ADI Predicts Q2 Weakness Amid Chip Surplus

Analog Devices (ADI) anticipates lower-than-anticipated profits and revenue for Q2 2024, citing challenges in meeting uncertain demands within the industrial and automotive sectors.

In January of this year, Texas Instruments released a subdued performance forecast, underscoring industry-wide challenges as companies grapple with excess inventory accumulated during the pandemic-driven demand surge.

Vincent Roche, CEO of ADI, stated, "Consistent with our previous outlook, we anticipate a significant reduction in customer inventory in the second quarter, positioning us for a more favorable business environment in the latter half of the year."

According to LSEG data, the company projects second-quarter revenue at $21.0 billion, fluctuating within a range of $1 billion, falling short of analysts' average expectations of $23.6 billion.

ADI's adjusted profit for the second quarter is projected at $1.26 per share, with a fluctuation of 10 cents, also below the expected $1.56 per share.

The industrial sector, which contributes nearly 50% to the company's revenue, experienced a 31% decline in Q1 2024 revenue due to a persistent supply surplus.

The growth in the automotive sector has also slowed to a two-year low at 9%. Chip orders in the automotive industry have decreased in recent months due to high-interest rates impacting car demand.

Research firm Canalys estimates that the global electric vehicle market's growth will decelerate to 27.1% this year, attributed to reduced national subsidies diminishing the appeal of new cars to buyers.

ADI reported first-quarter revenue of $25.1 billion in 2024, surpassing analysts' expectations of $25 billion.