• Revenue: $2.42 billion, a 1% sequential decrease and a 4% decline year-over-year.
• Industrial Revenue: 44% of total revenue, up 1% sequentially.
• Automotive Revenue: 30% of total revenue, up 2% sequentially.
• Communications Revenue: 12% of total revenue, up 6% sequentially.
• Consumer Revenue: 13% of total revenue, down 15% sequentially.
• Gross Margin: 68.8%, up 90 basis points sequentially.
• Operating Margin: 40.5%.
• Adjusted EPS: $1.63.
• Cash and Short-term Investments: $2.7 billion.
• Net Leverage Ratio: 1.1.
• Inventory: Increased by $27 million sequentially; Days of inventory at 176.
• Operating Cash Flow (TTM): $3.8 billion.
• CapEx (TTM): $656 million.
• Free Cash Flow (TTM): $3.2 billion or 34% of revenue.
• Dividend Increase: 8% increase to $0.99 per share.
• Share Repurchase Authorization: Additional $10 billion authorized, totaling $11.5 billion available.
• Q2 Revenue Guidance: $2.5 billion, plus or minus $100 million.
• Q2 Adjusted EPS Guidance: $1.68, plus or minus $0.10.

• Warning! GuruFocus has detected 11 Warning Signs with ADI.

Release Date: February 19, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Analog Devices Inc (NASDAQ:ADI) reported first quarter revenue, profitability, and earnings per share above the midpoint of their outlook.
• The company increased its dividend for the 21st consecutive year, highlighting a strong capital return program.
• ADI is well-positioned for sustained recovery in the semiconductor cycle, with normalized inventory levels and improved customer engagements.
• The company anticipates double-digit growth in several sectors, including industrial automation, surgical robotics, and automotive.
• ADI's hybrid manufacturing model and strategic investments have enhanced their ability to meet dynamic customer needs and support growth.

Negative Points

• Despite positive results, ADI continues to operate in a challenging macro and geopolitical environment.
• The company experienced a 4% year-over-year revenue decline in the first quarter, adjusting for an extra week in fiscal Q1 2024.
• Consumer revenue was down 15% sequentially, reflecting seasonal latency.
• Wireless revenue continues to face demand challenges, impacting the communications segment.
• The macroeconomic environment remains uncertain, which could influence the pace of ADI's recovery and growth.

Q & A Highlights

Q: Can you discuss the impact of the shift towards China in the auto market and how it affects ADI in terms of pricing and margins? A: Richard Puccio, CFO, explained that ADI has a strong share and content position with major Chinese EV OEMs, which is reflected in their results. Vincent Roche, CEO, added that ADI's high-performance technologies remain relevant and are well-compensated in the market, despite competitive pressures.

Q: What is the long-term model growth ADI expects to return to this year, and how does inventory normalization affect demand visibility? A: Richard Puccio stated that ADI aims for around 10% long-term model growth, with potential for more if macro conditions improve. Vincent Roche noted that inventory normalization is occurring across channels and customers, supporting demand visibility and growth prospects.

Q: How is ADI's hybrid manufacturing model positioned amid geopolitical turmoil? A: Vincent Roche highlighted that ADI's diverse manufacturing model provides optionality and resiliency. By 2026-2027, ADI aims to have dual sourcing for 95% of its products, reducing geographic risks and ensuring supply chain stability.

Q: What is driving the strength in the industrial sector, and how did bookings trend during the quarter? A: Richard Puccio noted that industrial growth is driven by strength in automatic test equipment and aerospace, with stabilization in automation, healthcare, and energy. Bookings improved across all areas, particularly in ATE and ADAS, supporting industrial growth in the next quarter.

Q: How does ADI view the current inventory levels in the channel, and what are the plans for channel refill? A: Richard Puccio stated that ADI is currently shipping to sell-through without adding to the channel. The company is comfortable operating below the historical seven to eight weeks of inventory, with flexibility provided by increased internal inventory.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.