It has been about a month since the last earnings report for Analog Devices (ADI Quick QuoteADI - Free Report) . Shares have added about 8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Analog Devices due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Analog Devices Beats Q2 Earnings & Revenue Estimates

Analog Devices delivered second-quarter fiscal 2023 adjusted earnings of $2.83 per share, beating the Zacks Consensus Estimate by 2.9%. The bottom line rose 18% from the year-ago fiscal quarter’s reported figure.

Revenues of $3.26 billion surpassed the Zacks Consensus Estimate of $3.21 billion. The top line improved by 10% from the year-ago fiscal quarter’s reported figure.

The strong performance delivered by Analog Devices across the industrial and automotive markets drove the top line.

Revenues by End Markets

Industrial: Analog Devices generated revenues of $1.74 billion (accounting for 53% of the total revenues), which grew 16% year over year.

Communications: Revenues from the market were $453.53 million (14% of revenues), decreasing 4% from the year-ago fiscal quarter’s reported figure.

Automotive: Revenues from the market summed up to $784.8 million (24% of revenues), up 24% from the year-ago fiscal quarter’s level.

Consumer: The market generated revenues of $280.1 million (9% of revenues), reflecting a 22% decline from the year-ago fiscal quarter’s reported figure.

Operating Details

The adjusted gross margin contracted 50 basis points (bps) from the year-ago fiscal quarter’s level to 73.7%.

Adjusted operating expenses were $733.1 million, up 3.2% from the year-ago fiscal quarter’s level. As a percentage of revenues, adjusted operating expenses were 22.5%, contracting 140 bps year over year.

The adjusted operating margin expanded 90 bps on a year-over-year basis to 51.2% in the reported quarter.

Balance Sheet & Cash Flow

As of Apr 29, 2023, cash and cash equivalents were $1.18 billion, down from $1.67 billion as of Jan 28, 2023.

Long-term debt was $6.48 billion at the end of the fiscal second quarter compared with $6.54 billion at the end of the fiscal first quarter.

Net cash provided by operations was $1.1 billion in the reported quarter, down from $1.4 billion in the prior fiscal quarter.

ADI generated $797 million of free cash flow in the fiscal second quarter.

Additionally, Analog Devices returned $1.6 billion to its shareholders in the fiscal second quarter, of which dividend payments accounted for $435 million and repurchased shares amounted to $1.15 billion.

Guidance

For third-quarter fiscal 2023, ADI expects revenues of $3.10 billion (+/- $100 million).

Non-GAAP earnings are expected to be $2.52 (+/- $0.10) per share.

Analog Devices anticipates non-GAAP operating margins of 48.5% (+/- 70 bps).

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

VGM Scores

Currently, Analog Devices has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Analog Devices has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.