tapebrief
ADI · Q2 2025
ADI · Q4 2025

ADI · Q3 2025 Earnings

Bullish

Analog Devices

Reported August 20, 2025

30-second summary

Revenue grew 25% YoY to $2.88B and beat the prior guide midpoint by $130M, with industrial up 23% YoY and every end market posting double-digit growth for the second consecutive quarter. Q4 revenue guide of $3.0B (±$100M) implies continued sequential expansion and adjusted operating margin of 43.5% (+130bps QoQ) — but auto is set to decline as China tariff pull-ins unwind, and gross margin stepped back to 69.2% on a one-time European fab utilization disruption that management says is already resolved.

Headline numbers

EPS

Q3 FY2025

$2.05

Revenue

Q3 FY2025

$2.88B

+25.0% YoY

Gross margin

Q3 FY2025

62.1%

Free cash flow

Q3 FY2025

$1.09B

Operating margin

Q3 FY2025

28.4%

Key financials

Q3 FY2025
MetricQ3 FY2025YoYQ2 FY2025QoQ
Revenue$2.88B+25.0%$2.64B+9.1%
EPS$2.05—$1.85+10.8%
Gross margin62.1%—61.0%+110bps
Operating margin28.4%—25.7%+270bps
Free cash flow$1.09B—$0.73B+49.0%

Guidance

ADI raised Q4 FY2025 guidance across revenue, adjusted EPS, and operating margins following strong Q3 beat on all metrics; sequential expansion expected with adjusted EPS up +8% and adjusted operating margin +130 bps.

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

Actuals vs prior guidance

MetricPeriodPrior guideActualΔResult
RevenueQ3 FY2025$2.75B +/- $0.10B$2.88B+$0.13B above guide midpointBeat
Adjusted EPSQ3 FY2025$1.92 +/- $0.10$2.05+$0.13 above guide midpointBeat
Adjusted Operating MarginQ3 FY202541.5% +/- 100 bps42.2%+70 bps above guide midpointBeat
Reported Operating MarginQ3 FY202527.2% +/- 150 bps28.4%+120 bps above guide midpointBeat

New guidance

MetricPeriodGuideYoY
RevenueQ4 FY2025$3.0B +/- $0.10B—
Adjusted EPSQ4 FY2025$2.22 +/- $0.10—
Reported EPSQ4 FY2025$1.53 +/- $0.10—
Adjusted Operating MarginQ4 FY202543.5% +/- 100 bps—
Reported Operating MarginQ4 FY202530.5% +/- 150 bps—

Segment performance

Q3 FY2025
SegmentQ3 FY2025YoY
Industrial$1.285B+23.0%
Automotive$0.851B+22.0%
Communications$0.372B+40.0%
Consumer$0.372B+21.0%

Profitability

Q3 FY2025
SegmentQ3 FY2025
Operating Margin (GAAP)28.4%
Operating Margin (Adjusted)42.2%
Free Cash Flow Margin38%
Gross Margin (GAAP)62.1%
Gross Margin (Adjusted)69.2%
Operating Cash Flow (TTM)$4.2B

Other KPIs

Q3 FY2025
SegmentQ3 FY2025
Capital Returned to Shareholders (Q3)$1.6B
Dividend per Share$0.99

Management tone

Q4-24 "revenues bottomed" → Q1-25 "cyclical upturn" → Q2-25 "ever more confident" → Q3-25 "tremendous growth opportunities, exponential humanoid"

From cyclical recovery to structural growth story. A year ago the narrative was about calling the bottom; two quarters ago it was about confirming the upturn; this quarter management abandoned cyclical hedging entirely and spent prepared remarks on the humanoid robotics opportunity. "Our content in a humanoid robot is likely to be several thousands of dollars. That's basically a 10x increase over the content in today's cutting-edge AMRs." The shift signals management thinks the cycle conversation is now table stakes — the equity story is being repositioned around content multipliers in next-generation platforms.

From industrial recovery breadth to industrial recovery depth. Last quarter the breakthrough was that book-to-bill turned positive across every industrial subsector; this quarter the breakthrough is that automation — flagged in Q2 as the laggard — joined double-digit YoY growth. "We're now seeing double digit year over year growth across the entire industrial portfolio... industrial automation business, which was the last sector to return to double digit growth." Two quarters ago automation was the missing piece of the bull case; now it's part of the base, which raises the bar for what counts as upside.

