your revenues at about a 9% CAGR. That’s about 30% faster than the overall semiconductor industry. Earnings, free cash flow per share, you’ve grown an 11 to 13% CAGR over that period of time. Some of the growth has been inorganic, but the majority has been organic. On a go-forward basis, this was the last analyst day a couple of years back. You were targeting to grow revenues at a 7 to 10% CAGR, earnings at a 10 to 11% CAGR, $15 per share of earnings power in fiscal 2027. This was a target that was put out a number of years back.

Given the severity of this past down cycle, how should we think about the team driving back to that sort of $15 of earnings power? Is that now maybe fiscal 2028, fiscal 2029?

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: I’ll go back to the beginning. At our investor day in 2022, the company put out its new long-term model, which had 7% to 10% growth rate, which was a pretty significant step up from sort of the historical industry growth rate that folks had seen. If you think about what we were describing and expecting, there were three things we knew or thought would drive the increase up in that revenue from the historical line. We figured we get an incremental point of growth out of our alignment with a lot of the cyclical mega trends, whether it’s the energy transition, whether it’s the electrification of autos, whether it’s more automation in the factories and warehouses. There were a number of those sort of macro trends that we were in leading positions. We thought that would give us about a point of growth.

We also, as we’ve talked about historically in our space, the industry, you’d give back two, three points plus of pricing every year. The old Moore’s law, we get more efficient you do. That changed for us during the supply chain crisis, and now the inflationary pressure on almost all the inputs in the semi-cycle continues. We have not been giving back the price like we have historically, and we figured that was good, essentially another point step up. The third piece that’s really important is when we did the Maxim Integrated acquisition, one of the things we said is by 2027, we’d pick up $1 billion worth of incremental revenue from synergies with Maxim. That was how we got that step up, which is what’s helped us obviously achieve some of the growth that we’ve been talking about. We continue to drive some leverage.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Right.

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: What we didn’t contemplate when we did that model in 2022 was the severity and the depth of the downturn. Obviously, something very unusual would have to happen for us to get back to a $15 share price in 2027. What we have demonstrated is continued accretion in EPS, right? In addition to getting more leverage from a gross margin perspective. Certainly in 2025, most of the incremental leverage is from a gross margin perspective, given the growth we’ve seen in OpEx. If you remember, our OpEx is a significant driver of the year-over-year changes, our variable comp plans, wherein last year we didn’t pay very much variable comp because we had no revenue growth. This year we have a lot of variable comp, but we do get leverage out of, we’ve been getting leverage out of gross margin, and you see that. You’re seeing the growth.

I do think you’re right. It’ll take a few more years.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Yeah.

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: I do think we still have the ability to get to that. The other piece that contributes and has been helping is our capital return policy has allowed us to retire a fair number of shares.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Right.

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: Certainly since I’ve been here, we continue to target, you know, returning 100% of our free cash flow to shareholders. From a framing perspective, it tends to be 40% to 60% of our free cash flow goes into our dividend, and then the remainder we use to retire shares. We will continue to target that return policy, which will help us on the numerator and denominator to get leverage and have less shares.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: A strong driver of the faster than overall industry growth that the ADI team has put in over the past number of years, right? A strong indicator of that momentum is your design win pipeline, right? You grew your design win pipeline by a double-digit % in fiscal 2023. You did it again, double-digit % growth in the design win pipeline in fiscal 2024 across all end markets. How is 2025 tracking so far? What are the areas of your portfolio or end market exposure? Are you seeing the strongest expansion and revenue opportunity as you look at the design win capture?

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: Great summary. 2024 was a record design win year for us, and 2025 is on path to exceed 2024 from a design win perspective. It is actually, thankfully, very broad, the design win success we’ve had. Certainly, some of the heaviest and most significant growth in design wins has been in the automotive space. That’s clearly indicative of the fact that we invested early to get in on some of the significant trends in automotive. If you think about connectivity, whether it’s the A to B or our GMSL solution, functionally safe power, we continue to get design wins in those areas. As more and more of those features go into more and more cars, we get more and more opportunities. We’ve also seen design wins across industrial. As I mentioned before, the broadening of our consumer portfolio is because we’ve had design wins that continue to ramp.

