Analog Devices Inc. (NASDAQ:ADI) is drawing bullish analyst commentary after its latest quarterly results showed accelerating artificial intelligence data center demand, broad-based semiconductor strength and improving margins.
JPMorgan analyst Harlan Sur reiterated an Overweight rating on Analog Devices and raised the December 2027 price forecast to $500 from the prior December 2026 forecast of $450. The firm called Analog Devices its top pick among broad-based diversified semiconductor companies.
TD Cowen maintained a Buy rating and $460 price forecast. The firm said accelerating AI demand and a continued cyclical recovery could support further gains.
AI Data Center Business Accelerates
JPMorgan said Analog Devices’ data center business now accounts for about 80% of Communications revenue and 13% of total company revenue. Optical and power sales grew more than 100% year over year.
The firm expects data center revenue to nearly double to about $1.9 billion in fiscal 2026. It sees roughly 50% growth next year, potentially pushing revenue toward $3 billion. That would be well above what JPMorgan believes Wall Street currently expects.
The opportunity could expand further as data centers shift toward 800-volt architectures. JPMorgan said the company expects content per rack to grow by multiples through 2028 and beyond. Recent design wins that have yet to generate revenue also support the longer-term outlook.
TD Cowen estimates Analog Devices’ broader AI data center revenue, including automatic test equipment, has already reached an annualized run rate above $3 billion.
Posts First $4 Billion Quarter
Analog Devices reported fiscal third-quarter revenue of $4.02 billion, up 40% year over year and above the $3.92 billion consensus estimate. The quarter marked the company’s first time topping $4 billion in revenue.
Communications revenue surged 84% year over year. Industrial climbed 53%, while Automotive rose 16%. JPMorgan said China helped drive the automotive upside.
Pricing Could Drive Margins Higher
Analog Devices guided fiscal fourth-quarter revenue to $4.3 billion, above the roughly $4.09 billion consensus estimate. The company expects gross margin of about 74%, up from 72.5% in the latest quarter.
JPMorgan said favorable product mix, fixed-cost absorption and pricing are driving the margin improvement. Additional price increases are expected in September, which could help offset higher input costs and support margins near 74% into fiscal 2027.
TD Cowen also sees room for margins to remain near current levels or move higher, while noting that customer inventories remain lean and meaningful restocking has yet to emerge.
Analog Devices Price Action
ADI Price Action: Analog Devices shares were up 1.21% at $377.77 at the time of publication on Thursday, according to Benzinga Pro data.
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