Analog Devices Outlook
Analog Devices is forecasting a dip in first-quarter revenue and profit, citing the persistent semiconductor oversupply as the primary challenge. The chipmaker is contending with cautious customers, affected by inflation, who are reluctant to initiate new chip orders, resulting in a surplus of semiconductor inventory.
Expressing confidence, CEO Vincent Roche asserts that the company expects to surmount the inventory overhang in the first half of the year, anticipating a return to a more typical growth trajectory in the second half.
To address the surplus inventory, Analog is strategically decelerating its capacity expansion, aiming to curtail capital expenditure by approximately $500 million in the ongoing fiscal year. Interim finance chief Jim Mollica reported a $70 million reduction in inventory in the fourth quarter, with an expectation for continued decline in the second quarter.
Q1 Projections
For the upcoming quarter, Analog Devices anticipates revenue around $2.50 billion, with a margin of plus or minus $100 million, falling short of market estimates hovering around $2.68 billion. Additionally, adjusted earnings for the first quarter are forecasted at $1.70 per share, with a margin of plus or minus 10 cents, trailing the estimated $1.90.
Concerns about a potential slowdown in the electric vehicle sector have contributed to cautious spending by automakers, further impacting Analog’s order volumes. Notably, the company’s automotive sales, constituting more than a quarter of total sales, grew at a sluggish 14%, marking the slowest pace in at least two years.
On a broader scale, Analog’s overall revenue witnessed a 16% decline to $2.72 billion, surpassing estimates. However, the primary industrial business registered a substantial 20% drop in sales.
CEO Roche emphasized the industrial sector’s weakness, affecting various market segments, with the exception of the aerospace and defense domain, which demonstrated resilience.
The company reported adjusted profits of $2.01 per share, closely aligning with expectations. Despite this performance, shares of the firm experienced a marginal decline, falling slightly more than 1%.
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