Q4 2024 Analog Devices Inc Earnings Call
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Please note reference to EPS are on a fully diluted basis.
And with that I'll turn it over to ADICO and chair this Roach.
Thanks very much, Mike, and a very good morning to you all. So our first quarter results reflected the continued steady recovery.
From our 2nd quarter, cyclical bottom with revenue operating margins and earnings per share.
All finishing above the midpoint of our outlook.
For the full fiscal year 24 revenue finished at $9.4 billion with earnings per share of $6.38.
The head wounds we faced in fiscal 24, most notably pronounced post-pandemic infantry digestion and the challenging macro backdrop muted demand recovery.
Despite the external challenges, however, our business model and disciplined execution delivered an impressive 41% operating margin for the year and a free cash flow margin of 33%.
Up from 29%.
In fiscal 23.
Importantly, we continued investing.
In key value generation and capture initiatives.
To better position ABI to cele our customers most difficult challenges at the intelligent edge.
In R&D, which is our first call on capital, we continue to strengthen our world-class analog foundation while extending the scope of our innovation capabilities with investments in digital software and AI.
Those investments resulted in, for example, last month's launch of AI's new cold fusion Studio software development platform.
Creating a resource rich hub.
And intuitive programming environment for embedded code development in support of our analog mixed signal power and digital franchises.
better secure the increasingly connected intelligent edge. We also launched the ADI Assure Trusted Edge Security architecture.
Which will enable cybersecurity capabilities on ADI products.
The addition of new tech stack capabilities to our tremendous analog foundation enables us to deliver ever more sophisticated innovations for our customers.
Our intense focus on R&D is reflected in the double digit growth of our design wind pipeline during fiscal 24.
That growth was enhanced by momentum in our maximum revenue synergies pipeline.
Across such areas as GMSO, healthcare.
And data center power.
Putting us firmly on a path to achieving our goal of a billion dollars in revenue synergies by 2027.
Now to accelerate pipeline growth and conversion. We continue to evolve our digital customer engagement platforms to support a greater range of technical expertise and customer needs.
We also expanded our cadre of field engineering experts to provide world-class support and service to our global customer base.
Our customers value our thought leadership, the breadth and depth of our cutting edge technology stack.
The strength and resilience of our supply chain and our service and support integrity.
I'd let me share a few examples with you now.
In industry 4.0 semifactor contents as a percentage of capex investments continues to expand rapidly.
As factories integrate IT and OT to connect and so to find the factory floor.
This is creating tremendous growth for ABI sensor to cloud automation solutions.
With a large number of customers leveraging our sensing power control and deterministic Ethernet technologies.
On the factory floor, our intelligent motion and positioning solutions are being designed in robotic systems by several large customers, expanding our content per robot by 3 times.
In our instrumentation and test business.
India is cutting edge analog mixed signal and power capabilities are the foundation for the leadership position we've established.
In the AI related SOC.
And high bandwidth memory test market. Where our content protester.
Stretches into the hundreds of thousands of dollars.
Now looking ahead, we're developing additional mixed signal and digital capabilities to further reduce test time and power requirements, which we believe will result in more than 20% additional ADI content per tester.
Within the healthcare sector, a precision signal processing and real-time connectivity solutions are critical to the rapidly expanding surgical robotics market.
And in the fast growing continuous glucose monitoring space. We have won multiple opportunities across several customers.
Our unique digitally enabled analog front-end solutions.
Increase the accuracy and power efficiency of sensors.
And enable a better patient experience by extending battery life from days to weeks.
Aerospace and defense has remained our most resilient industrial segment during this downturn.
With stellar design when pipeline growth.
We expect revenue growth to accelerate to a double-digit level next year.
Due to increasing global defense budgets and the proliferation of space communication systems.
That relied on our higher value integrated RF modules and subsystems.
Within automotives, the performance advantages of our battery management systems are driving substantial pipeline growth among OEMs.
In addition
We're also seeing momentum for these solutions.
The electrical grid storage systems.
These trends
Combined with recent wins give us confidence that our BMS revenues should return to growth in fiscal 25.
With meaningful contributions from a higher value wireless solution.
The proliferation of higher content vehicles that use more power management.
Connectivity.
And an increasing number of sensor platforms.
is expanding our content across all vehicle types.
Combustion engines, hybrids, and indeed full evenings.
