Analog Devices Inc.

02/18/2026 | Press release | Distributed by Public on 02/18/2026 06:06

Quarterly Report for Quarter Ending January 31, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
This information should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q and the audited consolidated financial statements and related notes and Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended November 1, 2025 (fiscal 2025).
This Quarterly Report on Form 10-Q, including the following discussion, contains forward-looking statements regarding future events and our future results that are subject to the safe harbor created under the Private Securities Litigation Reform Act of 1995 and other safe harbors under the Securities Act of 1933 and the Securities Exchange Act of 1934. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. These statements are based on current expectations, estimates, forecasts and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as "expects," "anticipates," "targets," "goals," "projects," "intends," "plans," "believes," "seeks," "estimates," "continues," "potential," "may," "could" and "will," and variations of such words and similar expressions are intended to identify such forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors.
The following important factors and uncertainties, among others, could cause actual results to differ materially from those described in the forward-looking statements: economic, political, legal and regulatory uncertainty or conflicts; recently announced and future tariffs and other trade restrictions; changes in export classifications, import and export regulations or duties and tariffs; changes in demand for semiconductor products; performance of independent distributors; manufacturing delays, product and raw materials availability and supply chain disruptions; products that may be diverted from our authorized distribution channels; our development of technologies and research and development investments; our ability to compete successfully in the markets in which we operate; our future liquidity, capital needs and capital expenditures; our ability to recruit and retain key personnel; risks related to acquisitions or other strategic transactions; security breaches or other cyber incidents; risks related to the use of artificial intelligence in our business operations, products and services; adverse results in litigation and regulatory matters; reputational damage; changes in our estimates of our expected tax rates based on current tax law; risks related to our indebtedness; the discretion of our Board of Directors to declare dividends and our ability to pay dividends in the future; factors impacting our ability to repurchase shares; and uncertainty as to the long-term value of our common stock. Additional factors that could cause actual results to differ materially from those described in these forward-looking statements include the risk factors included in Part I, Item 1A, "Risk Factors" of our Annual Report on Form 10-K for fiscal 2025. Forward-looking statements represent management's current expectations and are inherently uncertain. We undertake no obligation to revise or update any forward-looking statements, including to reflect events or circumstances occurring after the date of the filing of this report, except to the extent required by law.
Results of Operations
Overview
Amounts in the table below are reflected in thousands except per share amounts and percentages.
Three Months Ended
January 31, 2026 February 1, 2025 $ Change % Change
Revenue $ 3,160,263 $ 2,423,174 $ 737,089 30 %
Gross margin % 64.7 % 59.0 %
Net income $ 830,826 $ 391,316 $ 439,510 112 %
Net income as a % of revenue 26.3 % 16.1 %
Diluted EPS $ 1.69 $ 0.78 $ 0.91 117 %
Revenue Trends by End Market
The following table summarizes revenue by end market. The categorization of revenue by end market is determined using a variety of data points including the technical characteristics of the product, the "sold to" customer information, the "ship to" customer information and the end customer product or application into which our product will be incorporated. The assignment of products to end markets may change over time. When this occurs, we reclassify revenue by end market for prior periods. Such reclassifications typically do not materially change the sizing of, or the underlying trends of results within, each end market.
Three Months Ended
January 31, 2026 February 1, 2025
Revenue % of
Revenue* 		Y/Y% Revenue % of
Revenue*
Industrial $ 1,489,256 47 % 38 % $ 1,080,650 45 %
Automotive 794,402 25 % 8 % 735,646 30 %
Communications 476,797 15 % 63 % 292,186 12 %
Consumer 399,808 13 % 27 % 314,692 13 %
Total revenue $ 3,160,263 100 % 30 % $ 2,423,174 100 %
* The sum of the individual percentages may not equal the total due to rounding.
Revenue increased 30% in the three-month period ended January 31, 2026 as compared to the same period of the prior fiscal year as a result of a broad-based increase in demand for our products, notably within the wireline sub-markets of the Communications end market that supports datacenter expansion, within the test equipment sub-market of the Industrial end market and within portable consumer products sub-market of the Consumer end market.
