Analog Devices (ADI) earnings, revenue top Q3 expectations

Analog Devices (NASDAQ: ADI) shares rallied at the open on Wednesday after reporting better-than-expected third-quarter earnings and revenue, along with an optimistic outlook for the fourth quarter.

At the time of writing, ADI is up 1.7% from Tuesday's close.

The semiconductor company posted adjusted earnings per share of $1.58 for the quarter ended August 3, beating analyst estimates of $1.51. Revenue came in at $2.31 billion, surpassing the consensus forecast of $2.27 billion but declining 25% YoY.

Despite the YoY revenue drop, Analog Devices' CEO and Chair Vincent Roche expressed confidence in the company's positioning amid a nascent recovery in the business cycle.

"Our high-performance analog solutions portfolio positions us well to intersect the strong underlying stream of concurrent secular trends," Roche stated.

For the fourth quarter, Analog Devices forecasts revenue between $2.3 billion and $2.5 billion, with the midpoint of $2.4 billion slightly above analyst expectations of $2.37 billion. The company projects adjusted EPS in the range of $1.53 to $1.73, compared to the consensus estimate of $1.62.

CFO Richard Puccio noted improved customer inventory levels and order momentum across most markets, signaling sequential growth in the fourth quarter.

However, he cautioned that "economic and geopolitical uncertainty continues to limit the pace of the recovery."

The company's gross margin percentage for Q3 was 56.7%, down from 63.8% in the same quarter last year. Analog Devices returned $574 million to shareholders through dividends and stock repurchases during the quarter.

Following the report, analysts at Truist said the report reflects a cyclical recovery. The firm maintained a Buy rating and $275 price target on the stock.

Meanwhile, KeyBanc Capital markets wrote: "ADI posted strong F3Q (Jul) results and higher F4Q (Oct) guidance. F3Q results reflect strength in Consumer, stabilizing Industrial, and improving Comms."

By Sam Boughedda

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