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Analog Devices

ADI · Nasdaq

Operating income nearly doubled on 39.6% more revenue

Costs grew far slower than sales, so operating income rose 97.2% and operating margin reached 40.1%, up from 28.4% a year earlier.

Q3 FY2026, the quarter to Aug 1, 2026 · 10-Q filed Aug 19, 2026

Q3 FY2026 · revenue
$4.0B+39.6% on the year
Operating margin
40.1%
Net income
$1.3B
Free cash flow, quarter
$1.5B

Largest source of revenue: Industrial, 49.0% of the total.

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Key insights · Q3 FY2026
  1. 01

    Operating income nearly doubled on 39.6% more revenue

    Costs grew far slower than sales, so operating income rose 97.2% and operating margin reached 40.1%, up from 28.4% a year earlier.

    Why it matters

    Revenue rose 39.6% to $4.02B from $2.88B. Cost of sales rose only 20.5%, so gross margin widened 5.2 points to 67.3% from 62.1%. The filing attributes the gain to 'higher utilization of our manufacturing fixed costs as a result of increased customer demand' and a favorable mix of products sold into its end markets.1

    Below gross margin the pattern repeats. Research and development rose 17.4% and selling, marketing and administration 22.0%, both slower than revenue, and amortization of acquired intangibles was flat at $188.0M against $187.4M. Operating income rose 97.2% to $1.61B from $818.0M.1

    For scale: operating income of $1.61B in this one quarter equals 55.0% of operating income for the whole of the last fiscal year, $2.93B.1

    AnalysisOur reading: most of the extra revenue reached operating income because the cost base that produces it, factories, engineers and amortization, stayed close to where it was. That is operating leverage, and the filing's own explanation for the gross margin gain points to the same cause.

  2. 02

    Net income outran operating income because of the tax line

    Net income rose 158.5% against 97.2% for operating income, mainly because the effective tax rate fell to 13.3% from 32.1%.

    Why it matters

    Income before income taxes rose 102.5% to $1.55B, close to the 97.2% rise in operating income. Net income rose 158.5% to $1.34B. The difference is tax: the provision fell 16.0% to $205.8M from $244.9M while pre-tax income roughly doubled, so the effective rate was 13.3% against 32.1%.1

    The filing explains both rates. The year-earlier quarter carried a net deferred tax expense tied to the One Big Beautiful Bill Act. The current rate sits below the U.S. statutory rate because of lower statutory rates in the foreign jurisdictions where the company earns income.1

    Special charges also turned into a net gain of $24.2M, which the filing attributes mainly to the sale of a subsidiary in Penang, Malaysia. It sits inside operating income but is small next to it, 1.5% of $1.61B.1

    AnalysisOur reading: net margin of 33.3%, against 18.0% a year earlier, overstates how much the business itself improved. Operating margin, up 11.7 points to 40.1%, is the cleaner measure, since the tax rate depends on where income is earned and on a transfer pricing dispute the company is contesting.

  3. 03

    Fuller plants need little new capital spending

    Capital spending took 3.6% of revenue, against 10.3% in the last peak year, leaving free cash flow of $1.46B, 36.3% of revenue.

    Why it matters

    Capital spending was $145.7M in the quarter, 3.6% of revenue of $4.02B, against $79.2M, 2.7% of revenue, a year earlier. In the last peak year the company spent $1.26B on plant and equipment, 10.3% of revenue of $12.31B. In the most recent full year it spent $533.6M, 4.8% of revenue.1

    With little going back into plant, free cash flow was $1.46B, a free cash flow margin of 36.3%. Operating cash flow of $1.60B was 1.2 times net income of $1.34B, helped by amortization of acquired intangibles, a non-cash charge added back in the cash flow statement.1

    AnalysisOur reading, which the filing does not state: the heavier spending of the peak year added capacity that is now being filled. Higher utilization, which the filing credits for the margin gain, has come without a matching rise in capital spending, so added volume is reaching cash as well as profit.

