Analog Devices Reports ‘Robust’ FY Q2 Growth From 5G Momentum Gains

The “next wave” in the transition of the information and communications technology sector is the “nascent intelligent edge revolution,” said Analog Devices CEO Vincent Roche on an earnings call Wednesday for fiscal Q2 ended April 30. ADI finished the quarter with 79% year-over-year revenue growth to $2.97 billion, driven by double-digit increases in all its “end markets.”

Intelligent edge will be characterized by “ubiquitous sensing, hyperscale computing and pervasive connectivity,” said Roche. “Semiconductors are the bedrock enabling this next wave.”

In ADI’s communications end market, where the company holds top share in radio-signaling components for 5G, its latest-generation transceiver includes a “fully integrated digital front end,” which grows its serviceable available market “by 2X,” said Roche. The transceiver’s radio architecture “reduces system cost and waste and improves power efficiency,” he said. Its “flexibility” enables its use in “traditional” 5G deployments, plus in open radio access and LEO satellite networks, he said.

ADI drew 16% of its fiscal Q2 revenue from communications, said Chief Financial Officer Prashanth Mahendra-Rajah. The sector had “robust broad-based growth” in the quarter, he said. “In wireless, we experienced growing demand across our RF portfolio, as 5G deployments, particularly in North America, gained momentum.” In wireline, demand for ADI’s optical communications products remained strong, “as carriers and hyperscalers invest to meet the ever-growing demand for bandwidth, he said.

The consumer end market generated 12% of ADI’s revenue in fiscal Q2, “and has now grown year over year for six straight quarters,” said Mahendra-Rajah. “This consistent growth is a function of our product and customer breadth, which better insulates us from the typical fluctuations associated with PCs and portable devices.”

ADI, typifying “the rest of the industry,” has been passing along its higher costs in the form of price increases, said Mahendra-Rajah. “We have been very focused on not using this environment to take advantage of our customers, but to really maintain our gross margins,” he said. In 2021, ADI encountered “some headwind from the timing of inflation, versus when we able to enact the pricing” adjustments, he said. “That has really abated in ‘22.” ADI’s adjusted gross margin percentage in fiscal Q2 increased 330 basis points to 74.2%, mainly due to increased fab utilization and better product “mix,” he said.

In China, where ADI typically gets about a fifth of its quarterly revenue, the COVID-19 lockdowns “had some impact on customer production, but was really more severe around logistics and the supply chain related to the greater Shanghai area,” said Mahendra-Rajah. “Our China revenue was up quarter over quarter and year over year, with no notable impacts on demand,” he said.