His friends drove our GMSL and A to B connectivity and functionally car franchises to new high water marks and fiscal 24.
And with a record design when pipeline, we expect this growth to persist.
Notably
We added to our portfolio of connectivity solutions by launching our Ethernet to the edge bus solution or E2B.
Which is an enabler of the software defined vehicle vision and out of the gate, we have designed winds with several major OEMs including Leando.
In communications,
We've seen a positive inflection in the wireline market.
And expect that growth to continue that 25 and beyond.
Our confidence is based on significant new winds, including a high precision controller for the optical module and the high performance compute leaders AI systems.
And our next gen solutions.
Which will begin shipping later in 25.
We're also experiencing tremendous demand across leading data center customers for our new innovative hot swap solution.
Which significantly extends power and control capabilities for AI-based servers.
In consumer, new wins coming to market are driving strong growth.
We expect this momentum to continue in the years ahead.
Given new winds across power, audio, optical, and touch in portable applications at multiple key customers.
We've also seen growth in wearables.
and processing more biomarkers.
We've seen the design momentum accelerate and content opportunities expand that wearable market leaders.
As well as in disruptors bringing miniaturized form factors to market.
In wearable acoustic systems.
Our combination of ultra low power and neural processing with application-specific audio processing algorithms.
is enabling next generation noise cancellation and hearing augmentation.
We're leveraging these technology innovations and several B2B markets in addition.
Turning now to manufacturing, we've invested $2.7 billion in capex since acquiring Maxim.
To increase our capacity and enhance resiliency.
We also expanded our founding partnership with TSNC earlier this year.
To secure additional 300 millimeter fine pitch technology capacity at their Japan.
These investments enable a more flexible hybrid manufacturing model further insulating our supply from regional shocks and increasing our swing capacity to around 70% of revenue in the coming years.
This unique ability helps us to capture the upside and strong demand backdrops and better protect our gross margins during more challenging times.
So in closing, I'm very proud of how ADI has managed through one of the worst inventory digestion cycles. Our industry has ever seen.
While the macro backdrop presents challenges, I'm confident in our continued recovery in fiscal 25.
And with that no pass it over to rich.
Thank you, Vince, and let me add my welcome to our 4th quarter earnings call. I'll start with a brief recap of physical 24 results.
Revenue of more than 9.4 billion down from the record fiscal 23 driven by broad-based inventory digestion and sluggish and demand.
Gross margin is 67.9% reflects lower revenue, factory utilization, and mixed heads.
Decline in revenue and gross margins were partially offset by lower operating expenses which resulted in an operating margin of 40.9%.
An EPS of $6.38.
Moving to 4th quarter results, revenue of 2.44 billion came in above the midpoint of our outlook for a 6% sequential increase and a 10% decline year over year.
Industrial represented 44% of our fourth quarter revenue, finishing up 2% sequentially and down 21% year over year.
Continued strength in AI related tests, aerospace and defense, and a return to sequential growth and automation.
More than offset slower end demand driven by a weaker macro backdrop.
For the full year, industrial decreased 35% from a record 2023 with every major application declining double digits except aerospace and defense with significantly outperform the rest of industrial.
Automotive represented 29% of quarterly revenue, finishing up 4% sequentially and down 2% year over year.
This was notably better than our original expectation due to steadily improving demand from China throughout the quarter.
For the year, automotive declined 2% from a record fiscal 23 as double digit growth across our functionally safe power and leading A to B and GMSL connectivity franchises.
We offset by broad-based inventory digestion and production headways.
Communications represented 11% of our quarterly revenue, finishing up 4% sequentially and down 18% year over year.
Stronger demand from data center customers for our optical solutions drove low double digit sequential growth in our wireline business, which was more than offset.
By the decline, which more than offset the decline in wireless.
For the year, communications decreased 33% and somewhat to the fourth quarter we saw relative outperformance in our wireline business over wireless.
Lastly, consumer represented 16% of quarterly revenue, finishing up 22% sequentially and 31% year over year, driven by higher sharing wearables, premium handsets, and gaming applications.
For the year, consumer decreased just 1% with double digit growth and portable applications, balancing double digit declines in our prosumer business.
Which is more industrial like in nature.
Now on to the rest of the P&L.
Fourth quarter gross margin was 67.9%, flat sequentially as products mix headwinds offset modestly higher utilization rates.
