Analog Devices, Inc.

Good morning and welcome to the Analog Devices first quarter fiscal year 2026 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. Jeff Ambrose, head of investor relations.

Sir, the floor is yours. Thank you, Danny. And good morning, everybody. Thank you for joining our first quarter fiscal 2026 conference call. Joining me today, is ADI's CEO and Chair, Vincent Roche, and ADI's CFO, Richard Puccio. For anyone who missed the release, you can find it at investor.analog.com, along with related financial schedules. The information we're about to discuss includes forward-looking statements, which are subject to certain risks and uncertainties, as further described in earnings release, 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, earnings per share, 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 earnings per share are on a fully diluted basis. And with that, I'll turn the call over to ADI CEO and Chair, Vincent Roche.

Thank you, Jeff, and a very good morning to you all. Well, we extended our momentum through the first quarter with revenue, profitability, and earnings per share all coming in above the midpoint of our guidance. Year-over-year growth was broad-based across our end markets, with particular strengths in industrial and communications reflecting both cyclical improvement and company-specific execution. This performance underscores the strength of ADI's diversified and resilient business model, enabling us to navigate uncertainty while continuing to capture share in the markets that matter most. As you've heard me say many times before, the wellspring of ADI's prosperity is built on a culture of relentless innovation and deep customer engagement across the lifecycle of our solutions. As such, these activities are always our first call on capital, and now we're investing at record levels. At the same time, we remain committed to returning 100% of our free cash flow to shareholders over the long term. And I'm pleased to share that we just announced an 11% increase to this year's dividend, extending our impressive track record of annual dividend growth and reinforcing our focus on delivering consistent shareholder returns. Looking ahead, a strong second quarter outlook and improving demand signals reinforce 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. Now, as mentioned in previous calls, we're aligning our strategic investments to key megatrends that we believe offer outsized long-term secular growth potential, namely autonomy, proactive healthcare, sustainable energy transition, immersive sensory experience, and AI-driven computing and connectivity. And it's in this last area that I will focus the remainder of my comments today. Over our history, we have prided ourselves on our ability to sense the early signals of emerging trends and to invest aggressively to ensure leadership as those trends proliferate. Artificial intelligence is a good case in point. 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. Now, let me begin with automated test equipment, or ATE. Revenue increased approximately 40% in fiscal 25 and further accelerated in the first quarter of 26, fueled by several factors. ADI's ATE portfolio sits at the heart of the most complex semiconductor production test systems for digital SOC, memory, RF and millimeter wave, and power devices, as well as system-level products. We deliver the integrated pin electronics, device power supplies, and parametric measurement units that drive, sense, and precisely characterize every pin and rail on complex ICs. under the most demanding real-world conditions our application specific solutions are complemented by a suite of analog rf and power products enabling complete high density test subsystems these solutions enable customers to increase platform channel density and throughput to validate the most advanced nodes and packaging technologies faster and more thoroughly at lower costs with up to 30% less energy consumption per system. As a result, we enjoy industry leadership across the major test platforms and our content per tester stretches into the tens of thousands of dollars. Importantly, we've earned a durable role as the leading edge technology partner in the fast evolving ATE market, which continues to grow with rising semiconductor complexity and the proliferation of connected intelligent devices. Now let me turn to our data center business, which grew approximately 50% in fiscal 25 and also saw accelerated growth in the most recent quarter. Several factors are driving this expansion. AI's demand for faster processing speeds and greater power density, combined with the monumental increase in data volume, is creating exponentially greater complexity in data centers. This in turn drives the need for faster innovation cycles and new architectures. And ADI's analog and mixed signal power and optical portfolios are critical to this evolution. I'll talk a bit now about power management, which is increasingly a system level differentiator in AI data centers. At a high level, it breaks down into power delivery and power control. Think of power delivery as the vascular system moving energy across the data center. As customers migrate to higher voltage architectures, safely moving larger amounts of power becomes foundational. Protection is non-negotiable, as the consequences of falls rise sharply for both uptime and safety. ADI's hot swap and high performance protection solutions, which represent roughly one third of our data center power revenue today, enable predictable fault isolation, fast recovery, and live maintenance, allowing racks to run continuously even as power levels increase. Beyond protection, architectural change is also expanding our role in power delivery. We continue to see strong growth in point of load converters, micro modules, and high performance regulators. Newer approaches such as vertical power and higher voltage distribution are now opening incremental SAM for ADI. We shipped our smart power stage to our first vertical power customer last quarter, and adoption of our intermediate bus converter modules is accelerating for 48 and 54 volt architectures. Now think of power control as the brain of the data center energy system. AI performance per watt depends on how precisely power is regulated and converted at the GPU or CPU. Roughly one third of our data center power revenue comes from DC power control, including our power system management ICs and multi-phase controllers. AI accelerators demand fast, highly efficient, digitally controlled power conversion from the rack down to tightly regulated core voltages. ADI's analog and mixed signal solutions abilities to enable higher compute density and better system level performance are driving increasing demand and design wins. To sum up our AI data center power story, ADI enables customers to move power safely, regulate it intelligently, and scale AI infrastructure for the future. As power becomes a strategic constraint in AI data centers, our suite of high performance technologies and system level approach position us well for the next wave of infrastructure growth. Finally, turning to our optical connectivity portfolio. As AI continues to scale, the amount of data that must move within and between data centers is increasing exponentially. To deliver AI class bandwidth and latency, industry leaders are re-architecting their networks, increasingly replacing traditional electrical switching with optical circuit switches or OCSs. In this environment, performance is no longer defined solely by the optical modem system. It increasingly depends on the precision control, monitoring, and power solutions, the nervous system, if you will, around the laser, DSP, and photodiode signal chain. By tightly integrating precision control, temperature regulation, real-time monitoring, and compact high-performance power management, ADI allows optical systems to operate at higher speeds with lower power and in smaller form factors. This enables data center operators and carriers to increase front panel bandwidth density, reduce power consumption and cost per bit, and accelerate time to market. As AI workloads continue to drive faster upgrade cycles and new network architectures, our ability to help our customers manage optical complexity, performance, and economics positions us well to benefit from AI-driven infrastructure investment in the future. So in closing, it's important to remember that AI is just a part of our larger growth story. Our diverse business model is enabling profitable growth across numerous trends, markets, and applications. And as a result, we've never been more optimistic about our future at the intelligent edge. And with that, I'll pass it over to Rich.