    Cash does not track profit every quarter. In the prior quarter operating cash flow was $872.0M, below net income of $1.18B. Days sales outstanding rose to 50 from 44 at the last fiscal year end, which the filing attributes to higher sales and the timing of collections and billings.1

Sources

  1. 1.Analog Devices 10-Q for the period to 2026-08-01 (the filing), Aug 19, 2026, read Nov 2, 2026

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Business performance

Growth, profit and margin

Revenue went from $2.5B in FY2007 to $11.0B in FY2025, the operating margin from 23.1% to 26.6%, over 18 years.

  • Revenue$11.0B
  • Operating income$2.9B
  • Operating margin26.6%
Period
Q3 FY2026
Revenue
$4.0B
Operating income
$1.6B
Operating margin
40.1%
Net income
$1.3B
Free cash flow
$1.5B
Business performance

Does the profit turn into cash?

Q3 FY2026: free cash flow of $1.5B against net income of $1.3B in the quarter.

  • Operating cash flow$4.8B
  • Capital expenditure$533.6M
  • Free cash flow$4.3B
  • Net income$2.3B

Capital expenditure is drawn below the axis as cash out. Cash conversion is operating cash flow over net income, shown in the tooltip for years with a profit.

Financial data and sources

How the revenue mix has shifted

Each breakdown the filing reports, as shares of revenue, for every period it restates.

Industry and Segment Information - Schedule of Revenue Trends by End Market (Details). The filing restates this breakdown for 1 period.

Click a member to isolate it across the years shown.

The figures

Margins, cash and growth for the period, each with what it was computed from.

Gross margin
67.3%
Source10-Q, Derived from Gross margin and Revenue in the 10-Q filed 2026-08-19
Operating margin
40.1%
Source10-Q, Derived from Operating income: and Revenue in the 10-Q filed 2026-08-19
Net margin
33.3%
Source10-Q, Derived from Net income and Revenue in the 10-Q filed 2026-08-19
Free cash flow, quarter
$1.5B
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-08-19
Free cash flow margin, quarter
36.3%
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-08-19
Cash conversion, quarter
1.20x
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-08-19
Capital spending, quarter
3.6%
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-08-19
Revenue growth
+39.6%
From the record's own history, against the prior year.

Where revenue comes from

Every breakdown the filing reports for the period, with each item's share.

RevenueFromContractWithCustomerEndMarket

Industrial$2.0B49.0%
Automotive$998.2M24.8%
Communications$654.5M16.3%
Consumer$397.2M9.9%

Source10-Q, us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax, as reported in the 10-Q filed 2026-08-19

ContractWithCustomerSalesChannel

Distributors$2.3B57.9%
Direct customers$1.6B39.5%
Other$106.2M2.6%

Source10-Q, us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax, as reported in the 10-Q filed 2026-08-19

What it costs

The cost lines beneath operating income, each as a share of revenue, then the operating result.

Costs are reported by function: what it cost to make what was sold, then the expenses of selling, developing and administering.

Cost lineQ3 FY2026Of revenueSource
Cost of sales$1.3B32.7%Source10-Q, us-gaap:CostOfGoodsAndServicesSold, as reported in the 10-Q filed 2026-08-19
Operating income:$1.6B40.1%Source10-Q, us-gaap:OperatingIncomeLoss, as reported in the 10-Q filed 2026-08-19

Operating figures the company states

From the text of the filing rather than its statements, each with the sentence that states it.

Days cost of sales in inventory
131 days
As of Aug 1, 2026
View source
Days cost of sales in inventory* 131 130
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, 10-Q filed Aug 19, 2026
Days sales outstanding
50 days
As of Aug 1, 2026
View source
Days sales outstanding* 50 44
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, 10-Q filed Aug 19, 2026

The statements, as filed

The income statement, cash flow statement and balance sheet in the company's own order and words. Every line links to the filing.