From tariffs as transient noise to tariffs as a structural distinction between auto and industrial. Last quarter management dismissed tariffs as "short-lived" pull-in pressure. This quarter Roche used tariff dynamics as positive evidence for the industrial thesis: auto bookings showed "anomalous booking behavior around tariff announcements that normalized," while industrial bookings "have followed expected trends without similar anomalies." The reframe lets management point to the absence of tariff distortion in industrial as proof of clean demand — a more sophisticated use of the same data than Q2's flat dismissal.

From defensive macro acknowledgment to confidence-led acknowledgment. Hedging language is still present ("geopolitical and macro uncertainty continues to cloud the outlook," "mindful of the continued uncertainty facing customers with respect to tariffs"), but the surrounding sentence structure has flipped: macro caveats now appear after growth assertions rather than as their qualifier. The phrase "undeterred and excited by the tremendous growth opportunities" frames macro risk as something ADI navigates, not something that gates the outlook.

Recurring themes management leaned on this quarter:

Industrial automation and robotics as primary growth driverHumanoid robotics as next-generation exponential opportunityIntelligent edge data and real-time sensing enabling transformationASP expansion through ecosystem partnerships and higher-value solutionsDouble-digit growth across all end markets achievedAI infrastructure demand fueling automatic test equipment and data center growth

Risks management surfaced:

Geopolitical uncertaintyMacro uncertainty and tariff impacts on customersGlobal operating environment evolutionChannel inventory management in recovery cycle

Q&A highlights

Timothy Arcuri · UBS

Industrial segment grew 11% last quarter and 7% the quarter before. Is ADI now shipping above consumption and building inventory? How long can this strength last?

Industrial is the most profitable business growing sequentially every quarter. Q4 expected to grow low to mid-teens despite being seasonally down. Growth broad-based across all industrial sectors and geographies. Channel inventories remain very lean and end demand is still double digits below consumption. Expecting catch-up in Q4 with continued green shoots in aerospace/defense and ATE.

Industrial growth accelerating sequentiallyQ4 industrial expected to grow low to mid-teens QoQChannel inventory weeks ticking downEnd demand still double digits below consumption

Harlan Sir · JP Morgan

Q3 gross margins came in at 69% versus expected 70%, attributed to communications upside but also unexpected low utilization. What's the Q4 outlook for gross margins?

Unexpected lower utilization in Q3 prevented sequential margin growth due to absorption issues. Utilization is now back on track and expected to resume increasing. Q4 gross margin at midpoint expected to reach 75%. Without the utilization disruption, would have achieved sequential growth, but industrial mix of only 45% would have still limited full achievement of 70%.

Q3 utilization disruption in European FAB was one-time eventQ4 gross margin expected at 75% at midpointQ3 industrial mix was 45%Utilization levels increasing but not yet back to pandemic-era levels

Stacy Raskin · Bernstein Research

Auto is guiding down 15% sequentially due to pull-ins, while industrial is up low to mid-teens (mid-30s YoY). What's different between these trends that suggests industrial isn't also a pull-forward?

Auto pull-ins showed anomalous booking behavior around tariff announcements that normalized. Industrial bookings have followed expected trends without similar anomalies. Industrial channel remains very lean (not channel fill), with customers still in inventory digestion mode after 2 years. Strength driven by aerospace/defense backlog, ATE supporting AI chip builds, automation recovery, and healthcare stabilization. Breadth and depth of demand across multiple customer and product segments differs from auto pull-in pattern.

Auto pull-ins visible via anomalous booking patterns that have normalizedIndustrial channel very lean, still under-shipping real consumptionAerospace/defense supply limited with very strong backlogATE supporting AI infrastructure build-out showing strong demand

Jim Schneider · Goldman Sachs

What's the status of automotive pull-in activity mentioned last quarter? Did it occur in Q3? From what regions? Why is sequential decline expected in Q4?

Auto pull-ins did occur in Q3, extending beyond Q2. Q2 pull-ins were North America and Europe; Q3 pull-ins were in China. Management expects the unwinding in Q4, which represents closeout of early buying. Taking conservative near-term view on automotive due to EV credits expiring and tariff risks. However, record auto revenue expected for 2025, with content growth and share gains in next-gen ADAS and infotainment systems. Automotive outpacing SAR volumes with double-digit share and content gains.

Record auto revenue expected for 2025Q3 auto pull-ins primarily in China (vs NA/Europe in Q2)Q4 auto expected to decline as pull-ins unwindCurrent quarter above high-end guidance largely due to auto pull-ins

Joe Moore · Morgan Stanley

You mentioned supply limitations in aerospace and defense. Where are these constraints coming from? Are there supply constraints elsewhere in industrial?