We feel pretty good that we’re getting broad growth from a design win perspective. On the comms side, we’ve talked about already the design wins we had on the multiphase vertical power solution and the optical networking. Pretty broadly across our portfolio, for us, it’s a really good indicator of where we are. I think we’ve had strong design wins over the past two to three years and a good indicator of where we’d be three to five years out from the design wins.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Let’s focus on your end market exposure. Industrial, 45% to 50% of total revenues, composed of a set of diversified businesses across different markets: factory automation, healthcare, instrumentation and test, energy infrastructure, aerospace, and defense. Help us understand the sizing and growth of the different subsegments. As the team moves to this potential upturn, what subsegments are likely to outperform going forward?

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: Sure. From the key components, from an instrumentation and test, that tends to be in the 30% to 40% of our revenue.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Yes.

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: Okay. I’m going to go back to the, I’ll do the growth factors after we go through.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Yeah.

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: You know, and then you think about ADI and automation. Those are both a little bit above 20% of our revenue. Our healthcare business is sort of in that 10% to 12% range, and the remainder is in our energy management space. When you look at the drivers that we’ve been talking about, you know, from an industrial perspective going forward, we continue to see the aerospace and defense as a growth vector, with the growth in spending on aerospace and particularly on the defense side of things, both domestically in the U.S. as well as what’s going on internationally. We think that continues to be a growth driver. You know, you look at the AI/data center growth, which does not appear to be slowing at all. That will give us growth vectors both in our industrial.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Yes.

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: Because of what we’ll see in the test business.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Right.

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: It will also give us opportunity in the wireline part of our comms business. That’s pretty, you know, those are two areas where we expect to see continued growth going into the future given the macro trends that support those areas. We are starting, as we’ve talked about, starting to see growth in the digital healthcare space, right, where we’ve got design wins there and products ramping. On the consumer side, as I mentioned, we have a bunch of new sockets that we expect will continue to grow going forward.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: On the industrial breakout, instrumentation and test is about 30% to 40%.

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: Yep.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Automation is how much?

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: Automation and ADI are both a little above 20%.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Okay.

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: Healthcare is sort of 10% to 12%, and the remaining is in the energy management space.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Energy. Okay, got it. Okay, thank you. You know, one of the strong dynamics among several, which separates ADI from your peers, is your strong exposure to ADAS, right?

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: Yep.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Aerospace and defense. Strong portfolio in mixed signal, RF, millimeter wave, digital signal processing, compound semiconductor products, lots of customer initiatives here. This has been a strong growth area for the ADI team during this last downturn. Has this business broken through, I think based on the breakout, has this business broken through the billion dollar annualized revenue run rate or 10% of overall revenues for the business? What are some of the ADI specific product cycles within A&D that’s going to continue to drive the strong growth into the next fiscal year or over the next few years?

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: Yes, on an annualized basis, it has broken through the $1 billion barrier. As we said, that’s been one of the most resilient parts of our business during this cycle for us. As I mentioned, given the secular tailwinds from aerospace and defense, we would expect that to continue. One of the things that’s been a big benefit for us is we’ve always, first of all, that is a space where high performance and the criteria are very significant. As we’ve talked about, our favorite place to play is the highest, most complicated part of the chip market. This is an area where that is really important. When you combine the individual analog products that we sell with where we’ve made a ton of traction in that space is selling modules and subsystems.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Yes.

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: Where the ASP premiums are significant for us. You go from selling, you know, individual chips to selling the modules. You go into thousands of dollars per product. That’s one of the things that is, from a driver perspective for us, will continue to be a significant element, our ability to capture more value because we are able to do that at the modular and subsystem level. I think we’ve got a number of those drivers that support continued strength in the aerospace and defense business for us. That’s, you know, like I said, whether it’s in any of the categories you described, the one you didn’t mention in your list that is also an important part of us is our power portfolio.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Yeah.

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: Also plays an important role. You know, if you think about the requirements for things going into, whether it’s satellites or missile defense systems, pick your products. The power is also another element that I would add to that, Harlan, from a growth driver perspective.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Yeah, I think as a team over the years has grown its portfolio organically and inorganically, right? You’ve been able to drive more dollar value per customer engagement within aerospace and defense. Your aerospace and defense customers do appreciate the module/reference platform focus because it allows them to get to market faster as well. Any areas within aerospace and defense? You’ve got SATCOM, you’ve got UAV, you’ve got weapon system development, radar, so on. Any specifics and markets, submarkets within aerospace and defense where the Analog Devices team has particular leadership in, or is it kind of all of the above?

