Analog Devices reported sharply higher fiscal third-quarter profitability as broad-based semiconductor demand drove operating income growth far ahead of its already strong revenue increase.
Revenue for the quarter ended August 1 reached $4.02 billion, up 40% from $2.88 billion in the prior-year period. Operating income nearly doubled, increasing 97% to $1.61 billion from $818 million.
The increase translated into significant operating leverage. GAAP operating margin expanded 1,170 basis points to 40.1% from 28.4%.
Adjusted results showed a similar trend. Adjusted operating income increased 65% to $2.01 billion from $1.22 billion, while adjusted operating margin expanded 780 basis points to 50% from 42.2%.
Gross profit increased 51% to $2.71 billion, outpacing revenue growth, while gross margin expanded 520 basis points to 67.3%. Adjusted gross margin increased 330 basis points to 72.5%.
The combination of higher revenue and expanding margins also drove a significant increase in earnings per share. GAAP diluted EPS reached $2.74, up 163% from $1.04, while adjusted diluted EPS increased 68% to $3.45.
Analog Devices said the revenue increase was led by Data Center and Industrial demand as the company benefited from stronger activity across its product portfolio and regions.
The company also generated $1.6 billion of operating cash flow during the quarter and $1.46 billion of free cash flow, equivalent to 40% and 36% of quarterly revenue, respectively.
Analog Devices returned approximately $1.69 billion to shareholders during the quarter through $535 million of dividends and $1.16 billion of stock repurchases.
The momentum is expected to continue into the fiscal fourth quarter. Analog Devices forecast revenue of approximately $4.3 billion, plus or minus $100 million, with GAAP operating margin of approximately 42.6% and adjusted operating margin of approximately 52%.
KEY QUOTES:
“ADI delivered a strong third quarter, exceeding the midpoint of our revenue, margin, and earnings outlook as we capitalized on broad-based demand.”
Vincent Roche, CEO and Chair of Analog Devices