Income statement20 lines, as presented in the 10-Q
LineQ3 FY2026A year earlierChangeOf revenueSource
Income Statement
Revenue$4.02B$2.88B+40%100%Source10-Q, us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax, as reported in the 10-Q filed 2026-08-19
Cost of sales$1.31B$1.09B+21%32.7%Source10-Q, us-gaap:CostOfGoodsAndServicesSold, as reported in the 10-Q filed 2026-08-19
Gross margin$2.71B$1.79B+51%67.3%Source10-Q, us-gaap:GrossProfit, as reported in the 10-Q filed 2026-08-19
Operating expenses:
Research and development$533.5M$454.3M+17%13.3%Source10-Q, us-gaap:ResearchAndDevelopmentExpense, as reported in the 10-Q filed 2026-08-19
Selling, marketing, general and administrative$397.3M$325.7M+22%9.9%Source10-Q, us-gaap:SellingGeneralAndAdministrativeExpense, as reported in the 10-Q filed 2026-08-19
Amortization of intangibles$188.0M$187.4M+0.3%4.7%Source10-Q, adi:OperatingExpensesAmortizationOfIntangibles, as reported in the 10-Q filed 2026-08-19
Special charges, net-$24.2M$4.3M0.6%Source10-Q, us-gaap:RestructuringSettlementAndImpairmentProvisions, as reported in the 10-Q filed 2026-08-19
Total operating expenses$1.09B$971.7M+13%27.2%Source10-Q, us-gaap:OperatingExpenses, as reported in the 10-Q filed 2026-08-19
Income Statement
Operating income:$1.61B$818.0M+97%40.1%Source10-Q, us-gaap:OperatingIncomeLoss, as reported in the 10-Q filed 2026-08-19
Nonoperating expense (income):
Interest expense$88.7M$79.6M+11%2.2%Source10-Q, us-gaap:InterestExpenseNonoperating, as reported in the 10-Q filed 2026-08-19
Interest income (shown as a deduction)($25.4M)$27.1M-6.3%0.6%Source10-Q, us-gaap:InvestmentIncomeInterest, as reported in the 10-Q filed 2026-08-19
Other, net (shown as a deduction)(-$3.7M)-$2.1M+78%0.1%Source10-Q, us-gaap:OtherNonoperatingIncomeExpense, as reported in the 10-Q filed 2026-08-19
Total nonoperating expense (income) (shown as a deduction)(-$67.1M)-$54.6M+23%1.7%Source10-Q, us-gaap:NonoperatingIncomeExpense, as reported in the 10-Q filed 2026-08-19
Income Statement
Income before income taxes$1.55B$763.4M+102%38.4%Source10-Q, us-gaap:IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest, as reported in the 10-Q filed 2026-08-19
Provision for income taxes$205.8M$244.9M-16%5.1%Source10-Q, us-gaap:IncomeTaxExpenseBenefit, as reported in the 10-Q filed 2026-08-19
Net income$1.34B$518.5M+158%33.3%Source10-Q, us-gaap:NetIncomeLoss, as reported in the 10-Q filed 2026-08-19
Shares used to compute earnings per common share – basic (in shares)486,021,000494,390,000-1.7%Source10-Q, us-gaap:WeightedAverageNumberOfSharesOutstandingBasic, as reported in the 10-Q filed 2026-08-19
Shares used to compute earnings per common share – diluted (in shares)488,837,000496,726,000-1.6%Source10-Q, us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding, as reported in the 10-Q filed 2026-08-19
Basic earnings per common share (in dollars per share)$3$1+163%0.0%Source10-Q, us-gaap:EarningsPerShareBasic, as reported in the 10-Q filed 2026-08-19
Diluted earnings per common share (in dollars per share)$3$1+163%0.0%Source10-Q, us-gaap:EarningsPerShareDiluted, as reported in the 10-Q filed 2026-08-19
Cash flow statement2 lines, as presented in the 10-Q

Year to date, as a quarterly filing reports it.

