Analog Devices, Inc. (ADI): what the price assumes

In the published model solve dated 2026-Q2, anchored at $361.78, Analog Devices, Inc. (ADI) is priced for today's economics sustained for ~11.2 years. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-25.

Generated: 2026-08-30 · Source: https://boothcheck.com/report/ADI

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 11.1% cost of capital; growth searched up to the 25% self-funding ceiling.

How unusual the bet is: within-range (limited comparison data)

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Growth Families that call it expensive: Asset, Earnings, Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.9%); the inversion above states its own rate.

Per-Model Detail (n=18)

Economic-Unit Decomposition (Sum Of The Parts)

Only one reportable economic unit is present in the current topology source. Consolidated operating lenses remain available, but there is no multi-unit decomposition.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Bullet Takeaways

• Four end markets carry the business at once, with Industrial at 45% of revenue, Automotive at 30%, and Consumer and Communications at 13% each, so no single customer cycle sets the result.
• The clearest specific risk is political rather than commercial: the 10-K warns that export restrictions mean the company could lose business to foreign competitors who are not subject to such export restrictions, and that they may keep having direct and indirect adverse impacts on our revenues.
• Next quarter is guided to $3.9 billion of revenue give or take $100 million, against $3.62 billion just reported, and whether Industrial keeps the pace it set is the thing to watch.

Bull Case

A company can be mature and growth-stage at the same time, and reading Analog Devices requires holding both ideas at once. The underlying product is about as unglamorous as semiconductors get. The 10-K describes the durability in one clause: Our analog ICs typically have long product life cycles. An analog part designed into an industrial controller or a car platform often stays there for a decade or more, because requalifying a sensor interface costs the customer far more than the part does. That is a mature-company characteristic and it is the foundation of everything else.

Sitting on top of that foundation is a genuinely fast quarter. Revenue reached $3.62 billion in the fiscal second quarter, up 37% from $2.64 billion a year earlier, with Industrial at $1.80 billion, up 56%, Communications at $554.7 million, up 79%, Consumer at $397.8 million, up 23%, and Automotive at $871.6 million, up 2%. The 10-K identifies where the newer demand comes from, noting that the Communications increase was primarily driven by growth in the wireline sub-market from data center infrastructure expansion in support of AI applications. Power and signal-conditioning content per rack rises as those racks get denser, and that content is precisely what this company sells.

The spread of end markets is the second structural advantage. Industrial supplies 45% of revenue, Automotive 30%, Consumer 13% and Communications 13%. Four cycles, four sets of customers, four different reasons to place an order. When automotive stalls, as it just did at 2% growth, industrial and communications can carry the quarter, and the reverse has been true before. A single-market analog supplier does not get that option.

Profitability follows from the product economics rather than from scale games. Trailing operating margin on the reported basis runs 31.5%, and the business converts at a rate that funds everything it needs internally. Interest is covered 11.8 times by operating income, net debt of $5.1 billion sits at just 1.32 times operating income before tax, and the share count has actually shrunk about 1.7% a year over the four years to May 2026. The 10-K puts the buyback authorization in context: as of November 1, 2025 the board had authorized repurchases of $26.7 billion of our common stock under our common stock repurchase program and $9.7 billion remained available for repurchases under the current authorized program. That is not a company financing growth by selling equity to shareholders. It is one buying its own back while it grows.

Against the peer set the position holds up on the two metrics that separate analog franchises. Texas Instruments (TXN) runs $18.4 billion of revenue at 35.3% operating margins and 57.3% gross margins, and it is the standard everyone else is measured against; NXP (NXPI) turns $12.6 billion at 30.4%; and the second tier sits well below, with Microchip (MCHP) at 10.4% operating margins on $4.7 billion and ON Semiconductor (ON) at 10.0% on $6.1 billion with revenue down 9.0%. Monolithic Power (MPWR), the fastest grower in the group at 23.9%, names Analog Devices, Infineon Technologies, NXP Semiconductors, ON Semiconductor, Power Integrations, Renesas Electronics, ROHM Semiconductor, Semtech, STMicroelectronics and Texas Instruments as its primary competitors, which is a useful reminder of who sits in the top tier of this industry and who is trying to get there.