Revenue by Sales Channel
The following table summarizes revenue by sales channel. We sell our products globally through a direct sales force, third-party distributors, independent sales representatives and via our website. Distributors are customers that buy products with the intention of reselling them. Direct customers are non-distributor customers and consist primarily of original equipment manufacturers. Other customers include the U.S. government, government prime contractors and certain commercial customers for which revenue is recorded over time.
Three Months Ended
January 31, 2026 February 1, 2025
Revenue % of Revenue* Revenue % of Revenue*
Channel
Distributors $ 1,742,294 55 % $ 1,375,464 57 %
Direct customers 1,377,131 44 % 1,019,872 42 %
Other 40,838 1 % 27,838 1 %
Total revenue $ 3,160,263 100 % $ 2,423,174 100 %
* The sum of the individual percentages may not equal the total due to rounding.
As indicated in the table above, the percentage of total revenue sold via each channel has remained relatively consistent in the periods presented, but can fluctuate from time to time based on end market revenue trends.
Gross Margin
Three Months Ended
January 31, 2026 February 1, 2025 $ Change % Change
Gross margin $ 2,044,976 $ 1,430,303 $ 614,673 43 %
Gross margin % 64.7 % 59.0 %
Gross margin percentage increased by 570 basis points in the three-month period ended January 31, 2026 as compared to the same period of the prior fiscal year, primarily due to higher utilization of our factories as a result of increased customer demand and favorable mix of products sold into our end markets.
Research and Development (R&D)
Three Months Ended
January 31, 2026 February 1, 2025 $ Change % Change
R&D expenses $ 467,400 $ 402,892 $ 64,508 16 %
R&D expenses as a % of revenue 15 % 17 %
R&D expenses increased in the three-month period ended January 31, 2026, as compared to the same period of the prior fiscal year, primarily as a result of higher R&D employee-related variable compensation expenses.R&D expenses as a percentage of revenue will fluctuate from year-to-year depending on the amount of revenue and the success of new product development efforts, which we view as critical to our future growth. We expect to continue the development of innovative technologies and processes for new products. We believe that a continued commitment to R&D is essential to maintain product leadership with our existing products as well as to provide innovative new product offerings.
Selling, Marketing, General and Administrative (SMG&A)
Three Months Ended
January 31, 2026 February 1, 2025 $ Change % Change
SMG&A expenses $ 345,253 $ 284,796 $ 60,457 21 %
SMG&A expenses as a % of revenue 11 % 12 %
SMG&A expenses increased in the three-month period ended January 31, 2026, as compared to the same period of the prior fiscal year, primarily as a result of higher SMG&A employee-related variable compensation expenses and higher salary and benefit expenses.
Special Charges, Net
Three Months Ended
January 31, 2026 February 1, 2025 $ Change % Change
Special charges, net $ 47,982 $ 63,887 $ (15,905) (25) %
Special charges, net decreased in the three-month period ended January 31, 2026, as compared to the same period of the prior fiscal year, primarily due to decreased charges related to our Global Repositioning Actions, partially offset by a $15.6 million impairment charge related to our asset group in our leased facilities in San Jose, California.
Nonoperating Expense (Income)
Three Months Ended
January 31, 2026 February 1, 2025 $ Change
Total nonoperating expense (income) $ 51,155 $ 55,737 $ (4,582)
The year-over-year decrease in nonoperating expense (income) in the three-month period ended January 31, 2026, as compared to the same period of the prior fiscal year, was primarily due to gains on our other investments.
Provision for Income Taxes
Three Months Ended
January 31, 2026 February 1, 2025 $ Change
Provision for income taxes $ 115,045 $ 44,260 $ 70,785
Effective income tax rate 12.2 % 10.2 %
The primary driver for our increased tax rate is the increase in taxes paid on our international profits. This results in higher non-deductible foreign tax expense under the global intangible low-taxed income (GILTI) regime, which has the effect of increasing our effective tax rate.
