Analog Devices Beats On Q2 As Inventory Rationalization Takes Effect, CEO Predicts Cyclical Recovery And Growth In AI Investments

Analog Devices, Inc. ADI stock traded higher Wednesday after it reported fiscal second-quarter 2024 results.

The company’s revenue declined 34% year-on-year to $2.16 billion, beating the analyst consensus estimate of $2.11 billion. Adjusted EPS of $1.40 beat the analyst consensus estimate of $1.26.

Analog Devices’ Industrial revenue declined by 44% Y/Y to $1.01 billion. Automotive revenue decreased 10% Y/Y to $658.2 million.

Communications revenue declined by 45% to $240.8 million, and Consumer revenue decreased by 9% to $245.2 million.

The adjusted gross margin declined by 700 bps to 66.7% as lower revenue weighed on the profits. The adjusted operating margin fell by 1,220 bps to 39.0%.

Analog Devices held $2.36 billion in cash and equivalents as of May 4, generating $807.9 million in operating cash flow.

Vincent Roche, CEO and Chair, said, “We believe inventory rationalization across our broad customer base is stabilizing, clearing a path for us to return to sequential growth in the third quarter. This, coupled with improving new orders, gives us optimism that we are at the beginning of a cyclical recovery.”

Roche continued, “The continued proliferation of the Intelligent Edge presents ADI with numerous concurrent secular growth vectors. AI, where we have been increasing our investments, is expected to accelerate these trends as it increasingly extends from centralized applications in data centers to a myriad of applications at the physical edge.”

Outlook: Analog Devices expects third-quarter revenue of $2.27 billion, +/- $100 million, versus the consensus of $2.16 billion. The company projects adjusted EPS of $1.50, +/-$0.10, against the consensus of $1.34.

Price Action: ADI shares traded higher by 6.4% at $230.50 at the last check Wednesday.

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