Analog Devices, Inc. (ADI) DCF Valuation & Fundamental Primer
Analog Devices, Inc. (ADI) currently trades at $277.29 with an enterprise value of $82.40B. Our proprietary institutional model rates Analog Devices, Inc. at 70/100 (Grade: B+ · Quality Software Operator). The current market price prices in an implied 5-year revenue CAGR of 25.1% vs. historical growth of 10.8% (Aggressive Growth Expectations Priced In).
Institutional fundamental teardown of Analog Devices, Inc. (ADI) covering SEC 10-K/10-Q cash flow conversion, SBC dilution friction, and Reverse-DCF valuation hurdles.
Analog Devices, Inc. (ADI) 3-Scenario DCF Valuation Range
Stress-test ADI's 5-year growth, target FCF margin, WACC, terminal methodology, and SBC/dilution friction in real time.
Split between 5-Year Explicit Cash Flows and Discounted Terminal Value
2D Institutional Valuation Sensitivity Heatmap
Implied share price & upside/downside spread across 25 valuation states (Current Price: $277.29).
| WACC \ Terminal | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 8.5% | $172.87 -38% | $184.32 -34% | $197.68 -29% | $213.47 -23% | $232.42 -16% |
| 9.3% | $154.18 -44% | $163.20 -41% | $173.56 -37% | $185.58 -33% | $199.68 -28% |
| 10.0% | $138.81 -50% | $146.06 -47% | $154.28 -44% | $163.68 -41% | $174.52 -37% |
| 10.8% | $125.94 -55% | $131.88 -52% | $138.52 -50% | $146.03 -47% | $154.57 -44% |
| 11.5% | $115.03 -59% | $119.94 -57% | $125.41 -55% | $131.52 -53% | $138.39 -50% |
Institutional Software Quality Scorecard (70/100 · Grade B+)
Solid software model with clear operating leverage, partially offset by standard SBC or moderate burn.
Elite deferred revenue float; FCF exceeds operating income by >20%
Minimal dilution friction; management compensation aligned with shareholders
Sub-par gross margins; higher cost of delivery or hardware/services mix
Moderate leverage or cash burn; monitor liquidity runway
Core Investment Strengths & Moats
- High-grade cash conversion: FCF is 143% of EBIT driven by upfront annual collections
- Low dilution friction: SBC is only 2.9% of revenue
Key Operational & Dilution Risks
- Lower software gross margins (54.7%), indicating higher hosting or service delivery drag
Reverse-DCF Solver: What Growth is Priced Into ADI?
The current share price demands 25.1% 5-year CAGR (26.6% net of SBC & dilution)—a +14.3% acceleration over historical run-rate (10.8%). Any growth slowdown risks valuation multiple contraction.
Headline Reverse-DCF ignores Stock-Based Compensation (2.9% of revenue) and annual share dilution (0.4%/yr). Accounting for both requires 26.6% 5-year revenue CAGR to justify $277.29/sh on a true per-share economic cash flow basis.
Analog Devices, Inc. (ADI) 5-Year Fundamental Forecast
| Statement Line Item | TTM Audited Base | TTM | Y1 | Y2 | Y3 | Y4 | Y5 |
|---|---|---|---|---|---|---|---|
| Revenue | $11.02B | $11.02B | $12.21B | $13.52B | $14.98B | $16.59B | $18.38B |
| Gross Profit | $6.02B | $6.02B | $6.67B | $7.39B | $8.19B | $9.07B | $10.05B |
| Operating Income (EBIT) | $3.00B | $3.00B | $3.33B | $3.68B | $4.08B | $4.52B | $5.01B |
| Stock-Based Compensation (SBC) | $321.6M | $321.8M | $356.4M | $394.8M | $437.3M | $484.4M | $536.6M |
| Unlevered Free Cash Flow (FCF) | $4.28B | $4.28B | $4.74B | $5.25B | $5.82B | $6.44B | $7.14B |
| SBC-Adjusted True Cash Flow | $3.96B | $3.96B | $4.38B | $4.86B | $5.38B | $5.96B | $6.60B |
Software & Cloud Services Peer Comparables & Rule of 40 Regression
Rule of 40 vs. EV / Revenue Multiple Regression
OLS Fit: EV/Rev = -28.8 + 0.80 × (Rule of 40) · R² = 76%Stocks below the gold regression line trade at a discount relative to their Rule of 40 compounding efficiency.