I fix in the quarter was $655 million up approximately 35 million sequentially driven primarily by merit increases, which resulted in an operating margin of 41.1%.
Non-operating expenses for finished at 55 million and the tax rate for the quarter was 12.1%.
All told, EPS was $1.67 which finished above the midpoint of our outlook.
Despite the tough year, we took decisive action to strengthen our financial position, and I'd like to call out a few results from our balance sheet and cash flow statement.
We ended the quarter with approximately $2.4 billion in cash and short-term investments and a net leverage ratio of 1.2.
Inventory finished approximately 20 million higher than the third quarter while days of inventory decreased 11 to 167.
Channel inventory finished slightly below the low end of our 7 to 8 week target as we continue to prudently manage our supply.
Operating cash flow for the quar quarter was more than 1 billion and more than 3.8 billion for fiscal 24.
Capex was 165 million for the quarter and 730 million for the year, resulting in fiscal 24% free cash flow of more than 3.1 billion or 33% of revenue.
It
During the year, we returned $2.4 billion to shareholders via 1.8 billion in dividends and $600 million in repurchases.
Now moving on to guidance for the first quarter.
Revenue is expected to be 2.35 billion plus or minus 100 million.
Notably, this implies year over year growth when compared to a normalized 13 week first quarter of fiscal 24.
A good indication that we're past the trough and in gradual recovery.
We expect sell food to be roughly equal to Selwyn in this war.
At the midpoint we're expecting a seasonal decline on a sequential basis as noted last quarter.
Industrial automotive and communications are each expected to decline by low single digits with consumer down around 15%.
Operating margin is expected to be approximately 40% plus or minus 100 basis points.
Our tax rate is expected to be 12 to 14% and based on these imports, EPS is expected to be $1.53.
Plus or minus 10 cents.
I'll conclude by noting a few items as we begin the new fiscal year.
As Vince mentioned, we made great progress building a more agile and resilient hybrid manufacturing model.
As such, we expect our capex spend will moderate back to our long term model of 46% of revenue in fiscal 2025.
We expect this normalized capex level and planned receipt of investment tax credits tied to both the US and European chip chip stacks will provide tailwinds to fiscal 25s free cash flow.
Importantly, while we have delivered on our commitment to return a 100% free cash flow since our maximum acquisition.
Fiscal 24's return was lower due to our decision to increase balance sheet cash during this period of macroeconomic uncertainty.
And to help us extinguish 400 million of debt coming due in fiscal 25.
That said, and investors investors can expect us to revert to our targeted return of 100% free cash flow in fiscal 25.
I'm not gonna like back to Mike Q and A.
Thanks, Rich. Let's get to the Q&A session. We ask that you limit yourself to one question in order to allow for additional participants on the call this morning.
If you have a follow up question, please you, and we'll take a question time allows that be our first question, please.
Thank you. So those participating by telephone dial in if you have a question, please press 11 on your phone to enter the queue.
If your question has been answered and you wish to be removed from the queue.
Please press 11 again.
If you're listening on a speakerphone, please pick up the handset when asking your question.
We'll pause just for a moment to compile the Q&A roster.
And I share our first question comes from the line of Chris Danley from Citi. Please go ahead.
Hey, thanks guys, I just a little color on the auto strength. Can you talk about how big, uh, China is as the presenting your auto business and then within that how much of this strength was from, say, EV versus I or all these EV startups that we're hearing about from uh from China. Thanks.
So I'll give you a little bit of the perspective, Chris, on the auto near term. So on the last call we, we had expected the sequential decline in Q4 given the drop we talked about in bookings during Q3 and adjustment to production from multiple of our OEMs.
However, toward the end of Q3 booking started to improve and that continued throughout our Q4 with stronger demand in China reflecting EV volume growth, share gains, and content growth.
As for the other GOs we saw broad weakness, but upside in the US which turned to sequential growth.
Driven mainly by our BMS and wireless BMS portfolio.
Secular demand for AA and NextGen Infotainment continues to drive strength globally for our functionally safe power, audio and video connectivity solutions.
Content and share growth in these areas have helped offset broad inventory headwinds, resulting in a shallower correction than in other end markets.
And also note that while BMS is still facing inventory headwinds broadly.
