⚠ Revenue Booked at the DistributorModerate threat

Analog Devices (ADI) — threat to the moat

ADI books 56% of its revenue when distributors buy, with price credits and returns estimated later, so channel stock sits between its revenue and real demand.

Most of ADI's revenue is recognised before an end customer has bought anything. Distributors took 56% of fiscal 2025 revenue, 58% in 2024 and 61% in 20231, and 58% in the third quarter of fiscal 20262. In 2017 the share was 52%3; it peaked at 63% in fiscal 20214.

Distributors share of Analog Devices revenue (%)52FY201757FY201963FY202162FY202261FY202358FY202456FY202558Q3 FY2026Analog Devices Forms 10-K FY2019, FY2022, FY2025; Form 10-Q Q3 FY2026, sales channel
More than half of revenue has gone through distributors every year since 2017.

The accounting follows the shipment, not the end sale. ADI records revenue when it sells to a distributor and estimates what it will give back later: "We are required to estimate the effects of variable consideration including price protection and stock rotation provided to distributors and record revenue at the time of sale to the distributor."5 It warns: "If our estimates of such liabilities are materially understated, it could cause subsequent adjustments that negatively impact our revenues and gross profits in a future period."6

The agreements allow "certain distributors to receive price adjustment credits and to return qualifying products for credit"7. That makes distributor stock a buffer between ADI and real demand. When distributors fill their shelves, ADI's revenue runs ahead of consumption; when they empty them, as in fiscal 2024, revenue falls faster.

The latest quarter leans toward filling. The company said the higher distributor share was "primarily due to the increase in the percentage of revenue from our Industrial end market"8, and distributor revenue rose 46.1% against total growth of 40%910. That is argued further on What the Market Isn't Pricing In. If the distributor share passes 60% again while ADI reports record quarters, the recovery will be resting on shelves rather than on end demand.

