Analog Devices Inc.

08/20/2025 | Press release | Distributed by Public on 08/20/2025 05:09

Quarterly Report for Quarter Ending August 2, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
This information should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q and the audited consolidated financial statements and related notes and Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended November 2, 2024 (fiscal 2024).
This Quarterly Report on Form 10-Q, including the following discussion, contains forward-looking statements regarding future events and our future results that are subject to the safe harbor created under the Private Securities Litigation Reform Act of 1995 and other safe harbors under the Securities Act of 1933 and the Securities Exchange Act of 1934. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. These statements are based on current expectations, estimates, forecasts and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as "expects," "anticipates," "targets," "goals," "projects," "intends," "plans," "believes," "seeks," "estimates," "continues," "potential," "may," "could" and "will," and variations of such words and similar expressions are intended to identify such forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors.
The following important factors and uncertainties, among others, could cause actual results to differ materially from those described in the forward-looking statements: economic, political, legal and regulatory uncertainty or conflicts, including increased uncertainty and volatility with respect to tariffs, export controls and other trade restrictions, actions taken or which may be taken by the presidential administration, executive offices of the U.S. government, or U.S. Congress, monetary policy, political, geopolitical, trade, or other issues in the United States or internationally, and the ongoing conflicts between Russia and Ukraine and in Israel and the Middle East; changes in demand for semiconductor products; manufacturing delays, product and raw materials availability and supply chain disruptions; diversion of products from our authorized distribution channels; changes in export classifications, import and export regulations or duties and tariffs; our development of technologies and research and development investments; our future liquidity, capital needs and capital expenditures; our ability to compete successfully in the markets in which we operate; our ability to recruit and retain key personnel; risks related to acquisitions or other strategic transactions; security breaches or other cyber incidents; adverse results in litigation matters; reputational damage; changes in our estimates of our expected tax rates based on current tax law; risks related to our indebtedness; the discretion of our Board of Directors to declare dividends and our ability to pay dividends in the future; factors impacting our ability to repurchase shares; and uncertainty as to the long-term value of our common stock. Additional factors that could cause actual results to differ materially from those described in these forward-looking statements include the risk factors included in Part I, Item 1A, "Risk Factors" of our Annual Report on Form 10-K for fiscal 2024. Forward-looking statements represent management's current expectations and are inherently uncertain. We undertake no obligation to revise or update any forward-looking statements, including to reflect events or circumstances occurring after the date of the filing of this report, except to the extent required by law.
Results of Operations
Overview
Amounts in the tables below are reflected in thousands except per share amounts and percentages.
Three Months Ended
August 2, 2025 August 3, 2024 $ Change % Change
Revenue $ 2,880,348 $ 2,312,209 $ 568,139 25 %
Gross margin % 62.1 % 56.7 %
Net income $ 518,518 $ 392,232 $ 126,286 32 %
Net income as a % of revenue 18.0 % 17.0 %
Diluted EPS $ 1.04 $ 0.79 $ 0.25 32 %
Nine Months Ended
August 2, 2025 August 3, 2024 $ Change % Change
Revenue $ 7,943,590 $ 6,983,952 $ 959,638 14 %
Gross margin % 60.8 % 56.8 %
Net income $ 1,479,604 $ 1,157,201 $ 322,403 28 %
Net income as a % of revenue 18.6 % 16.6 %
Diluted EPS $ 2.97 $ 2.32 $ 0.65 28 %
We have a 52-53 week fiscal year that ends on the Saturday closest to the last day in October. The fiscal year ending November 1, 2025 (fiscal 2025) is a 52-week fiscal year and fiscal 2024 was a 53-week fiscal year. The additional week in fiscal 2024 was included in the first quarter ended February 3, 2024. Therefore, the first nine months of fiscal 2025 included one less week of operations as compared to the first nine months of fiscal 2024.
Revenue Trends by End Market
The following tables summarize revenue by end market. The categorization of revenue by end market is determined using a variety of data points including the technical characteristics of the product, the "sold to" customer information, the "ship to" customer information and the end customer product or application into which our product will be incorporated. As data systems for capturing and tracking this data and our methodology evolves and improves, the categorization of products by end market can vary over time. When this occurs, we reclassify revenue by end market for prior periods. Such reclassifications typically do not materially change the sizing of, or the underlying trends of results within, each end market.
