Analog Devices, Inc. (NASDAQ:ADI) stock fell Wednesday despite the chipmaker reporting stronger-than-expected fiscal second-quarter 2026 results and announcing a $1.5 billion acquisition of Empower Semiconductor aimed at expanding its AI infrastructure capabilities.

The strong earnings beat likely prompted investors to lock in recent gains.

The acquisition adds integrated voltage regulator and silicon capacitor technologies used in AI data centers and high-performance computing systems to ADI's portfolio. The deal is expected to close in the second half of 2026, pending regulatory approvals.

Analog Devices Second-Quarter Revenue, Earnings Beat Estimates

ADI reported second-quarter revenue of $3.62 billion, up 37% from a year earlier and above the analyst consensus estimate of $3.51 billion. Adjusted earnings came in at $3.09 per share, topping Wall Street estimates of $2.90 per share.

Industrial revenue rose 56% year over year to $1.8 billion, while communications revenue climbed 79% to $554.73 million. Automotive revenue increased 2% to $871.57 million, and consumer revenue advanced 23% to $397.76 million.

Analog Devices said industrial remained its largest business segment in the fiscal second quarter, accounting for 50% of total revenue, while automotive represented 24%, communications 15% and consumer 11%.

The company also highlighted continued momentum in AI infrastructure, noting that data center now contributes more than 75% of communications revenue and grew more than 90% year over year, driven by demand for optical and power products.

Margins Expand As Cash Flow Remains Strong

Adjusted gross margin expanded 360 basis points to 73%, while adjusted operating margin increased 780 basis points to 49%.

As of May 2, 2026, ADI held $2.44 billion in cash and cash equivalents and generated $872.04 million in operating cash flow during the quarter.

ADI generated $734 million in free cash flow during the quarter and $4.6 billion over the trailing 12 months. The company also returned $1.3 billion to shareholders in the quarter through dividends and share repurchases.

Analog Devices CEO Highlights AI And Industrial Demand

CEO Vincent Roche said second-quarter revenue, profitability and earnings per share exceeded the high end of the company's guidance despite geopolitical and macroeconomic pressures.

Roche said ADI is seeing record demand across its product portfolio, supported by the company's hybrid manufacturing model and supply-chain flexibility.

The company identified AI-driven computing and connectivity, autonomy, healthcare, energy transition and immersive consumer technologies as major long-term growth drivers.

Management added that ADI's data center and automated test equipment businesses continue to benefit from strong AI infrastructure spending and are positioned for further growth heading into 2027.

Automation, Robotics And Energy Drive Industrial Growth

Management also said industrial markets, including automation, healthcare, energy and electronic test and measurement, grew more than 40% during the first half of fiscal 2026.

They cited factory automation, robotics adoption and reshoring trends as key demand drivers for ADI's sensing, connectivity and power-management technologies.

Empower Semiconductor Deal Expands AI Infrastructure Exposure

On the acquisition, the company said Empower Semiconductor's technologies could reduce power footprints, improve compute density and lower energy consumption in AI data centers, while broadening ADI's exposure to AI accelerator infrastructure.

CFO Sees Broad-Based Demand Strength

CFO Richard Puccio said industrial and communications growth was driven by demand for data center, optical and power products. He added that automotive growth benefited from gains in advanced driver-assistance systems, infotainment platforms and battery-management systems for electric vehicles.

Analog Devices Issues Strong Third-Quarter Outlook

For the fiscal third quarter, ADI forecast revenue of $3.80 billion to $4.00 billion, above analyst estimates of $3.62 billion. The company also projected adjusted earnings of $3.15 to $3.45 per share, ahead of the Street consensus estimate of $3.00 per share.

ADI Price Action: Analog Devices shares were down 5.97% at $390.26 at the time of publication on Wednesday, according to Benzinga Pro data.

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