References
  1. ReportedDistributors took 56% of fiscal 2025 revenue, 58% in 2024 and 61% in 2023, and 58% in the third quarter of fiscal 2026.
    Analog Devices Form 10-K for fiscal 2025 (year ended 1 November 2025) - revenue by end market, sales channel and geography, and significant distributors. — FY2025 · publ. 25 November 2025 · source ↗
  2. ReportedDistributors took 56% of fiscal 2025 revenue, 58% in 2024 and 61% in 2023, and 58% in the third quarter of fiscal 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 ↗
  3. ReportedIn 2017 the share was 52%; it peaked at 63% in fiscal 2021.
    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. ReportedIn 2017 the share was 52%; it peaked at 63% in fiscal 2021.
    Analog Devices Form 10-K for fiscal 2022 (year ended 29 October 2022) - end-market, channel and geographic revenue for 2020-2022 and the acquisition history. — FY2022 · publ. November 2022 · source ↗
  5. ReportedADI records revenue when it sells to a distributor and estimates what it will give back later: "We are required to estimate the effects of variable consideration including price protection and stock rotation provided to distributors and record revenue at the time of sale to the distributor." It warns: "If our estimates of such liabilities are materially understated, it could cause subsequent adjustments that negatively impact our revenues and gross profits in a future period."
    Analog Devices Form 10-K for fiscal 2025 (year ended 1 November 2025) - Item 1A risk factors: foundries, Taiwan, distributors, trade, state-backed competitors and variable consideration. — FY2025 · publ. 25 November 2025 · source ↗
  6. ReportedADI records revenue when it sells to a distributor and estimates what it will give back later: "We are required to estimate the effects of variable consideration including price protection and stock rotation provided to distributors and record revenue at the time of sale to the distributor." It warns: "If our estimates of such liabilities are materially understated, it could cause subsequent adjustments that negatively impact our revenues and gross profits in a future period."
    Analog Devices Form 10-K for fiscal 2025 (year ended 1 November 2025) - Item 1A risk factors: foundries, Taiwan, distributors, trade, state-backed competitors and variable consideration. — FY2025 · publ. 25 November 2025 · source ↗
  7. ReportedThe agreements allow "certain distributors to receive price adjustment credits and to return qualifying products for credit".
    Analog Devices Form 10-K for fiscal 2025 (year ended 1 November 2025) - Item 1A risk factors: foundries, Taiwan, distributors, trade, state-backed competitors and variable consideration. — FY2025 · publ. 25 November 2025 · source ↗
  8. ReportedThe company said the higher distributor share was "primarily due to the increase in the percentage of revenue from our Industrial end market", and distributor revenue rose 46.1% against total growth of 40%.
    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 ↗
  9. Moat Explorer calcThe company said the higher distributor share was "primarily due to the increase in the percentage of revenue from our Industrial end market", and distributor revenue rose 46.1% against total growth of 40%.
    Moat Explorer calculation from Analog Devices reported figures ($ millions unless stated; fiscal years ending late October or early November). Revenue growth: FY2025 11,019.7 / 9,427.2 - 1 = +16.9%; FY2024 9,427.2 / 12,305.5 - 1 = -23.4%; FY2023 12,305.5 / 12,014.0 - 1 = +2.4%; FY2022 12,014.0 / 7,318.3 - 1 = +64.2%; FY2021 7,318.3 / 5,603.1 - 1 = +30.6%; FY2020 5,603.1 / 5,991.1 - 1 = -6.5%; FY2019 5,991.1 / 6,224.7 - 1 = -3.8%; FY2024 revenue fall 12,305.5 - 9,427.2 = 2,878.3, about $2.9bn; FY2026 implied 10,805.6 + 4,300 = 15,105.6, about $15.1bn, 15,105.6 / 11,019.7 - 1 = +37%, 15,105.6 / 12,305.5 - 1 = +23%; Q3 FY2026 quarterly revenue 4,021.9 / 3,076.1 - 1 = +30.7% on Q4 FY2025; 4,021.9 / 2,423.2 = 1.66 times Q1 FY2025. Operating income: FY2024 2,032.8 / 3,823.1 - 1 = -46.8%, a