Analog Devices Inc (NASDAQ:ADI) stock fell 1.49% (As on May 23, 11:19:49 AM UTC-4, Source: Google Finance) though the company forecast third-quarter revenue and profit above Wall Street expectations, betting on upbeat demand for its chips used in the automotive and industrial sectors. The analog chip industry is seeing a gradual recovery in demand from key sectors such as automotive and industrial demand, while demand for AI-upgraded devices has also boosted orders from the consumer electronics segment. Revenue in the communications segment rose 32% year on year in the second quarter, while the consumer division delivered a 30% increase. Further, ADI’s automotive segment saw a 16% sequential growth and 24% year-over-year increase, driven by strong demand for connectivity and power solutions, particularly in China. The industrial segment, representing 44% of revenue, showed an 8% sequential and 17% year-over-year growth, with broad recovery across subsectors. The company is cautious about the potential impact of tariffs on future demand, particularly in the automotive sector. The company expects growth to continue in Q3 across all industrial sub-sectors, while tariffs create uncertainty, automation remains crucial, and they anticipate a CapEx cycle as localization takes root.
Moreover, Gross margin improved by 630 basis points year on year to 61% during the quarter, while operating margin soared 780 basis points to about 25.7%. Second quarter bookings accelerated across all end markets and all regions, resulting in continued sequential backlog growth. Operating cash flow of $3.9 billion and free cash flow of $3.3 billion on a trailing twelve-month basis or 39% and 34% of revenue, respectively. ADI’s investments in expanding manufacturing capacity and deepening partnerships with foundries have enhanced supply chain resilience and customer supply optionality.
ADI in the second quarter of FY25 has reported the adjusted earnings per share of $1.85, beating the analysts’ estimates for the adjusted earnings per share of $1.40, according to the FactSet-polled consensus. The company had reported the adjusted revenue growth of 22 percent to $2.64 billion in the second quarter of FY25, beating the analysts’ estimates for revenue of $2.51 billion.
The Wilmington, Massachusetts-based chipmaker projected third-quarter revenue of $2.75 billion, plus or minus $100 million, above estimates of $2.62 billion, according to data compiled by LSEG. It also forecast adjusted per-share earnings of $1.92, plus or minus 10 cents, which was above Wall Street estimates of $1.83 per share. For the third quarter of fiscal 2025, the company expects adjusted EPS to be $1.92, +/-$0.10