⚠ Earnings Fell in the Year of the DealLow threat

Analog Devices (ADI) — threat to the moat

Linear cut ADI's diluted EPS from $2.76 to $2.29 in 2017 before it rose to $4.00, the price of size that ADI paid again with Maxim.

A deal can add revenue and still cost the owners money for a time. Diluted earnings per share were $2.76 in fiscal 2016, fell to $2.29 in fiscal 2017, the year Linear closed, and rose to $4.00 in 2018 and $3.65 in 20191. Net income fell from $861.7 million to $805.4 million2 while revenue rose by more than half.

Analog Devices diluted EPS around the Linear deal ($)2.20FY20152.76FY20162.29FY20174.00FY20183.65FY2019Analog Devices Form 10-K FY2019, selected financial data (FY2017-18 restated)
One year of lower earnings, then a step up.

The reasons are in the accounting and the financing. ADI financed the $11.1 billion cash portion partly with loans and new notes3, so interest rose, and it issued stock for the rest, so the share count rose. Acquired inventory and intangibles were written up to fair value and then run through the income statement. None of that is unusual, and the 2018 recovery showed the business underneath was sound.

What the history shows is how ADI pays for size. It accepts a year or two of weaker reported earnings and a permanently larger capital base in exchange for a broader catalogue. The same pattern returned with Maxim: diluted EPS was $3.46 in fiscal 2021, the year it closed4, before rising to $5.25 in 20225.

The danger is that the pattern becomes a habit. Two small deals, Empower and Alif, are closing in 202667. If ADI announces another purchase of more than $10 billion before the Maxim amortisation has run off, the dip in reported earnings will stop being a one-off and become the normal state of the accounts.

References
  1. ReportedDiluted earnings per share were $2.76 in fiscal 2016, fell to $2.29 in fiscal 2017, the year Linear closed, and rose to $4.00 in 2018 and $3.65 in 2019.
    Analog Devices Form 10-K for fiscal 2019 (year ended 2 November 2019) - the Linear acquisition, five-year selected data for 2015-2019, Arrow, Macnica and Apple concentration, named competitors and fabs. — FY2019 · publ. November 2019 · source ↗
  2. ReportedNet income fell from $861.7 million to $805.4 million while revenue rose by more than half.
    Analog Devices Form 10-K for fiscal 2019 (year ended 2 November 2019) - the Linear acquisition, five-year selected data for 2015-2019, Arrow, Macnica and Apple concentration, named competitors and fabs. — FY2019 · publ. November 2019 · source ↗
  3. ReportedADI financed the $11.1 billion cash portion partly with loans and new notes, so interest rose, and it issued stock for the rest, so the share count rose.
    Analog Devices Form 10-K for fiscal 2019 (year ended 2 November 2019) - the Linear acquisition, five-year selected data for 2015-2019, Arrow, Macnica and Apple concentration, named competitors and fabs. — FY2019 · publ. November 2019 · source ↗
  4. ReportedThe same pattern returned with Maxim: diluted EPS was $3.46 in fiscal 2021, the year it closed, before rising to $5.25 in 2022.
    Analog Devices Form 10-K for fiscal 2021 (year ended 30 October 2021) - the Maxim acquisition, named competitors, wafer sourcing and end-market revenue for 2019-2021. — FY2021 · publ. December 2021 · source ↗
  5. ReportedThe same pattern returned with Maxim: diluted EPS was $3.46 in fiscal 2021, the year it closed, before rising to $5.25 in 2022.
    Analog Devices Form 10-K for fiscal 2023 (year ended 28 October 2023) - revenue, gross margin, net income and diluted EPS for 2023 and 2022, and the automotive drivers. — FY2023 · publ. November 2023 · source ↗
  6. ReportedTwo small deals, Empower and Alif, are closing in 2026.
    Analog Devices Form 10-Q for the quarter ended 1 August 2026 - end-market and channel revenue, the Empower acquisition, the Penang sale, the buyback authorisation and the chief operating decision maker. — Q3 FY2026 · publ. 19 August 2026 · source ↗
  7. ReportedTwo small deals, Empower and Alif, are closing in 2026.
    Analog Devices release of 9 September 2026, Form 8-K exhibit 99.1 - agreement to acquire Alif Semiconductor for $1.35 billion in cash plus up to $200 million of contingent consideration. — September 2026 · publ. 9 September 2026 · source ↗
Sources
Generated September 29, 2026