tapebrief
ADI · Q1 2026

ADI · Q2 2026 Earnings

Bullish

Analog Devices

Reported May 20, 2026

30-second summary

Revenue grew 37% YoY to $3.62B in Q2, beating the prior guide midpoint by $120M, with industrial up 56% YoY to $1.80B, communications up 79% YoY to $0.55B, and adj. operating margin reaching 49.0% (+150bps above guided midpoint). The Q3 guide of $3.9B (±$100M) implies +32–39% YoY against a $2.88B base — well above the $3.6B threshold flagged last quarter as the line between organic momentum and post-pricing deceleration. Management's closing language ("our confidence in our future has never been greater") is unusually unqualified for ADI.

Headline numbers

EPS

Q2 FY2026

$3.09

Revenue

Q2 FY2026

$3.62B

+37.0% YoY

Gross margin

Q2 FY2026

67.3%

Free cash flow

Q2 FY2026

$0.73B

Operating margin

Q2 FY2026

38.1%

Key financials

Q2 FY2026
MetricQ2 FY2026Q2 FY2025YoYQ1 FY2026QoQ
Revenue$3.62B$2.64B+37.1%$3.16B+14.6%
EPS$3.09$1.85+67.0%$2.46+25.6%
Gross margin67.3%61.0%+630bps64.7%+260bps
Operating margin38.1%25.7%+1240bps31.5%+660bps
Free cash flow$0.73B$0.73B+0.1%$1.26B-42.0%

Guidance

Strong Q2 beat across revenue and EPS, with robust Q3 guidance signaling accelerating growth; management confidence at historic highs.

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

Actuals vs prior guidance

MetricPeriodPrior guideActualΔResult
RevenueQ2 FY2026$3.5B +/- $100M$3.62B+$0.12B above guideBeat
Adjusted EPSQ2 FY2026$2.88 +/- $0.15$3.09+$0.21 above guideBeat
Reported EPSQ2 FY2026$2.19 +/- $0.15$2.40+$0.21 above guideBeat
Reported Operating MarginQ2 FY202636.4% +/- 150 bps38.1%+170 bps above guideBeat
Adjusted Operating MarginQ2 FY202647.5% +/- 100 bps49.0%+150 bps above guideBeat

New guidance

MetricPeriodGuideYoY
RevenueQ3 FY2026$3.9B +/- $100M+35-39% YoY
Adjusted EPSQ3 FY2026$3.30 +/- $0.15—
Reported EPSQ3 FY2026$2.60 +/- $0.15—
Reported Operating MarginQ3 FY202639.0% +/- 150 bps—
Adjusted Operating MarginQ3 FY202649.0% +/- 100 bps—
Tax RateQ3 FY202612% - 14%—

Segment performance

Q2 FY2026
SegmentQ2 FY2026Q2 FY2025YoY
Industrial$1.8B$1.158B+55.4%
Automotive$0.87B$0.85B+2.4%
Communications$0.55B$0.315B+74.6%
Consumer$0.4B$0.318B+25.8%

Capacity & utilization

Q2 FY2026
SegmentQ2 FY2026Q2 FY2025YoY
Record BookingsAcross Industrial, Automotive, and Communications——

Profitability

Q2 FY2026
SegmentQ2 FY2026Q2 FY2025YoY
Adjusted Gross Margin73.0%69.4%—
Adjusted Operating Margin49.0%41.2%—
Operating Cash Flow (TTM)$5.1B——
Free Cash Flow Margin (TTM)36%——

Other KPIs

Q2 FY2026
SegmentQ2 FY2026Q2 FY2025YoY
Cash Returned to Shareholders (Q2)$1.3B——

Management tone

Customer optimization hangover → AI experiments → Industrial breadth → AI as operating model → Confidence at historic highs

From cycle-call to "confidence has never been greater." A year ago Roche was confirming the cycle bottom; two quarters ago he framed FY26 as "potential to be a banner year"; this quarter he closed with "our confidence in our future has never been greater." The progression is not just rhetorical — it tracks four consecutive quarters of accelerating industrial YoY growth (23 → 34 → 38 → 56%) and three of accelerating comms (40 → 63 → 79%). The superlative language is unusual for ADI, which has historically hedged macro commentary even in strong quarters; that the closing sentence has no qualifier is itself the signal.

From data center as a quantified line item to data center as the comms business. Two quarters ago data center was disclosed as $1B run rate inside comms; last quarter it was reframed as ~$2B at the company level (including ATE-inside-industrial); this quarter management quantified data center at 75% of communications revenue with 90% YoY growth split evenly between power and optical. "Both [power and optical] are continuing to trend very well... management expects this growth to increase and be the fastest-growing sequentially into next quarter." The shift is from "we have AI exposure" to "comms is now an AI infrastructure segment with a small wireline tail" — and the framing of further sequential acceleration into Q3 is the more aggressive forward signal.

