QS Research · Michael Burry's Scion Capital analyst template · 2006
ANALOG DEVICES INC (ADI)
As of 2026-11-08 · 13/15 boxes filled from SEC filings and market data
Conclusion: SHORT
Conviction medium · base case -39% · downside -42% · upside 0%
The market is paying 26.3x TTM EV/EBITDA (N29) and 42.6x P/E (N32) for a business whose own FY2020-FY2025 cycle-average EBITDA is $4.30B and net income $2.10B, versus TTM EBITDA of $6.91B and net income of $4.14B (S2, N15, N16) - the price capitalizes the top of the cycle, not the cycle. Held at the company's own current 26.3x, normalized EBITDA of $4.30B gives $113.1B of EV, $107.3B of equity after $5.79B of net debt and $221/share, 39% below today (N25, N5); the FY2024 trough EBITDA of $4.13B (operating income $2.03B + depreciation $362.8M + intangible amortization $1.74B) at the same multiple gives about $212, and only TTM EBITDA of $6.91B at 26.3x supports today's $363. The upcycle is real - Q3 FY2026 revenue of $4,022M was +40% with 67.3% gross margin and TTM FCF of $4.94B (S29, N19) - but on those TTM earnings at today's multiple the stock is worth roughly what it costs, so the upside case is about zero and the downside is a normal cyclic mean reversion. With $8.12B of debt, net debt of $5.79B and a $5.17B TTM cash return against $4.94B of TTM FCF, the balance sheet now leans on the peak too. Short.
Key numbers
- Share price: $363.56
- Market cap: $176.17B
- Latest financial period: TTM to Aug 1, 2026
- Revenue (TTM): $13.88B
- EV / EBITDA (TTM): 26.3x
- P/E (TTM): 42.6x
- Price / book: 5.25x
The 15 boxes
- ✓ 1. Long-form business notes
ADI sells high-performance analog, mixed-signal, power, RF and DSP ICs into an industrial-led end-market mix: FY2025 was 45% Industrial, 30% Automotive, 13% Consumer and 13% Communications. Revenue ran $12.31B in FY2023, $9.43B in FY2024 and $11.02B in FY2025, with gross profit of $7.88B, $5.38B and $6.77B and operating income of $3.82B, $2.03B and $2.93B over the same years. The company uses internal fabs plus more than half third-party wafers and sells direct and through distributors. The provided sources contain annual data only, so Q3 2026 and TTM figures cannot be shown.
- ✓ 2. Competitive advantage
Sources support a qualitative, multi-factor competitive claim—technical innovation, performance/reliability, customer service and support—but not a quantified moat: no market share, pricing-power or switching-cost metric is given. Through FY2020-FY2025 ADI stayed profitable at the gross-profit and operating-income lines, but the cycle is visible: FY2023 revenue $12.31B fell to $9.43B in FY2024 and recovered to $11.02B in FY2025, with gross profit $7.88B, $5.38B and $6.77B. Competition is described as intense and broad, including foreign government-backed semiconductor efforts; distributors were ~56% of revenue in the year ended November 1, 2025, and most orders are cancellable.
- ✓ 3. 10-Q takeaways
The Q3 FY2026 10-Q (quarter ended August 1, 2026) shows record revenue of $4.02 billion, up 40% year over year, with nine-month revenue of $10.81 billion (+36%), gross margin of 67.3% (+520 bps) and reported operating margin of 40.1% (adjusted 50.0%). Growth was broad-based but led by Communications (+84% Y/Y on AI data-center demand) and Industrial (+53%, 49% of revenue); inventory rose 17% to $1.93 billion and days sales outstanding moved to 50 from 44. Q3 GAAP EPS of $2.74 includes a $24.4 million gain on the Penang subsidiary sale booked in special charges and a 13.3% effective tax rate versus 32.1% a year ago, when a $153.8 million net deferred tax expense hit the quarter; Q4 FY2026 guidance is $4.3 billion revenue +/-$100 million and reported EPS of $3.14 +/-$0.15.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ✓ 11. Impression of the shareholder letter
Filled; members read this box.
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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