Analog Devices reported record quarterly revenue of $4.02 billion, up 40% from a year earlier, as demand from industrial customers and data centres lifted sales and widened profit margins. Its latest guidance indicates that management expects the record to be broken again in the current quarter.
The semiconductor company generated GAAP operating income of $1.61 billion in its fiscal third quarter, which ended on 1 August 2026. That was a 97% increase from $818 million a year earlier. Diluted earnings per share rose from $1.04 to $2.74.
Revenue also finished slightly above the top of the company’s previous forecast. Analog Devices had guided to $3.9 billion, plus or minus $100 million, in its second-quarter earnings release. The final figure of $4.022 billion exceeded the upper end of that range by about $22 million.
Industrial customers supplied most of the dollar growth
Industrial remained the company’s largest market. Revenue from the segment increased 53% to $1.97 billion and represented 49% of total sales, according to the results filed with the US Securities and Exchange Commission.
Communications grew faster, rising 84% to $654.5 million, but it accounted for a smaller 16% of revenue. Automotive sales increased 16% to $998.2 million, while consumer revenue rose 6% to $397.2 million.
The company said year-on-year growth was led by data centres and industrial customers. Data-centre sales are not disclosed as a separate line in the results table, however. They sit within the broader communications segment, which also contains other communications equipment. It would therefore be inaccurate to attribute the segment’s entire 84% increase to artificial intelligence.
The released figures show that industrial customers contributed about $679 million of the company’s $1.14 billion year-on-year revenue increase. That is roughly 59% of the total dollar growth. Communications contributed about $300 million, or 26%. Together, the two segments supplied almost 86% of the increase.
This makes the quarter broader than a simple AI story. Data-centre demand was an important driver, but industrial equipment generated most of the additional revenue in dollar terms.
What an analog chip does inside a data centre
Analog Devices’ data-centre products perform different jobs from the headline graphics processors used to train AI models. Its portfolio includes components for power management, signal conversion, sensing and connectivity.
An analog semiconductor translates continuously changing real-world signals, such as temperature, light, sound or voltage, into digital data, or converts digital information back into an analog form. The Semiconductor Industry Association’s explanation of chip categories distinguishes these devices from logic chips, which perform calculations and control digital systems.
These supporting components become more demanding as AI equipment consumes more electricity and moves more data. Voltage regulators deliver precise power levels, sensors monitor temperature and electrical conditions, and data converters help equipment communicate with the physical systems around it.
A June 2026 report from the Semiconductor Industry Association and Deloitte estimates that a leading AI server rack can contain more than 4,500 packaged chips, comprising about 20,000 individual semiconductor dies. The report identifies power chips, controllers, sensors and transceivers alongside processors, memory and networking components.
Those industry estimates do not show how many parts Analog Devices supplies to any particular rack or customer. They do explain why spending on AI infrastructure can benefit chipmakers that do not manufacture the headline graphics processors.
Higher sales produced wider margins
Analog Devices’ GAAP gross margin increased from 62.1% to 67.3%. Gross margin is the proportion of revenue left after the direct cost of producing the goods sold.
Operating margin rose more sharply, from 28.4% to 40.1%. This indicates that operating expenses grew more slowly than revenue, allowing a larger share of each sales dollar to reach operating profit.
The company also reported adjusted earnings of $3.45 per share and an adjusted operating margin of 50.0%. Adjusted, or non-GAAP, results remove selected items that remain in the standard accounts. Analog Devices’ exclusions include acquisition-related costs, amortisation of acquired intangible assets, restructuring charges and certain tax effects.
Cash generation was also strong. Operating activities supplied $1.60 billion during the quarter. After $146 million of capital expenditure, the company reported $1.46 billion of free cash flow. Analog Devices defines free cash flow as operating cash flow minus spending on property, plant and equipment.
Dividends and share repurchases returned $1.69 billion to shareholders during the same period. The quarterly cash return was therefore greater than that quarter’s free cash flow, although the two figures do not need to match because companies can use existing cash or financing when setting capital returns.
The power-management portfolio is expanding
Analog Devices completed its $1.5 billion cash acquisition of Empower Semiconductor on 7 July, during the reported quarter. Empower develops integrated voltage regulators and power-management technology intended to deliver electricity more efficiently to high-density processors.
The acquisition gives Analog Devices more products aimed at the power constraints created by AI computing. The expected commercial benefits remain management’s assessment. Analog Devices said Empower’s revenue and earnings between the acquisition date and the end of the quarter were immaterial to its financial statements, but it did not provide separate figures or identify customers. Details of the completed acquisition are available in Analog Devices’ announcement.
Even the bottom of the forecast would set another record
For its fiscal fourth quarter, Analog Devices expects revenue of $4.3 billion, plus or minus $100 million. The company is also forecasting a GAAP operating margin of approximately 42.6%, plus or minus 1.5 percentage points, and diluted earnings of $3.14 per share, plus or minus $0.15.
The lower end of the revenue range is $4.2 billion. That would still be about $178 million, or 4.4%, above the record just reported. Management is consequently forecasting another quarterly revenue record across the whole guidance range, rather than only at its midpoint.
Guidance is a forecast, not a contracted result. Analog Devices’ quarterly report identifies changes in semiconductor demand, tariffs, export restrictions, manufacturing delays and supply-chain disruption among the risks that can affect results.
The next quarter will show whether the unusually rapid expansion can continue. The current numbers suggest two engines are working at once: a broad recovery in industrial demand and rising investment in the power, sensing and communications hardware surrounding AI processors.
