In short: Grid-to-chip breakout. Q3 revenue surged 40% Y/Y to $4.0B ($0.1B beat) with adjusted EPS +68% to $3.45 ($0.11 beat), adjusted operating margin reaching 50% and trailing-12-month free cash flow climbing to a record $4.9B. The AI mix has taken over the growth: data center is now 80% of Communications revenue (from more than 75% last quarter), with both the optical and power businesses growing more than 100% Y/Y; Optical Circuit Switching revenue is expected to roughly double this year and again in 2027, and the broader energy business has grown past $500M. The $1.5B Empower Semiconductor acquisition closed in July, "extending ADI's power portfolio directly into the processor package" — management now frames its opportunity as spanning "grid to chip," addressing the increasingly difficult problem of delivering power efficiently from the data-center grid to AI accelerators. Demand strengthened through the quarter and Q4 guidance moved higher again: revenue ~$4.3B vs $4.08B consensus, adjusted EPS ~$3.86 vs $3.55, with momentum expected to carry into FY27. Bottom Line: "With Empower adding another layer to its power stack and AI infrastructure now becoming a meaningful structural business, ADI's growth story looks increasingly like an AI infrastructure cycle of its own."
Analog Devices makes the unglamorous chips that sit between the real world and a computer — the parts that measure things, convert signals, and above all move electricity around cleanly. It is a century-old kind of business, and it just grew 40% in a quarter, with profit per share up 68%. When profit grows nearly twice as fast as sales, it means the new business is arriving at very high margin: half of every extra dollar is dropping through to operating profit.
The reason is AI data centres, and the specific problem is power. A rack of AI accelerators draws an enormous amount of electricity, and getting that power from the building's grid connection all the way down to the chip — through many voltage steps, without wasting it as heat — has become one of the hardest engineering problems in the industry. ADI sells the parts that do that. Its data-centre business is now 80% of its whole Communications segment, and both its optical parts (moving data as light instead of electricity, which matters over distance) and its power parts each more than doubled year over year.
The July acquisition of Empower Semiconductor for $1.5 billion extends that reach right into the processor's own package — the last few millimetres of the journey. Management's phrase for the resulting franchise is "grid to chip," and it is a fair description of the span: from the substation to the silicon.
This is the second-order way to own the AI buildout. ADI does not make the accelerators everyone argues about; it sells the picks and shovels that every accelerator needs regardless of whose logo is on it. Guidance went up again for the current quarter and management expects the momentum to continue into next fiscal year. The author's read: what used to be a cyclical analog business "looks increasingly like an AI infrastructure cycle of its own." Analysis, not a recommendation.
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