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Can ADI's Communications Segment Emerge as a New Growth Driver?
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Key Takeaways
ADI communications revenues grew 79% year over year, led by data center strength.
ADI expects communications to be its fastest sequential grower, supported by AI demand.
ADI sees record bookings and data center growth boosting a higher-margin business segment.
Analog Devices’ (ADI - Free Report) communications segment is growing strongly throughout 2025 and 2026. In fiscal second-quarter 2026, the segment posted revenues of $554.7 million, with revenues increasing 22% sequentially and 79% year over year to represent 15% of total company revenues.
The segment’s growth was led by the data center business, which now accounts for more than 75% of communications revenues and grew over 90% year over year, supported by strength in both optical and power portfolios. Wireless also remained healthy, rising more than 35% year over year.
Analog Devices' communications business serves the growing demand for high-speed, reliable connectivity across wireless infrastructure and data center applications. The segment is positioned to address increasing requirements for advanced communications technologies driven by expanding network traffic, cloud computing, artificial intelligence (AI) and machine learning workloads.
The data center market represents another key area of focus, benefiting from the rapid adoption of AI, machine learning and hyperscale computing architectures. These trends are driving demand for advanced power delivery systems, thermal management technologies and high-speed connectivity solutions capable of supporting increasingly complex computing workloads and cloud infrastructure. To address these requirements, the company offers a portfolio that includes power management technologies, optical and high-speed connectivity solutions, and energy optimization products designed to improve the performance and efficiency of next-generation data centers.
ADI experienced record bookings across its B2B markets. The management reported that the demand signals remain constructive, supporting expectations for continued strong growth in the third quarter and beyond. Communications, including data center, is an above-corporate-average-margin business, which can lift profitability as it scales. For the third quarter, management expects Communications to be its fastest sequential grower, up low- to mid-teens at the midpoint, reinforcing the momentum in AI connectivity.
How Competitors Fare Against Analog Devices
Analog Devices competes with Texas Instruments (TXN - Free Report) and Broadcom (AVGO - Free Report) in the Communications segment. Texas Instruments competes with ADI in analog/mixed-signal, RF front-ends, power amp/driver ICs, ADCs/DACs in infrastructure and wireless systems.
Broadcom is strong in networking, data center, broadband, Wi-Fi, Ethernet PHYs and switches. In the communications segment, Broadcom mainly competes with its high-speed connectivity, optical / wireline networking equipment and cable or broadband IC portfolio.
Despite strong competition from Texas Instruments and Broadcom, Analog Devices has enough scope to grow in the communications space as new 5G technology is being introduced.
ADI’s Price Performance, Valuation and Estimates
Shares of ADI have gained 68.6% in the past 12 months compared with the Semiconductor - Analog and Mixed industry’s growth of 77.7%.
ADI 12-Month Performance Chart
Image Source: Zacks Investment Research
From a valuation standpoint, ADI trades at a forward price-to-sales ratio of 12.18X, higher than the industry’s average of 10.30X.
ADI Forward 12-Month (P/S) Valuation Chart
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for ADI’s fiscal 2026 and 2027 earnings implies year-over-year growth of 59% and 14%, respectively. The consensus estimate for fiscal 2025 and 2026 has remained unchanged in the past 30 days.
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Can ADI's Communications Segment Emerge as a New Growth Driver?
Key Takeaways
Analog Devices’ (ADI - Free Report) communications segment is growing strongly throughout 2025 and 2026. In fiscal second-quarter 2026, the segment posted revenues of $554.7 million, with revenues increasing 22% sequentially and 79% year over year to represent 15% of total company revenues.
The segment’s growth was led by the data center business, which now accounts for more than 75% of communications revenues and grew over 90% year over year, supported by strength in both optical and power portfolios. Wireless also remained healthy, rising more than 35% year over year.
Analog Devices' communications business serves the growing demand for high-speed, reliable connectivity across wireless infrastructure and data center applications. The segment is positioned to address increasing requirements for advanced communications technologies driven by expanding network traffic, cloud computing, artificial intelligence (AI) and machine learning workloads.
The data center market represents another key area of focus, benefiting from the rapid adoption of AI, machine learning and hyperscale computing architectures. These trends are driving demand for advanced power delivery systems, thermal management technologies and high-speed connectivity solutions capable of supporting increasingly complex computing workloads and cloud infrastructure. To address these requirements, the company offers a portfolio that includes power management technologies, optical and high-speed connectivity solutions, and energy optimization products designed to improve the performance and efficiency of next-generation data centers.
ADI experienced record bookings across its B2B markets. The management reported that the demand signals remain constructive, supporting expectations for continued strong growth in the third quarter and beyond. Communications, including data center, is an above-corporate-average-margin business, which can lift profitability as it scales. For the third quarter, management expects Communications to be its fastest sequential grower, up low- to mid-teens at the midpoint, reinforcing the momentum in AI connectivity.
How Competitors Fare Against Analog Devices
Analog Devices competes with Texas Instruments (TXN - Free Report) and Broadcom (AVGO - Free Report) in the Communications segment. Texas Instruments competes with ADI in analog/mixed-signal, RF front-ends, power amp/driver ICs, ADCs/DACs in infrastructure and wireless systems.
Broadcom is strong in networking, data center, broadband, Wi-Fi, Ethernet PHYs and switches. In the communications segment, Broadcom mainly competes with its high-speed connectivity, optical / wireline networking equipment and cable or broadband IC portfolio.
Despite strong competition from Texas Instruments and Broadcom, Analog Devices has enough scope to grow in the communications space as new 5G technology is being introduced.
ADI’s Price Performance, Valuation and Estimates
Shares of ADI have gained 68.6% in the past 12 months compared with the Semiconductor - Analog and Mixed industry’s growth of 77.7%.
ADI 12-Month Performance Chart
Image Source: Zacks Investment Research
From a valuation standpoint, ADI trades at a forward price-to-sales ratio of 12.18X, higher than the industry’s average of 10.30X.
ADI Forward 12-Month (P/S) Valuation Chart
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for ADI’s fiscal 2026 and 2027 earnings implies year-over-year growth of 59% and 14%, respectively. The consensus estimate for fiscal 2025 and 2026 has remained unchanged in the past 30 days.
Image Source: Zacks Investment Research
ADI currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.