Analog Devices(ADI) - 2025 Q3 - Quarterly Report

PART I — FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and management's discussion for the three and nine months ended August 2, 2025 Financial Statements This section presents the unaudited condensed consolidated financial statements for the three and nine months ended August 2, 2025, along with detailed explanatory notes Condensed Consolidated Statements of Income The company reported strong year-over-year growth in revenue and net income for both the third quarter and the first nine months of fiscal 2025 Q3 & Nine Months FY2025 Financial Performance (YoY) | Financial Metric | Three Months Ended Aug 2, 2025 (Millions USD) | Three Months Ended Aug 3, 2024 (Millions USD) | YoY Change | Nine Months Ended Aug 2, 2025 (Millions USD) | Nine Months Ended Aug 3, 2024 (Millions USD) | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | $2,880.3 | $2,312.2 | +24.6% | $7,943.6 | $6,984.0 | +13.7% | | Gross Margin | $1,789.7 | $1,311.2 | +36.5% | $4,831.7 | $3,965.2 | +21.8% | | Operating Income | $818.0 | $491.3 | +66.5% | $1,987.3 | $1,463.4 | +35.8% | | Net Income | $518.5 | $392.2 | +32.2% | $1,479.6 | $1,157.2 | +27.9% | | Diluted EPS | $1.04 | $0.79 | +31.6% | $2.97 | $2.32 | +28.0% | Condensed Consolidated Balance Sheets Total assets remained stable at $48.19 billion, with increased long-term debt and a decrease in shareholders' equity as of August 2, 2025 Key Balance Sheet Items (As of August 2, 2025 vs. November 2, 2024) | Account | August 2, 2025 (Millions USD) | November 2, 2024 (Millions USD) | | :--- | :--- | :--- | | Total Current Assets | $6,924.6 | $5,484.7 | | Total Assets | $48,192.6 | $48,228.3 | | Long-term Debt | $8,139.9 | $6,634.3 | | Total Liabilities | $14,106.8 | $13,051.9 | | Total Shareholders' Equity | $34,085.8 | $35,176.3 | Condensed Consolidated Statements of Cash Flows Operating cash flow increased to $3.11 billion, while financing activities used $1.69 billion primarily due to stock repurchases and dividends Cash Flow Summary (Nine Months Ended) | Cash Flow Activity | August 2, 2025 (Millions USD) | August 3, 2024 (Millions USD) | | :--- | :--- | :--- | | Net cash provided by operating activities | $3,111.4 | $2,801.7 | | Net cash used for investing activities | ($1,096.2) | ($993.2) | | Net cash used for financing activities | ($1,685.3) | ($660.5) | | Net increase in cash and cash equivalents | $329.8 | $1,148.0 | Notes to Condensed Consolidated Financial Statements Notes detail special charges, strong revenue growth across all markets, debt issuance and repayment, and tax law impacts Revenue by End Market (Q3 FY2025 vs Q3 FY2024) | End Market | Revenue (Q3 2025, Millions USD) | % of Revenue | YoY Growth | | :--- | :--- | :--- | :--- | | Industrial | $1,285.0 | 45% | 23% | | Automotive | $850.6 | 30% | 22% | | Consumer | $372.2 | 13% | 21% | | Communications | $372.5 | 13% | 40% | | Total Revenue | $2,880.3 | 100% | 25% | - The company recorded net special charges of $70.0 million in the first nine months of fiscal 2025 as part of its Global Repositioning Actions, primarily for employee severance costs[28] - In June 2025, the company issued $850.0 million of 4.250% senior notes due 2028 and $650.0 million of 4.500% senior notes due 2030, also repaying $400.0 million of notes due in April 2025[48][49][50] - The OBBBA tax law in Q3 2025 resulted in a net deferred tax expense of $153.8 million, with the company contesting a separate IRS assessment of approximately $267.0 million for fiscal years 2018 and 2019[53][54][56] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses strong Q3 2025 financial performance, including 25% revenue growth, improved gross margins, and capital allocation strategies Results of Operations Revenue grew 25% year-over-year, driven by strong demand and 40% growth in Communications, with gross margin improving to 62.1% - Revenue increased 25% in Q3 2025 year-over-year, attributed to a broad-based increase in demand, with the Communications end market growing 40% due to data center infrastructure build-outs for artificial intelligence applications[71][72][73] - Gross margin percentage increased by 540 basis points in Q3 2025 year-over-year, primarily due to higher utilization of factories resulting from increased customer demand[78] - R&D and SMG&A expenses increased by 25% and 27% respectively in Q3 2025 year-over-year, primarily due to higher employee-related variable compensation expenses[79][80] - The effective income tax rate for Q3 2025 was 32.1%, a significant increase from 7.3% in the prior-year period, mainly due to a $153.8 million net deferred tax expense related to the passage of the OBBBA tax law[85] Liquidity and Capital Resources The company maintained $3.5 billion in liquidity, with $3.1 billion from operations, and allocated capital to stock repurchases and dividends - As of August 2, 2025, the company's principal source of liquidity was $3.5 billion of cash, cash equivalents, and short-term investments[88] - In the first nine months of fiscal 2025, the company used $1.48 billion for common stock repurchases and $1.44 billion for dividend payments[19][93] - As of August 2, 2025, $10.3 billion remained available for repurchases under the company's common stock repurchase program[102] - In August 2025, the company increased the aggregate amount it may issue under its commercial paper program from $2.5 billion to $3.0 billion[60][99] Quantitative and Qualitative Disclosures About Market Risk No material changes in market risks were reported for the nine-month period ended August 2, 2025, compared to the prior fiscal year - There were no material changes in the company's market risks during the nine-month period ended August 2, 2025, compared to those disclosed in the fiscal 2024 Form 10-K[108] Controls and Procedures Disclosure controls and procedures were deemed effective as of August 2, 2025, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of August 2, 2025[109] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control[110] PART II — OTHER INFORMATION This section provides other information including risk factors, equity security purchases, and exhibits Risk Factors This section refers to previously disclosed risk factors from the fiscal year 2024 Form 10-K, with no new material changes reported - The company directs investors to the risk factors identified in its Annual Report on Form 10-K for the fiscal year ended November 2, 2024[113] Issuer Purchases of Equity Securities The company repurchased 4.68 million shares for $1.06 billion in Q3 2025, with $10.3 billion remaining for future repurchases Issuer Purchases of Equity Securities (Q3 FY2025) | Period | Total Shares Purchased | Average Price Paid Per Share (USD) | Value of Shares Remaining for Purchase (Millions USD) | | :--- | :--- | :--- | :--- | | May 4 - May 31, 2025 | 1,217,136 | $214.45 | $11,095.4 | | June 1 - June 28, 2025 | 1,402,921 | $228.08 | $10,777.0 | | June 29 - Aug 2, 2025 | 2,061,232 | $235.04 | $10,294.7 | | Total | 4,681,289 | $227.60 | $10,294.7 | Other Information CEO and Chair Vincent Roche adopted a new Rule 10b5-1 trading plan on May 23, 2025, for the sale of up to 90,000 shares - On May 23, 2025, CEO and Chair Vincent Roche terminated a Rule 10b5-1 trading arrangement and adopted a new one for the sale of up to 90,000 shares of company stock[116] Exhibits Key exhibits filed include a supplemental indenture for new debt, CEO and CFO certifications, and XBRL interactive data files - Key exhibits filed with this report include the Supplemental Indenture for the June 2025 notes, Sarbanes-Oxley certifications by the CEO and CFO, and XBRL interactive data files[119]