The Analog Devices story

What drives the business

• Analog Devices’ foundation is a broad portfolio of analog chips with long product life cycles, spanning more than 75,000 stock keeping units, with data converters its largest and most diverse product family.
• Industrial applications accounted for 45% of revenue in fiscal 2025 and automotive for 30%, linking demand to factory automation, measurement equipment, energy systems, battery management and vehicle electronics.
• The $1.5 billion all-cash agreement to acquire Empower Semiconductor, announced in May 2026, expands its power delivery technology for AI computing through integrated voltage regulators and silicon capacitors.
• The $1.35 billion all-cash agreement to acquire Alif Semiconductor, announced in September 2026, adds AI processors to its planned transition from individual components toward complete sensing, processing and power systems.
• Revenue reached a record $4.02 billion in the quarter to August 2026, with growth led by Data Center and Industrial, while Communications was the fastest-growing end market at 84% year over year.

What the price assumes

At $395.43, the reverse DCF implies that free cash flow after stock pay grows 17.9% a year for ten years, using a 10.2% discount rate.

Analog Devices delivered 17.2% annual growth on that measure over the last 10 years, while the TenQ check sets a 10.6% bar by slowing the historical record halfway toward 4%.

The price therefore embeds growth above both comparisons, alongside a free cash flow yield of 2.6% versus 4.8% in its own history.

Value ADI on your own assumptions

What could change the story

• Revenue growth of 33.6% over the last twelve months contrasts with an annual pace of -2.8% over the last three years, leaving sustained growth less established than the recent recovery.
• Analog Devices typically lacks long-term customer contracts and sometimes manufactures against forecasts or nonbinding orders, creating cancellation and inventory risks that distributor inventories can compound.
• Shareholder distributions consumed 104.7% of free cash flow over the last twelve months, while the liquidity ratio of 1.25 fell below the TenQ check’s 1.50 bar.
• The June 2026 cybersecurity incident involved files taken from company systems without interrupting operations, but the August 2026 disclosure left the scope of the information taken unresolved.
• The company warns that evolving cyber threats, including vulnerabilities increased by AI, could require significant resources, while failures to assess or disclose material incidents could lead to regulatory action, litigation or reputational damage.

What to watch next

• For the fourth quarter of fiscal 2026, management forecasts revenue of $4.3 billion, plus or minus $100 million.
• At that revenue midpoint, it expects reported operating margin of approximately 42.6%, plus or minus 150 basis points, and adjusted operating margin of approximately 52.0%, plus or minus 100 basis points.
• Industrial and Communications growth, distributor inventory commentary and free cash flow conversion will help distinguish sustained end demand from a temporary recovery.
• Further releases can clarify Alif transaction progress, Empower integration, the balance sheet after the September 2026 senior note issuance, and the scope and costs of the cybersecurity incident.

Sources

• Analog Devices's earnings release, filed with the SEC
• Its latest 10-Q or 10-K, for the risk factors
• The ADI stock report, for every figure and check