LineQ3 FY2026A year earlierChangeSource
Cash flows from operating activities:
Net income$1.34B$518.5M+158%Source10-Q, us-gaap:NetIncomeLoss, as reported in the 10-Q filed 2026-08-19
Statement of Cash Flows
Cash and cash equivalents at end of period$2.17B$2.32B-6.7%Source10-Q, us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents, as reported in the 10-Q filed 2026-08-19
Balance sheet31 lines, as presented in the 10-Q
LineQ3 FY2026A year earlierChangeSource
Current Assets
Cash and cash equivalents$2.17BSource10-Q, us-gaap:CashAndCashEquivalentsAtCarryingValue, as reported in the 10-Q filed 2026-08-19
Short-term investments$159.1MSource10-Q, us-gaap:AvailableForSaleSecuritiesDebtSecuritiesCurrent, as reported in the 10-Q filed 2026-08-19
Accounts receivable$2.39BSource10-Q, us-gaap:AccountsReceivableNetCurrent, as reported in the 10-Q filed 2026-08-19
Inventories$1.93BSource10-Q, us-gaap:InventoryNet, as reported in the 10-Q filed 2026-08-19
Prepaid expenses and other current assets$426.5MSource10-Q, us-gaap:PrepaidExpenseAndOtherAssetsCurrent, as reported in the 10-Q filed 2026-08-19
Total current assets$7.07BSource10-Q, us-gaap:AssetsCurrent, as reported in the 10-Q filed 2026-08-19
Non-current Assets
Net property, plant and equipment$3.35BSource10-Q, us-gaap:PropertyPlantAndEquipmentNet, as reported in the 10-Q filed 2026-08-19
Goodwill$27.99BSource10-Q, us-gaap:Goodwill, as reported in the 10-Q filed 2026-08-19
Intangible assets, net$7.47BSource10-Q, us-gaap:IntangibleAssetsNetExcludingGoodwill, as reported in the 10-Q filed 2026-08-19
Deferred tax assets$1.69BSource10-Q, us-gaap:DeferredIncomeTaxAssetsNet, as reported in the 10-Q filed 2026-08-19
Other assets$853.0MSource10-Q, us-gaap:OtherAssetsNoncurrent, as reported in the 10-Q filed 2026-08-19
Total non-current assets$41.35BSource10-Q, us-gaap:AssetsNoncurrent, as reported in the 10-Q filed 2026-08-19
Assets
Total assets$48.42BSource10-Q, us-gaap:Assets, as reported in the 10-Q filed 2026-08-19
Current Liabilities
Accounts payable$682.2MSource10-Q, us-gaap:AccountsPayableCurrent, as reported in the 10-Q filed 2026-08-19
Income taxes payable$461.8MSource10-Q, us-gaap:AccruedIncomeTaxesCurrent, as reported in the 10-Q filed 2026-08-19
Debt, current$1.34BSource10-Q, us-gaap:LongTermDebtCurrent, as reported in the 10-Q filed 2026-08-19
Commercial paper notes$1.01BSource10-Q, us-gaap:CommercialPaper, as reported in the 10-Q filed 2026-08-19
Accrued liabilities$2.16BSource10-Q, us-gaap:AccruedLiabilitiesCurrent, as reported in the 10-Q filed 2026-08-19
Total current liabilities$5.66BSource10-Q, us-gaap:LiabilitiesCurrent, as reported in the 10-Q filed 2026-08-19
Non-current Liabilities
Long-term debt$6.77BSource10-Q, us-gaap:LongTermDebtNoncurrent, as reported in the 10-Q filed 2026-08-19
Deferred income taxes$1.84BSource10-Q, us-gaap:DeferredIncomeTaxLiabilitiesNet, as reported in the 10-Q filed 2026-08-19
Income taxes payable$90.7MSource10-Q, us-gaap:AccruedIncomeTaxesNoncurrent, as reported in the 10-Q filed 2026-08-19
Other non-current liabilities$517.0MSource10-Q, us-gaap:OtherLiabilitiesNoncurrent, as reported in the 10-Q filed 2026-08-19
Total non-current liabilities$9.22BSource10-Q, us-gaap:LiabilitiesNoncurrent, as reported in the 10-Q filed 2026-08-19
Shareholders’ Equity
Preferred stock, $1.00 par value, 471,934 shares authorized, none outstanding$0Source10-Q, us-gaap:PreferredStockValue, as reported in the 10-Q filed 2026-08-19
Common stock, $0.16 2/3 par value, 1,200,000,000 shares authorized, 484,565,465 shares outstanding (489,654,097 on November 1, 2025)$80.8MSource10-Q, us-gaap:CommonStockValue, as reported in the 10-Q filed 2026-08-19
Capital in excess of par value$21.29BSource10-Q, us-gaap:AdditionalPaidInCapitalCommonStock, as reported in the 10-Q filed 2026-08-19
Retained earnings$12.33BSource10-Q, us-gaap:RetainedEarningsAccumulatedDeficit, as reported in the 10-Q filed 2026-08-19
Accumulated other comprehensive loss-$149.1MSource10-Q, us-gaap:AccumulatedOtherComprehensiveIncomeLossNetOfTax, as reported in the 10-Q filed 2026-08-19
Total shareholders’ equity$33.55BSource10-Q, us-gaap:StockholdersEquity, as reported in the 10-Q filed 2026-08-19
Liabilities and shareholders’ equity
Total liabilities and shareholders’ equity$48.42BSource10-Q, us-gaap:LiabilitiesAndStockholdersEquity, as reported in the 10-Q filed 2026-08-19

