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Bull: Accelerated adoption of industrial automation and automotive electrification drives sustained double-digit revenue recovery, expanding margins through scale and premium product mix.
Cyclical Recovery Failure: The anticipated 27.13% Year 1 cyclical revenue recovery completely fails to materialize, leaving capacity severely bloated.
Analog Devices represents a high-quality, mature dividend payer with strong free cash flow generation, robust margins, and defensible market positions in analog and mixed-signal ICs. The current valuation reflects cyclical near-term headwinds, offering a stable yield while positioning for long-term compounding.
Analog Devices represents a high-quality, mature dividend payer with strong free cash flow generation, robust margins, and defensible market positions in analog and mixed-signal ICs. The current valuation reflects cyclical near-term headwinds, offering a stable yield while positioning for long-term compounding.
Accelerated electrification and industrial automation drives short-term capacity bookings and premium pricing power.
Sell.
Analog Devices, Inc. engages in the design, manufacture, testing, and marketing of integrated circuits (ICs), software, and subsystems products in the United States, rest of North and South America, Europe, Japan, China, and rest of Asia. It provides data converter products, which translate real-world analog signals into digital data, as well as translates digital data into analog signals; power management and reference products for power conversion, driver monitoring, sequencing, and energy management applications in the automotive, communications, industrial, and consumer markets; and power ICs that include performance, integration, and software design simulation tools for accurate power supply designs. The company also offers amplifiers to condition analog signals; and radio frequency and microwave ICs to support cellular infrastructure; and micro-electro-mechanical systems technology solutions, including accelerometers used to sense acceleration, gyroscopes for sense rotation, inertial measurement units to sense multiple degrees of freedom, and broadband switches for radio and instrument systems, as well as isolators. In addition, it provides digital signal processing and system products for numeric calculations. The company serves clients in the industrial, automotive, consumer, instrumentation, aerospace, defense and healthcare, and communications markets through a direct sales force, third-party distributors, and independent sales representatives, as well as online. The company was incorporated in 1965 and is headquartered in Wilmington, Massachusetts.
Under severe macro softness, ADI's automotive and industrial segments stall. Without the 27.1% Year 1 revenue rebound, operating leverage works in reverse, compressing EBIT margins below 30%. Terminal multiple reverts to 14x, pushing fair value toward the $135 downside extreme.
High switching costs and proprietary intangible assets in analog and mixed-signal ICs. Deep integration into extended customer product lifecycles.
Economic profit is supported when reported returns exceed the company cost-of-capital hurdle.
Unavailable
FCFF DCF remains positive at the base case: base FCFF $4.0B after capex $551.0M, with terminal value at 51.7% of enterprise value. No FCF cliff is projected unless capex/ or materially resets.
If Year 1 revenue growth meets the >25% estimate, baseline cash flow thesis holds but remains overvalued. If growth misses, fair value drops immediately toward $135.
If Year 1 revenue growth meets the >25% estimate, baseline cash flow thesis holds but remains overvalued. If growth misses, fair value drops immediately toward $135.
Mature phase. Heavy reliance on disciplined capital allocation. Current market pricing incorrectly implies an early-stage hyper-growth pivot.
Accelerated electrification and industrial automation drives short-term capacity bookings and premium pricing power.
Inventory indigestion and macro tightening lead to sharp order cancellations and prolonged destocking across the analog space.
Mature phase. Heavy reliance on disciplined capital allocation. Current market pricing incorrectly implies an early-stage hyper-growth pivot.
Zero exposure. The massive divergence between intrinsic value and price mandates avoiding long exposure.
Aggressively sell existing long positions at $416.52 to capitalize on the market's severe pricing error prior to cyclical mean reversion.
Upside case depends on the report valuation range and named growth catalysts.
The intrinsic cash flow reality is entirely detached from the market's current hyper-growth pricing. A 47% downside gap to the $208.81 fair value midpoint demands an immediate exit.
ADI is rated Sell at $416.52 versus the reconciled fair value midpoint of $208.81, implying -49.87% upside/downside.