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: I think we have got strong positions in all of the spaces you mentioned, but certainly in the guidance area.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Yes.

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: In the microwave comms.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Yes.

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: Those are two really, really strong assets for ADI and important assets across that aerospace and defense business. What customers want from ADI is they, and one of the things we got really good at during the supply chain shortage was getting closer to customers. We get invited in earlier. They want us to solve problems. Oftentimes it is, here’s what we’re trying to do. Can you provide an elegant solution, whether it’s a module or a subsystem or even, you know, individual components that help solve our problem? Our success doing that has positioned us really well in that space.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Yeah. Let’s shift to automotive. You know, 30% of your revenues this fiscal year, your auto business will be, as you mentioned in your prepared remarks, at record levels. However, here in the fourth quarter, you are experiencing some inventory normalization, as you did see auto pull-ins in the first half of this year, right? April quarter, it was a little bit of pull-in from auto customers in North America and Europe. July quarter was a little bit of pull-ins from China auto customers. Here in the October quarter, you and your customers are working down these pull-ins, right, with auto sales for Analog Devices expected to decline by mid-teens sequentially. Do you anticipate you will exit this quarter with your auto business back to kind of shipping to consumption trends, or do you see more inventory digestion maybe heading into the January quarter?

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: If you think back to when we first raised the advanced buying pull-ins in auto in Q2, I had said I thought that the pull-ins were largely going to come from Q4 and/or Q1.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Yeah.

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: We didn’t expect to see any incremental pull-ins. We did actually, as you mentioned, see some pull-ins in China in Q3. The result is when we look at what we’re going to expect for Q4, it is well below seasonal, you know, and I think we said on the call, low double-digit decline. When you look at the magnitude of that decline relative to our prior expectations, my sense is, and our analysis would lead me to believe most of the correction of the pull-in happens in the fourth quarter. Could there be some small residual amount that flows through in the first quarter? Possible, right? Because we don’t have a precise way, nobody calls to tell me they’re pulling in inventory.

Given the magnitude of the correction in the fourth quarter, we think we exit the fourth quarter with it largely behind us and then getting back into a more seasonal pattern.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Got it. Relative to your broad auto portfolio, you’ve been driving outsized growth in leadership areas like connectivity, right? You mentioned both in-cabin and ADAS. You talked about power management, functional safety. How are these areas of product leadership performing relative to the overall auto business?

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: All of the areas you just mentioned are growing at a very strong clip. In fact, that part of our business now represents almost half of our auto business.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Wow.

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: It has been a significant contributor. It gets back to our early investment to have the right products in those areas in advance of the market trends. The market trends continue, right? If you look at our auto story, especially over the last 10 years, we’ve outgrown SAR pretty significantly. Our content growth, you know, gives us over a 10-year period, it’s given us, you know, round numbers, 10% growth above SAR. What’s interesting, and you all see this in what’s being put in cars these days, if you shorten that and look over the last five years, it’s actually about a 15% premium to SAR for content. Content and share gain, but a big piece of that is content. If you think about even a moderately priced car in the U.S. and now even a very low-priced vehicle in China has more in-cabin immersive experiences.

They’re moving level two ADAS down into more vehicles. Those all create opportunities for the products you just said, right? Whether it’s A to B, GMSL solution, functionally safe power. Particularly when we get into the full EV vehicle production, that’s where we get more BMS share.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Yeah.

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: Those are all real content and strong drivers of growth for us in the auto space.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: When you mentioned these growth drivers being greater than 50% of the auto business, that includes GMSL, A to B, functional safety. Does that also include BMS?

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: Yes.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Okay.

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: I just didn’t include the BMS in the growth driver because, as we’ve talked about, BMS has been working through an inventory correction this year.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Any visibility in terms of when inventories in BMS could potentially normalize?

