ANALOG DEVICES INC (ADI)

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This information should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q and the audited consolidated financial statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended November 1, 2025 (fiscal 2025).

This Quarterly Report on Form 10-Q, including the following discussion, contains forward-looking statements regarding future events and our future results that are subject to the safe harbor created under the Private Securities Litigation Reform Act of 1995 and other safe harbors under the Securities Act of 1933 and the Securities Exchange Act of 1934. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. These statements are based on current expectations, estimates, forecasts and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “continues,” “potential,” “may,” “could” and “will,” and variations of such words and similar expressions are intended to identify such forward-looking statements, however, the absence of the foregoing words or expressions does not mean that a statement is not forward-looking. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors.

The following important factors and uncertainties, among others, could cause actual results to differ materially from those described in the forward-looking statements: economic, political, legal and regulatory uncertainty or conflicts; recently announced and future tariffs and other trade restrictions; changes in export classifications, import and export regulations or duties and tariffs; changes in demand for semiconductor products; performance of independent distributors; manufacturing delays, product and raw materials availability and supply chain disruptions; products may be diverted from our authorized distribution channels; our development of technologies and research and development investments; our ability to compete successfully in the markets in which we operate; our future liquidity, capital needs and capital expenditures; our ability to recruit and retain key personnel; risks related to acquisitions or other strategic transactions; unanticipated difficulties or expenditures relating to integrating acquired businesses; security breaches or other cyber incidents; risks related to the use of artificial intelligence in our business operations, products and services; adverse results in litigation; the outcome of any regulatory actions, including governmental inquiries, investigations or enforcement proceedings in the event of noncompliance or alleged noncompliance with laws or regulations; reputational damage; changes in our estimates of our expected tax rates based on current tax law; risks related to our indebtedness; the discretion of our Board of Directors to declare dividends and our ability to pay dividends in the future; factors impacting our ability to repurchase shares; and uncertainty as to the long-term value of our common stock. Additional factors that could cause actual results to differ materially from those described in these forward-looking statements include the risk factors included in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for fiscal 2025. Forward-looking statements represent management’s current expectations and are inherently uncertain. We undertake no obligation to revise or update any forward-looking statements, including to reflect events or circumstances occurring after the date of the filing of this report, except to the extent required by law.

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Results of Operations

Overview

Amounts in the tables below are reflected in thousands except per share amounts and percentages.

Revenue Trends by End Market

The following tables summarize revenue by end market. The categorization of revenue by end market is determined using a variety of data points including the technical characteristics of the product, the “sold to” customer information, the “ship to” customer information and the end customer product or application into which our product will be incorporated. The assignment of products to end markets may change over time. When this occurs, we reclassify revenue by end market for prior periods. Such reclassifications typically do not materially change the sizing of, or the underlying trends of results within, each end market.

Revenue increased 37% and 34% in the three- and six-month periods ended May 2, 2026 as compared to the same periods of the prior fiscal year as a result of a broad-based increase in demand for our products, notably within all Industrial

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sub-markets with the highest growth coming from our test equipment and aerospace and defense sub-markets. Revenue also increased in the data center portion of the Communications end market related to artificial intelligence-driven infrastructure investments.

Revenue by Sales Channel

The following tables summarize revenue by sales channel. We sell our products globally through a direct sales force, third-party distributors, independent sales representatives and via our website. Distributors are customers that buy products with the intention of reselling them. Direct customers are non-distributor customers and consist primarily of original equipment manufacturers. Other customers include the U.S. government, government prime contractors and certain commercial customers for which revenue is recorded over time.

As indicated in the tables above, the percentage of total revenue sold via each channel has remained relatively consistent in the periods presented, but can fluctuate from time to time based on end market revenue trends.

Gross Margin

Gross margin percentage increased by 630 and 600 basis points in the three- and six-month periods ended May 2, 2026 as compared to the same periods of the prior fiscal year, primarily due to higher utilization of our manufacturing fixed costs as a result of increased customer demand and favorable mix of products sold into our end markets.

Research and Development (R&D)

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R&D expenses increased in the three- and six-month periods ended May 2, 2026, as compared to the same periods of the prior fiscal year, primarily as a result of higher R&D employee-related variable compensation expenses. R&D expenses declined as a percentage of revenue, primarily reflecting higher revenue levels and improved operating leverage. We expect to continue the development of innovative technologies and processes for new products, which we view as critical to our future growth. We believe that a continued commitment to R&D is essential to maintain product leadership with our existing products as well as to provide innovative new product offerings.

Selling, Marketing, General and Administrative (SMG&A)

SMG&A expenses increased in the three- and six-month periods ended May 2, 2026, as compared to the same periods of

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ITEM 7.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (all tabular amounts in thousands except per share amounts)

The following discussion includes results of operations and financial condition for the fiscal year ended November 1, 2025 (fiscal 2025) and the fiscal year ended November 2, 2024 (fiscal 2024) and year-over-year comparisons between fiscal 2025 and fiscal 2024. For discussion on results of operations and financial condition for fiscal 2024 and the fiscal year ended October 28, 2023 (fiscal 2023) and year-over-year comparisons between fiscal 2024 and fiscal 2023, please refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our Annual Report on Form 10-K for fiscal 2024 filed with the Securities and Exchange Commission on November 26, 2024. Our fiscal year is the 52-week or 53-week period ending on the Saturday closest to the last day in October. Fiscal 2025 was a 52-week fiscal period, while fiscal 2024 was a 53-week fiscal period. The additional week in fiscal 2024 was included in the first quarter ended February 3, 2024. Therefore, fiscal 2025 includes one less week of operations as compared to fiscal 2024.