We saw a strong uptick in China reflecting the expanded share we talked about on our Q2 call compounded by volume growth in the region.
BMS also improved in the US, including growth for our higher content wireless solution, which is now 10% of total BMS as Vince mentioned, design when activity was strong in 2024, giving us confidence that BMS will return to growth in fiscal year 25.
A little more color Chris uh what Richard just said so.
You know, we've got a really high performance portfolio. We got many, many, uh, different skews if you like in that portfolio and uh
You know, we're playing the high performance game with the big players in China for America. So that's the uh
That's the state of the business there.
And some context on the US China kind of relative what's the mix of China? Our China business looks a lot like ABI Enterprise where industrial and automotive the two biggest percent of our revenue in China. They'll make about 80% of the China business comes in in the teens and consumers below 5%.
Thank you.
And I shall next question comes from the line of CJ Muse from Cantor Fitzgerald. Please go ahead.
Yeah, good morning, thank you for taking the question since you, you talked about a number of companies specific drivers, uh, that should allow you to outperform in calendar 25, so I was hoping you could kind of use that as a backdrop and then maybe um later in kind of your thoughts on how um the cycle will kind of emerge from from today's trough and you know what, what your kind of thoughts are in terms of pushing, um, you know, business through 25 and 26. Thank you.
Yeah, thanks CJ. So, um,
Yeah, obviously we've already stated our first quarter will be down, so we expect.
We start getting back to a positive growth trajectory in the in the 2nd quarter. Um, I think during 25, if I were to kind of rank the uh the market recoveries.
Um
You know, I think it'll be led by industrial.
Uh, we have very healthy customer inventories.
The channel is below 7 weeks, and that's a big part of the supply chain into the industrial sector.
Uh, you know, you couple that with the green shoots that we've mentioned already in areas like um AI tests and uh aerospace and defense, which I called out in the script. So I think the uh the compare is easier overall.
And, uh, you know, as a result, I think industrial, given the signs we see, we recover.
Uh, briskly in 25, um, I've been in consumer we have a much more diversified business than we've ever had. We've, uh, better portfolio than we've ever had inventory is normalized and um you know, we're
We're already seeing the benefits we saw it in our, in our, uh, 4 key results, uh, 3 and 4 key results, um, the strength of our consumer business.
Um, I think next is, uh, is the coms business, you know, it declined by by over 30% in 2024, and I think that was really an inventory digestion issue.
Um, so we feel at this point that we're through the worst of the supply normalization, um, and as we
Talked about in the scripts we're beginning to see steady demand improvement, particularly in wireline driven by the the build out of these new uh.
Externalized intelligence systems and um
You know, the, the AI infrastructure, so.
We're not seeing much on the wireless side, uh, we've, I think at a low point in wireless during 24. So, um, I think it'll all depend on carrier capex's investments in 5G moving ahead.
Um, last but not least,
The automotive sector.
Um, we expect to see
Continued momentum.
Uh, in areas of functionally safe power, the connectivity things that I spoke about, um, and, uh, essentially we expect globally to be driving share and penetration.
Um, across all the different types of platforms.
So, um
You know, we've had a tough year in 24 and BMS 25, we expect to see that get back um.
To, uh, to a better shape, uh, get back to a growth pattern, um, and, um, you know, given that
All was done just 2% in 2024. It's a tough compare moving ahead, but, um, overall, we feel that we'll be on a solid road up there as well. So that's the ranking CJ. It's a long answer to a simple question.
Mm
Thank you.
And I show our next question comes from the line of Vivek Arya from Bank of America securities. Please go ahead.
Oh, thanks for taking my question. Um, my question is on uh Q4 Industrial and then how it uh sort of shapes the fiscal 25. I think for Q4 industrial if I'm not mistaken, you would expected sales to grow high single digit, I think they went up only modestly and then your guiding Q1 industrial down again, um, sequentially. So with my question is industrial really out of the woods, you know, what helps it, um, grow above seasonal because just assuming seasonal growth for the rest of fiscal 25.
may not be sufficient, right, to really grow a fiscal 25 at, at a strong uh pace. So just, you know, maybe help us, uh, um, you know, understanding what's happening in the industrial uh market. And when do you expect it, uh, to start growing above uh seasonal trends next year.
So Vivek I'll take that one. So 4 cube, uh, as you mentioned, was a bit lower than we expected, uh, driven largely by weakness in the broad market and our, and our decision to reduce channel inventory during the quarter.