Net Income
Three Months Ended
January 31, 2026 February 1, 2025 $ Change % Change
Net income $ 830,826 $ 391,316 $ 439,510 112 %
Net income as a % of revenue 26.3 % 16.1 %
Diluted EPS $ 1.69 $ 0.78
Net income increased in the three-month period ended January 31, 2026, as compared to the same period of the prior fiscal year, as the result of a $505.7 million increase in operating income and a $4.6 million decrease in nonoperating expense (income), partially offset by a $70.8 million increase in provision for income taxes.
Liquidity and Capital Resources
At January 31, 2026, our principal source of liquidity was $4.0 billion of cash, cash equivalents and short-term investments, of which approximately $2.3 billion was held in the United States, and the balance of which was held outside the United States in various foreign subsidiaries. We manage our worldwide cash requirements by, among other things, reviewing available funds held by our foreign subsidiaries and the cost effectiveness by which those funds can be accessed in the United States. We do not expect current regulatory restrictions or taxes on repatriation to have a material adverse effect on our overall liquidity, financial condition or results of operations. Our cash, cash equivalents and short-term investments consist of highly liquid investments, including money market funds and corporate and bank obligations. We maintain these balances with counterparties with high credit ratings, and continually monitor the amount of credit exposure to any one issuer and diversify our investments in order to minimize our credit risk.
We believe that our existing sources of liquidity and cash expected to be generated from future operations, together with existing and anticipated available short- and long-term financing, will be sufficient to fund operations, capital expenditures, research and development efforts and dividend payments (if any) in the immediate future and for at least the next twelve months.
Three Months Ended
January 31, 2026 February 1, 2025
Net cash provided by operating activities $ 1,368,515 $ 1,126,809
Net cash provided by operations as a % of revenue 43 % 47 %
Net cash used for investing activities $ (107,029) $ (194,301)
Net cash used for financing activities $ (855,032) $ (573,856)
The following changes contributed to the net change in cash and cash equivalents in the three-month period ended January 31, 2026 as compared to the same period in fiscal 2025.
Operating Activities
Cash provided by operating activities is net income adjusted for certain non-cash items and changes in operating assets and liabilities. The increase in cash provided by operating activities during the three-month period ended January 31, 2026, as compared to the same period of the prior fiscal year, was mainly the result of higher net income adjusted for non-cash items.
Investing Activities
Investing cash flows generally consist of purchases of property, plant and equipment, available-for-sale investments and acquisitions of other businesses. The change in investing cash flows during the three-month period ended January 31, 2026, as compared to the same period of the prior fiscal year, was primarily the result of a decrease in cash used for capital expenditures. The change in investing cash flows also included cash paid for an acquisition in the first quarter of fiscal 2025.
Financing Activities
Financing cash flows generally consist of payments of dividends to stockholders, repurchases of common stock, issuances and repayments of debt and proceeds from the sale of shares of common stock pursuant to employee equity incentive plans. The change in cash used for financing activities during the three-month period ended January 31, 2026, as compared to the same period of the prior fiscal year, was primarily the result of higher common stock repurchases.
Working Capital
January 31, 2026 November 1, 2025 $ Change % Change
Accounts receivable $ 1,360,184 $ 1,436,075 $ (75,891) (5) %
Days sales outstanding* 40 44
Inventory $ 1,767,104 $ 1,656,323 $ 110,781 7 %
Days cost of sales in inventory* 140 130
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*We use the average of the current quarter and prior quarter ending net accounts receivable and ending inventory balance in our calculation of days sales outstanding and days cost of sales in inventory, respectively.
The decrease in accounts receivable in dollars was primarily the result of variations in the timing of collections and billings.
Inventory increased primarily as a result of building inventory levels to support increased demand.
Current liabilities increased to $4.3 billion at January 31, 2026 as compared to $3.2 billion at the end of fiscal 2025 primarily due to the reclassification of $0.9 billion of debt due in December 2026 to current liabilities as well as an increase in income taxes payable.
