tapebrief
ADI · Q4 2025

ADI · Q1 2026 Earnings

Bullish

Analog Devices

Reported February 18, 2026

30-second summary

Revenue grew 30% YoY to $3.16B and beat the prior guide midpoint by $60M, with industrial up 38% YoY (the second consecutive acceleration), comms up 63% YoY on data center, and adj. operating margin expanding 200bps above guide to 45.5%. Q2 guide of $3.5B (±$100M) is an explicit "new high watermark" with adj. operating margin guided to 47.5% (+200bps QoQ) — and management quantified data center at ~20% of total ADI (~$2B run rate) for the first time, reframing what was a comms sub-line as a company-level growth engine.

Headline numbers

EPS

Q1 FY2026

$2.46

Revenue

Q1 FY2026

$3.16B

+30.0% YoY

Gross margin

Q1 FY2026

64.7%

Free cash flow

Q1 FY2026

$1.26B

Operating margin

Q1 FY2026

31.5%

Key financials

Q1 FY2026
MetricQ1 FY2026YoYQ4 FY2025QoQ
Revenue$3.16B+30.0%$3.08B+2.7%
EPS$2.46—$2.26+8.8%
Gross margin64.7%—63.1%+160bps
Operating margin31.5%—30.7%+80bps
Free cash flow$1.26B—$1.49B-15.3%

Guidance

Guidance is issued for both next quarter and the full year. Both may appear below.

Actuals vs prior guidance

MetricPeriodPrior guideActualΔResult
RevenueQ1 FY2026$3.1B +/- $100M$3.16B+$60M above midpointBeat
Adjusted EPSQ1 FY2026$2.29 +/- $0.10$2.46+$0.17 above midpointBeat
Reported Operating MarginQ1 FY202631.0% +/- 130 bps31.5%+50 bps above midpointBeat
Adjusted Operating MarginQ1 FY202643.5% +/- 100 bps45.5%+200 bps above midpointBeat
Reported EPSQ1 FY2026$1.60 +/- $0.10$1.69+$0.09 above midpointBeat
Tax RateQ1 FY202612% - 14%Implied ~12-13% based on reported resultsIn-lineMet

New guidance

MetricPeriodGuideYoY
RevenueQ2 FY2026$3.5B +/- $100M+32-35% YoY
Adjusted EPSQ2 FY2026$2.88 +/- $0.15—
Reported Operating MarginQ2 FY202636.4% +/- 150 bps—
Adjusted Operating MarginQ2 FY202647.5% +/- 100 bps—
Reported EPSQ2 FY2026$2.19 +/- $0.15—

Segment performance

Q1 FY2026
SegmentQ1 FY2026YoY
Industrial$1.489B+38.0%
Automotive$0.794B+8.0%
Communications$0.477B+63.0%
Consumer$0.4B+27.0%
Industrial Segment Growth38% YoY—
Communications Segment Growth63% YoY—

Capacity & utilization

Q1 FY2026
SegmentQ1 FY2026
Data Center BookingsRecord orders

Profitability

Q1 FY2026
SegmentQ1 FY2026
Adjusted Gross Margin71.2%
Adjusted Operating Margin45.5%
Free Cash Flow Margin40%
Operating Cash Flow Margin (TTM)43%

Other KPIs

Q1 FY2026
SegmentQ1 FY2026
Dividend per Share (Quarterly)$1.10

Management tone

Q4-24 "revenues bottomed" → Q1-25 "cyclical upturn" → Q2-25 "ever more confident" → Q3-25 "tremendous growth opportunities, humanoid" → Q4-25 "well positioned for further profitable growth" → Q1-26 "banner year, never been more optimistic"

From AI as a vertical to AI as the operating model. A year ago AI was a sub-line within communications; two quarters ago it was quantified at $1B data center + $800M ATE as proof of breadth; this quarter it became the headline number for the whole company. "We've never been more optimistic about our future at the intelligent edge." The disclosure of data center at ~20% of total ADI is not new growth — it's the same data points consolidated into a single equity-narrative-defining metric. Management is now selling ADI as an AI infrastructure name, not as an analog semis name that has AI exposure.