You know, as you know, reducing channel inventory as an outsized impact on our industrial business. At the same time, we did see continued strength in ADA instrumentation and test and a return to sequential growth and automation. If you remember in the prior two quarters we've seen a significant declines in automation, so to see that return to sequential growth was, was a very positive sign.
You know, taking a step back, we've grown industrial sequentially now for two quarters of what we said was our trough in Q2 of 24, so we feel pretty good that the recovery is still unfolding for us and now we're in a waiting game a bit to see what the macros do, but if I look to 2025, you know, one of the, one of the important signals for us continues to be, we have been under shipping demand for the better part of 18 months, uh.
You know, and if you just normalize that for even our historical patterns or the market patterns, you know, it would indicate we've under shipped something like 20%, which is how we get confidence in coming out of Q1s, uh,
Seasonal down, we will start to see growth again in industrial, uh, in the remainder of 25. Obviously the slope of that recovery will be covered a bit by the macro backdrop.
Thank you.
And I show our next question comes from the line of Joe Moore from Morgan Stanley. Please go ahead.
Hi, thank you for letting me ask questions. This is Shane from Morgan Stanley on behalf of Jim Moore. Uh, just on your automotive business, how is customer orders and pricing discussions tracked for the growth areas of your portfolio such as A to B, GMSL and functional safe power and then how they progressed for this sort of other half of the automotive business. Thank you.
So I, I don't, I don't break that into two pieces, I guess I'll, I'll talk about a pri pricing um for so from a pricing perspective so far with customers it's been largely as expected and continuing exhibit the stability that we've talked about previously.
Right, we, we continue to focus on the high end where our customers value performance versus price, you know, we can continue to uh command ASPs for the industry average, and that has continued to grow over the cycle.
You know, particularly as we, you know, look across our broad large customers, you know, we're becoming more and more important, moving from a essentially a tier 2 contracting with tier ones to actually partnering with the OENs at the early stages of design, um, you know, and we've talked about before, price is set at the design intend to stay pretty fixed throughout a long period of time, sometimes over a decade on average, although there is some volume discounts that come through so we trade off incremental volume for uh small decreases in price.
And then we do look to mitigate those discounts with our vintage increases on our older products, you know, the other thing that's helping on the
You know, pricing stability and we are clearly broadly across costs in in our business experiencing inflationary environments which uh supports continued stability on the pricing side.
And your comedy a little about the, the pieces of the automotive business. You're right, we break it down to kind of two halves. One we call second of the growth areas miss outlined a bunch of those PMSL A2B functiona Power BMS. They make about half our revenue in auto. Those grew in 24 over 10%.
The other part of the business, the other 50% is really more standard product for building that goes across all OEMs, all customers and really was up and down with production.
That piece was down about 10% in 24 and you fast forward to 25, I think it'd be more of the same where we see a lot of the growth come from those GMSL ADB monthly save portfolio and as we said a couple times I call BMS return to growth as well.
The Next question please. Thank you.
And I share next question comes from the line of Tore Vanberg from Stifel, please go ahead.
Yes, thank you. um, Vince, I had a sort of bigger picture question, especially as we embark on this new.
Uh, cycle, uh, so as I navigate your website, I just see so much software, uh, products and I'm just wondering as AI continues to move to the edge, uh, what do you see as a differentiation here for devices, especially in relation to some of your other analytic signal peers.
Yeah, thanks to it. Well, software is not particularly new to ADI in the sense that, uh, you know, for many decades now, we've had a vibrant DST franchise with a lot of uh
You know, tool chain capability, uh, a lot of algorithmic capability, but we've begun really, I think over the last decade, taking a more application view to the world across.
All our core markets industrial automotive, communications, etc. etc.
Um, and yeah, we've begun, uh, moving up the stack from the, the core base of analog mixed signal power technologies.
Uh, so we use, I would say more algorithmic technology to kind of um as a, as a co-pilot, so to speak.
With the um
With decor envelope franchise. So everything we do in software essentially supports
The cutting its strength that we have in the analog mix signal and power solutions.
Um, and you know, it's increasingly important for our ADI to present our solutions to our customers in a way that makes us.
