Q1 FY2026 MAJOR INFLECTION: Revenue $3.16B +30% YoY (Accelerating From +26% Q4), EPS $2.46 +51% YoY, Operating Margin 45.5% Above High End of Guide, Communications +63% YoY (Data Center Surge), Q2 FY26 Guide $3.5B Sequential +11% (vs Normal +4-5% Seasonal), Q2 EPS $2.88 vs Street $2.62, 22nd Consecutive Dividend +11%, Vince Frames FY26 as "Banner Year" — Maintaining Outperform with HIGH Conviction
Key Takeaways
- Q1 revenue $3.16B (+30% YoY / +3% QoQ) toward high end of guide. Multi-quarter YoY ACCELERATING: +22% Q2 → +25% Q3 → +26% Q4 → +30% Q1. Non-GAAP EPS $2.46 (+51% YoY / +9% QoQ) above high end of $2.29 ± $0.10 guide; beats Street $2.32 by $0.14.
- Operating margin 45.5% (+200bp QoQ / +500bp YoY) — ABOVE high end of guide 43.5% ± 100bp. Gross margin 71.2% (+140bp QoQ / +240bp YoY) — record level (incl ~50bp from discrete items). Multi-year operating margin trajectory now beyond prior 43-45% framework.
- End markets Q1: Industrial 47% (+38% YoY, all subsectors +25%+ YoY, record ATE + AD&A); Communications 15% (+63% YoY — strongest growth on data center + wireless cyclical); Automotive 25% (+8% YoY / -8% QoQ on pull-in unwind); Consumer 13% (+27% YoY on wearables + premium handsets).
- AI STORY: ATE + Data Center ~20% of revenue. ATE +40% FY25 + further accelerated Q1 FY26. Data Center +50% FY25 + further accelerated Q1 FY26. Multi-year HBM4 transition + hyperscaler capex tailwinds. Content per tester reaches tens of thousands. Power management 1/3 each from hot swap + DC control.
- Q2 FY26 guide: Revenue $3.5B ± $100M (sequential +11% vs normal +4-5% seasonal); operating margin 47.5% ± 100bp; EPS $2.88 ± $0.15 — all materially above Street. Industrial up 20% QoQ +50% YoY; Communications up HSD QoQ +60% YoY; Auto flat to down (pull-in unwind); Consumer down MSD% (seasonal).
- "FY26 has the potential to be a BANNER YEAR for ADI" — Vincent Roche explicit framing. Multi-year framework: broad-based growth + multi-year AI exposure + multi-year automation + multi-year capital return discipline.
- 22nd consecutive annual dividend increase +11% to $1.10 quarterly — strongest dividend raise in recent years. $32B+ total returned since 2004 inception. Since Maxim acquisition: >100% of FCF returned. Trailing 12M FCF $4.6B (39% revenue).
- "No evidence whatsoever" of OEM customer restocking per Vince — multi-quarter sustainability. Multi-year cyclical recovery + multi-year content expansion compounding.
- Stock +11.2% to ~$328 on multi-quarter inflection + multi-year framework validation + "banner year" framing + Q2 guide materially above. Multi-year compounder thesis operationally accelerating.
- Rating: Maintaining Outperform with HIGH conviction. Multi-quarter inflection validated; multi-year AI exposure (ATE + Data Center ~20% revenue) + multi-year automation + multi-year capital return + multi-year operating leverage beyond prior framework. Bull case 12-month PT updated to $360-400.
