Analog Devices(ADI 1.01%) reported third quarter fiscal 2025 results on Aug. 20, 2025, with revenue of $2.88 billion, up 25% year over year and 9% sequentially (non-GAAP), and non-GAAP EPS of $2.05, a 30% year-over-year increase. The company emphasized its strategic focus on advanced robotics and automation, robust free cash flow, and provided revenue guidance of $3 billion plus or minus $100 million for the fourth quarter of fiscal 2025, with an expected non-GAAP operating margin of 43.5%. The following insights highlight key drivers of performance, strategic positioning, and forward-looking expectations.

Industrial momentum accelerates Analog Devices growth

The industrial segment accounted for 45% of total revenue, growing 12% sequentially and 23% year over year, with notable strength in automated test equipment (ATE), aerospace and defense, and broad geographic contributions. Management noted that channel inventory weeks are declining, and end demand remains double-digit percentages below true consumption levels, suggesting further upside as inventories normalize.

"More recently, as we've talked about, the growth has accelerated, and our outlook for Q4, which is normally a seasonally down quarter for industrial, we expect it to grow in the low to mid-teens quarter over quarter. So very, very strong outlook there. You know? And what's important is growth is happening across all of our industrial sectors, including instrumentation, automation, aerospace, defense, healthcare, and energy infrastructure, as well as across all the geographies. Again, an indication that we are in this cyclical upturn. You know, at the same time for us, we've talked about this in multiple quarters, you know, our channel inventories continue to be very lean, and we believe end demand is still double digits below consumption. Now we are gonna start seeing some catch up to the end demand in the fourth quarter. As we as I mentioned in my prepared remarks, you know, we did see the channel inventory weeks tick down a little bit as the end demand was a bit higher than we had planned. You know? And then so on top of that, you know, as we look forward, we are continuing to see green shoots across aerospace and defense and ATE. And so we feel pretty good about where we are both near and long term from an industrial perspective."
-- Richard Puccio, EVP and CFO

With lean channel inventories and broad-based industrial strength, Analog Devices is positioned for continued sales acceleration as demand aligns with consumption and inventory normalization progresses, supporting sustained growth in its most profitable segment.

Robotics and automation drive ADI’s strategic expansion

The automation business delivered double-digit year-over-year growth and is projected to double by 2030, fueled by demand for real-time, edge-intelligent, and highly sensed automation and robotics, including healthcare and humanoid robots. Partnerships with Teradyne and NVIDIA, combined with the company’s expertise in robotics and proprietary content gains, are expanding the addressable market and increasing average silicon content per system by up to 10 times in future robotic platforms.

"Our content in a humanoid robot is likely to be several thousands of dollars, that's basically a 10x increase over the content in today's cutting-edge AMRs. The primary reason for this content multiplier is the explosion in sensor and actuator counts. Every joint and point of contact requires accurate sensing and precision motor control, and every sensor and actuator drives a signal chain and power management opportunity for ADI. To further capture this flourishing opportunity, we're investing in higher-level application-specific solutions that integrate multiple sensing modalities, such as pressure, vibration, depth, acoustics, vision, and positioning, with high accuracy, ultra-low power signal chains, functionally safe power management, and AI algorithms powered by robotics foundation models. Simultaneously, we're collaborating with NVIDIA on a range of digital twin simulation programs and reference designs for humanoid and other robotic systems to accelerate development and AI training for our customers."
-- Vincent Roche, CEO and Chair

This strategic pivot toward high-value, system-level robotics and AI-enabled automation enhances pricing power, differentiation, and long-term revenue diversification across high-growth verticals, reducing reliance on traditional markets.

Margin profile and capital allocation strengthen at Analog Devices

Gross margin reached 69.2%, operating margin was 42.2%, and free cash flow (non-GAAP) over the trailing twelve months totaled $3.7 billion, or 35% of revenue, enabling $3.5 billion in capital returns. The company expects gross margin (non-GAAP) to return to the 70% range as the industrial mix increases, supported by a strong balance sheet with $3.5 billion in cash and short-term investments and a net leverage ratio of 1.1.

"And if you look to our, you know, where we expect our Q4 to go with the industrial growth we've talked about, you know, we will probably exit Q4 with more like a 49% industrial mix, which is part of the reason we think we'll get back into that 70% range in our fourth quarter. So it is as we talked at the beginning a little bit, it is also mix constrained given the industrial piece is our most profitable business."
-- Richard Puccio, EVP and CFO

Increasing the industrial revenue mix is expected to drive margin expansion and support continued capital returns, reinforcing the company’s financial flexibility and resilience.

Looking Ahead

Management projects fourth quarter fiscal 2025 revenue of $3 billion plus or minus $100 million, with sequential growth led by industrial, communications, and consumer segments, while automotive is expected to decline as prior order pull-ins unwind. Non-GAAP operating margin is targeted at 43.5% plus or minus 0.01 percentage points, the tax rate is expected to be 11% to 13%, and adjusted non-GAAP EPS is guided to $2.22 plus or minus 10¢. Capital expenditures are expected to remain within 4% to 6% of revenue, and management anticipates record automotive revenue and continued industrial outperformance.