Easier and more enjoyable for them to use our solutions, the complexity and sophistication of what we bring to them. So, uh, you know, over the last couple of months, we announced two new parts to our software story. One is what we call cold fusion studio.
And essentially what that is, is an open source software development environment that includes software development kits, tools, debuggers, and so on and so forth.
Um, and that enables
Um, our customers to uh get access, um, you know, to be able to embed ADIs, analog and digital technologies into their end systems solutions.
And the second piece is, um, it goes without saying cybersecurity is uh is top of mind for everybody.
Uh, so we've released what we call the ADI assure platform.
And essentially what it is, it's uh it's a new security architecture that enables us to provide a route of trust from the hardware right into the cloud, so to speak, and to understand the movement, the creation and movement of data, uh, across that spectrum. So, um, you know, we are spending more on software than we've done, uh, but, uh, we're taking a very holistic view, and I'd say using software to drive the innovation system.
The company, the innovation within our products around our products.
And making it easier for our customers to access our solutions. That's it in a nutshell, I think.
Thank you.
And I show a next question comes from the line of Stacy Rascon from Bernstein. Please go ahead.
Hi guys, uh, thanks for taking my question.
I wanted to ask about uh gross margins, um, what are your thoughts on gross margins into Q1 is revenue declines, and do you think the Q1 is the bottom as it does seem like you do think revenue grows off of there, like, how do we think about the trajectory off of that for gross margins in the next year and what does it take to get them back into the 60% plus range.
Uh, I'll I'll, I'll take that one. So gross gross 24 gross margin was lower than we than we had expected due to mix so with consumer and auto being so much stronger while industrial is weaker, you know, that, that created some downward pressure because we had talked about uh a slight sequential increase which we didn't see for Q1, you know, we expected slower, uh, slightly lower gross margin given sort of normal factory shutdowns around the holidays as well as the seasonally low revenue, you know, um, you know.
If we think about the when we see sort of the 70% uh, you know, this is gonna continue to be driven by mixed and utilization as we grow revenue right now industrial is pretty low mix, um, and utilization while no longer decreasing and coming off of our low points back in Q2 remain sort of well below optimal levels, you know, if you want to think about it from a, a longer term perspective from a revenue view we'd likely, you know, need revenue in the 2.7 billion plus.
To start seeing 70%.
From a 2025 sort of sequential perspective as we do, as we mentioned, expect revenue to recover to growth coming out of the Q1 seasonality, we would expect to see, uh, gross margin improvement as we work through the back half of the year, and then obviously as we've talked about the, the, the back half macros and we'll, we'll de determine how much revenue growth we get and how much incremental margin we see.
Thank you.
And I show our next question comes from the line of Timothy Archiri from UBS. Please go ahead.
Thanks a lot. Um, Rich, you just mentioned that fiscal Q2 is gonna be up. Um, I'm wondering what you consider normal seasonal to be in fiscal Q2. It seems like it's up about 3 to 4, so, so that's the first part of my question and then the second part is if you sort of strip out autos, um, I wonder, uh, like, like how is book to bill if you could sort of, you know, strip out autos versus normal is it is is it trending pretty much as you would think?
Yes, sir, so I'll grab the first question and then we'll we'll go to the book and build question. I would say I lost a bet to myself. I thought the two of you to be in the top 3 questions were number 7, so.
That's what I'll go sometimes, but you're right, we keep on seasonally strength. What does seasonal mean to you? It's been a while from seasonality. Usually you see industrial auto well this single digits in in queue.
Communications is up some, not as much, maybe flat up slightly will consumers down a little bit. So overall you're up about loaded mid single digits in the portal company level again, that's seasonal trends there's a wide band on that. That's typically how we think about two people from a seasonal perspective.
Yeah, on the booking side, so, uh, as we talked about after the decline in Q3 and auto, um, total bookings return to growth driven by continued growth industrial and a rebound in auto overall book to bill was slightly below one, which we would say is pretty normal at this point, uh, reflecting our, our seasonally lower 1Q outlook, you know, regionally bookings were up everywhere excluding the Americas, and that largely reflects the seasonal decline in consumer.
Thanks. Thank you.
And I show a next question comes from the line of Ross Seymour from Deutsche Bank. Please go ahead.
Hi guys, thanks for let me ask a question, Vince, a bit of a longer term question for you. Cycle to cycle, you know, the good news is it sounds like you've found the bottom especially on the industrial side and you you mentioned that it was kind of the worst.
