Analog Devices, Inc.

good morning and welcome to the analog devices third quarter fiscal year 2025 earnings conference call which is being audio webcast via telephone and over the web i'd like to now introduce your host for today's call mr richard puccio executive vice president and chief financial officer sir the floor is yours thank you josh and good morning everybody thanks for joining our third quarter fiscal 25 conference call

Joining me today on the call is ADI's CEO and Chair, Vincent Roche. For anyone who missed the release, you can find it and related financial schedules at investor.analog.com. The information we're about to discuss includes forward-looking statements, which are subject to certain risks and uncertainties as further described in our earnings release and our periodic reports and other materials filed with the SEC. Actual results could differ materially from the forward-looking information as these statements reflect our expectations only as of the date of this call. We undertake no obligation to update these statements except as required by law. References to gross margin, operating and non-operating expenses, operating margin, tax rate, EPS, and free cash flow in our comments today will be on a non-GAAP basis, which excludes special items. When comparing our results to our historical performance, special items are also excluded from prior periods. Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures and additional information about our non-GAAP measures are included in today's earnings release. References to EPS are on a fully diluted basis. Okay, with that, I'll turn it over to ADI's CEO and Chair, Vincent Roche.

Thank you, Rich, and a very good morning to you all. Well, our third quarter revenue and earnings exceeded our expectations. And for the second quarter in a row, we achieved double digit year over year growth across all of our end markets. While geopolitical and macro uncertainty continues to cloud the outlook, we believe ADI's innovation driven, resilient, highly diversified business model positions us to continue to successfully navigate these challenges. The accelerated recovery of our industrial business, encompassing instrumentation, automation, healthcare, aerospace and defense, and energy management is a case in point. As you've heard us detail on prior calls, our industrial recovery began in the aerospace and defense and instrumentation sectors, driven by our strong product and customer portfolio positions, as well as spending growth in defense, and AI infrastructure. We're now seeing double digit year over year growth across the entire industrial portfolio. For today's call, I'm going to focus on our billion dollar plus industrial automation business, which was the last sector to return to double digit growth. Its market dynamics and trajectory are expected to bring long term expansion. Companies have long invested in automation systems to gain first-order productivity, efficiency, and quality benefits. Today, a new wave of adoption is being driven by economic and demographic pressures and enabled by the potential to transform and accelerate business through leverage of real-time intelligent edge data. ADI's high-performance technology stack and deep domain expertise are crucial to customer success in this highly-sensed, securely-connected, software-driven era. And the new robotic modalities that are emerging, it's predicted that the convergence of compounding macro and AI-enabled technology factors will drive robust, double-digit growth within the robotics market for the foreseeable future. ADI's ability to deliver exceptionally accurate physical representations and enable faster insights at the edge will become even more essential as the market migrates to next generation autonomous robotic systems. Our long history in robotics has given us a deep understanding of the sector's hardest problems and the greatest opportunities. We're investing to maintain our performance edge and analog while capturing increasing levels of system value. In addition, we're building ecosystem partnerships and deploying experts and an increasingly broad suite of technologies to enrich and deepen our customer collaborations. We expect this multi-pronged approach to unlock significant ASP and some expansion for our automation business. following the proven path we've successfully executed in other markets, such as aerospace and defense and healthcare. Now, let me share a few examples of our strategy in action. Earlier this year, we partnered with Teradyne Robotics. Our solutions for precision positioning and dynamic motion control are helping Teradyne increase their value proposition to the logistics industry through higher performance cobots and autonomous mobile robots, or AMRs. In the agricultural sector, where labor shortages are chronic, high-precision robotic systems are increasingly filling the gap. In addition, these systems' enhanced data collection capabilities are enabling higher crop yields while reducing water and chemical usage levels. A growing portion of our robotics revenue is coming from this sector, as we help customers solve their toughest challenges through our sensing, connectivity, and energy management solutions. In the healthcare sector, robot-assisted surgery systems minimize invasiveness and improve patient outcomes through enhanced system precision, and we're leveraging our leading precision technology franchise to successfully attach more of our power management, connectivity, and sensing content to the more innovative systems being designed and deployed. This year, we're achieving robust growth and expect continued momentum as the proliferation of automated surgical procedures further expands our opportunities in this space. Overall, the near and medium-term outlook for robotics is compelling. supported by increasing revenue and a burgeoning opportunity pipeline. From this strong foundation, we're extending into the next promising era of robotics, namely humanoid and other highly dexterous robot form factors, and creating a potentially exponential growth opportunity for ADI. Our content in a humanoid robot is likely to be several thousands of dollars. That's basically a 10x increase over the content in today's cutting-edge AMRs. The primary reason for this content multiplier is the explosion in sensor and actuator counts. Every joint and point of contact requires accurate sensing and precision motor control, and every sensor and actuator drives a signal chain and power management opportunity for ADI. To further capture this flourishing opportunity, we're investing in higher level application specific solutions that integrate multiple sensing modalities, such as pressure, vibration, depth, acoustics, vision, and positioning. With high accuracy, ultra low power signal chains, functionally safe power management, and AI algorithms powered by robotics foundation models. Simultaneously, we're collaborating with NVIDIA on a range of digital twin simulation programs and reference designs for humanoid and other robotic systems to accelerate development and AI training for our customers. This work is particularly relevant for high-value applications such as dexterous manipulation of cable assemblies in data centers and, of course, in automotive manufacturing, to name just one. We are combining ADI's unique sensor expertise and our latest advances in robotics policy training and techniques to enhance realism in NVIDIA's ISAAC Sim and substantially shorten our customers' innovation timelines. So in summary, we're capitalizing on growth in advanced robotics today and investing to capture even more value in the future. Ultimately, the strategy, investments, and customer impact of our robotics business is a microcosm of our approach across ADI, namely uncovering and tackling the hardest innovation challenges at the intelligent physical edge and leveraging our industry-leading technology portfolio and expertise to solve them. As we turn our attention to the end of fiscal 25 and the beginning of the new fiscal year, we're focused on executing our strategy and capitalizing on cyclical and idiosyncratic momentum. Despite the geopolitical and macro turbulence, we remain undeterred and excited by the tremendous growth opportunities that we see over both the near and long terms. And with that, I'm going to pass it back to Rich.