Results vs. Consensus
Q1 FY2026 Scorecard ($USD)
| Metric | Q1 Actual | Guide / Street | Beat/Miss | Magnitude |
|---|---|---|---|---|
| Revenue | $3.16B (+30% YoY) | $3.1B ± $100M; $3.12B Street | Beat | Toward high end |
| Non-GAAP gross margin | 71.2% (+140bp QoQ / +240bp YoY) | ~70% Street | Strong Beat | +120bp Street; record level |
| Non-GAAP operating margin | 45.5% (+200bp QoQ / +500bp YoY) | 43.5% ± 100bp guide | ABOVE HIGH END | +200bp guide; +150bp Street |
| Non-GAAP EPS | $2.46 (+51% YoY) | $2.29 ± $0.10; $2.32 Street | Beat | Above high end; +$0.14 Street |
| Operating cash flow (TTM) | $5.1B | n/a | Strong | vs $4.8B FY25 |
| Free cash flow (TTM) | $4.6B (39% revenue) | n/a | Strong | Multi-year compounding |
Multi-Quarter Revenue + EPS Acceleration Trajectory
| Quarter | Revenue | YoY Growth | EPS | EPS YoY | Op Margin |
|---|---|---|---|---|---|
| Q2 FY25 | $2.64B | +22% | $1.85 | +32% | 41.2% |
| Q3 FY25 | $2.88B | +25% | $2.05 | +30% | 42.2% |
| Q4 FY25 | $3.08B | +26% | $2.26 | +35% | 43.5% |
| Q1 FY26 | $3.16B | +30% | $2.46 | +51% | 45.5% |
| Q2 FY26 (guide) | $3.5B | +33% | $2.88 | +56% | 47.5% |
End Market Q1 FY2026
| Segment | Q1 Mix | QoQ | YoY | Notes |
|---|---|---|---|---|
| Industrial | 47% | +5% | +38% | All subsectors +25%+ YoY; record ATE + AD&A |
| Automotive | 25% | -8% | +8% | Tariff pull-in unwind continues |
| Communications | 15% | +20% | +63% | Data center + wireless cyclical |
| Consumer | 13% | +2% | +27% | Wearables + premium handsets |
Revenue assessment. Q1 revenue $3.16B (+30% YoY) — multi-quarter YoY growth ACCELERATING (vs +26% Q4). Industrial +38% YoY (all subsectors +25%+ YoY; record ATE + AD&A). Communications +63% YoY (data center + wireless cyclical). Q2 guide $3.5B (sequential +11%) — UNUSUAL above-seasonal magnitude. FY26 implied at $13-14B (+18-27% growth). "Banner year" framing operationally validated.
Margin assessment. Operating margin 45.5% — ABOVE high end of 43.5% ± 100bp guide. Gross margin 71.2% (record). Q2 guide operating margin 47.5% — material expansion beyond prior framework. Multi-quarter operating leverage compounding on cyclical recovery + multi-year megatrend content + Maxim synergies + manufacturing optimization. Multi-year operating margin trajectory now beyond prior 43-45% framework toward 45-48%.
EPS assessment. Q1 EPS $2.46 (+51% YoY) — multi-quarter EPS ACCELERATING. Q2 guide $2.88 (+56% YoY implied). H1 FY26 EPS implied at $5.34. FY26 annualized run-rate ~$10.50-11.00. Multi-year EPS power compounding via cyclical recovery + multi-year content + operating leverage + multi-year capital return.
Segment Performance
Industrial — +38% YoY / +5% QoQ (All Subsectors +25%+ YoY)
Multi-quarter industrial acceleration: +38% YoY (vs +34% Q4). All subsectors +25%+ YoY. Record quarters for ATE + Aerospace + Defense. Multi-quarter cyclical recovery + multi-year secular drivers (AI infrastructure → ATE; defense buildout → AD&A; automation; healthcare; energy) compounding.
"Strength was broad-based with all segments delivering growth of 25% or more on a year-over-year basis including record quarters for ATE and aerospace and defense."
— Richard Puccio, CFO
Assessment. Multi-quarter Industrial broad-based acceleration + multi-year framework supporting multi-year compounder thesis.
Communications — +63% YoY / +20% QoQ (Data Center + Wireless)
Multi-quarter Communications +63% YoY — strongest of all segments. Data center surge driven by AI infrastructure power + optical control products. Wireless 3rd consecutive quarter double-digit growth (cyclical improvement + new product wins).
Assessment. Multi-year communications growth structurally tied to AI infrastructure + wireless cyclical recovery.
Automotive — +8% YoY / -8% QoQ (Pull-In Unwind)
Auto +8% YoY / -8% QoQ — pull-in unwind continues from Q2 FY25 + Q3 FY25 tariff-driven activity. Underlying L2+ ADAS share + 10% content per annum sustained. Multi-year framework intact despite multi-quarter headwind.
Assessment. Multi-quarter auto pull-in unwind multi-quarter; multi-year content growth thesis intact.
Consumer — +27% YoY / +2% QoQ (Wearables + Handsets)
Consumer +27% YoY — recovered from Q4's +7%. All consumer applications growing. Notable wearables + premium handsets share + content gains.
Assessment. Multi-quarter consumer diversification supports continued growth.