The bull thesis, then, is not that analog chips are exciting. It is that a business with decade-long design-in cycles, four independent demand drivers, high reported margins and a shrinking share count is currently attached to the fastest-growing infrastructure buildout in the economy. The maturity is what makes the growth worth paying for; without it, a 37% quarter would just be the top of a cycle.

Bear Case

The variable with the most leverage on this thesis is not demand. It is policy. The 10-K states that international sales will continue to account for a significant portion of our revenue in the future, and it is direct about what that means when the rules change: export restrictions can leave the company to lose business to foreign competitors who are not subject to such export restrictions, and management expects such measures may continue to have direct and indirect adverse impacts on our revenues. The same section lists sanctions imposed by the U.S. government or by the governments in countries in which we do business among the factors that could hurt results, and flags macroeconomic conditions, including impacts related to tariffs and other trade restrictions as a driver of end demand.

The competitive half of that risk is more corrosive than the transactional half. The filing names among its rivals companies outside of the U.S., including entities associated with well-funded efforts by foreign governments to create indigenous semiconductor industries. A customer barred from buying an American analog part does not stop building the product. It qualifies a domestic substitute, and because analog design-ins last a decade, that substitution is close to permanent once it happens. The moat that makes this business durable cuts the other way when a competitor gets inside it: the same stickiness that keeps a won socket won keeps a lost socket lost.

Now set that against what the price assumes. At $371.99 the market is paying about 48 times a year of company-wide operating income, which is the equivalent of today's economics being sustained for roughly 13.6 years before anything fades. Read through margins instead of duration, the price wants operating margins around 54.1% on the reported basis against 31.5% today. Of comparable fast-growing companies historically, only about 15% held that kind of pace for a decade. The multiple sits at the very top of the peer distribution, well beyond the upper quartile, which means the market is not merely paying for a good analog franchise; it is paying for the best possible version of one, uninterrupted, through the next two industry cycles.

That is where the timing question bites. The most recent quarter grew 37%, led by Industrial up 56%. Semiconductor demand of that shape has a well-documented habit of arriving in bursts, and the 10-K says so in its own risk language, listing competitive pricing pressures and cyclical market patterns among the factors that affect results, and warning about what happens if we overbuild inventory in a period of decreased demand. The distributor channel adds its own lag: revenue is recorded on sale to the distributor with estimates for price protection and stock rotation, and the filing concedes that if those estimates are materially understated it could cause subsequent adjustments that hurt revenue and gross profit later. Sell-in is not sell-through, and the gap between them widens exactly when a cycle turns.

Management's own guidance record is worth reading honestly here. Since 2006 the company has raised guidance twice, cut it twice, reaffirmed it once and withdrawn it once. That is the profile of a business exposed to conditions it cannot forecast, not a metronome. Paying a top-of-distribution multiple for a company that has withdrawn guidance rather than defend it is a specific choice, not a neutral one.

The concession is that the balance sheet gives this bear case no help at all. Interest is covered 11.8 times, net debt is a fraction of a year and a half of operating income, and the share count is falling. Nothing here breaks. The risk is entirely in the price: when a multiple embeds more than a decade of uninterrupted execution, the damage from a single lost geography, a policy shift, or one ordinary cyclical air pocket shows up in the multiple long before it shows up in the business.

Valuation

Duration is what today's price is really buying. At $371.99 the market pays about 48 times a year of company-wide operating income, and that works out to today's economics being sustained for roughly 13.6 years before any fade is allowed to start. Expressed through profitability instead, the same price wants operating margins near 54.1% on the reported basis, against 31.5% earned over the last twelve months. The rate of growth is not the stretch. The company has recently delivered that rate. The stretch is how long it has to keep delivering it.

For calibration, only about 15% of comparable fast-growing companies held such a pace for a decade, and this multiple sits at the very top of its peer distribution rather than somewhere inside it. Neither number is a forecast. Together they place the assumption at the demanding end of what businesses of this kind have historically managed.

