ADI's Automotive Segment is Booming: Is the Momentum Sustainable?

Analog Devices’ ADI automotive segment, which offers products like high-performance signal processing solutions for advanced vehicle systems like infotainment, electrification and autonomous applications, is delivering record revenue growth for the past two quarters.

The automotive segment has grown to contribute 30% of fiscal 2024 revenues from 20% in fiscal 2022. In the second quarter of fiscal 2025, it grew 22.4% year over year, driven by traction in auto connectivity, ADAS, infotainment, and power solutions.

ADI has maintained a strong position in the automotive segment through its partnership with global manufacturers. The company has developed a deep expertise and extensive portfolio of analog, digital, power and sensor ICs that address the immediate needs of the industry.

ADI’s portfolio covers products for enriching the in-cabin experience, low emission, navigation, car audio, voice processing and connectivity, battery monitoring and management systems and video processing and connectivity.

Despite its deep domain expertise and strong financial results in the past couple of quarters, ADI expects its fourth-quarter automotive revenues to decline, as discussed on its earnings call. The company provided a conservative automotive outlook, citing EV credits expiration and a risk of tariffs affecting production.

How Competitors Fare Against Analog Devices

Analog Devices competes with Texas Instruments TXN and STMicroelectronics STM in the Automotive segment. Texas Instruments competes with ADI in Analog sensors, power ICs, in-vehicle networking/signal chain, and driver assistance electronics.

STMicroelectronics competes in sensors like MEMS and inertial, analog front ends, interface ICs, and microcontrollers. Both Texas Instruments and STMicroelectronics compete with ADI in the broader scope in the Industrial and communication segment.

ADI’s Price Performance, Valuation and Estimates

Shares of ADI have gained 16.4% year to date compared with the Semiconductor - Analog and Mixed industry’s growth of 13.8%.

From a valuation standpoint, ADI trades at a forward price-to-sales ratio of 10.13X, higher than the industry’s average of 7.75X.

The Zacks Consensus Estimate for ADI’s fiscal 2025 and 2026 earnings implies year-over-year growth of 21.5% and 19.4%, respectively. The consensus estimate for fiscal 2025 and 2026 has been revised upward in the past 30 days.

ADI currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research