From supply chain as constraint to supply chain as moat. Through 2024–2025 supply chain commentary was defensive (utilization, capacity flexibility). This quarter: "Our robust investments over recent years have enhanced the scale and the optionality of our supply chain, enabling ADI to address demand surges and capture upside... form the foundation for our growing criticality to our customers." The reframe — supply agility as the reason customers cannot replace ADI — is the same structural-not-cyclical playbook management ran on ATE last quarter and aerospace/defense the quarter before. ADI is systematically converting cyclical positives into structural narratives.

From industrial breadth as recovery proof to industrial breadth as multi-year runway. Last quarter management cited "more than 20% design pipeline growth" as a forward predictor. This quarter Roche made the durability claim explicit: "these businesses are still well below their prior cycle highs with lean channel inventories. This combination of secular and cyclical positioning, along with strong demand signals, gives us confidence that all of our industrial sectors are poised for continued strong growth in the coming quarters and indeed over the longer term." The "well below prior cycle highs" line is the critical detail — it claims the +56% YoY print is not a peak even within the cyclical component.

From humanoid robotics as a content multiplier to autonomy as the long-term value pipeline. Three quarters ago humanoid robotics was Roche's marquee showcase example (10x content). This quarter the framing has been generalized: "Longer term, humanoids and other advanced robotics modalities are steadily increasing our opportunity pipeline value... automation transitions to autonomy." The single-example pitch has been replaced by a portfolio-of-modalities pitch — management is now selling the autonomy thesis as a multi-product category, not a single hero application.

Recurring themes management leaned on this quarter:

Record demand across all end markets despite macro headwindsIndustrial segment broad-based growth (50% of revenue, up 56% YoY)Data center AI-driven acceleration (90% YoY growth, 75% of communications)Supply chain optionality as competitive moatLong-cycle industrial markets still below prior peaks with lean inventorySecular trends (automation, energy transition, healthcare digitalization) compounding cyclical upswing

Risks management surfaced:

Heightened geopolitical tensionsOngoing macroeconomic challengesDynamic macro and geopolitical environmentRegulatory approval required for Empower Semiconductor acquisitionInnovation cycle acceleration creating complexity for customers

Q&A highlights

Vivek Prabhakar · Bank of America Securities

How is ADI approaching pricing tactically and strategically? What pricing is assumed in Q3 and H2 outlook? How sustainable are pricing moves, and can competitors with internal capacity use this inflationary environment to take share?

ADI has increased prices to absorb inflation and will continue monitoring inflationary effects. The company has 4-5X industry average ASPs across portfolio. Newer products capture more value and pricing is very sticky due to long product lifecycles and near-zero competitive substitution post-design win. Tactical pricing from last quarter came through as expected; pricing actions in 2026 will add a couple points to growth rate.

ASPs 4-5X industry averagePricing actions in 2026 will add couple points to growth rateCompetitive substitution effectively zero post-design winTactical pricing impact played out as expected in Q2

Joe Moore · Morgan Stanley

Can you update on growth trends within optical and power sides of the 90% data center communications growth? How should we think about growth given tuck-in acquisitions expanding TAM on power side?

90% data center growth is being fueled almost equally by similar growth rates across both power and optical portfolios. Both are continuing to trend very well with strong orders and results. Management expects this growth to increase and be the fastest-growing sequentially into next quarter.

Data center is 75% of communications revenue90% growth split roughly equally between power and opticalBoth power and optical expected to be fastest-growing sequentially in next quarterStrong orders and momentum continuing

Tom O'Malley · Barclays

Where is auto strength coming from? Is there customer restocking happening? Are OEMs and Tier 1s moving back to pre-pandemic inventory levels? What specific areas are growth drivers in auto given weaker broader backdrop?

Auto business has compounded double digits 10+ years driven by content and share gains. Growth driven by ADAS (GMSL, Functionally Safe Power, A2B) and next-gen infotainment. BMS grew double digits YoY for first time in 2 years due to EV penetration. China showed material pickup in Q2; all regions up including record Europe/Japan performance. Customers are fairly lean on inventory post-digestion. Record bookings and positive book-to-bill expected to drive mid-high single digit sequential growth in Q3.

Auto compounded double digits for 10+ yearsBMS revenue grew double digits YoY for first time in 2 yearsRecord Europe and Japan automotive performance in Q2China vehicles expected to deploy L3 ADAS by end of year

Joshua Buchalter · TD Cowan

What is implied for gross margins in Q3? Help understand levers across pricing, mix, and utilization given 50bps inventory true-up that won't repeat.

Q2 achieved 73% gross margin driven by better mix and utilization. Q3 expected to decline ~50bps primarily due to absence of one-time channel repricing benefit. Mix likely to provide slight tailwind; utilization expected to be fairly neutral with limited future upside given current factory utilization levels.

Q2 gross margin 73%Q3 expected ~50bps gross margin declineDecline driven by absence of one-time channel repricing benefitMix expected slight tailwind in Q3

Chris Kessel · Wolf Research

For Empower acquisition: Is there current revenue? Are there design wins in pipeline? Timeline for integration of technology into ADI's product line?