Results of Operations

Overview

Revenue Trends by End Market

The following table summarizes revenue by end market. The categorization of revenue by end market is determined using a variety of data points including the technical characteristics of the product, the “sold to” customer information, the “ship to” customer information and the end customer product or application into which our product will be incorporated. As data systems for capturing and tracking this data and our methodology evolves and improves, the categorization of products by end market can vary over time. When this occurs, we reclassify revenue by end market for prior periods. Such reclassifications typically do not materially change the sizing of, or the underlying trends of results within, each end market.

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(1)The sum of the individual percentages may not equal the total due to rounding.

Revenue increased 17% in fiscal 2025 as compared to fiscal 2024 as a result of broad-based increase in demand for our products. In addition to increased demand, the increase in the Industrial end market was primarily due to customer inventory balances normalizing and growth in the test equipment and aerospace and defense sub-markets. In the Automotive end market, the increase was primarily driven by increases from connectivity solutions. The increase in the Consumer end market was primarily related to portable consumer products and the increase in the Communications end market was primarily driven by growth in the wireline sub-market from data center infrastructure expansion in support of AI applications. These increases were partially offset by the impact of an additional week of operations in fiscal 2024 as compared to fiscal 2025.

Revenue by Sales Channel

The following table summarizes revenue by sales channel. We sell our products globally through a direct sales force, third-party distributors, independent sales representatives and via our website. Distributors are customers that buy products with the intention of reselling them. Direct customers are non-distributor customers and consist primarily of original equipment manufacturers (OEMs). Other customers include the U.S. government, government prime contractors and certain commercial

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customers for which revenue is recorded over time.

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(1)The sum of the individual percentages may not equal the total due to rounding.

As indicated in the table above, the percentage of total revenue sold via each channel has remained relatively consistent in the periods presented but can fluctuate from time to time based on end market revenue trends. As a percentage of total revenue, the decrease in the distributor channel is primarily due to the decrease in the percentage of revenue from our Industrial end market.

Revenue Trends by Geographic Region

Geographic revenue information for fiscal 2025 and fiscal 2024 reflects the geographic location of the distributors or OEMs who purchased the Company’s products. This may differ from the geographic location of the end customers particularly in cases where a third-party contract manufacturer purchases the Company’s products through distributors.

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(1)The sum of the individual percentages may not equal the total due to rounding.

In all periods presented, the predominant regions comprising “Rest of North and South America” are Mexico and Canada; the predominant regions comprising “Europe” are Germany, the Netherlands, France and Israel; and the predominant regions comprising “Rest of Asia” are Taiwan, South Korea, Malaysia and Singapore.

Total revenue increased in fiscal 2025 as compared to fiscal 2024 in most regions due to broad-based demand increases as discussed above under the heading Revenue Trends by End Market.

Gross Margin

Gross margin percentage in fiscal 2025 increased by 440 basis points compared to fiscal 2024, primarily due to higher utilization of our factories due to increased customer demand as well as a decrease in amortization expense related to acquired intangible assets.

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Research and Development (R&D)

R&D expenses increased in fiscal 2025 as compared to fiscal 2024, primarily as a result of higher R&D employee related variable compensation expenses and higher salary and benefit expenses, partially offset by the impact of an additional week of operations in fiscal 2024 as compared to fiscal 2025.

R&D expenses as a percentage of revenue will fluctuate from year-to-year depending on the amount of revenue and the success of new product development efforts, which we view as critical to our future growth. We expect to continue the development of innovative technologies and processes for new products. We believe that a continued commitment to R&D is essential to maintain product leadership with our existing products as well as to provide innovative new product offerings.

Selling, Marketing, General and Administrative (SMG&A)

SMG&A expenses increased in fiscal 2025 as compared to fiscal 2024, primarily as a result of higher SMG&A employee related variable compensation expenses and salary and benefit expenses, partially offset by an additional week of operations in fiscal 2024 as compared to fiscal 2025.

Amortization of Intangibles

Amortization expenses decreased in fiscal 2025 as compared to fiscal 2024, primarily as a result of a portion of our acquired intangible assets becoming fully amortized.

Special Charges, Net

Special charges, net increased in fiscal 2025 as compared to fiscal 2024, primarily due to increased charges related to our Global Repositioning Actions. See Note 5, Special Charges, Net, of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for more information.

Nonoperating Expense (Income)

The year-over-year decrease in nonoperating expense in fiscal 2025 as compared to fiscal 2024 was primarily the result of higher interest income from higher cash, cash equivalents and short-term investments balances during fiscal 2025.

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Provision for Income Taxes

Our effective tax rates for fiscal 2025 and fiscal 2024 were below the U.S. statutory rate of 21% due to lower statutory tax rates applicable to our operations in the foreign jurisdictions in which we earn income. For fiscal 2025 and fiscal 2024 our pretax income was primarily generated in Ireland at a tax rate of 12.5%. Our effective tax rate for fiscal 2025 was impacted by a net deferred tax expense of $153.8 million related to the re

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