At $416.52, the stock is measured against the final $208.81 midpoint and -49.87% upside/downside, so new capital should respect the report margin-of-safety discipline.
Capture your own thesis, position size, and follow-up questions. Stays on this device, only you can see it.
Prolonged inventory corrections and macro softness in industrial and automotive segments compress margins and delay revenue recovery, severely pressuring the premium valuation multiple and breaking the assumed 27% near-term bounce.
The anticipated 27.13% Year 1 cyclical revenue recovery completely fails to materialize, leaving capacity severely bloated.
Market pivots away from tech hyper-growth multiples, repricing ADI to its mature industrial 14x PE mean.
Gross margins break below historical averages due to intense price wars and persistent inventory corrections in auto and industrial segments.
The five developments that would weaken our investment case.
Prolonged inventory overhang at distributors leads to price discounting and underutilized factory capacity, suppressing manufacturing absorption and reducing core product gross profitability across automotive and industrial segments.
Current:61.5% for the period ended 2025-10-31
Alert if< 58.0% over two consecutive quarters
Severe operating margin contraction indicates that reverse operational leverage from unabsorbed manufacturing capacity and fixed operating costs is eroding corporate earning power during an extended industrial downcycle.
Current:27.2% for the period ended 2025-10-31
Alert if< 22.0% over two consecutive quarters
Failure to achieve a robust cyclical rebound in automotive and industrial markets leaves manufacturing footprint bloated, undermining top-line scale and delaying overall financial recovery.
Current:16.9% for the period ended 2025-10-31
Alert if< 5.0% YoY over two consecutive quarters
A persistent drop in capital productivity signals that ongoing manufacturing investments are failing to produce sufficient operating profit expansion, destroying economic value and dampening long-term returns on reinvested capital.
Current:5.6% as of 2026-05-08
Alert if< 4.0% over any trailing twelve-month period
Inadequate conversion of accounting net income into operating cash flow strains liquidity buffers, threatening balance sheet flexibility and the capacity to comfortably fund dividend distributions and capital expenditure.
Current:2.122 as of 2026-05-08
Alert if< 1.20 over any trailing twelve-month period
Each lens answers a different valuation question. Only included lenses set Fair value; floors and diagnostics provide context.
Apply a terminal P/E to the dated forward EPS path, then discount that future share value back to the analysis date.
Convert the revenue and margin path into after-tax free cash flow, discount the annual per-share amounts and at , then adjust for signed per current share.
Add depreciation to net income, subtract maintenance capex, divide by diluted shares, and apply a normalized valuation multiple.
Solve for the growth rate that makes the model value equal the report-date share price.
Accelerated adoption of industrial automation and automotive electrification drives sustained double-digit revenue recovery, expanding margins through scale and premium product mix. The market sustains its premium valuation multiple.
Our primary Forward Earnings models synthesize to $208.81. ADI achieves near-term cyclical recovery, but the market's implied 27.5% 10-year growth rate proves mathematically impossible for a mature dividend payer, triggering a correction.
If Year 1 revenue growth meets the >25% estimate, baseline cash flow thesis holds but remains overvalued. If growth misses, fair value drops immediately toward $135.
If Year 1 revenue growth meets the >25% estimate, baseline cash flow thesis holds but remains overvalued. If growth misses, fair value drops immediately toward $135.
Warning level: < 58.0% over two consecutive quarters. Prolonged inventory overhang at distributors leads to price discounting and underutilized factory capacity, suppressing manufacturing absorption and reducing core product gross profitability across automotive and industrial segments.
Warning level: < 22.0% over two consecutive quarters. Severe operating margin contraction indicates that reverse operational leverage from unabsorbed manufacturing capacity and fixed operating costs is eroding corporate earning power during an extended industrial downcycle.
Warning level: < 5.0% YoY over two consecutive quarters. Failure to achieve a robust cyclical rebound in automotive and industrial markets leaves manufacturing footprint bloated, undermining top-line scale and delaying overall financial recovery.