From power management as content to power management as constraint relief. For four consecutive quarters power has been mentioned as a content driver inside data center. This quarter Roche reframed it entirely: "As power becomes a strategic constraint in AI data centers, our suite of high performance technologies and system level approach position us well for the next wave of infrastructure growth." The framing has flipped from "we have content here" to "the customer's bottleneck is what we solve." That's the difference between a commodity supplier narrative and a system-level-IP narrative, and it's deliberately positioned to support pricing.

From optical as connectivity to optical as a control system. Last quarter optical was lumped into "800G to 1.6T transition." This quarter: "performance is no longer defined solely by the optical modem system. It increasingly depends on the precision control, monitoring, and power solutions, the nervous system, if you will, around the laser, DSP, and photodiode signal chain." The "nervous system" metaphor is doing strategic work — it positions ADI's optical content as integrated and defensible rather than as a discrete BoM line that can be designed out.

From conservative FY framing to explicit "banner year" call. Four quarters of beats culminated in: "fiscal 26 has the potential to be a banner year for ADI, barring unforeseen material changes in the macroeconomic and geopolitical backdrop." ADI has still not issued a formal FY26 revenue or EPS range — preserving optionality — but the qualitative escalation is unambiguous. The hedging clause is in the same sentence as the upgrade, but the structure puts "banner year" first and the caveat as a tail clause, the inverse of FY24 phrasing.

From ATE as cyclical to ATE as durable partnership. "We've earned a durable role as the leading edge technology partner in the fast evolving ATE market... content per tester stretches into the tens of thousands of dollars." ATE grew 40% in FY25 and "further accelerated" in Q1 (>30% sequentially per Q&A). The reframing of ATE from cyclical test equipment to leading-edge strategic partnership is the same playbook management ran on aerospace/defense last quarter — turning a cyclical line into a structural one.

Recurring themes management leaned on this quarter:

AI infrastructure monetization acceleration (ATE, data center power, optical)Power management as strategic differentiator and system-level constraintMargin expansion via favorable mix and utilization (240 bps YoY gross margin, 500 bps YoY operating margin)Diversified resilience across industrial, automotive, communications, consumerCapital allocation discipline: record innovation investment + 100% FCF return target + 11% dividend increaseTechnology leadership positioning for next-wave infrastructure (48V/54V vertical power, optical circuit switches)

Risks management surfaced:

Macroeconomic uncertainty ('barring unforeseen material changes in the macroeconomic and geopolitical backdrop')Geopolitical backdrop volatility (same phrase)Inventory management complexity (building 'die bank and finish good buffers' while 'strategically leaner channel position')Power as emerging constraint in data centers (implicit: managing supply/delivery)Cyclical automotive exposure (automotive down 8% sequentially despite +8% YoY)

Q&A highlights

Vivek Arya · Bank of America Securities

Request for quantification of data center exposure across ATE, optical, and power segments, including historical growth and forward visibility, and discussion of market share sustainability in the competitive power segment.

Management disclosed data center represents ~20% of total ADI (~$2B run rate), with ~40% in ATE and the remainder balanced between power and optical. All three areas expected to grow double digits over several years. Management emphasized ADI's differentiation through solving increasingly difficult power system problems at the system level using expertise in thermodynamics, electromagnetics, and mixed-signal technology.

Data center is ~20% of total ADI revenueData center run rate over $2B40% of data center business is ATEPower and optical balanced within data center

Ross Seymour · Deutsche Bank

Request to decompose the 20%+ industrial sequential growth guidance into components attributable to ASPs/pricing, secular growth, and cyclical recovery.