| Company | Ticker | Market Cap | TTM Revenue | Gross Margin | FCF Margin | Rule of 40 | SBC % Rev | EV / Rev |
|---|---|---|---|---|---|---|---|---|
| Analog Devices, Inc. | ADI | $137.09B | $11.02B | 54.7% | 38.8% | 49.6% | 2.9% | 13.0× |
| ServiceNow | NOW | $152.61B | $10.98B | 79.2% | 31.1% | 54.2% | 15.9% | 13.9× |
| Workday, Inc. | WDAY | $50.35B | $8.00B | 75.0% | 27.4% | 43.9% | 19.0% | 6.4× |
| Salesforce | CRM | $217.10B | $37.90B | 77.2% | 32.8% | 42.8% | 8.4% | 5.8× |
| Datadog | DDOG | $46.05B | $2.68B | 80.8% | 31.1% | 57.7% | 21.3% | 17.4× |
| Snowflake Inc. | SNOW | $71.79B | $3.63B | 66.5% | 25.2% | 57.7% | 40.8% | 20.0× |
| Hubspot | HUBS | $19.89B | $2.63B | 85.0% | 21.3% | 52.7% | 19.2% | 7.7× |
| Peer Cohort Median Benchmark (N=6) | 78.2% | 29.2% | 53.5% | 19.1% | 10.8× | |||
EV / Revenue Multiple Compression Stress Test
| Multiple Scenario | EV / Revenue | Implied Enterprise Value | Implied Equity Value | Implied Share Price | Delta vs Current |
|---|---|---|---|---|---|
| Current Multiple | 13.0× | $143.25B | $137.09B | $277.29 | 0.0% |
| -20% Multiple Compression | 10.4× | $114.60B | $108.44B | $219.34 | -20.0% |
| -35% Multiple Compression | 8.4× | $93.11B | $86.95B | $175.87 | -35.0% |
| Software Baseline Floor (5.0× EV/Rev) | 5.0× | $55.10B | $48.93B | $98.98 | -61.5% |
Frequently Asked Questions: Analog Devices, Inc. (ADI) Valuation
What is Analog Devices, Inc. (ADI)'s intrinsic DCF valuation and implied share price?
Based on audited SEC 10-K/10-Q filings and a 5-year 3-statement discounted cash flow (DCF) model, Analog Devices, Inc. (ADI) has a Base Case implied value of $154.21 per share (with a Bear Case of $73.66 and a Bull Case of $252.30), compared to its current price of $277.29. The model discounts projected free cash flows at a 10.0% WACC and a 2.5% terminal growth rate.
What is Analog Devices, Inc. (ADI)'s Rule of 40 score and Free Cash Flow margin?
Analog Devices, Inc. achieves a Rule of 40 score of 49.6%, combining a 10.8% revenue growth run-rate with a 38.8% TTM free cash flow margin on $11.02B in trailing twelve-month revenue. In the Software & Cloud Services peer cohort, the median Rule of 40 benchmark is 53.5%.
What revenue growth rate is priced into ADI stock according to Reverse-DCF analysis?
At $277.29 per share (Enterprise Value of $143.25B), our Reverse-DCF solver indicates the market is pricing in a 5-year implied revenue CAGR of 25.1%, compared to Analog Devices, Inc.'s historical CAGR of 10.8%. Overall market expectations are rated as "Aggressive Growth Expectations Priced In".
How does Analog Devices, Inc. compare to Software & Cloud Services software peers?
Analog Devices, Inc. (ADI) earns an institutional Software Quality Score of 70/100 (Grade B+ — Quality Software Operator). Across its Software & Cloud Services peer group (NOW, WDAY, CRM, DDOG, SNOW), the cohort trades at a median EV/TTM Revenue multiple of 10.8× and a median gross margin of 78.2%.
How does Stock-Based Compensation (SBC) impact Analog Devices, Inc. (ADI)'s valuation?
Analog Devices, Inc. recorded $321.6M in TTM stock-based compensation (2.9% of revenue). When treating SBC as a cash-equivalent compensation expense, Analog Devices, Inc.'s SBC-adjusted free cash flow yield is 2.9%, scoring 25/25 on our Shareholder Dilution Friction pillar.