The methods divide sharply, and the division is the most informative thing in the file. Only the approaches that project cash flows forward with growth land above the current price. All three of them do, and each arrives there by extending present economics a long distance into the future. The exit-multiple version is explicit about the mechanism: today's enterprise-value-to-EBITDA multiple of 44.3 is held flat to the end of a seven-year projection, compressing to 41.3 in the bear case and expanding to 47.3 in the bull. Everything static lands far below. Value the company on its book and the answer comes in near a fifth of the price, because the balance sheet reports a trailing return on equity of 9.8% against a required return of 9.3%, which leaves almost no excess return to capitalize. Capitalize a normalized year of operating profit with no growth and the answer is similar. Peer multiples land closer but still well under, blending the sector reference with the company's own trailing figure to a price-to-earnings ratio around 31.9, against a trailing 55.

That pattern has a plain reading. There is no valuation floor being offered here by any static method. The entire case for the current price rests on the forward path, which is exactly what the growth methods encode and the others structurally cannot.

The peer group sharpens rather than softens the point. Texas Instruments (TXN) earns 35.3% operating margins on $18.4 billion of revenue growing 14.9%, and NXP (NXPI) earns 30.4% on $12.6 billion, while ON Semiconductor (ON) manages 10.0% on revenue down 9.0% and Microchip (MCHP) 10.4%. Analog Devices sits in the top tier on profitability, alongside the largest and most respected name in the industry rather than ahead of it, yet carries the most demanding assumption in the cohort. Being excellent and being priced for excellence are separable facts, and here they point in different directions.

Solvency removes most of the tail risk without touching the valuation question. Interest is covered 11.8 times by operating income, net debt of $5.1 billion runs 1.32 times operating income before tax, and the company is not burning anything. The share count has fallen about 1.7% a year over the four years to May 2026, so per-share results start each year slightly ahead of company results, which is the opposite of the arithmetic most premium-multiple growth stories carry. A cycle downturn would hurt the multiple here well before it threatened the balance sheet.

Catalysts

The May-quarter print was the largest in the company's history and it was broad. Revenue came in at $3.62 billion, up 37% from $2.64 billion a year earlier, with every end market growing. Industrial did most of the work at $1.80 billion, up 56%, and Communications grew fastest in percentage terms at $554.7 million, up 79%. Automotive lagged, growing 2% to $871.6 million, and that is worth holding onto: the end market supplying 30% of revenue is currently contributing almost none of the growth.

Guidance for the following quarter is $3.9 billion of revenue plus or minus $100 million. Hitting the midpoint would mean another sequential step up on top of a quarter that already grew 37% year over year, and it puts the burden of proof on the same two end markets. The 10-K attributes the communications strength to data center infrastructure expansion in support of AI applications, so the segment's next few prints double as a read on whether that buildout is still accelerating or merely large.

Three things in the next report carry more information than the headline. Whether Automotive comes off its 2% growth rate, since a recovery there would broaden the base and its continued absence would concentrate the story further. Whether Industrial holds anything close to the pace it just set, because a 56% comparison becomes progressively harder to lap. And whether inventory in the distributor channel is building, since revenue is recognized on the sale into that channel rather than out of it, which is where the difference between a genuine upcycle and a restocking cycle eventually shows up.

Peer Cohorts (Per Segment, With Filing Citations)

Analog Devices (consolidated) (reported)