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: We think we’ll see normalization as we exit this year and should see return to growth in BMS in 2026.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: In 2026, okay. Let’s talk about AI and accelerated compute. Obviously, it’s very topical, not a lot of people understand ADI’s strong position in AI and accelerated compute. For ADI, AI, data center compute, networking, a combination of testing and instrumentation, power, optical networking, connectivity solutions. The team drove about $400 million in AI revenues last year. You were targeting to grow this segment by about 30% to 50% this year. How is this subsegment trending relative to that target? You were anticipating the ramp of some $1.60 optical module wins and vertical power delivery end of this year and next year. Are these programs still on track to fire as well?

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: I’ll go back to the beginning.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Right.

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: We expect this year’s number to be more in the $500 to $600 million range, which tracks with the growth objective.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Yes.

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: Certainly growing well above the company average. In fact, if you look at the pieces that are in our comms business, so the.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Yes.

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: The wireline part of comms, that part of our business has actually grown 50% year over year in each of the last two quarters. It continues to grow very strong and continue to be well positioned, as I said before, given the CapEx trends we’re seeing in that space. The two design wins, the vertical power and the optical modules, we now expect that revenue to start ramping in 2026. We thought we might see some in late 2025, but given customer schedules, it looks like it’ll be late 2026. Those two wins combined, you know, when they get to sort of normal shipping volumes, is approximately $100 million worth of incremental revenue in that part of our business. We do continue to see growth above company average in that space.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: On the comms infrastructure part of your business, right? Strong leadership in signal processing, RF, power management, really strong exposure to 5G infrastructure, cloud, hyperscale, optical connectivity, and AI compute power management, as you just talked about. Wired comm infrastructure has been strong due to AI, but wireless has been weak due to muted infrastructure spending trends by the cellular service providers. However, you did see sequential growth trends in wireless for the first time in a while last quarter. Have the positive trends in wireless continued into this quarter? How do you see the potential profile of recovery for the wireless infrastructure part of your business looking out over the next several quarters?

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: We have been talking about the wireless part of our business, you know, being down and essentially being a bit of a drag on our comms business.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Yes.

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: I think I described it as bouncing along the bottom in the last couple of quarters. We did see some growth. You haven’t heard me celebrate that anywhere publicly because I do think a bit of that is just being, one, very easy compared to what we had from a revenue perspective in the prior year. Yes, we are shipping higher amounts and, you know, it is in the traditional sort of 5G space.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Right.

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: To your forward look question, you know, obviously where we are, there hasn’t been any broad expansion in the 5G market at this point.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Yeah.

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: I wouldn’t say that’s necessarily a long-term driver for us, you know, as we wait to see what the next turn of wireless looks like. At this stage, at least it is a growing business and not detracting from the success we’re having on the wireline side.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: I think the mix in the comms infrastructure business has changed pretty dramatically because of that, right? Is it 70-30 now, wireline versus wireless?

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: The wireline for us is at least two-thirds, yeah.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: At least two-thirds.

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: Yeah.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Okay.

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: May flex a little bit around that, but it’s typically above two-thirds right now.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Let’s talk about the financials and maybe some of the manufacturing strategy. In the July quarter, your gross margins came in slightly below expectations due to some underutilization in your Ireland fab. I believe you had some supply constraints, but you had anticipated your gross margins trending to the 70% level this quarter, a combination of utilization improvements and mix. Is the team still tracking to this target, and have you resolved the supply issues with the Ireland fab?

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: Yes, we have resolved the supply issue. I think we had mentioned that on the call. We thought that we would get that worked out and be back on track in Q4 to get back up to our 70% margin. The other piece of that that’s really important, one is that supply piece. The second is the mix issue. If we hit our guide, industrial is back up to almost 50% of our revenue, which is an important margin accretor for us. Industrial obviously is our highest margin business. That will continue to be really important for us in the fourth quarter and as we go forward. As we said at the time of the earnings call, that’s the expectation for Q4 and then positioning us for continuing, assuming continued revenue growth, continued increase in utilization, which should also help us on the margin side.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Are utilizations improving this quarter?

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: We have had continuous improvement in utilization since we came off the floor in Q2, as we expected. We’re still below an optimal utilization, and obviously well below where we were at peak margins because we were running even then at what, in hindsight, you’d say were pretty unhealthy levels above normal during the supply crunch.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: As you continue to move through this upcycle, could you discuss some of the key gross margin levers and whether it’s possible to approach the 74% gross margin levels that the team drove in 2022?

