Analog Devices Q2 Earnings Top Forecasts

Core Insights - Analog Devices, Inc. reported Q2 FY2025 earnings with revenue of $2.64 billion, reflecting a 22% year-over-year increase and a 9% sequential growth, alongside a non-GAAP EPS of $1.85, exceeding guidance expectations [1] Group 1: Financial Performance - The company anticipates Q3 FY2025 revenue of $2.75 billion (+/- $100 million) and aims to achieve long-term margin and free cash flow targets [2] - Operating margin (non-GAAP) reached 41.2%, with gross margin (non-GAAP) climbing to 69.4% (+60bps sequentially) [7] - Adjusted EPS for Q3 FY2025 is projected at $1.92 (+/- $0.10) [10] Group 2: Supply Chain and Manufacturing - Recent capital expenditures have significantly increased manufacturing capacity, now exceeding twice pre-pandemic levels, enhancing geographic flexibility [3] - The company has cross-qualified a substantial portion of its product portfolio, allowing for rapid production shifts across various geographies, thus reducing supply risk [4] Group 3: Market Dynamics - The industrial segment accounted for 44% of revenue, with an 8% sequential growth and a 17% year-over-year increase, driven by broad-based recovery [5] - The company has been under-shipping to the industrial segment, creating pent-up demand as customer inventories remain constrained [6] Group 4: Strategic Outlook - Management emphasizes ongoing investments in R&D, particularly in analog, power management, digital, and software capabilities, aligning operational expenditures with innovation priorities [8] - The company reaffirms confidence that FY2024 marked the revenue trough, citing lean channel inventories and increasing backlog [10]