Key Topics & Management Commentary
Overall Management Tone: Most confident multi-quarter tone in years. Vincent Roche dedicated extensive prepared remarks to AI story (ATE + Data Center ~20% of revenue) + "banner year" framing. Multi-year framework articulation reinforced.
1. AI Story — ATE + Data Center ~20% of Revenue
Multi-year AI exposure structurally validated. ATE FY25 +40% + further accelerated Q1 FY26. Data Center FY25 +50% + further accelerated Q1 FY26. Together ~20% of revenue.
"Our investments targeting solutions for AI's massive performance requirements are generating substantial returns in two distinct parts of ADI, our automated test equipment and data center businesses, which collectively make up close to 20% of our revenue."
— Vincent Roche, CEO + Chair
Assessment. Multi-year AI exposure quantified at ~20% of revenue — material multi-year secular growth driver.
2. Data Center Power Management Deep Dive
Vince provided detailed multi-year data center power story: ~1/3 hot swap + protection; ~1/3 DC power control + PSM ICs + multiphase controllers; emerging vertical power architecture. NEW smart power stage shipped first vertical power customer Q1. 48/54V intermediate bus converter modules accelerating.
Assessment. Multi-year data center power expansion vector supports continued AI infrastructure exposure.
3. Optical Connectivity Portfolio + OCS Emergence
Multi-year optical portfolio for AI data center connectivity. Optical Circuit Switches (OCS) emerging architecture. Precision control + monitoring + power around laser, DSP, photodiode signal chain. Multi-year content expansion.
Assessment. Multi-year optical AI exposure compounds data center thesis.
4. ATE — Content Per Tester Tens of Thousands
Multi-year ATE leadership: content per tester reaches tens of thousands of dollars. Industry leadership across all major test platforms. HBM4 transition catalyst. Multi-year design pipeline expanding.
Assessment. Multi-year ATE structural exposure to AI tester demand.
5. "Banner Year" FY26 Framing
Vincent Roche explicit framing: "FY26 has the potential to be a banner year for ADI, barring unforeseen material changes in the macroeconomic and geopolitical backdrop." Multi-year framework supported by Q1 acceleration + Q2 guide.
"A strong second quarter outlook and improving demand signals reinforced our belief that fiscal '26 has the potential to be a banner year for ADI, barring unforeseen material changes in the macroeconomic and geopolitical backdrop."
— Vincent Roche, CEO + Chair
Assessment. "Banner year" framing is multi-year framework reset. Multi-quarter execution + multi-year secular drivers support FY26 framework.
6. 22nd Consecutive Dividend Increase +11%
Quarterly dividend raised +11% to $1.10 — 22nd consecutive annual increase. Strongest dividend raise in recent years. $32B+ returned since 2004. Since Maxim acquisition: >100% FCF returned.
Assessment. Multi-year capital return discipline + strongest dividend raise signals multi-year cash flow confidence + multi-year shareholder returns acceleration.
7. Q2 FY26 Guide $3.5B Sequential +11% — Unusual
Q2 FY26 guide sequential +11% vs normal Q2 seasonal +4-5%. Industrial up 20% QoQ +50% YoY; Communications up HSD% +60% YoY; Auto flat/down; Consumer down MSD% (seasonal).
Assessment. Multi-quarter above-seasonal trajectory + multi-year secular drivers support sustained acceleration.
8. Operating Margin 45.5% Beyond Prior Framework
Q1 operating margin 45.5% above 43.5% guide. Q2 guide 47.5%. Multi-year operating margin trajectory beyond prior 43-45% framework toward 45-48%.
Assessment. Multi-year operating leverage expanding beyond prior framework supports multi-year EPS power growth.
9. "No Evidence Whatsoever of Restocking"
Vince explicit: "We don't see any evidence whatsoever of [OEM customer restocking] at this point in the cycle." Multi-quarter sustainability — multi-year cyclical recovery + multi-year content compounding without bullwhip risk.
Assessment. Multi-quarter sustainability confirmation — multi-year compounder thesis intact.
10. Multi-Year Megatrend Reinforcement
Five megatrends reiterated: Autonomy + Proactive Healthcare + Sustainable Energy Transition + Immersive Sensory Experience + AI-Driven Computing + Connectivity. Multi-year content compounding.
Assessment. Multi-year megatrend framework + multi-quarter acceleration supports multi-year compounder.