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: Sure. Two biggest drivers, you know, the mix, which I won’t repeat again, getting back to at least a 50% industrial mix helps us get back to margin levels more like what we saw because a peak margin you described was 53%. The other piece is continued expansion in volumes, gets better absorption, and helps us reduce the variances because if you looked at the drop from peak to trough, it’s, you know, split between the mix of business and the underutilization caused by the lower amount of factory production. Now, built into that sort of utilization and variance number is we did double our internal capacity over that period from 2022 to 2024. You saw that in our CapEx numbers.

You also see the benefit today of our CapEx coming back down to normal levels, which is a bit of a free cash flow tailwind for us. You see that in our free cash flow margins getting up to 35% on a trailing 12. Those two areas, you know, mix and utilization will continue to drive, those will be the key to driving margin accretion for us. Back to 74, I absolutely think we can get back to 74. It will just have to be at a higher level than the last time because, you know, we’re in a 12-3 kind of revenue number given the doubling of our capacity. The number to get to 74% is quite a bit higher on the revenue side. Depending on what happens in the industrial mix, we’ll determine how much higher it has to be.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Yeah, the other driver of the strong operating margins and EBITDA margin improvements, as we move through the upper part of the cycle, is the team has obviously got scale. How would you recommend, as we look out over the next few quarters and a couple of years as we move through the sweet spot of the positive upcycle, how should we think about relative to, let’s say, maybe that 7% to 10% long-term revenue growth rate? How do you think about the growth in OpEx relative to that framework?

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: One of the interesting dynamics we had is we have a pretty substantial increase in OpEx in 2025 because of the return of variable comp.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Yes.

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: Even in a high growth year, again, if we were to have a growth year in 2026, the increment of variable comp would not be nearly what we had this year. For context, I think I’ve said this before, the growth in variable comp is like 500% in 2024 to 2025, pretty significant headwind. That should give us some accretion. It’s also what’s caused us to grow above our sort of historical norm of growing expenses at a fraction of what we grow revenue. With that behind us, we expect to have continued opportunity to get more operating leverage. Obviously, the more impactful is getting leverage at the gross margin line, but we will also expect in a revenue growth environment. Now, again, look, what 2026 looked like is going to largely be determined by the macro factors that are still unsettled, but there is some opportunity.

We get a bunch of the trade and tariff stuff done by the end of the calendar year. We may get some of the rate cuts that people think could be helpful, certainly would be helpful in the auto end market. There are a number of those things still to settle that will help guide what 2026 looks like. If we have growth years, we would expect more accretion in both.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: I was going to ask you a question about the Maxim revenue synergy target, but you clearly told us in your prepared remarks that the team is well on track to hit that $1 billion of revenue synergies in fiscal 2027. I wanted to pivot more towards the consumer part of your business because you don’t often get questions on the consumer part of your business, but that business is growing strong. My question is, what has the ADI team done over the past number of years to inject strong growth? It seems like it’s very diverse, right? Smartphones, client, IoT, wearables, hearables, maybe a little bit of consumer digital health. What has the team done on the consumer side to drive this pretty strong, what it looks like to be sustainable revenue growth profile in the consumer business going forward?

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: Yeah, I actually think you nailed it. The team did a really nice job diversifying the number of sockets and types of sockets we have on the consumer side. We’re not nearly as dependent on a small number of sockets to drive growth. You’re right, if you described them before, we still have a very strong position in power and touch in the handset world. We also have a strong position now in hearables, wearables, whether it’s your hearing aids, whether it’s the monitoring that you watch for vital signs, a lot of those things, plus also in the gaming platforms. Those have been very strong growth drivers for us, and we expect that that broader portfolio will continue to drive our growth.

Obviously, consumer is not as important to our growth from a dollar perspective as industrial, but from a percentage perspective, it has been an outstanding grower for us for the last 12 months.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Perfect. We are just about out of time, Harlan.

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: Wow.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Always insightful. Thank you for participating in our conversation.

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: Thanks for having me.

Harlan Surr, Semiconductor and Semiconductor Capital Equipment Analyst, JPMorgan: Look forward to monitoring the execution of the ADI team as we move to this year. Thank you.

Richard Puccio, Executive Vice President and Chief Financial Officer, Analog Devices: Thank you, Harlan. Appreciate it, everybody. Thanks.

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