Three Months Ended
August 2, 2025 August 3, 2024
Revenue % of
Revenue* 		Y/Y% Revenue % of
Revenue*
Industrial $ 1,285,041 45 % 23 % $ 1,045,291 45 %
Automotive 850,619 30 % 22 % 694,905 30 %
Consumer 372,197 13 % 21 % 306,832 13 %
Communications 372,491 13 % 40 % 265,181 11 %
Total revenue $ 2,880,348 100 % 25 % $ 2,312,209 100 %
Nine Months Ended
August 2, 2025 August 3, 2024
Revenue % of
Revenue* 		Y/Y% Revenue % of
Revenue*
Industrial $ 3,502,751 44 % 9 % $ 3,223,111 46 %
Automotive 2,445,391 31 % 14 % 2,136,173 31 %
Consumer 1,009,614 13 % 24 % 817,436 12 %
Communications 985,834 12 % 22 % 807,232 12 %
Total revenue $ 7,943,590 100 % 14 % $ 6,983,952 100 %
* The sum of the individual percentages may not equal the total due to rounding.
Revenue increased 25% and 14% in the three- and nine-month periods ended August 2, 2025 as compared to the same periods of the prior fiscal year as a result of a broad-based increase in demand for our products.
In addition to increased demand, the increase in the nine-month period is due to customer inventory balances normalizing in the Industrial end market, the increases in the Automotive end market are primarily driven by increases from connectivity solutions, and the increases in the Communications end market are primarily driven by growth in the wireline sub-market from data center infrastructure build outs, primarily to support growth in artificial intelligence applications. The increases in the Consumer end market are primarily related to portable consumer products. These increases in the nine-month period were partially offset by the impact of an additional week of operations in the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2025.
Revenue by Sales Channel
The following tables summarize revenue by sales channel. We sell our products globally through a direct sales force, third-party distributors, independent sales representatives and via our website. Distributors are customers that buy products with the intention of reselling them. Direct customers are non-distributor customers and consist primarily of original equipment manufacturers. Other customers include the U.S. government, government prime contractors and certain commercial customers for which revenue is recorded over time.
Three Months Ended
August 2, 2025 August 3, 2024
Revenue % of Revenue* Revenue % of Revenue*
Channel
Distributors $ 1,592,407 55 % $ 1,332,244 58 %
Direct customers 1,240,924 43 % 940,317 41 %
Other 47,017 2 % 39,648 2 %
Total revenue $ 2,880,348 100 % $ 2,312,209 100 %
Nine Months Ended
August 2, 2025 August 3, 2024
Revenue % of Revenue* Revenue % of Revenue*
Channel
Distributors $ 4,447,959 56 % $ 4,115,836 59 %
Direct customers 3,386,571 43 % 2,753,885 39 %
Other 109,060 1 % 114,231 2 %
Total revenue $ 7,943,590 100 % $ 6,983,952 100 %
* The sum of the individual percentages may not equal the total due to rounding.
As indicated in the tables above, the percentage of total revenue sold via each channel has remained relatively consistent in the periods presented, but can fluctuate from time to time based on end market revenue trends. As a percentage of total revenue, the decrease in the distributor channel is primarily due to the decrease in the percentage of revenue from our Industrial end market.
Gross Margin
Three Months Ended Nine Months Ended
August 2, 2025 August 3, 2024 $ Change % Change August 2, 2025 August 3, 2024 $ Change % Change
Gross margin $ 1,789,748 $ 1,311,239 $ 478,509 36 % $ 4,831,661 $ 3,965,215 $ 866,446 22 %
Gross margin % 62.1 % 56.7 % 60.8 % 56.8 %
Gross margin percentage increased by 540 and 400 basis points in the three- and nine-month periods ended August 2, 2025 as compared to the same periods of the prior fiscal year, primarily due to higher utilization of our factories as a result of increased customer demand as well as a decrease in amortization expense related to acquired intangible assets.
Research and Development (R&D)
Three Months Ended Nine Months Ended
August 2, 2025 August 3, 2024 $ Change % Change August 2, 2025 August 3, 2024 $ Change % Change
R&D expenses $ 454,251 $ 362,671 $ 91,580 25 % $ 1,298,980 $ 1,108,960 $ 190,020 17 %
R&D expenses as a % of revenue 16 % 16 % 16 % 16 %
R&D expenses increased in the three- and nine-month periods ended August 2, 2025, as compared to the same periods of the prior fiscal year, primarily as a result of higher R&D employee-related variable compensation expenses and higher salary and benefit expenses. R&D expenses as a percentage of revenue will fluctuate from year-to-year depending on the amount of revenue and the success of new product development efforts, which we view as critical to our future growth. We expect to continue the development of innovative technologies and processes for new products. We believe that a continued commitment to R&D is essential to maintain product leadership with our existing products as well as to provide innovative new product offerings.