A&D supply constraints due to tremendous demand surge outpacing manufacturing capacity expansion. Takes time to lay in capacity, tooling, and the business has high product complexity. Each quarter more capacity is being deployed but demand continues rising. Describing as high-quality problem with surging demand ahead of manufacturing ability. Nearly everything in A&D is sole-source proprietary products. Internal factory very important; increased footprint and ongoing tooling deployment. In Q3-Q4 deploying tools specifically for A&D manufacturing. Rest of industrial business in good shape on supply. Have sufficient supply to cover all near-term booked demand.

Aerospace/defense demand surging ahead of manufacturing capacityNearly everything in A&D is sole-source proprietary productsInternal A&D manufacturing facility being tooled and expandedTools being deployed in Q3-Q4 for A&D manufacturing

Answers to last quarter's watch list

Auto Q3 print vs. "seasonally flat ex-pull-in" framing. Auto grew 22% YoY and was up sequentially in Q3 — better than Q2's "expect a Q3 decline" framing suggested — but management disclosed that Q3 included another round of pull-ins, this time in China. The Q4 guide implies auto declines roughly 15% sequentially as those unwind. The pull-in was larger and lasted longer than Q2's disclosure implied; the air pocket simply moved from Q3 to Q4.
Resolved negatively
Industrial sequential growth ≥10% in Q3. Industrial revenue of $1.29B vs. Q2's $1.16B is +11% QoQ — right at the threshold management set. Q4 is guided to low-to-mid-teens sequential industrial growth on top of that, and channel inventories remain lean. The convergence story is intact.
Resolved positively
Wireless within communications. Communications grew 40% YoY in aggregate, but management did not break out wireless separately on the call. The communications strength was attributed primarily to ATE supporting AI infrastructure rather than to a wireless inflection, so the specific wireless trajectory wasn't called out on the print.
Continue monitoring
Adj. operating margin holding ≥41.5%. Adj. operating margin came in at 42.2%, beating the guided midpoint by 70bps, and Q4 is guided to 43.5% (+130bps QoQ). Operating leverage is intact and accelerating.
Resolved positively
Whether management updates a full-year revenue or EPS range in Q3. ADI continued to guide only one quarter forward and did not issue an FY revenue or EPS range. Management framed FY2025 qualitatively as a "strong recovery year" but declined to commit to point estimates — implying they want optionality on the auto pull-in unwind and tariff path.
Resolved negatively

What to watch into next quarter

Q4 auto decline magnitude vs. the implied ~15% QoQ. With Q3 auto at $0.85B, a Q4 auto print below ~$0.72B would mean the pull-in was even larger than disclosed and the China-specific timing was more concentrated. A print above ~$0.78B would suggest pull-ins were smaller than management framed, validating the "record auto year" claim.

Q4 gross margin reaching the 75% midpoint. Management was explicit that the European fab utilization disruption was one-time. Adj. gross margin below 73% in Q4 would mean either the disruption wasn't fully isolated or industrial mix isn't lifting margin as expected — and would reopen the question of whether 70%+ is the structural ceiling at current mix.

Industrial Q4 sequential growth in the low-to-mid teens despite seasonal headwind. Management guided industrial up sequentially in a quarter that is normally down. A print below +10% QoQ would suggest end-demand convergence is stalling before reaching consumption levels; a print at or above +12% would confirm the structural-not-cyclical framing management is now selling.

Whether ADI introduces an FY2026 framework on the Q4 print. Two consecutive quarters of guiding one quarter forward only, despite beating every metric, signals management is still hedging the auto unwind. Reinstating any FY framework on the Q4 print would be a material confidence escalation.

A&D capacity coming online in Q1 FY2026. Management said tools are being deployed in Q3 and Q4 specifically for aerospace/defense manufacturing. Whether constrained A&D revenue inflects in Q1 — and by how much — is a near-term test of how much industrial growth was being held back by supply rather than demand.

Sources

  1. ADI Q3 FY2025 press release / earnings exhibit, filed with the SEC: https://www.sec.gov/Archives/edgar/data/6281/000000628125000142/adi3q25exhibit991earnings.htm
  2. ADI Q3 FY2025 earnings call commentary (quoted from extraction inputs).
  3. Tapebrief ADI Q2-2025 brief (for cross-quarter tone and watch-list comparison).

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