About this data

Source
Analog Devices 10-Q, accession 0000006281-26-000073, filed Aug 19, 2026, read on Nov 2, 2026.
History
From the SEC's XBRL company facts, the value from the latest filing that stated each period.
Reading
Paragraphs marked Analysis are CXProWealth's reading; everything else is the filing's own numbers and words, or a cited source.
Version
methodology business-lens-1.0 · schema 1.2.0 · run business-lens-2026-11-02
Edge and risks

What holds Analog Devices's model up, and what could bend it

Competitive edge

  • Distributors carry a broad industrial customer base

    Industrial brings 49.0% of revenue and distributors handle 57.9%, while selling and administrative costs take only 9.9% of revenue.

    The detail

    Industrial revenue was $1.97B, 49.0% of the total, and the filing says every Industrial sub-market grew, led by test equipment and aerospace and defense. Distributors, customers that buy to resell, accounted for $2.33B, 57.9% of revenue, and the filing ties the rise in their share to the larger Industrial weight.1

    Selling, marketing, general and administrative expense rose 22.0% to $397.3M while revenue rose 39.6%, so it fell to 9.9% of revenue from 11.3% a year earlier.1

    AnalysisOur reading: distributors stock parts, extend credit and fill small orders across a fragmented industrial customer base, while the company's own engineers win the designs. A part designed into equipment that ships for years can keep reordering through the channel without new selling effort, and demand is spread across many buyers rather than a few.

  • Research spending held steady as revenue surged

    Research and development rose 17.4% to $533.5M while revenue rose 39.6%, so its share of revenue fell 2.5 points to 13.3%.

    The detail

    The filing calls a continued commitment to research and development 'essential to maintain product leadership'. It attributes the increase mainly to higher variable compensation, salaries and benefits, and the lower share of revenue to higher revenue and improved operating leverage.1

    A year earlier, research and development of $454.3M equalled 55.5% of operating income of $818.0M. This quarter, $533.5M equalled 33.1% of operating income of $1.61B.1

    AnalysisOur reading: analog and mixed-signal parts tend to stay in production for many years, so work funded today can earn across long product lives. Keeping the budget on a steady path through the cycle, rather than cutting it with orders, is what lets an upswing in revenue fall through to profit.

  • Cash held up when profit fell

    In the last downturn year free cash flow was $3.12B against net income of $1.64B, with non-cash amortization of acquired intangibles part of the gap.