• TXN (TEXAS INSTRUMENTS INCORPORATED)
• FY2025 10-K: …to revenue growth, improved gross margins, disciplined R&D and SG&A expense, free cash flow margins and ultimately to free cash flow per share growth. 2 We believe that our business model with the combined effect of our four competitive advantages sets TI apart from our peers and will for a long time to come. We will…
• FY2025 10-K: …storage Communications equipment Wireless infrastructure (3% of TI revenue) Wired networking Broadband fixed line access In addition, we sell calculators, which was about 1% of our revenue. Market characteristics Competitive landscape Despite consolidation, the analog and embedded processing markets remain highly…
• NXPI (NXP Semiconductors N.V.)
• FY2025 10-K: …defined vehicle (SDV) middleware for the growing ecosystems in & around vehicles, smart factories, robotics, homes and buildings. Enabling innovation at our customers as well as reducing complexity, integration efforts and shorten time to market is a key element of our strategy. We believe we have the broadest Arm…
• FY2025 10-K: …as well as Wi-Fi and Wi-Fi/Bluetooth integrated SoCs. These products are integrated into a wide variety of end devices, such as mobile phones, wearables, enterprise access points, home gateways, voice assistants, multimedia devices, gaming consoles, printers, automotive infotainment and smart industrial devices. v.…
• QRVO (Qorvo, Inc.)
• FY2025 10-K: …by rapid advances in technology and new product introductions. Our customers' product life cycles can be short, especially in mobile devices, and our competitiveness depends on our ability to improve our products and processes faster than our competitors, anticipate changing customer requirements and successfully…
• FY2025 10-K: …maker ("CODM"). The CODM primarily uses segment operating income (loss) to evaluate each segment's performance and allocate resources. This measure is utilized during the budgeting and forecasting process to assess profitability and enable decision making regarding strategic initiatives, capital investments and…
• MPWR (MONOLITHIC POWER SYSTEMS INC)
• FY2025 10-K: …partners utilize prior to shipping to our customers. The manufacturing facilities we utilize in Asia enable us to benefit from shorter manufacturing cycle times and lower labor and overhead costs. We have expanded our product testing capabilities in these facilities and are able to take advantage of the rich pool of…
• FY2025 10-K: …of such products. We consider our primary competitors to include Analog Devices, Infineon Technologies, NXP Semiconductors, ON Semiconductor, Power Integrations, Renesas Electronics, ROHM Semiconductor, Semtech, STMicroelectronics and Texas Instruments. 9 Table of Contents We expect continued competition from…
• MCHP (MICROCHIP TECHNOLOGY INCORPORATED)
• FY2025 10-K: …Statements Note 1 . Significant Accounting Policies Nature of Business Microchip Technology Incorporated (Microchip or the Company) develops, manufactures and sells smart, connected and secure embedded control solutions used by its customers for a wide variety of applications. The Company provides cost-effective…
• FY2025 10-K: …product line decreased approximately 42.6% in fiscal 2025 compared to fiscal 2024. The decrease in net sales was primarily due to adverse economic conditions, including slowing economic activity, increasing business uncertainty, persistent inflation, high interest rates, and shorter product lead times, which factors…
• ON (ON Semiconductor Corporation)
• FY2025 10-K: ;term gross margin expansion and enable efficient scaling of differentiated high‑value power products. AMG AMG designs and develops a comprehensive range of analog and mixed-signal solutions including power‑management, sensor‑interface, connectivity, and standard products that serve automotive, industrial automation,…
• FY2025 10-K: …personnel. Our competitive position with respect to the above is enhanced by long-standing relationships with leading customers. Our ability to compete successfully depends on internal and external variables. These variables include, but are not limited to, the timeliness with which we can develop new products and…
• STM (STMicroelectronics N.V.)
• FY2025 20-F: (iii) in Personal Electronics: engaged customer programs in sensors and analog; (iv) in Communication Equipment and Computer Peripherals: data centers, including cloud optical interconnect and Power and Analog for AI servers and data centers and low earth orbit ("LEO") satellites. We are also uniquely positioned to…
• FY2025 20-F: …Discrete products ("P&D") reportable segment to Analog products, MEMS and Sensors ("AM&S") reportable segment. • In Microcontrollers, Digital ICs and RF products (MDRF) Product Group: • the newly created ‘Embedded Processing' reportable segment includes the former ‘MCU' segment (excluding the RF ASICs mentioned…
• SWKS (SKYWORKS SOLUTIONS, INC.)
• FY2025 10-K: …allow our team to facilitate customer-driven solutions, which leverage the unique strength of our intellectual property and product portfolio while providing high value and greatly reducing time-to-market. We believe the technical and complex nature of our products and markets demand an extraordinary commitment to…
• FY2025 10-K: …5,200 worldwide issued patents and other intellectual property that we own and control. Together, our industry-leading technology enables us to deliver the highest levels of product performance and integration. Customer Relationships Given our scale and technology leadership, we are engaged with leading original…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.