Debt
As of January 31, 2026, our debt obligations consisted of the following:
Principal Amount Outstanding
Commercial paper notes $ 543,042
2026 Notes, due December 2026 900,000
2027 Notes, due June 2027 440,212
2028 Notes, due June 2028 850,000
2028 Notes, due October 2028 750,000
2030 Notes, due June 2030 650,000
2031 Notes, due October 2031 1,000,000
2032 Notes, due October 2032 300,000
2034 Notes, due April 2034 550,000
2036 Notes, due December 2036 144,278
2041 Notes, due October 2041 750,000
2045 Notes, due December 2045 332,587
2051 Notes, due October 2051 1,000,000
2054 Notes, due April 2054 550,000
Total debt $ 8,760,119
The indentures governing our outstanding notes contain covenants that may limit our ability to: incur, create, assume or guarantee any debt for borrowed money secured by a lien upon a principal property; enter into sale and lease-back transactions with respect to a principal property; and consolidate with or merge into, or transfer or lease all or substantially all of our assets to, any other party. As of January 31, 2026, we were in compliance with these covenants.
Under our commercial paper program, we may issue short-term, unsecured commercial paper notes in amounts up to a maximum aggregate face amount of $3.0 billion outstanding at any time, with maturities of up to 397 days from the date of issuance. As of January 31, 2026, we had $543.0 million of outstanding borrowings under the commercial paper program recorded in the Condensed Consolidated Balance Sheet. We intend to use the net proceeds of the commercial paper program for general corporate purposes, including without limitation, repayment of indebtedness, stock repurchases, acquisitions, capital expenditures and working capital.
Revolving Credit Facility
Our Fourth Amended and Restated Revolving Credit Agreement, dated as of April 11, 2025, with Bank of America N.A. as administrative agent and the other banks identified therein as lenders (the Revolving Credit Agreement) provides for a five-year unsecured revolving credit facility in an aggregate principal amount not to exceed $3.0 billion (subject to certain terms and conditions).
We may borrow under the Revolving Credit Agreement in the future and use the proceeds for repayment of existing indebtedness, stock repurchases, acquisitions, capital expenditures, working capital and other lawful corporate purposes. The terms of the Revolving Credit Agreement impose restrictions on our ability to undertake certain transactions, to create certain liens on assets and to incur certain subsidiary indebtedness. In addition, the Revolving Credit Agreement contains an interest coverage covenant which requires the ratio of consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) to consolidated interest charges to be greater than 3.0 to 1.0. As of January 31, 2026, we were in compliance with these covenants.
Stock Repurchase Program
As of January 31, 2026, our Board of Directors had authorized us to repurchase an aggregate of $26.7 billion of our common stock under our common stock repurchase program and $9.1 billion remained available for repurchases under the current authorized program. Repurchased shares are held as authorized but unissued shares of common stock. Unless terminated earlier by resolution of our Board of Directors, the repurchase program will expire when the full dollar amount of the authorization has been used to repurchase shares under the program. Future repurchases of common stock will be dependent upon our financial position, results of operations, outlook, liquidity and other factors we deem relevant.
Capital Expenditures
Net additions to property, plant and equipment were $109.3 million in the first three months of fiscal 2026. We expect capital expenditures for fiscal 2026 to be between approximately 4% and 6% of fiscal 2026 revenue. These capital expenditures will be funded with a combination of cash on hand and cash expected to be generated from future operations, together with existing and anticipated available short- and long-term financing.
Dividends
On February 17, 2026, our Board of Directors declared a cash dividend of $1.10 per outstanding share of common stock. The dividend will be paid on March 17, 2026 to all shareholders of record at the close of business on March 3, 2026 and is expected to total approximately $537.0 million. We currently expect quarterly dividends to continue in future periods, although they remain subject to determination and declaration by our Board of Directors. The payment of future dividends, if any, will be based on several factors, including our financial performance, outlook and liquidity.
New Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board that are adopted by us as of the specified effective date. Unless otherwise discussed, management believes that the impact of recently issued standards will not have a material impact on our future financial condition, results of operations, and disclosures. See Note 11, New Accounting Pronouncements,in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for a description of recently issued and adopted accounting pronouncements, including the dates of adoption and impact on our historical financial condition, results of operations, and disclosures.
Analog Devices Inc. published this content on February 18, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on February 18, 2026 at 12:06 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]