Selling, Marketing, General and Administrative (SMG&A)
Three Months Ended Nine Months Ended
August 2, 2025 August 3, 2024 $ Change % Change August 2, 2025 August 3, 2024 $ Change % Change
SMG&A expenses $ 325,706 $ 257,213 $ 68,493 27 % $ 913,171 $ 791,420 $ 121,751 15 %
SMG&A expenses as a % of revenue 11 % 11 % 11 % 11 %
SMG&A expenses increased in the three- and nine-month periods ended August 2, 2025, as compared to the same periods of the prior fiscal year, primarily as a result of higher SMG&A employee-related variable compensation expenses and higher salary and benefit expenses.
Amortization of Intangibles
Three Months Ended Nine Months Ended
August 2, 2025 August 3, 2024 $ Change % Change August 2, 2025 August 3, 2024 $ Change % Change
Amortization expenses $ 187,415 $ 187,754 $ (339) - % $ 562,245 $ 567,030 $ (4,785) (1) %
Amortization expenses as a % of revenue 7 % 8 % 7 % 8 %
Amortization expenses decreased in the three- and nine-month periods ended August 2, 2025, as compared to the same periods of the prior fiscal year, primarily as a result of a portion of our acquired intangible assets becoming fully amortized during fiscal 2024.
Special Charges, Net
Three Months Ended Nine Months Ended
August 2, 2025 August 3, 2024 $ Change % Change August 2, 2025 August 3, 2024 $ Change % Change
Special charges, net $ 4,348 $ 12,282 $ (7,934) (65) % $ 69,980 $ 34,399 $ 35,581 103 %
Special charges, net decreased in the three-month period ended August 2, 2025, as compared to the same period of the prior fiscal year, primarily due to decreased charges related to our Global Repositioning Actions. Special charges, net increased in the nine-month period ended August 2, 2025, as compared to the same period of the prior fiscal year, primarily due to charges related to our Global Repositioning Actions recorded in the first quarter of fiscal 2025. See Note 5, Special Charges, Net, in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further discussion.
Nonoperating Expense (Income)
Three Months Ended Nine Months Ended
August 2, 2025 August 3, 2024 $ Change August 2, 2025 August 3, 2024 $ Change
Total nonoperating expense (income) $ 54,619 $ 68,328 $ (13,709) $ 162,372 $ 202,394 $ (40,022)
The year-over-year decrease in nonoperating expense (income) in the three-month period ended August 2, 2025, as compared to the same period of the prior fiscal year, was primarily due to lower foreign currency expenses and lower interest expense on our debt obligations.
The year-over-year decrease in nonoperating expense (income) in the nine-month period ended August 2, 2025, as compared to the same period of the prior fiscal year, was primarily due to the result of higher interest income on our cash, cash equivalents and short-term investments, lower interest expense on our debt obligations and lower foreign currency expenses.
Provision for Income Taxes
Three Months Ended Nine Months Ended
August 2, 2025 August 3, 2024 $ Change August 2, 2025 August 3, 2024 $ Change
Provision for income taxes $ 244,891 $ 30,759 $ 214,132 $ 345,309 $ 103,811 $ 241,498
Effective income tax rate 32.1 % 7.3 % 18.9 % 8.2 %
The tax rates for the three- and nine-month periods ended August 2, 2025 increased primarily due to a net deferred tax expense of $153.8 million recorded in the third quarter of fiscal 2025 related to the remeasurement of our GILTI-related deferred tax assets and liabilities attributable to the passage of the OBBBA.
Net Income
Three Months Ended Nine Months Ended
August 2, 2025 August 3, 2024 $ Change % Change August 2, 2025 August 3, 2024 $ Change % Change
Net income $ 518,518 $ 392,232 $ 126,286 32 % $ 1,479,604 $ 1,157,201 $ 322,403 28 %
Net income as a % of revenue 18.0 % 17.0 % 18.6 % 16.6 %
Diluted EPS $ 1.04 $ 0.79 $ 2.97 $ 2.32
Net income increased in the three-month period ended August 2, 2025, as compared to the same period of the prior fiscal year, as the result of a $326.7 million increase in operating income and a $13.7 million decrease in nonoperating expense (income), partially offset by a $214.1 million increase in provision for income taxes.
Net income increased in the nine-month period ended August 2, 2025, as compared to the same period of the prior fiscal year, as the result of a $523.9 million increase in operating income and a $40.0 million decrease in nonoperating expense (income), partially offset by a $241.5 million increase in provision for income taxes.
