Analog Devices (ADI) Q2 FY26 earnings call: guidance and Q&A

Are customers worried about supply and giving you more visibility into build plans?

Vince described a generally calm environment with some concern around semiconductor supply choke points (memory), most affecting consumer customers. Lead times are in good shape and the demand book is increasing; ADI has more than doubled internal capacity versus pre-COVID plus added external optionality, giving room to absorb upside while maintaining service. The main concern is the steepness of the industry demand ramp into 2027.

“There is concern that at the steepness of the demand ramp across the industry and what that will mean, say, going into '27. But we have a lot of flexibility and resiliency built into our particular supply chain.”

asked by Tore Svanberg · answered by Vincent Roche

What pricing is assumed in the outlook, how sustainable are price increases, and can internal-capacity peers take share?

Vince said ADI raised prices this year mainly to absorb input-cost inflation and will continue offsetting costs as needed. Strategically ADI has the industry's highest ASP (4-5x the average), capturing more value with each new generation; pricing is very sticky given long product life cycles and near-zero competitive substitution after initial design-in. Rich added the tactical pricing came through as expected — Q2 upside above the midpoint was volume, not incremental price — and full-year pricing actions add a couple of points to FY26 growth.

“everything that was above the midpoint of our guide was actually due to the volume, not incremental price.”

asked by Vivek Arya · answered by Vincent Roche

How are optical and power trending within data center and how should growth trend going forward?

Rich said the 90%+ data-center growth was fueled pretty much equally by similar growth rates across both power and optical portfolios, both trending well with strong orders. Given the momentum, ADI expects data center to keep increasing and to be its fastest-growing area sequentially into the next quarter.

“that is being fueled pretty much equally by similar growth rates across both the power and optical portfolios.”

asked by Joe Moore · answered by Richard Puccio

What is implied for fiscal Q3 gross margin across pricing, mix and utilization?

Rich guided ~50 bps gross-margin decline in Q3, largely from the absence of the one-time channel-repricing benefit that boosted Q2. Mix is expected to be a slight tailwind while utilization is roughly neutral, and he cautioned there is limited future utilization-driven upside given how the factories are already running.

“we don't see a ton of future upside on gross margin from utilization given where we're running the factories today.”

asked by Joshua Buchalter · answered by Richard Puccio

How are segments tracking into the July quarter and the back half of the calendar year?

Rich recapped Q2 (industrial up 20% as expected, upside in auto and data center, resilient consumer) and guided Q3 to above-seasonal growth: industrial and auto mid-to-high single digits sequentially, communications the fastest grower up low-to-mid teens, consumer down single digits, on flat channel inventory weeks. He reminded that Q4 is seasonally up low single digits.

“what we expect to see in Q3 is continued above seasonal growth across industrial, automotive and communications.”

asked by Matthew Prisco · answered by Richard Puccio

Are gross margins near a local peak given maxed utilization, and is data center accretive to mix?

Rich agreed that near-term the guided gross margin is the right way to think about it, with a more significant favorable mix shift the main potential upside. He confirmed the communications business, which includes data center, runs above the corporate-average gross margin.

“the comms business, which includes that data center chunk is an above corporate average business for us.”

asked by Stacy Rasgon · answered by Richard Puccio

Given ADI's Linear/Maxim/Volterra heritage in power, why acquire Empower instead of building internally?

Vince said the power space is highly dynamic and Empower fills a specific portfolio gap where time is of the essence. Its unique IP — integrated voltage regulator and silicon-capacitor technology — are critical building blocks for vertical power delivery closer to the XPU/GPU/CPU core, letting ADI solve customer power-density problems on time and capture significant new TAM.

“Empower gets us further up the the value chain more quickly to solve more problems more completely for our customers.”

asked by William Stein · answered by Vincent Roche

Is there current revenue, design wins in the pipeline, and when can the technology be integrated?

Rich said if Empower stays on trajectory there will be some revenue upon closing in the back half of the year, but it will not be material. Vince described it as a small, roughly pre-revenue amount today with a demand surge expected in 2027; many design-ins are already in train, and ADI's manufacturing and go-to-market scale should accelerate the ramp to production.

“'27 is when we expect to start seeing the surge in demand. There is a lot of design-ins in train at this point in time.”

asked by Christopher Caso · answered by Vincent Roche

Is auto strength restocking-driven, and what are the specific growth drivers?

Rich said auto has compounded double digits for 10-plus years on content and share gains (GMSL, functionally safe power, A2B) rather than unit growth. Expected second-half strength arrived early, led by a material China pickup late in the quarter, with record Europe and Japan; China still declined QoQ. BMS revenue grew double digits YoY for the first time in two years, with L3 ADAS expected in some China vehicles by year-end. Record bookings and positive book-to-bill support the outlook, and management is not seeing inventory build-up — auto customers appear fairly lean.

“on the inventory buildup question, we're not seeing that yet... we feel like automotive customers are fairly lean on inventory”

asked by Thomas O'Malley · answered by Richard Puccio

How much capacity do you have internally and externally, and how will you grow it while growing 30%+?

Rich reiterated ADI has doubled internal capacity and continues to expand partnerships, with capacity comfortable to support up to the $20B 2030 vision; it keeps evaluating efficiency gains and additional internal capacity, and has not been unable to secure needed external capacity despite tightness in some nodes. Vince added ADI has built geographic optionality externally for both capacity and resiliency, leaving upside on the current revenue base.

“we are comfortable that we have the capacity to support up to the $20 billion that we've been talking about as part of our 2030 vision.”

asked by Tore Svanberg · answered by Richard Puccio