ADI reported a record quarter with strong growth across all end markets, led by industrial and data center. Management guided for continued strong growth in Q3 2026 with optimism around AI infrastructure and industrial recovery. They also announced the acquisition of Empower Semiconductor to bolster their power management portfolio. Record quarterly revenue of $3.62B and EPS of $3.09, both above the high end of guidance.
ADI reported a record quarter with strong growth across all end markets, led by industrial and data center. Management guided for continued strong growth in Q3 2026 with optimism around AI infrastructure and industrial recovery. They also announced the acquisition of Empower Semiconductor to bolster their power management portfolio. Record quarterly revenue of $3.62B and EPS of $3.09, both above the high end of guidance.
Management says AI-driven infrastructure investment is fueling record data center and ATE growth, and confidence in continued growth into 2027 is increasing. The Empower acquisition adds IVR and silicon capacitor technology to strengthen vertical power delivery for AI…
Management repeatedly highlighted record demand, raised guidance, and said confidence in the future had 'never been greater' despite acknowledging macro and geopolitical risks.
Data center revenue grew over 90% YoY, now 75% of communications revenue, driven by optical and power portfolios.
Industrial revenue grew 56% YoY, with strong contributions from aerospace & defense, ATE, ETM, and broad markets.
Management says AI-driven infrastructure investment is fueling record data center and ATE growth, and confidence in continued growth into 2027 is increasing. The Empower acquisition adds IVR and silicon capacitor technology to strengthen vertical power delivery for AI accelerators, with meaningful revenue expected in 2027.
Demand remains at record levels despite macro tensions. Management repeatedly highlighted record demand, raised guidance, and said confidence in the future had 'never been greater' despite acknowledging macro and geopolitical risks.
CapEx remains disciplined within the long-term model of 4% to 6% of revenue. Management says it has doubled internal capacity and expanded external optionality, and is comfortable supporting up to $20 billion of revenue by 2030.
Management repeatedly highlighted record demand, raised guidance, and said confidence in the future had 'never been greater' despite acknowledging macro and geopolitical risks.
“And the biggest bottleneck that AI is creating for us today is we've got to solve for power density and delivery efficiency.”
“Data Center, which now accounts for more than 75% of our communications revenue, was up more than 90% year over year, driven by both our optical and power portfolios.”
“we don't see a ton of future upside on gross margin from utilization given where we're running the factories today”
| Metric | Period | Range | Midpoint | Status |
|---|---|---|---|---|
| EPS | FY2026 Q3 | $3.15–$3.45 | $3.30 | GUIDED |
| Op margin | FY2026 Q3 | 48%–50% | 49% | GUIDED |
| Revenue | FY2026 Q3 | $3.8B–$4B | $3.9B | GUIDED |
| Issued | Metric | Target | Guide | Actual | Outcome |
|---|---|---|---|---|---|
| FY2026 Q1 | EPS | FY2026 Q2 | $2.73–$3.03 | $3.09 | Met / beat |
| FY2026 Q1 | Op margin | FY2026 Q2 | 46.5%–48.5% | 38.08% | Missed |
| FY2026 Q1 | Revenue | FY2026 Q2 | $3.4B–$3.6B | $3.6235B | Met / beat |
ADI's data center business grew over 90% year-over-year, driven equally by optical and power portfolios, and is now 75% of communications revenue, making it the fastest-growing segment. — Indicates accelerating AI infrastructure buildout, with strong demand spilling into analog and power management chips needed for data center compute and networking.
… and 2% year over year. We continue to capitalize globally on content and share gains in next-generation ADAS and infotainment systems with increased demand for our GMSL, functionally safe power, and A-to-B technologies. In addition, our BMS solutions for EVs return to year-over-year growth for the first time in two years. Communications represented 15% of revenue, finishing up 22% sequentially and 79% year-over-year. Data Center, which now accounts for more than 75% of our communications revenue, was up more than 90% year over year, driven by both our optical and power portfolios. In our wireless business, we continue to see increasing demand growing more than 35% year over year. Lastly, consumer represented 11% of quarterly revenue, flat sequentially and up 23% year over year. Continued strong growth reflects our exposure to the high-end consumer space and ongoing cyclical tailwinds in our B2B-like prosumer business. Now on to the rest of the P&L. Second quarter gross margin was 73%, up 180 basis points sequentially and 360 basis points year over year, driven by favorable mix, higher utilization, and pricing. OPEX in the quarter was $872 million, resulting in an …
ADI sees margin upside limited near-term because factories are running at high utilization; further revenue growth will likely require more external outsourcing, which could cap gross margin around 73%. — Suggests foundry partners will see increasing demand from ADI as internal capacity is maxed, potentially tightening supply at mature nodes.
Hey, guys. Thanks for taking my questions, and congrats on the results. Maybe following up a little bit on Vivek's, could you walk through what's implied for gross margins in the fiscal third quarter? Maybe like help us understand the levers across pricing mix and utilization. I know there's the 50 basis points of inventory true up that won't repeat, but how should we think about gross margins in the third quarter? Thank you.
Thanks, Josh. So, you know, obviously starting with the 73% gross margin, which was even a little higher than we expected based on some better mix and utilization. And as I mentioned, the pricing impact was pretty much as expected. You know, for Q3, we are assuming about a 50 bps decline in gross margin, largely driven by the absence of that one-time benefit we got from repricing the channel during the prior quarter, obviously. And from a mixed perspective, we do expect it's likely to be a slight tailwind based on our outlook. Well, as I mentioned previously, utilization is expected to be fairly neutral. We don't see a ton of future upside on gross margin from utilization given where we're running the factories today. So that's how we're thinking about it here in the near term, Josh.