Liquidity and Capital Resources
At August 2, 2025, our principal source of liquidity was $3.5 billion of cash, cash equivalents and short-term investments, of which approximately $2.3 billion was held in the United States, and the balance of which was held outside the United States in various foreign subsidiaries. We manage our worldwide cash requirements by, among other things, reviewing available funds held by our foreign subsidiaries and the cost effectiveness by which those funds can be accessed in the United States. We do not expect current regulatory restrictions or taxes on repatriation to have a material adverse effect on our overall liquidity, financial condition or results of operations. Our cash, cash equivalents and short-term investments consist of highly liquid investments, including money market funds and corporate and bank obligations. We maintain these balances with counterparties with high credit ratings, and continually monitor the amount of credit exposure to any one issuer and diversify our investments in order to minimize our credit risk.
We believe that our existing sources of liquidity and cash expected to be generated from future operations, together with existing and anticipated available short- and long-term financing, will be sufficient to fund operations, capital expenditures, research and development efforts and dividend payments (if any) in the immediate future and for at least the next twelve months.
Nine Months Ended
August 2, 2025 August 3, 2024
Net cash provided by operating activities $ 3,111,392 $ 2,801,712
Net cash provided by operations as a % of revenue 39 % 40 %
Net cash used for investing activities $ (1,096,216) $ (993,244)
Net cash used for financing activities $ (1,685,327) $ (660,497)
The following changes contributed to the net change in cash and cash equivalents in the nine-month period ended August 2, 2025 as compared to the same period in fiscal 2024.
Operating Activities
Cash provided by operating activities is net income adjusted for certain non-cash items and changes in operating assets and liabilities. The increase in cash provided by operating activities during the nine-month period ended August 2, 2025, as compared to the same period of the prior fiscal year, was mainly the result of higher net income adjusted for non-cash items.
Investing Activities
Investing cash flows generally consist of purchases of property, plant and equipment, available-for-sale investments and acquisitions of other businesses. The change in investing cash flows during the nine-month period ended August 2, 2025, as compared to the same period of the prior fiscal year, was primarily the result of changes in our short-term investments and a decrease in cash used for capital expenditures as the rate of spending on our global resiliency and hybrid manufacturing footprint moderated. The change in investing cash flows also included net proceeds from the sale of property, plant and equipment during the second quarter of fiscal 2025, partially offset by cash paid for an acquisition in the first quarter of fiscal 2025.
Financing Activities
Financing cash flows generally consist of payments of dividends to stockholders, repurchases of common stock, issuance and repayment of debt and proceeds from the sale of shares of common stock pursuant to employee equity incentive plans. The change in cash used for financing activities during the nine-month period ended August 2, 2025, as compared to the same period of the prior fiscal year, was primarily the result of higher common stock repurchases and higher dividend payments to shareholders.
Working Capital
August 2, 2025 November 2, 2024 $ Change % Change
Accounts receivable $ 1,553,259 $ 1,336,331 $ 216,928 16 %
Days sales outstanding* 46 46
Inventory $ 1,596,853 $ 1,447,687 $ 149,166 10 %
Days cost of sales in inventory* 130 127
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*We use the average of the current quarter and prior quarter ending net accounts receivable and ending inventory balance in our calculation of days sales outstanding and days cost of sales in inventory, respectively.
The increase in accounts receivable in dollars was primarily the result of variations in the timing of collections and billings and increased revenue levels in the third quarter of fiscal 2025 as compared to the fourth quarter of fiscal 2024.
Inventory increased primarily as a result of our efforts to balance manufacturing production, demand and inventory levels. Our inventory levels are impacted by our need to support forecasted sales demand and variations between those forecasts and actual demand.
Current liabilities decreased to $2,979.0 million at August 2, 2025 as compared to $2,988.3 million at the end of fiscal 2024 primarily due to the repayment of approximately $400.0 million of debt during the second quarter of fiscal 2025 partially offset by higher accrued liabilities.
Debt
As of August 2, 2025, our debt obligations consisted of the following:
Principal Amount Outstanding
Commercial paper notes $ 548,665
2026 Notes, due December 2026 900,000
2027 Notes, due June 2027 440,212
2028 Notes, due June 2028 850,000
2028 Notes, due October 2028 750,000
2030 Notes, due June 2030 650,000
2031 Notes, due October 2031 1,000,000
2032 Notes, due October 2032 300,000
2034 Notes, due April 2034 550,000
2036 Notes, due December 2036 144,278
2041 Notes, due October 2041 750,000
2045 Notes, due December 2045 332,587
2051 Notes, due October 2051 1,000,000
2054 Notes, due April 2054 550,000
Total debt $ 8,765,742
The indentures governing our outstanding notes contain covenants that may limit our ability to: incur, create, assume or guarantee any debt for borrowed money secured by a lien upon a principal property; enter into sale and lease-back transactions with respect to a principal property; and consolidate with or merge into, or transfer or lease all or substantially all of our assets to, any other party. As of August 2, 2025, we were in compliance with these covenants.