Management indicated pricing contributes to the growth but emphasized that book-to-bill excluding pricing impact was well above one, indicating strong underlying demand. Breakdown: ATE and aerospace/defense (~1/3 of industrial) driven by new highs and clear end-demand drivers (secular); other 2/3 still 20% below peak (cyclical recovery opportunity). Noted secular tailwinds in automation, energy, and healthcare; attributed success to multi-year innovation investments.

Industrial growth guidance of 20%+ sequentiallyBook-to-bill in industrial well above one (excluding pricing)ATE and aerospace/defense represent ~1/3 of industrialATE growing >30% sequentially

Chris Kesa · Wolf Research

Clarification on pricing dynamics, specifically what portion of the 11% sequential growth is pricing-driven, expectations for blended pricing throughout the year, and whether pricing reflects value delivered or inflationary pass-through.

Management characterized pricing as dynamic adjustment to reflect solution value and innovation premium, with recent increases as practical response to persistent inflation. Specified that ~1/3 of Q2 sequential revenue growth (~11% → 7% excluding price) is price-driven; ~50% of channel repricing (one-time effect not repeating in Q3); expect ~50 bps incremental price growth in Q3 and Q4 each. Direct customer negotiations largely complete for Q2 effectiveness.

~1/3 of Q2 midpoint sequential growth (~11%) attributable to priceExcluding price: sequential growth more like 7% vs 11% guidance~50% of price uplift is channel inventory repricing (non-repeating)~50 bps incremental price growth expected in each of Q3 and Q4

Jim Schneider · Goldman Sachs

Inquiry into sustainability of above-seasonal industrial performance in coming quarters and whether there are signs of OEM customer restocking activity.

Management guided to 11% sequential Q2 growth (well above historical 4-5% seasonality), with industrial up 20% sequentially and 50% year-over-year. Explicitly stated no evidence whatsoever of restocking at current stage of cycle. Attributed strength to cyclical recovery and company strength in ATE and aerospace/defense.

Q2 guidance: 11% sequential growth (vs. 4-5% normal seasonality)Industrial: 20% sequential, 50% year-over-year growthComms: high single-digit sequential, 60% year-over-yearAuto: flat to down sequentially

Stacy Raskin · Bernstein Research

Request for granular explanation of gross margin and OpEx drivers embedded in forward guidance, including impacts of mix, utilization, variable compensation, and the one-time inventory repricing effect.

Q1 gross margin 71.2% beat driven by better mix, stronger utilization, and discrete items. Q2 assumes 100 bps expansion (150 bps normalized excluding discrete items), driven by favorable mix and 50 bps from one-time channel inventory repricing (non-recurring in Q3). OpEx growing mid-single digits in Q2 but declining as % of revenue; expects 200 bps sequential operating margin improvement to 47.5% midpoint. Full year: OpEx growth to trail revenue growth by ~half.

Q1 gross margin: 71.2%Q2 gross margin expansion: 100 bps (150 bps normalized)50 bps of Q2 margin from one-time channel repricingQ2 OpEx growth: mid-single digits

