ADI
ANALOG DEVICES INCNasdaqValuation snapshot
Above bull casePrice is above even the bull case.
Price as of Aug 17, 2026 · Valuation Aug 16, 2026
What drives ADI's base case?
base-case thesisThe latest quarter shows a broad recovery led by factory equipment and AI-related data-center demand, and management expects another strong quarter. Growth then slows as easy comparisons pass, but the large industrial and automotive franchises continue expanding. Better factory use and fading acquisition charges allow profitability to improve gradually.
What shapes the assumptions
Management guided the next quarter to $3.9 billion of sales
Near-term revenue
Raises revenue growth
Industrial and Communications grew 56% and 79% in the latest quarter
End-market revenue growth
Raises revenue growth
Reported profitability rose to 38.1% with stronger factory use
Reported profitability
Raises operating margin
Capital spending is planned at 4% to 6% of sales
Capital expenditures
Informs reinvestment
Each driver links a business metric to the forecast assumption it shapes — the basis for this case, not investment advice.
Why the gap?
The market is pricing this as if revenue grows 36.5% a year. Over the last 5 years it grew 15.5% a year — so the price assumes far more than it has delivered.
What else could explain it?›
- How confident is this estimate?
- Robustness 52.0/10 (Moderate) — some of any gap is our own uncertainty rather than disagreement.
- What would change the answer?
- Which assumption this valuation swings on, and by how much.
Many combinations of assumptions reproduce the same price. These are ways to read what the market might be expecting, not the market's actual view. How this is worked out
Research & assumptions
Inspect the valuation thesis, cases, risks, evidence, and model inputs.
View details
Research & assumptions
Inspect the valuation thesis, cases, risks, evidence, and model inputs.
Three independently researched cases generated automatically from published financials. Every assumption is justified and cited; the discount rate is computed from researched market inputs.
Base inputs from financials
source period →Base revenue (TTM)
$12.7B
Diluted shares
490,458,000
Net cash
-$5.7B
Bear
low confidence$85.66
IV / share
-78.0% vs $389.39
- Explicit cash flows
- $28.69
- Terminal value
- $68.59
- Net cash
- -$11.62
- Intrinsic value / share
- $85.66
80.1% of the value rests on the terminal value — high dependency. A small change to terminal growth moves the valuation a lot — see terminal growth below.
bear revenue growth (avg 4%) runs well above the trailing -15% trend
Revenue growth10.0% → 2.0% → 2.0% → 2.5% → 2.5%medium
How derived: Starting from 0.37 quarterly growth and management's $3.9 billion next-quarter outlook, this path assumes the inventory-recovery and AI-infrastructure surge fades quickly because Automotive grew only 0.02 and current growth is measured against a weak prior year.
Why this confidence: Near-term management guidance ↑, Uncertain duration of the semiconductor recovery ↓
Evidence for
- Automotive, one quarter of revenue, grew only 0.02 year over year in Q2 FY2026, leaving a meaningful part of the portfolio well behind the recovery.[ADI Q2 FY2026 Form 10-Q]· primary
Evidence against
- Management reported record bookings across Industrial, Automotive, and Communications and forecast $3.9 billion of Q3 revenue.[ADI Q2 FY2026 results]· primary
Operating margin36.0%medium
How derived: Starting from the latest 0.381 reported margin and management's 0.39 Q3 midpoint, the bear case assumes weaker utilization and continued research spending pull profitability back below the current peak.
Why this confidence: Current reported margin and next-quarter guidance ↑, Utilization sensitivity over five years ↓
Evidence for
- ADI states that factory utilization materially affects gross margin, making the current margin vulnerable if demand weakens.[ADI 2025 Annual Report]· primary
Evidence against
- Reported margin reached 0.381 in Q2 and management guided to approximately 0.39 for Q3.[ADI Q2 FY2026 results]· primary
Tax rate17.0%medium
How derived: Starting from the 0.164 FY2025 rate, this case rounds upward for higher international-profit taxes, GILTI expense, and unresolved transfer-pricing exposure.