11. Wireless Communications Inflection — 3rd Consecutive Double-Digit Growth
Wireless 3rd consecutive quarter double-digit YoY growth. Cyclical improvement + new product wins (software-defined AI-enabled macro base station on a chip). Multi-year wireless recovery vector.
Assessment. Multi-quarter wireless recovery + multi-year new product wins supports multi-year communications growth.
Guidance & Outlook
Q2 FY2026 Guide
- Revenue: $3.5B ± $100M (sequential +11% midpoint vs normal +4-5% seasonal)
- Operating margin: 47.5% ± 100bp
- Tax rate: 11-13%
- Adjusted EPS: $2.88 ± $0.15
Q2 FY26 End Market Outlook
- Industrial: up 20% QoQ, ~+50% YoY (well above seasonal)
- Communications: up high-single-digit QoQ, ~+60% YoY (AI surge + wireless)
- Automotive: flat to down QoQ (tariff pull-in unwind continues)
- Consumer: down mid-single-digit QoQ (in line seasonal)
FY2026 Framework Implied
- H1 FY26: $6.66B implied (Q1 $3.16B + Q2 guide $3.5B)
- FY26 annualized: ~$13-14B (vs FY25 $11B = +18-27% growth)
- "Banner year" framing supported
- FY26 EPS implied at $10.50-11.00 annualized
Analyst Q&A Highlights
Above-Seasonal Industrial + Restocking Evidence
James Schneider (Goldman) asked about Industrial above-seasonal sustainability + OEM restocking signs. Rich: Q2 sequential +11% (above normal +4-5%); end market color shows Industrial +20% QoQ +50% YoY (ATE + ADAS); Communications +HSD% +60% YoY (AI + wireless); Auto flat to down; Consumer down MSD% (seasonal). Vince: "No evidence whatsoever of restocking."
Q: "As you look forward over the next quarter or 2, whether you expect to continue to see above seasonal performance in the Industrial segment in particular? And can you maybe also discuss whether you're seeing any kind of signs of OEM customer restocking at this stage or not yet?"
— James Schneider, Goldman Sachs
A: "Q2 was our strongest sequential quarter, normally up in the mid-single digits, 4% or 5%, and our outlook, which embeds sell-in equal to sell-through, reflects about an 11% sequential growth implying, obviously, significantly above seasonal growth... I think, Jim, one other comment you asked as well about any evidence of restocking. We don't see any evidence whatsoever of that at this point in the cycle."
— Richard Puccio + Vincent Roche
Assessment: Multi-quarter above-seasonal trajectory + no restocking evidence + sell-in=sell-through discipline supports sustainable multi-quarter cyclical recovery.
Gross Margin + OpEx Drivers
Stacy Rasgon (Bernstein) asked about Q1 gross margin + OpEx drivers. Rich: gross margin 71.2% includes ~50bp from discrete items; utilization back + mix favorable. Multi-year gross margin framework intact.
Assessment: Multi-year gross margin trajectory beyond prior framework.
What They're NOT Saying
- FY26 specific revenue/EPS framework: "Banner year" framing but no specific annual number.
- Humanoid robotics revenue contribution timing: Multi-year potential but no current revenue.
- HBM4 transition revenue impact magnitude: Catalyst acknowledged but no quantification.
- Auto pull-in unwind duration: Multi-quarter expected but no specific Q-X.
Market Reaction
- Pre-print setup (Feb 17 close): approximately $295. YTD: ~+2%; trailing 12M: ~+25%.
- Day-of reaction: Pre-market +8-11% on broad beat + Q2 guide far above + "banner year" framing.
- February 18 close: approximately $328, up +11.2% (+$33). Volume ~10M shares (~1.8x).
- February 19 close: ~$332, continued strength.
- Sell-side: Multiple PT raises 10-15%; new range $360-400.
The +11.2% post-print rally validates multi-quarter inflection + multi-year framework. Multi-quarter EPS acceleration (+51% YoY vs Q4's +35%) + Q2 guide far above seasonal + "banner year" framing + multi-year AI exposure (~20% of revenue) + multi-year dividend +11% supports multi-year compounder thesis. Operating margin 45.5% breaks beyond prior 43-45% framework.
Street Perspective
Debate: Multi-Year FY26 Banner Year + Multi-Quarter Sustainability
Bull view: Multi-quarter YoY growth ACCELERATING (+22% → +30% → +33% guide); Q2 sequential +11% vs normal seasonal; "banner year" framing; multi-year AI exposure (~20% revenue); multi-year automation framework; no restocking evidence; multi-year operating margin beyond framework. Multi-year compounder thesis structurally accelerating.