Warning level: < 4.0% over any trailing twelve-month period. A persistent drop in capital productivity signals that ongoing manufacturing investments are failing to produce sufficient operating profit expansion, destroying economic value and dampening long-term returns on reinvested capital.
Warning level: < 1.20 over any trailing twelve-month period. Inadequate conversion of accounting net income into operating cash flow strains liquidity buffers, threatening balance sheet flexibility and the capacity to comfortably fund dividend distributions and capital expenditure.
| $12.31B |
| $9.43B |
| $11.02B |
| -2.8% |
| Gross profit | $7.53B | $7.88B | $5.38B | $6.77B | -3.5% |
| Operating income | $3.30B | $3.87B | $2.10B | $3.03B | -2.8% |
| Net income | $2.75B | $3.31B | $1.64B | $2.27B | -6.2% |
| EPS (diluted) | $5.25 | $6.55 | $3.28 | $4.56 | -4.6% |
| EBITDA | $5.60B | $6.17B | $4.20B | $5.03B | -3.5% |
| R&D | $1.70B | $1.66B | $1.49B | $1.77B | +1.3% |
| SG&A | $1.27B | $1.27B | $1.07B | $1.26B | -0.3% |
Capital allocation should be evaluated against reinvestment needs, balance-sheet strength, and shareholder returns.
| Revenue | 11,019,707,000 |
|---|---|
| Cost of revenue | 4,246,229,000 |
| Gross profit | 6,773,478,000 |
| Operating expenses | 3,771,002,000 |
| Operating income | 3,002,476,000 |
| Non-operating items and tax | -735,134,000 |
| Net income | 2,267,342,000 |
| Total assets | 47,992,712,000 |
|---|---|
| Cash | 2,499,406,000 |
| Current assets | 7,108,061,000 |
| Total liabilities | 14,176,957,000 |
| Current liabilities | 3,245,801,000 |
| Shareholders’ equity | 33,815,755,000 |
Point-in-time financial data used in the 2026-05-08 analysis.
| Period | Revenue | EBITDA | Net income | Operating cash flow | Free cash flow | Capex | Depreciation and amortization | Stock-based compensation | Share repurchases | Dividends paid | Net debt issuance | Investing cash flow | Financing cash flow | Beginning cash | Ending cash | Cash and investments | Total debt | Operating margin | ROIC | WACC | ROIC − WACC spread |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022-10-31 | 12B | 5.6B | 2.7B | 4.5B | 3.8B | 699.3M | 2.3B | 323.5M | 2.6B | 1.5B | -223M | — | — | — | — | 1.5B | 6.6B | 29.6% | — | 9.3% | — |
| 2023-10-31 | 12.3B | 6.2B | 3.3B | 4.8B | 3.6B | 1.3B | 2.3B | 299.8M | 3B | 1.7B | 481.5M | — | — | — | — | 958.1M | 7B | 32.4% | — | 10.1% | — |
| 2024-10-31 | 9.4B | 4.2B | 1.6B | 3.9B | 3.1B | 730.5M | 2.1B | 262.7M | 615.6M | 1.8B | 588.4M | — | — | — | — | 2B | 7.6B | 22.0% | — | 9.4% | — |
| 2025-10-31 | 11B | 5B | 2.3B | 4.8B | 4.3B | 533.6M | 2B | 321.6M | 2.2B | 1.9B | 989.7M | — | — | — | — | 2.5B | 8.7B | 27.2% | — | 10.0% | — |
ADI trades at 31.7x forward earnings against a peer median of 22.8x; EV/EBITDA of 37.4x against a peer median of 40.7x; 6 peers.
| Do not enter. Current levels represent extreme mathematical overvaluation based on mature cash flow realities. |
| Broadcom Inc. |
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| 55.5x |
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| MU | Micron Technology Inc. | 6.4x | 12.5x | 19.7x | 39.8% | 67.6% |
| AMD | Advanced Micro Devices Inc. | 34.4x | 19.3x | 88.5x | 8.1% | 14.4% |
| INTC | Intel Corporation | 83.1x | 11.9x | 40.7x | -2.9% | 6.9% |