Why this confidence: Reported tax-rate history ↑, Tax-law and audit uncertainty ↓
Evidence for
- The company said higher taxes on international profits raised GILTI-related expense in the first half of FY2026, while an IRS transfer-pricing assessment could materially affect future tax expense.[ADI Q2 FY2026 Form 10-Q]· primary
Evidence against
- The Q2 FY2026 effective rate was only 0.112 because substantial income is earned in lower-tax foreign jurisdictions.[ADI Q2 FY2026 Form 10-Q]· primary
Reinvestment rate16.0%low
How derived: Starting from management's capital-spending range of 0.04 to 0.06 of revenue, this rate assumes subdued growth requires limited incremental fixed and working capital while research spending remains necessary.
Why this confidence: Company capital-expenditure guidance ↑, Reinvestment includes uncertain working-capital and research needs ↓
Evidence for
- ADI expects FY2026 capital expenditures of only 0.04 to 0.06 of revenue, consistent with a relatively asset-efficient hybrid manufacturing model.[ADI Q2 FY2026 Form 10-Q]· primary
Evidence against
- Inventory increased to $1.85 billion by Q2 FY2026 and management describes continued product and process research as essential to future growth.[ADI Q2 FY2026 Form 10-Q]· primary
Terminal growth2.0%low
How derived: Starting from ADI's diversified industrial and automotive exposure, this rate assumes mature nominal growth below the broader economy because semiconductor demand remains cyclical and competitive.
Why this confidence: Diversified long-life applications ↑, Very long forecast horizon ↓
Evidence for
- ADI serves long-lived automation, mobility, healthcare, energy, and data-center applications that can support persistent demand.[ADI 2025 Annual Report]· primary
Evidence against
- ADI identifies demand changes, competition, export restrictions, tariffs, and manufacturing disruptions as material risks.[ADI Q2 FY2026 results]· primary
Base
low confidence$126.21
IV / share
-67.6% vs $389.39
- Explicit cash flows
- $37.02
- Terminal value
- $100.81
- Net cash
- -$11.62
- Intrinsic value / share
- $126.21
79.9% of the value rests on the terminal value — high dependency. A small change to terminal growth moves the valuation a lot — see terminal growth below.
base revenue growth (avg 8%) runs well above the trailing -15% trend
Revenue growth17.0% → 8.0% → 6.0% → 5.0% → 4.0%medium
How derived: Starting from 0.37 Q2 growth, 0.34 first-half growth, and the $3.9 billion Q3 outlook, the central path captures a strong recovery year followed by normalization as comparisons toughen.
Why this confidence: Management guidance and bookings ↑, Growth beyond the guided quarter ↓
Evidence for
- Q2 revenue grew 0.37, management reported record business-market bookings, and its Q3 revenue midpoint implies another strong year-over-year increase.[ADI Q2 FY2026 results]· primary
Evidence against
- Automotive grew just 0.02 in Q2, while the strongest gains in Industrial and Communications followed a deep industry correction and weak comparisons.[ADI Q2 FY2026 Form 10-Q]· primary
Operating margin42.0%medium
How derived: Starting from the 0.381 Q2 margin and 0.39 Q3 guidance, this case adds moderate scale leverage and declining acquired-intangible amortization without assuming the current 0.49 adjusted margin becomes fully reportable.
Why this confidence: Current margin and management outlook ↑, Future product-mix and utilization uncertainty ↓
Evidence for
- Q2 adjusted margin was 0.49, while reported amortization expense has been declining as acquired intangible assets become fully amortized.[ADI Q2 FY2026 results]· primary
Evidence against
- Research and development consumed 0.16 of FY2025 revenue and management intends to continue investing to preserve product leadership.[ADI 2025 Annual Report]· primary
Tax rate14.0%medium
How derived: Starting from the 0.112 Q2 rate and 0.164 FY2025 rate, this normalized assumption splits the difference while allowing for higher international-profit taxation.
