Analog Devices Shares Sink After Disappointing Guidance

Analog Devices (ADI) experienced a decline in its shares early on Wednesday, following the release of underwhelming guidance. This announcement has sent ripples of concern throughout the semiconductor sector.

For the July quarter, Analog Devices reported adjusted earnings of $2.49 per share, with revenue totaling $3.08 billion. However, this fell slightly short of expectations. Analysts projected the company's earnings to reach $2.52 per share, accompanied by revenue amounting to $3.10 billion, according to a FactSet poll.

Vincent Roche, CEO of Analog Devices, acknowledged the challenges faced by the company but expressed contentment with their third quarter results. Roche also noted that customer inventory adjustments, mentioned in the previous quarter, have accelerated due to deteriorating economic conditions and improving lead times.

As for its fourth quarter, Analog Devices forecasts adjusted earnings per share of $2.00, with a margin of plus or minus 10 cents, alongside revenue of $2.70 billion, with a margin of plus or minus $100 million. Unfortunately, this outlook fell below analysts' previous expectations of adjusted earnings per share of $2.40 and revenue of $3.01 billion, according to FactSet.

As a result of this news, Analog Devices saw a 6.9% decrease in premarket trading. NXP Semiconductors (NXPI) experienced a decline of 2.4%, while ON Semiconductor (ON) dropped 2.1%.

On the other hand, fellow chip company Nvidia (NVDA) experienced a minor dip in premarket trading but managed to maintain a 0.5% increase. Nvidia's own earnings announcement is set to take place after the market closes on Wednesday. It is worth noting that Nvidia also serves the automotive industry, although it is not a significant part of its business.

Analog Devices' weak outlook is reminiscent of the concerns raised by Texas Instruments (TXN), another chip maker, last month. Despite the current setbacks, Analog Devices is expected to benefit from the growing demand for chips in electric vehicles. However, they have encountered obstacles this year due to car-related weaknesses and a decrease in industrial demand in China.