Analog Devices and an AI-Driven Semiconductor Supercycle

Analog Devices' (NASDAQ: ADI) Q3 2025 earnings report and guidance for Q4 highlight its enviable position as a global, AI-driven semiconductor supercycle expands and gains momentum. The company’s technology is critical for bridging gaps between physical and digital realities and is used across sectors and verticals, now in demand because of AI.

AI is powering a revolution in the IoT that has been brewing for years; as AI evolves, robotics advances, and use cases are expanded, the number of IoT devices will proliferate and drive demand for analog-to-digital products. While estimates vary, they tend to agree that IoT growth will advance at a solid, double-digit CAGR for the next decade, more than doubling the number of connected devices. 

Analog Devices Confirms Uptrend After Solid Report, Guidance Update

Analog Devices had a great Q3 with revenue topping MarketBeat’s reported consensus by more than 430 basis points. The $2.88 billion in revenue is up nearly 25% compared to the last year, extending the growth streak to two consecutive quarters, reversing last year’s decline, and accelerating from the prior quarter.

The company reported double-digit growth across all end-markets and expects it to continue for the foreseeable future despite the uncertainty caused by tariffs and geopolitical headwinds. 

The margin news is also robust. The company widened its gross and operating margin on a GAAP and adjusted basis to drive outperformance and accelerate bottom-line growth. The $2.05 adjusted EPS is 38% compared to the prior year and outpaced the consensus by more than 500 basis points. 

Regarding the guidance, the company’s outlook for Q4 is not only better than expected, outpacing the consensus forecast by a wide margin at the low-end range, but it puts the full-year tally in an even stronger position, with the trends suggesting strength will persist into the subsequent fiscal year. 

While growth is a driver of share prices in the near term, the dividend and capital return are also strong, supporting the price action in the long term. The capital return in Q3 totalled $1.6 billion, including dividends and repurchases; the dividend is attractive, yielding 1.6% of late mid-July, and the share repurchases are significant.

Share repurchases reduced the count by an average of 0.4% for the quarter and 0.16% for the YTD period, offsetting dilutive activity including share-based compensation. 

The balance sheet reflects the impact of its capital-intensive efforts, including the balance sheet, but the net results are positive. 

Highlights include increased debt, total liability, and a 3% decline in shareholder equity, offset by increased cash, flat assets, and persistently low leverage. The long-term debt is less than 0.25 times the equity and less than 4X the cash, leaving it in a flexible position capable of sustaining operations, capital return, and growth efforts. 

Analyst Trends are Pushing ADI Stock To New Highs

The optimistic analyst trends pushing ADI higher in July and August are likely to strengthen now that guidance has been updated. The trends include increased coverage, upgrades, a bullish bias to the Moderate Buy rating, and a high conviction in the $260 consensus target. 26 analysts covered the stock, and the consensus price target trended higher.

The $260 represents only a low single-digit upside from the pre-release closing level, but it is sufficient for a new all-time high, and the high-end range is pegged at $300. 

The price action following the release was very bullish, lifting the market by more than 5% to confirm support at a significant level. That level coincides with near, short, and long-term uptrends and has the market poised to hit a new high.

The new high could happen soon and could lead to much higher price movement. The market might increase by $20 to $40 in the short term and possibly up to $80 over the longer term in this scenario.

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The article "Analog Devices and an AI-Driven Semiconductor Supercycle" first appeared on MarketBeat.