Why this confidence: Multiple reported periods ↑, Changing international tax rules ↓
Evidence for
- ADI's effective rates remain below the 0.21 U.S. statutory rate because much of its pretax income is generated in lower-tax foreign jurisdictions.[ADI 2025 Annual Report]· primary
Evidence against
- The FY2025 rate rose to 0.164, and management said taxes on international profits increased the FY2026 rate through GILTI.[ADI Q2 FY2026 Form 10-Q]· primary
Reinvestment rate22.0%low
How derived: Starting from planned capital spending of 0.04 to 0.06 of revenue, this rate adds working-capital and product-development needs sufficient to support mid-single-digit normalized growth.
Why this confidence: Explicit capital-expenditure guidance ↑, No company disclosure of a DCF reinvestment rate ↓
Evidence for
- Management expects FY2026 capital expenditures of 0.04 to 0.06 of revenue and continues to treat research investment as critical to new-product growth.[ADI Q2 FY2026 Form 10-Q]· primary
Evidence against
- Trailing free cash flow equaled 0.36 of revenue, indicating that the existing asset base can support substantial sales with relatively modest net investment.[ADI Q2 FY2026 results]· primary
Terminal growth2.5%low
How derived: Starting from ADI's broad exposure to automation, electrification, healthcare, and communications, this rate assumes mature nominal growth near long-run inflation plus limited unit expansion.
Why this confidence: Diversified durable end markets ↑, Terminal assumptions extend indefinitely ↓
Evidence for
- Industrial and Automotive represented three quarters of FY2025 revenue and sell into applications with long product lives and ongoing electronic-content growth.[ADI 2025 Annual Report]· primary
Evidence against
- ADI's annual revenue has experienced material expansions and contractions, demonstrating that long-run progress is unlikely to be smooth.[ADI 2025 Annual Report]· primary
Bull
low confidence$154.90
IV / share
-60.2% vs $389.39
- Explicit cash flows
- $40.99
- Terminal value
- $125.53
- Net cash
- -$11.62
- Intrinsic value / share
- $154.90
81.0% of the value rests on the terminal value — high dependency. A small change to terminal growth moves the valuation a lot — see terminal growth below.
bull revenue growth (avg 11%) runs well above the trailing -15% trend
Revenue growth22.0% → 12.0% → 9.0% → 7.0% → 5.0%low
How derived: Starting from record bookings, 0.37 Q2 growth, and rapid Industrial and Communications expansion, this path assumes AI infrastructure, automation, and eventual Automotive acceleration sustain above-cycle growth.
Why this confidence: Record bookings and broad current growth ↑, Aggressive extrapolation beyond management guidance ↓
Evidence for
- Industrial grew 0.56 and Communications grew 0.79 in Q2, with management attributing strength to test equipment, aerospace and defense, and AI-driven data-center infrastructure.[ADI Q2 FY2026 Form 10-Q]· primary
Evidence against
- Automotive grew only 0.02, and the company's filings warn that semiconductor demand, tariffs, export rules, and competition can interrupt growth.[ADI Q2 FY2026 Form 10-Q]· primary
Operating margin46.0%low
How derived: Starting from the 0.381 reported and 0.49 adjusted Q2 margins, this case assumes sustained volume leverage and amortization runoff close most of the present accounting gap.
Why this confidence: Demonstrated adjusted profitability ↑, Large gap between adjusted and reported results ↓
Evidence for
- Q2 adjusted margin reached 0.49, reported gross margin expanded by 0.063 year over year, and acquired-intangible amortization is declining.[ADI Q2 FY2026 results]· primary
Evidence against
- The reported Q2 margin remained 0.109 below the adjusted measure, and ADI continues substantial research and commercial spending.[ADI Q2 FY2026 results]· primary
Tax rate12.0%medium
How derived: Starting from the latest 0.112 quarterly rate, this case assumes ADI retains most benefits of its international income mix while allowing a small buffer for GILTI and other tax friction.
