ADI · Q2 2025 Earnings
BullishAnalog Devices
Reported May 22, 2025
30-second summary
Revenue grew 22% YoY to $2.64B with industrial up 17%, auto up 24%, consumer up 30%, and comms up 32% — the first quarter in this cycle where every segment posted double-digit YoY growth. Management called the 2024 bottom explicitly and guided Q3 to $2.75B (±$100M) with operating margin expanding to 41.5%. The catch: roughly high-single-digit points of Q2 auto growth came from late-March tariff pull-ins, and management expects auto to decline sequentially in Q3 as that normalizes.
Headline numbers
EPS
Q2 FY2025
$1.85
Revenue
Q2 FY2025
$2.64B
+22.0% YoY
Gross margin
Q2 FY2025
61.0%
Free cash flow
Q2 FY2025
$0.73B
Operating margin
Q2 FY2025
25.7%
Key financials
Q2 FY2025| Metric | Q2 FY2025 | YoY |
|---|---|---|
| Revenue | $2.64B | +22.0% |
| EPS | $1.85 | — |
| Gross margin | 61.0% | — |
| Operating margin | 25.7% | — |
| Free cash flow | $0.73B | — |
Guidance
Prior quarter data unavailable — comparison not possible.
Segment performance
Q2 FY2025| Segment | Q2 FY2025 | YoY |
|---|---|---|
| Industrial | $1.158B | +17.0% |
| Automotive | $0.85B | +24.0% |
| Consumer | $0.318B | +30.0% |
| Communications | $0.315B | +32.0% |
Capacity & utilization
Q2 FY2025| Segment | Q2 FY2025 |
|---|---|
| Trailing Twelve Month Revenue | $9.82B |
| Bookings Acceleration | All end markets & regions |
| Sequential Backlog Growth | Continued |
Profitability
Q2 FY2025| Segment | Q2 FY2025 |
|---|---|
| Adjusted Gross Margin | 69.4% |
| Adjusted Operating Margin | 41.2% |
| Free Cash Flow Margin | 28% |
| Operating Cash Flow Margin | 31% |
Other KPIs
Q2 FY2025| Segment | Q2 FY2025 |
|---|---|
| Cash Returned to Shareholders | $0.74B |
Management tone
Three discrete shifts stand out, all pointing the same direction.
From "macro uncertain" to "we are in a cyclical upturn." ADI has historically been measured about cycle-calling, preferring to let bookings speak. This quarter Vincent Roche said outright that revenues "bottomed in 2024" and used the phrase "ever more confident" — explicitly comparative language signaling escalating conviction. The company is naming the inflection rather than letting analysts infer it.
From tariffs as constraint to tariffs as transient noise. Last quarter's framing positioned tariffs as a material overhang on customer behavior. This quarter management acknowledged the late-March pull-in spike but said "this was short-lived and orders have returned to more normalized levels." The shift matters because it lets management point to underlying industrial book-to-bill above 1.0 as clean demand signal rather than tariff-distorted noise.
From defensive capex to record investment. "We invested substantial CapEx over recent years to enhance and scale our hybrid manufacturing model… we're investing at record levels to further strengthen and extend our world-class technology stack." Internal capacity is now more than 2x pre-pandemic, with 180nm-and-above nodes (the majority of ADI revenue) brought in-house — a structural change in cost and geopolitical posture, not a cyclical reaction.
From "broad-based recovery still uncertain" to all four segments growing double digits YoY. Communications +32% and consumer +30% are no longer the laggards they were through 2024; industrial breadth (book-to-bill >1.0 across every subsector) closes the case that this is segment-wide rather than carried by one or two end markets.
Recurring themes management leaned on this quarter:
Risks management surfaced:
Q&A highlights
Joseph Moore · Morgan Stanley
What is driving the 16% sequential growth in automotive relative to peers, and is there tariff pull-forward activity or mitigation strategies?
Q2 automotive growth was aided by pull-in activity estimated in the high single-digit range, driven by ~25% tariff concerns. Americas and Europe saw ~20% sequential increases. Company expects Q3 decline due to normalized pull-ins, but seasonally flat when adjusted for pull-in impact. China showed record growth with less noticeable pull-in activity.
Vivek Arya · Bank of America Securities
How much is the company undershipping demand currently, and over how many quarters until undershipment normalizes? Specifically for industrial side?
Company is currently shipping 10+ percent below end consumption. Q3 guidance of 10% industrial growth at midpoint will align shipping with end demand. Company has kept channel inventory very lean and will begin shipping to end demand in Q3 while balancing channel inventory.
Harlan Sir · JP Morgan
Did industrial automation show further sequential growth in April following January growth, and how are tariff and trade uncertainty affecting industrial automation order trends especially from China?
Continued automation growth with book-to-bill above 1.0; positive book-to-bill above 1.0 across all industrial subsectors. Strong geographic bookings momentum. Tariff uncertainty causing customer circumspection and delayed build-outs, but no question about automation importance. Expects CapEx cycle from localization trend over coming years.
Stacy Rasgon · Bernstein Research
What are expectations for SAR and auto builds in H2 given tariff uncertainty, and how to differentiate industrial cyclical recovery from pull-forward driven by tariff uncertainty?
Expecting SAR down in back half but offset by continued content increase. Auto pull-ins were time-specific around late March tariff announcement and have normalized; bookings across other end markets showed no anomalies. Industrial customers show steady demand with no supply anxiety; convergence between shipping and sell-through indicates normal pattern, not pull-forward.
Blaine Curtis · Jefferies
What are the plans for outsource versus insource manufacturing, particularly given tariff uncertainty and preference for geographic diversity?
Internal capacity now >2x pre-pandemic levels invested through CapEx. Company secured internal production for 180nm+ nodes (majority of ADI revenue) where external investment was historically absent, critical for industrial and automotive. Maintains flexible swing between internal and external; partners on advanced nodes below 90nm including 5nm designs.
What to watch into next quarter
Auto Q3 print vs. "seasonally flat ex-pull-in" framing. Management implied Q3 auto declines sequentially but would be flat without the late-March tariff pull-in. A decline materially steeper than high-single-digits would suggest the pull-in was larger than disclosed and Q2 auto strength was more borrowed than organic.
Industrial sequential growth ≥10% in Q3. ADI explicitly tied the Q3 guide to convergence with end-demand at this level. A miss here would mean either end demand is softer than the book-to-bill suggests, or the undershipping gap is being held wider on purpose — both invalidate the "cyclical upturn" frame.
Wireless within communications. Comms grew 32% YoY in aggregate but wireless was called out as still declining YoY. Watch whether wireless inflects positive in Q3 or whether the comms strength remains wireline-only.
Adj. operating margin holding ≥41.5%. Q3 guide implies +30bps QoQ on revenue +4% QoQ — the operating leverage story. Margin missing the low end (40.5%) would signal that variable comp accruals or mix are eating the leverage faster than expected.
Whether management updates a full-year revenue or EPS range in Q3. ADI guided Q3 only this quarter; reinstating an FY guide would be a confidence escalation, while continuing to guide one quarter forward through Q3 implies management still wants optionality on the tariff/macro path.
Sources
- ADI Q2 FY2025 press release / earnings exhibit, filed with the SEC: https://www.sec.gov/Archives/edgar/data/6281/000000628125000124/adi2q25exhibit991earnings.htm
- ADI Q2 FY2025 earnings call commentary (quoted from extraction inputs).
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