Analog Devices Q3 Guidance Tops Estimates

Analog Devices Inc. (ADI) reported Q3 guidance above Wall Street estimates on May 20, 2026, following a record fiscal second quarter. The company attributed stronger orders to rising AI-related demand for power-management chips and sensors.

Record Quarter, Cash Generation, and Market Growth

ADI’s fiscal second-quarter revenue rose 37% year over year to $3.6 billion for the quarter ended May 2, 2026. GAAP diluted earnings per share (EPS) reached $2.40, while adjusted EPS was $3.09. GAAP operating margin expanded to 38.1%, and adjusted operating margin rose to 49.0%.

Industrial remained the largest end market, generating about $1.8 billion in revenue. Communications posted the strongest year-over-year percentage growth, with Automotive and Consumer segments also contributing to the quarterly advance.

Over the trailing 12 months through the quarter, operating cash flow totaled $5.1 billion, or roughly 40% of revenue, and free cash flow was $4.6 billion, about 36% of revenue. The company returned $1.3 billion to shareholders through dividends and share repurchases and declared a quarterly dividend of $1.10 per share payable June 16, 2026.

Raised Q3 Outlook Supported by AI Demand

For the third quarter, ADI guided revenue to approximately $3.9 billion, plus or minus $0.1 billion, with adjusted EPS near $3.30 and GAAP EPS near $2.60. Operating-margin expectations were about 49.0% on an adjusted basis and roughly 39.0% on a GAAP basis. The guidance midpoint exceeds the LSEG-compiled Street consensus near $3.62 billion.

Management cited record bookings across Industrial, Automotive, and Communications as the basis for stronger near-term demand for power-management semiconductors and sensors. A company technical article on data-center cooling framed surging AI workloads as driving demand for higher-efficiency power, sensing, and thermal-management solutions that align with ADI’s converter, power-management, and sensor products.

Empower Semiconductor Acquisition Expands AI Power Portfolio

ADI announced a definitive agreement to acquire Empower Semiconductor in an all-cash transaction valued at about $1.5 billion. The acquisition aims to expand ADI’s AI-focused power-management portfolio and strengthen its power-chip offerings to meet rising demand for AI applications.

The transaction is expected to close in the second half of 2026, subject to customary closing conditions and regulatory approvals. Combined with strong cash generation and raised guidance, the acquisition positions ADI to scale AI-related power solutions. The closing of the deal and regulatory review represent near-term strategic catalysts.