Empower currently in post-revenue phase with immaterial revenue upon closing in back half of 2025. Has design-ins in pipeline. Significant revenue growth expected in 2027. Combination of Empower with ADI's manufacturing and go-to-market capabilities will enable faster production ramp. IVR technology expected to drive significant revenue growth in go-forward.

Empower immaterial revenue at closing in back half 2025Design-ins already in pipelineSignificant revenue expected in 2027IVR technology is key value driver

Answers to last quarter's watch list

Q3 sequential growth ex the one-time channel repricing. Q3 revenue guide of $3.9B is +7.7% QoQ on a $3.62B base — well above the $3.6B threshold that would have validated organic legs. The pricing tailwind is decaying (Q&A confirmed ~50bps incremental price in Q3, consistent with prior framing), yet sequential growth is accelerating, not fading.
Resolved positively
Whether adj. operating margin sustains above 47% in Q3. Q3 adj. operating margin guide of 49.0% holds the new ceiling exactly at Q2's record print rather than giving back the channel-repricing benefit — a stronger result than the watch-list bull case of ≥47%. The structural margin step-up appears real, not pricing-flattered.
Resolved positively
Auto stabilization vs. continued decline. Q2 auto came in at $872M, well above both the $810M positive threshold and the $780M rollover floor — and management guided Q3 mid-to-high single-digit sequential growth, implying $910M–$935M. The QoQ trough is behind. The YoY deceleration to +2% is the unresolved concern, but Q&A clarified content gains (BMS, ADAS) are driving the underlying growth with no restocking.
Resolved positively
Data center disclosure cadence. Management disclosed data center is now 75% of communications with 90% YoY growth, and Q&A added the optical/power split. Communications at $0.55B implies data center at ~$416M ($1.65B annualized) — continued and more granular quarterly disclosure, not a reversion to qualitative commentary. The AI infrastructure narrative is being actively maintained as a quarterly metric.
Resolved positively
The FY26 framework on the Q2 print. Six consecutive quarters of beats without an FY range. The qualitative escalation continues ("confidence has never been greater," "increasing confidence into 2027") but no point estimate was issued. At this point the pattern is intentional and management's optionality preservation is the message: trailing run-rate is the floor, not the midpoint.
Resolved negatively
Pricing fade trajectory. Q&A confirmed Q3 pricing contribution is ~50bps incremental (in line with prior framing) and 2026 pricing actions will add "a couple of points" to the full-year growth rate — i.e. not escalating, not the dominant driver. The narrative is value capture on new products, not inflationary pass-through.
Resolved positively

What to watch into next quarter

Whether Q3 auto prints inside the implied $910M–$935M sequential range and whether YoY re-accelerates above +5%. Auto +2% YoY at $872M is the segment with the most fragile YoY trajectory. A Q3 auto print at or above $930M with YoY recovery into mid-single-digits validates the "content gains, no restocking" Q&A framing; a print below $895M would mean the sequential bounce was mechanical and the segment is rolling over despite content wins.

Industrial Q3 acceleration vs. deceleration. Industrial at +56% YoY is the third consecutive quarter of YoY acceleration. Q3 against a $1.14B FY25 base implies anything above ~$1.93B (~+70% YoY) would extend the acceleration; anything below $1.85B (~+62%) would mark the inflection. Management has tied the durability claim to "well below prior cycle highs" — Q3 is the first quarter where that claim faces a meaningful comparison base.

Data center sequential growth and whether comms exceeds $600M. Management said data center will be the fastest-growing segment sequentially in Q3. Communications above $600M (+9% QoQ) would imply data center continues at >+85% YoY annualized; communications below $580M would suggest 90% YoY was peak.

Adj. gross margin holding above 72%. Q&A flagged ~50bps Q3 gross margin decline from 73.0%, plus utilization at peak meaning further volume growth requires foundry support that could compress incrementals. A Q3 adj. gross margin print below 71.5% would mean foundry mix is biting earlier than implied; at or above 72.5% would confirm the 73% ceiling is the new normal.

Whether the FY26 framework finally arrives on the Q3 print. Seven consecutive quarters without an FY range would be unprecedented for ADI in a non-recessionary environment. If still absent on Q3 — with three quarters of FY26 already in the books and a guided Q3 — the framework is effectively being held back to set up an FY27 commitment.

Empower close timing and any pre-revenue design-in disclosure. Management said back-half 2025 close with immaterial revenue at close and 2027 revenue inflection. Whether the Q3 print includes the close and any first design-in commentary is the first checkpoint on the integration timeline.

Sources

  1. ADI Q2 FY2026 press release / earnings exhibit, filed with the SEC: https://www.sec.gov/Archives/edgar/data/6281/000000628126000050/adi2q26exhibit991earnings.htm
  2. ADI Q2 FY2026 earnings call commentary.
  3. Tapebrief ADI Q1-2026, Q4-2025, Q3-2025, and Q2-2025 briefs (for cross-quarter tone and watch-list comparison).

Get the next brief, free.

We publish analyst-grade earnings briefs the same day or morning after every call — headline numbers, segment KPIs, Q&A highlights, and tone analysis. Free during beta.

This is not investment advice.