    The detail

    In the last downturn year revenue fell to $9.43B from $12.31B and net income to $1.64B from $3.31B. Operating cash flow was $3.85B and free cash flow $3.12B, close to double net income.1

    This quarter amortization of intangibles was $188.0M, 4.7% of revenue, almost unchanged from $187.4M a year earlier. It is a charge against profit for technology and customer relationships bought with past acquisitions, and it is added back in the cash flow statement.1

    AnalysisOur reading: because a sizeable part of reported cost is non-cash amortization, cash generation is steadier than profit through the cycle, which gives the company room to keep funding research and shareholder payouts when earnings fall. The cushion shrinks as older acquired intangibles finish amortizing.

What to watch

  • Fixed factory costs also deepen downturns

    In the last downturn year revenue fell to $9.43B from $12.31B, while gross margin dropped to 57.1% from 64.0% and operating margin to 21.6% from 31.1%.

    The detail

    In that year cost of revenue fell only to $4.05B from $4.43B while revenue fell to $9.43B from $12.31B. Operating income fell to $2.03B from $3.82B.1

    AnalysisOur reading: this quarter's operating margin of 40.1% rests on the same factory utilization the filing credits for the gain. If orders slowed, gross margin would likely be the first line to show it, before operating costs adjust.

    The filing lists changes in demand for semiconductor products, manufacturing delays, raw material availability and supply chain disruptions among the factors that could make results differ from expectations.1

  • Growth runs through distributors and slower collections

    Distributors take 57.9% of revenue and days sales outstanding rose to 50 from 44, so end demand is harder to read from orders.

    The detail

    Distributors accounted for $2.33B, 57.9% of revenue. The filing names the performance of independent distributors and products diverted from authorized distribution channels among its risks.1

    Days sales outstanding rose to 50 from 44 at the last fiscal year end, and days of inventory were 131 against 130 as the company built inventory 'to support increased demand'. In the prior quarter operating cash flow was $872.0M, below net income of $1.18B.1

    AnalysisOur reading: what has to hold is that distributors pass parts to end customers as fast as they order them. If inventory builds in the channel faster than end demand, the correction would arrive in later quarters as lower orders, and fixed factory costs would amplify it in margins.

  • Tax and cyber exposures sit outside reported results

    The 13.3% tax rate faces an IRS transfer pricing assessment the company disputes, and a June cyber incident is still under investigation.

    The detail

    The IRS assessed additional tax for two earlier fiscal years over transfer pricing between the company and a foreign subsidiary. The company 'firmly disagrees', has recorded no added liability and is preparing an appeal, but says an adverse outcome, with any effect on later years, could have a material adverse effect on tax expense and net earnings.1

    The one risk factor updated this quarter is cybersecurity. A June incident led to files being exfiltrated from some systems. Operations were not interrupted and the company does not currently expect a material impact, but its investigation 'remains ongoing' and its assessment could change.1

    AnalysisOur reading: neither exposure shows in this quarter's income statement as a material charge. Either would land below operating income or in one-off costs, another reason to read the business through operating margin rather than net income.

Sources

  1. 1.Analog Devices 10-Q for the period to 2026-08-01 (the filing), Aug 19, 2026, read Nov 2, 2026
Go deeper

Analog Devices, further in

Member research, then your own questions on ChatGPT.

What could change the outlook

What Analog Devices's numbers depend on from here, read from the filing: the conditions behind this period's margins and growth, and where a change would show first.

  • What the 40.1% operating margin depends on from here

    Which part of the margin gain comes from fuller factories and which from mix, how far the last downturn moved them, and the channel and receivables signals that would show a turn first.

  • Cash, payouts and the balance sheet after Empower

    How operating cash flow, dividends, repurchases and the Empower purchase fit together, and what would have to rise for shareholder returns to continue without more borrowing.

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Questions to start with
  • How much of Analog Devices' 5.2-point gross margin gain came from fuller factories rather than product mix?
  • Why did Analog Devices' net income rise 158.5% when its operating income rose 97.2%?
  • What would distributor inventory building mean for Analog Devices' revenue and margins in later quarters?

Business Lens describes Analog Devices from its own filings with the SEC. It is not a view on its shares, a target, or advice to buy, sell or hold anything; figures are as filed and may be restated by the company later. The filing, the dates and the version are under the financial data above.