Bear view: Premium multi-quarter valuation; auto multi-quarter pull-in unwind; macro/geopolitical uncertainty; multi-quarter inventory build risk; competition.
Our take: Bull view captures multi-year framework. Multi-quarter execution + multi-year secular drivers + multi-year capital return support continued Outperform with HIGH conviction.
Debate: AI Story Multi-Year Sustainability — ATE + Data Center
Bull view: ~20% of revenue exposed to AI; ATE +40% + Data Center +50% FY25 with further acceleration Q1; HBM4 transition + hyperscaler capex tailwinds; OCS emergence; multi-year content expansion vectors.
Bear view: AI capex cycle moderation risk; concentrated hyperscaler customers; competition.
Our take: Multi-year AI exposure structurally validated. Multi-year secular growth runway.
Debate: At ~$332 / ~33x Forward FY26 EPS, Multi-Year Compounder Priced?
Bull view: Multi-year compounder + multi-year secular drivers + multi-year operating leverage + multi-year capital return + "banner year" framework supports continued multi-multiple expansion. Bull case 12-month PT $360-400.
Bear view: Premium multi-quarter valuation; mean reversion risk.
Our take: Base case 12-month PT $340-380 (+2-14% upside); bull case $360-400 (+8-20%); bear case $290-310 (-13 to -7%). Up/down ratio ~2:1 favorable for Outperform.
Model Update Needed
| Item | Prior (Q4 Recap) | Updated (Q1) | Reason |
|---|---|---|---|
| FY2026 Revenue | $12.4-12.8B | $13.0-14.0B | Q1 beat + Q2 guide far above |
| FY2026 Non-GAAP EPS | $9.30-9.80 | $10.50-11.00 | Multi-quarter operating leverage |
| FY2027 Revenue (prelim) | $13.5-14.0B | $14.5-15.5B | Multi-year secular drivers |
| FY2027 Non-GAAP EPS (prelim) | $10.50-11.00 | $11.50-12.50 | Operating leverage continuation |
| 12-month PT (base) | $300-330 | $340-380 | ~33x forward FY26 EPS |
| 12-month PT (bull) | $320-360 | $360-400 | ~37x on continued acceleration |
| 12-month PT (bear) | $260-280 | $290-310 | ~28x |
Thesis Scorecard Post-Earnings
| Thesis Point | Status | Notes |
|---|---|---|
| Q4 Signpost: Multi-quarter execution + multi-year framework | Strongly Confirmed | Q1 +30% revenue; +51% EPS; banner year framework |
| Q4 Signpost: HBM4 + hyperscaler capex catalyst | Confirmed | Multi-year AI exposure expanding |
| Bull #1: Multi-quarter cyclical recovery | Accelerating | YoY: +22% → +25% → +26% → +30% → +33% guide |
| Bull #2: Multi-year operating leverage | Beyond Framework | 45.5% Q1 → 47.5% Q2 guide |
| Bull #3: Multi-year AI exposure | ~20% of Revenue | ATE + Data Center quantified |
| Bull #4: NEW — "Banner year" FY26 framing | New Catalyst | Multi-year framework reset |
| Bull #5: NEW — Dividend +11% strongest in years | New Catalyst | Multi-year capital return acceleration |
| Bull #6: NEW — OCS + vertical power + optical | New Catalysts | Multi-year content expansion vectors |
| Bull #7: Multi-quarter above seasonal | Q2 sequential +11% vs +4-5% | 8th consecutive above seasonal |
| Bear #1: Auto pull-in unwind | Multi-quarter | -8% Q1 QoQ |
| Bear #2: Premium valuation | Reasonable | Multi-year compounder supports |
Overall: Multi-year compounder thesis STRONGLY ACCELERATING. 7 of 7 bull points confirmed (3 new catalysts). 2 bear points are monitoring items. Multi-quarter inflection + multi-year framework validated with high conviction.
Action: Maintaining Outperform with HIGH conviction. New positions: $310-335 zone acceptable. Bull case 12-month PT $360-400. Next binding catalysts: (1) Q2 FY26 print (May 2026), (2) HBM4 transition + hyperscaler capex continued strength, (3) Multi-year automation + humanoid robotics customer wins, (4) Capital return execution.