Answers to last quarter's watch list

Q1 auto print versus the "down mid-single digits sequentially" framing. Auto came in at $794M, down 6.8% sequentially from $852M — just outside the "mid-single-digits" guidance window but well above the $720M floor that would have validated a structural pullback, and well above the $800M threshold tied to the seasonal call. The pull-in unwind happened but milder than feared, and YoY is still +8%.
Continue monitoring
Industrial Q1 growth at "mid-single digits above seasonal." Industrial revenue of $1.489B vs. Q4's $1.427B is +4.3% QoQ — at the low end of "mid-single-digits above seasonal" given Q1 is normally a down quarter for industrial, and above the $1.45B confirmation threshold. YoY accelerated to +38% from +34%. ATE growing >30% sequentially and aerospace/defense at new highs were the explicit drivers. The breadth is real.
Resolved positively
Comms growth concentration vs. diversification. Comms grew 63% YoY to $477M, with management quantifying data center at ~$2B run rate company-wide (~20% of total ADI). The disclosure confirms data center is the carrier — wireless inflection was not called out as a separate driver, and management's framing positions data center / ATE / power / optical as the comms growth engine. The segment risk profile is now explicitly concentrated, not diversified — though management argues the underlying exposures within data center (ATE + optical + power) are themselves diversified. Status: Resolved negatively (on the diversification question; positively on the growth question)
Whether the FY26 framework arrives on the Q1 print. No. Management still declined to issue an FY26 revenue or EPS range, but escalated the qualitative framing to "banner year potential." This is the fourth consecutive quarter without an FY range despite beating every metric — at this point the pattern is intentional optionality preservation, not data-driven hedging.
Resolved negatively
Data center run-rate trajectory toward what management implied is double-digit multi-year growth. Management disclosed data center at ~$2B run rate, up from the $1B run rate disclosed in Q4 — a doubling in two quarters, though some of the gap is reclassification of ATE-into-data-center that wasn't previously consolidated. Either way, the AI infrastructure narrative is validated and then some. Q2 comms guide implies +60% YoY, with data center the carrier.
Resolved positively
Tax rate guide drift. Q2 tax rate guide moved back to 11–13%, reversing the 100bps upward drift seen in Q1. The drift was transient.
Resolved positively

What to watch into next quarter

Q3 sequential growth ex the one-time channel repricing. Management disclosed that ~50% of Q2's pricing lift is a one-time channel repricing not repeating in Q3. With only ~50bps of incremental pricing expected in Q3, a Q3 revenue guide below ~$3.55B (roughly flat-to-up low-single-digit QoQ on the $3.5B Q2 base) would signal underlying organic momentum is decelerating once the price tailwind normalizes. A guide at or above $3.6B would prove the cycle still has organic legs ex-pricing.

Whether adj. operating margin sustains above 47% in Q3. Q2 guides 47.5%, with management framing it as benefiting from one-time channel repricing margin. A Q3 guide at or above 47% would confirm the new margin ceiling is structural; a guide at 45–46% would mean the Q2 print was mix-and-pricing-flattered.

Auto stabilization vs. continued decline. Auto at $794M (-6.8% QoQ, +8% YoY) is back to roughly Q2 FY25 sequential levels. Q2 guide is flat-to-down. A Q3 auto print below $780M would mean the +8% YoY is fading and the auto segment is rolling over; a print at $810M+ would confirm the auto trough is behind.

Data center disclosure cadence. Management broke out data center at ~20% of total ADI for the first time. Whether they disclose a Q2 update (would imply >$550M comms / $2.2B+ run rate at +60% comms growth) is itself a tell on management's confidence in the durability of the AI infrastructure narrative. Continued quarterly disclosure = confidence; reverting to qualitative commentary = not.

The FY26 framework on the Q2 print. Five consecutive quarters of beats without an FY range is the upper bound of credible optionality preservation. If management still won't commit to FY26 numbers after Q2, the implied message is that the trailing four-quarter run-rate is not the trough — they want headroom to upgrade further mid-year.

Pricing fade trajectory. Management quantified incremental price growth at ~50bps in each of Q3 and Q4. If the Q3 print shows price contribution materially above that — or if the Q4 guide implies further price escalation — the narrative shifts from "value capture on new products" to "inflationary pass-through with limited durability."

Sources

  1. ADI Q1 FY2026 press release / earnings exhibit, filed with the SEC: https://www.sec.gov/Archives/edgar/data/6281/000000628126000015/adi1q26exhibit991earnings.htm
  2. ADI Q1 FY2026 earnings call commentary (quoted from extraction inputs).
  3. Tapebrief ADI Q4-2025, Q3-2025, and Q2-2025 briefs (for cross-quarter tone and watch-list comparison).

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