Downturn from an inventory perspective in a long, long time. I guess my question is the prior peak I guess in your fiscal 23 is that attainable and what are the puts and takes to get to that because I guess from a big picture question was that overinflated or was that a realistic target that we should look forward to and if so at what time?
Yeah, thanks Ross. Well, I think, uh, you know, first and foremost, um,
Our portfolios in better position than it's ever been.
I would say ADI's connection with our customers, big and small, is better than it's ever been. Um, you know, we're investing in, I believe in the right areas in the R&D sector, our pipeline coming out of 24.
Uh, it grew double digits year over year. uh Opportunity pipeline. So I think the company as well positioned. We've also been very, very
Um, I would say taking a very almost purist view to how we flush inventories and enable our customers to flush inventories off their balance sheets.
So my sense is, um,
You know, we, we've got a supply chain that uh is well capable of meeting what we believe will be good demand during 24.
Uh, to get back to the kind of the 23 levels, um, you know, we believe that our business is capable of growing double digits, so, uh, you know, through the rest of the decade here.
Uh, given the position we've got, the demand that we see, the opportunity pipeline, so, and I think um you know, we'll see a good down payment on that future prospect, uh, during 205.
And I show a next question comes from the line of William Stein from Truest Securities. Please go ahead.
Oh great, thanks for taking my question, um, since I, I think you mentioned, uh, data center power management in the prepared remarks, but I'm hoping you can dig into this a little bit. There's been quite a bit of volatility there. There's some very
Um, you know, what some people call charismatic design when opportunities in that and market. I know that um uh uh at least one of the companies you acquired Maxim had a uh significant effort in 48 volt PE and I, I suspect Lanier had something there as well. I wonder if you can comment as to the medium term opportunity as you all see it and maybe any comment on um design win traction there. Thank you.
Yeah, thanks Will. So, um, you first off, if you just put the entire data center business of ADI and perspective.
elements to our power story. I think one of the, the uh the power solutions that go around the computing chips, uh, and the rest of the, you know, the server infrastructure, uh, the second piece is the, the control units, things like hot swapping, supervisory, so on so forth we've had good traction of that business for a long, long time. We've got some new products coming to market.
That will continue to boost that in terms of ASP share and so on and so forth.
Uh, we're also, uh, getting good traction with our optical control solutions right up to 1.6 terabytes. Uh, so that's kind of the landscape of products and technologies that we have, um, you know, if you're going to win.
Uh, anything in this, in these, uh, this, um.
Data center business, you've got to play an ecosystem game, so we play with the, with the processor companies we're playing with the data center companies themselves.
Um, and, um, you know, again,
We're picking our places very, very carefully. We're going for the highest end solutions where we can make a big difference in the energy space.
Uh, by the way, we're even attaching energy solutions that, uh, you know, kind of the more between the grid and the data center.
So we view this this power is just merely part of a, of an energy solution and uh we're looking at that from the intersection of the grid.
Right down to the chip.
Thanks, Will. We go to our last question, please. Thank you and I share a last question comes from the line of uh Joshua shelter from TD Cowan. Please go ahead.
Hey guys, thanks for squeezing me in, um, I wanted to ask about utilization rates. I think you might be the only company in Broad-based semis that called out higher utilization rates this quarter, um, how should we think about how you're thinking about that trending into fiscal 2025 or, you know, it sounds like selling is matching sell through. Should, should we just think about that ramping, um.
Basically directionally and linearly with your revenue or or any other puts and takes, uh, we should keep in mind as we think about the impact of margins. Thank you.
You so I, I, I, I guess I would start with, you know, from a utilization perspective we've talked about our agile manufacturing, you know, one of the reasons we're we've been able to bring utilization levels up is our ability to to swing capacity back into our internal fabs, so I think as I've mentioned we're, we're still not at a anywhere near a normalized utilization rate, but our ability to swing during the downturn has allowed us to continue to grow off the drop that we talked about in Q2 so we have seen two quarters of sequential modest.
I would say modest sequential increases in utilization, uh, and as the revenue picks up as we work our way through fiscal year 25, I expect that utilization to continue increase to continue.
All right.
Thank you, Josh, and thanks everyone for joining us this morning.
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Thank you. This concludes today's analog devices conference call. You may now disconnect.