Analog Devices Earnings Aug 19: 49% Margins, Guided Flat

TL;DR

• Analog Devices reports fiscal Q3 2026 at 7:00am ET on Wednesday, August 19, with the call three hours later at 10:00am ET. The company confirmed both times itself.
• Management guided revenue to $3.9 billion plus or minus $100 million and adjusted EPS to $3.30 plus or minus $0.15. Consensus sits at $3.92 billion and $3.33, so the Street is already asking for a small beat on the guide.
• The margin line stopped climbing. Adjusted operating margin was 42.2% a year ago and 49.0% last quarter, and the guide is approximately 49.0%. Every quarter of this upcycle expanded margin. This one is not guided to.
• Automotive is 24% of revenue and 1.6% of the growth. It grew 2% last quarter while industrial did 56% and communications did 79%. A year ago automotive was growing 22%.
• ADI closed at $381.17 on August 13, 14.4% below its June 22 record close of $445.48, on 56.75x trailing and 27.19x forward earnings.

When Does Analog Devices Report Earnings?

Wednesday, August 19, at 7:00am ET, with the conference call at 10:00am ET. Analog Devices set both times in its own advisory release, and the three-hour gap is worth planning around: the numbers hit before the open and the explanation arrives half an hour after it. Vincent Roche and CFO Richard Puccio take the call.

It is a crowded morning. Target reports the same day into the retail week, and Wolfspeed closes it out that evening. The full slate is in the earnings calendar.

The Board

Three segments did the work. The fourth is a quarter of the company.

A Quarter Of The Company, 1.6% Of The Growth

Take the fiscal Q2 end markets apart and the shape of this business changes. Revenue went from $2,640.1m to $3,623.5m, so ADI added $983.4m year over year. Here is where it came from:

• Industrial: $1,799.4m, up 56%. Added $649.1m, or 66% of the growth.
• Communications: $554.7m, up 79%. Added $244.1m, or 25%.
• Consumer: $397.8m, up 23%. Added $74.7m, or 8%.
• Automotive: $871.6m, up 2%. Added $15.5m, or 1.6%.

The four sum to the reported total exactly, which is the first thing I check on a segment table. Industrial and communications together were 91% of the growth.

Automotive is not a rounding error inside this company. At $871.6m it was 24% of revenue, the second-largest segment, and it contributed almost nothing. What makes that worth a section rather than a footnote is the comparison to itself: in the year-ago fiscal Q3, automotive grew 22% to $850.6m. The deceleration ran from 22% to 2% while the rest of the business accelerated.

Management has said automotive customers are running lean on inventory and has pointed to better second-half growth. That is a reasonable read and it may well be right. It is also the same segment that has been about to inflect for several quarters, and the year-ago base of $850.6m is only 2.4% below what automotive did last quarter. If the segment merely holds its current run rate, it prints roughly +2% again.

The Margin Guide Doesn't Move

Adjusted operating margin has been the engine under the EPS line, and the guide switches it off.

The sequence: 41.2% in fiscal Q2 2025, 42.2% in fiscal Q3 2025, 49.0% last quarter. That is 780 basis points of year-over-year expansion in Q2 alone, and it is why adjusted EPS grew 67% on revenue growth of 37%. Operating leverage did roughly half the work.

For fiscal Q3, ADI guided adjusted operating margin to approximately 49.0%, plus or minus 100 basis points. The same number. On revenue guided 7.6% higher sequentially.

Run the arithmetic and it is a real constraint rather than conservatism about rounding. Adjusted gross margin was 73.0% last quarter. Another $277m of revenue at that gross margin drops about $202m of incremental gross profit. Holding operating margin flat at 49.0% means adjusted operating income rises only about $135m. The other $67m goes to operating expense, so opex is guided to grow faster than revenue for the first time in this run.

I do not think that is a warning. ADI is hiring and integrating into a data center opportunity, and spending into it is the correct call. But the EPS beats this year have been margin beats, and a flat margin guide removes the mechanism. The Street's $3.33 sits above the $3.30 midpoint anyway.

What $3.9 Billion Actually Requires

Work forward from the segments and the guide gets specific. Year-ago revenue was $2.88bn, so the $3.9bn midpoint needs about $1.02bn of year-over-year growth, roughly 35%.

Freeze every segment at its fiscal Q2 dollar level and see what that delivers against the year-ago quarter: industrial adds about $510m, communications about $182m, consumer about $26m, automotive about $21m. That totals $739m, and revenue lands near $3.62bn.

Which is the same figure ADI just posted, and about $277m short of the guide. So the midpoint requires another sequential step of that size, and on last quarter's evidence it has to come from industrial and communications again. Data center is now more than 75% of communications revenue and grew over 90% year over year, with the optical and power portfolios contributing in roughly equal measure. That is the line I will read first on August 19.

The Deal That Closed Inside The Quarter

ADI announced a $1.5bn all-cash acquisition of Empower Semiconductor on May 19 and issued this guidance on May 20. The deal closed on July 7, inside fiscal Q3, which ends in early August.

Empower makes integrated voltage regulators and silicon capacitors, the point-of-load power parts that sit next to an AI accelerator. Management has said it adds little revenue this year and starts contributing meaningfully in 2027. A $1.5bn business that adds cost now and revenue later pushes on exactly the operating expense line discussed above, and on GAAP more than adjusted.

What I cannot tell from the release is whether the 49.0% guide assumed the deal closing mid-quarter. Companies normally guide excluding an unclosed acquisition, and if that is what happened here, the reported margin carries a headwind the guide never contemplated. It is a small effect on four weeks of ownership either way. I flag it because "guide set before close, deal closed inside the quarter" is the kind of detail that explains a miss after the fact, and I would rather have named it first.

The Options Angle

The setup is specific enough to say something about, even without a live chain. ADI beat on revenue and adjusted EPS last quarter, guided above estimates, and the stock fell that session. Reported magnitudes for that move range from about 2% to nearly 6% across outlets, so I am not putting a number on it, but the direction is not in dispute.

That has been the season's pattern rather than an ADI quirk. Applied Materials cleared its quarter on Thursday, guided fiscal Q4 roughly $700m above consensus, and traded lower after hours anyway. Beating a guide the market has already priced is not paying this month.

So the case for buying options into this print would have to be that the realised move beats what the chain implies, and I could not source ADI's implied move to test it. Without that number I will not pretend to a view on whether volatility is cheap. The directional read I will commit to: consensus above the guide midpoint, margin guided flat, and a quarter of the business contributing nothing to growth is a combination that needs a strong fiscal Q4 guide to clear, and the fiscal Q4 guide is the number that matters on the day.

Trade log

#	Stance	Structure	Strikes and expiry	Cost or credit	Spot at writing	Implied move	Breakeven
1	Pass	Any pre-print options position	Aug expiries	Not sourced; no live chain available	$381.17, Aug 13 close	Not sourced	n/a; pass scored against the realised move
2	Conditional	Post-print long (shares or 1-2 month calls) if the fiscal Q4 guide carries adjusted operating margin above 49.0%	Struck off the Aug 19 open	Struck off the Aug 19 open	To be struck Aug 19	n/a	Scored against the post-print entry if triggered

The One-Line Read

Analog Devices guides fiscal Q3 to $3.9 billion and 49% adjusted operating margin, exactly the margin it just posted. The growth engine is industrial and data center. Automotive, a quarter of revenue, has stopped contributing.