Why this confidence: Recent effective-rate evidence ↑, International tax-policy and audit risk ↓
Evidence for
- ADI's Q2 and first-half FY2026 effective rates were 0.112 and 0.116 because foreign statutory rates remain below the U.S. rate.[ADI Q2 FY2026 Form 10-Q]· primary
Evidence against
- FY2025's effective rate was 0.164, international-profit taxes are rising, and the IRS has challenged historical transfer pricing.[ADI 2025 Annual Report]· primary
Reinvestment rate30.0%low
How derived: Starting from the 0.04 to 0.06 capital-spending guide, this case adds heavier research, inventory, and working-capital investment needed to support sustained high-single-digit and double-digit sales growth.
Why this confidence: Growth-consistent investment requirement ↑, High historical cash conversion ↓
Evidence for
- ADI calls continued technology and process development essential, while accounts receivable and inventory both rose as revenue accelerated in FY2026.[ADI Q2 FY2026 Form 10-Q]· primary
Evidence against
- The company generated trailing free cash flow equal to 0.36 of revenue while capital expenditures were only $541 million, showing strong growth does not necessarily require this much reinvestment.[ADI Q2 FY2026 results]· primary
Terminal growth3.0%low
How derived: Starting from ADI's durable positions in industrial automation, electrification, and connectivity, this rate assumes electronic content continues expanding slightly faster than inflation without exceeding plausible long-run economic growth.
Why this confidence: Multiple structural end-market drivers ↑, Indefinite forecast horizon ↓
Evidence for
- ADI's disclosed applications include automation, robotics, mobility, healthcare, energy, and data centers, providing several structural sources of increasing semiconductor content.[ADI 2025 Annual Report]· primary
Evidence against
- Rapid technological change, competition, trade restrictions, and semiconductor cyclicality make indefinitely above-inflation growth uncertain.[ADI Q2 FY2026 results]· primary
Valuation robustness
reliability of the estimate, not a stock rating52 / 100 · Moderate
Formula v1.0.0. Higher means a more reliable estimate — not a recommendation.
Quality checks
Automated model-risk flags — warnings, not recommendations.
- 80% of the intrinsic value rests on the terminal value — a small change to terminal growth moves the valuation a lot.→ terminal growth
- The reinvestment assumption is low-confidence.→ reinvestment
- The terminal growth assumption is low-confidence.→ terminal growth
Per-share economics
Business growth after changes in the diluted share count.
| Period | Revenue growth | FCF/share | FCF/share growth | Shares | Share growth |
|---|---|---|---|---|---|
| Q3 2024 | -24.8% | 1.41 | -13.5% | 498.79M | -0.9% |
| Q1 2025 | -3.6% | 1.96 | 6.8% | 498.67M | -0.0% |
| Q2 2025 | 22.3% | 1.46 | 17.8% | 498.2M | -0.1% |
| Q3 2025 | 24.6% | 2.19 | 55.5% | 496.73M | -0.4% |
| Q1 2026 | 30.4% | 2.56 | 30.6% | 491.66M | -1.4% |
| Q2 2026 | 37.2% | 1.5 | 2.3% | 490.46M | -1.6% |
Valuation history every run
History builds as the valuation is recalculated — this is the first recorded run.
Market inputs researched
The 0.0468 input is the U.S. Treasury's 10-year par yield for August 14, 2026, used as the nominal U.S.-dollar risk-free rate.
The 1.19 five-year monthly beta is used as the market-observed measure of ADI's equity sensitivity rather than a scenario-specific business assumption.
The 0.042 mature-market premium is the July 1, 2026 forward-looking implied U.S. equity premium after separating the sovereign default spread from the Treasury yield.
The $387.11 input is ADI's latest available Nasdaq closing price before the August 16, 2026 valuation date.
Generated 8/16/2026, 6:29:57 AM · pipeline v1.1.0