Commercial Paper Program
Under our commercial paper program, we may issue short-term, unsecured commercial paper notes in amounts up to a maximum aggregate face amount of $2.5 billion outstanding at any time, with maturities of up to 397 days from the date of issuance. As of August 2, 2025, we had $548.7 million of outstanding borrowings under the commercial paper program recorded in the Condensed Consolidated Balance Sheet. In August 2025, during our fourth fiscal quarter, we increased the aggregate amount we may issue under our commercial paper program from $2.5 billion to $3.0 billion outstanding at any time. We use the net proceeds of the commercial paper program for general corporate purposes, including without limitation, repayment of indebtedness, stock repurchases, acquisitions, capital expenditures and working capital.
Revolving Credit Facility
The Revolving Credit Agreement provides for a five-year unsecured revolving credit facility in an aggregate principal amount not to exceed $3.0 billion (subject to certain terms and conditions). We may borrow under this revolving credit facility in the future and use the proceeds for repayment of existing indebtedness, stock repurchases, acquisitions, capital expenditures, working capital and other lawful corporate purposes.
The Revolving Credit Agreement contains customary representations and warranties, and affirmative and negative covenants and events of default. The events of default include, among others, nonpayment of principal, interest, fees or other amounts, failure to perform certain covenants, cross-defaults to certain other indebtedness, insolvency or bankruptcy, customary ERISA defaults or the occurrence of a change of control. The negative covenants include limitations on liens and mergers and other fundamental changes, among others. The Revolving Credit Agreement also requires we maintain a ratio of consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA) to consolidated interest charges of no less than 3.00 to 1.00 for any fiscal quarter ending thereafter. As of August 2, 2025, we were in compliance with these covenants.
Stock Repurchase Program
As of August 2, 2025, our Board of Directors had authorized us to repurchase an aggregate of $26.7 billion of our common stock under our common stock repurchase program and $10.3 billion remained available for repurchases under the program. The repurchased shares are held as authorized but unissued shares of common stock. Unless terminated earlier by resolution of our Board of Directors, the repurchase program will expire when we have utilized the entire amount authorized for repurchases of shares under the program. Future repurchases of common stock will be dependent upon our financial position, results of operations, outlook, liquidity and other factors we deem relevant.
Capital Expenditures
Net additions to property, plant and equipment were $318.4 million in the first nine months of fiscal 2025. We expect capital expenditures for fiscal 2025 to be between approximately 4% and 6% of fiscal 2025 revenue as spending returns to our long-term operating model. These capital expenditures will be funded with a combination of cash on hand and cash expected to be generated from future operations, together with existing and anticipated available short- and long-term financing.
Dividends
On August 19, 2025, our Board of Directors declared a cash dividend of $0.99 per outstanding share of common stock. The dividend will be paid on September 16, 2025 to all shareholders of record at the close of business on September 2, 2025 and is expected to total approximately $487.0 million. We currently expect quarterly dividends to continue in future periods. The declaration of any future quarterly dividends, or a future increase in the quarterly dividend amount, will be at the discretion of the Board of Directors and will be dependent upon our financial position, results of operations, outlook, liquidity and other factors deemed relevant by the Board of Directors.
Contractual Obligations
In the third quarter of fiscal 2025, we issued $850.0 million aggregate principal amount of 4.250% senior unsecured notes due June 15, 2028 (2028 Notes) and $650.0 million aggregate principal amount of 4.500% senior unsecured notes due June 15, 2030 (2030 Notes). The 2028 Notes and the 2030 Notes have semi-annual fixed interest payments due on June 15 and December 15 of each year, commencing December 15, 2025. For additional information, see Note 10, Debt, in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.
New Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board that are adopted by us as of the specified effective date. Unless otherwise discussed, management believes that the impact of recently issued standards will not have a material impact on our future financial condition, results of operations, and disclosures. See Note 12, New Accounting Pronouncements,in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for a description of recently issued and adopted accounting pronouncements, including the dates of adoption and impact on our historical financial condition, results of operations, and disclosures.
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