fall of 3,823.1 - 2,032.8 = 1,790.3, about $1.8bn. Gross profit FY2024 5,381.3 / 7,877.2 - 1 = -31.7%. Gross margin FY2015 2,259.3 / 3,435.1 = 65.8%; FY2016 2,227.2 / 3,421.4 = 65.1%; reported gross margin range FY2015-FY2025 57.1% (FY2024) to 68.3% (FY2018); Q3 FY2026 adjusted less reported 72.5 - 67.3 = 5.2 points. Acquisition-related expenses Q3 FY2026 209.2 (cost of sales) + 188.6 (operating expenses) = 397.8; nine months FY2026 619.4 + 565.1 = 1,184.5. People: revenue per employee FY2021 7,318.3 / 24,700 = about $296,000; FY2022 12,014.0 / 24,450 = $491,000; FY2024 9,427.2 / 24,000 = $393,000; FY2025 11,019.7 / 24,500 = $450,000; engineers 13,000 / 24,500 = 53% (FY2025), 11,000 / 24,700 = 45% (FY2021); engineers added 13,000 - 11,000 = 2,000. R&D as a share of revenue: FY2015 637.5 / 3,435.1 = 18.6%; FY2016 653.8 / 3,421.4 = 19.1%; FY2017 968.1 / 5,246.4 = 18.5%; FY2018 1,165.0 / 6,224.7 = 18.7%; FY2019 1,130.3 / 5,991.1 = 18.9%; FY2020 1,050.5 / 5,603.1 = 18.7%; FY2021 1,296.1 / 7,318.3 = 17.7%; FY2022 1,700.5 / 12,014.0 = 14.2%; FY2023 1,660.2 / 12,305.5 = 13.5%; FY2024 1,487.9 / 9,427.2 = 15.8%; FY2025 1,766.0 / 11,019.7 = 16.0%; Q3 FY2026 533.5 / 4,021.9 = 13.3%; R&D FY2024 1,487.9 / 1,700.5 - 1 = -12.5%. End markets: FY2024 over FY2023 Industrial 4,290.3 / 6,565.4 - 1 = -34.7%; Communications 1,091.4 / 1,591.6 - 1 = -31.4%; Automotive 2,837.5 / 2,904.0 - 1 = -2.3%; Consumer 1,207.9 / 1,244.6 - 1 = -3.0%. FY2025 over FY2024 Industrial 4,929.4 / 4,290.3 - 1 = +14.9%; Automotive 3,277.9 / 2,837.5 - 1 = +15.5%; Communications 1,377.9 / 1,091.4 - 1 = +26.2%; Consumer 1,434.6 / 1,207.9 - 1 = +18.8%. FY2017 to FY2025: Industrial 4,929.4 / 2,324.7 = 2.12 times, 9.9% a year; Automotive 3,277.9 / 758.1 = 4.3 times, 20.1% a year; Communications 1,377.9 / 908.6 = 1.52 times, 5.3% a year; Consumer 1,434.6 / 1,255.0 = 1.14 times, 1.7% a year. Consumer share 1,255.0 / 5,246.4 = 23.9% (FY2017), 933.8 / 6,224.7 = 15.0%, 752.3 / 5,991.1 = 12.6%, 624.9 / 5,603.1 = 11.2%, 1,519.9 / 12,014.0 = 12.7%, 1,244.6 / 12,305.5 = 10.1%, 1,434.6 / 11,019.7 = 13.0% (FY2025), Q3 FY2026 397.2 / 4,021.9 = 9.9%. Automotive share 3,277.9 / 11,019.7 = 29.7% (FY2025), Q3 FY2025 857.1 / 2,880.3 = 29.8%, Q3 FY2026 998.2 / 4,021.9 = 24.8%. Communications share Q3 FY2025 354.8 / 2,880.3 = 12.3%, Q3 FY2026 654.5 / 4,021.9 = 16.3%. Industrial plus Communications (4,929.4 + 1,377.9) / 11,019.7 = 57.2% (FY2025); Q3 FY2026 (1,971.9 + 654.5 = 2,626.4) / 4,021.9 = 65.3%. Trailing twelve months to August 2026 (Q4 FY2025 + Q1 + Q2 + Q3 FY2026): Industrial 1,426.5 + 1,489.3 + 1,799.4 + 1,971.9 = 6,687.1; Automotive 852.2 + 794.4 + 871.6 + 998.2 = 3,516.4; Communications 389.8 + 476.8 + 554.7 + 654.5 = 2,075.8; Consumer 407.5 + 399.8 + 397.8 + 397.2 = 1,602.3. Distributor revenue Q3 FY2026 2,327.1 / 1,592.4 - 1 = +46.1%. Geography: China share of revenue 898.6 / 5,246.4 = 17.1% (FY2017); 1,215.9 / 6,224.7 = 19.5%; 1,316.3 / 5,991.1 = 22.0%; 1,348.0 / 5,603.1 = 24.1%; 1,614.4 / 7,318.3 = 22.1%; 2,563.5 / 12,014.0 = 21.3%; 2,229.6 / 12,305.5 = 18.1%; 2,128.8 / 9,427.2 = 22.6%; 2,858.3 / 11,019.7 = 25.9% (FY2025); China growth 2,858.3 / 2,128.8 - 1 = +34.3%; United States growth 3,238.1 / 2,840.4 - 1 = +14.0%; China over United States 2,858.3 / 3,238.1 = 88%; United States share 3,238.1 / 11,019.7 = 29.4% (FY2025), 4,165.3 / 12,305.5 = 33.8% (FY2023). Customers: distributors at 10% or more FY2024 24% + 12% + 12% = 48%; FY2025 24% + 13% = 37% (a second distributor below 10%). Acquisitions and balance sheet: Linear price 15.8bn / FY2016 revenue 3.42bn = 4.6 times; goodwill FY2017 12,217.5 / FY2016 1,679.1 = 7.3 times; goodwill 1 August 2026 27,988.7 / FY2015 1,636.5 = 17.1 times; Maxim goodwill added 26,918.5 - 12,278.4 = 14,640.1, about $14.6bn; Linear plus Maxim 15.8 + 28.0 = 43.8, about $44bn; goodwill and intangibles (26,945.2 + 8,013.8) / 47,992.7 = 72.8% (1 November 2025); (27,988.7 + 7,468.2 = 35,456.9) / 48,424.4 = 73.2% (1 August 2026); other assets 47,992.7 - 26,945.2 - 8,013.8 = 13,033.7; market value over equity 191.61bn / 33.55bn = 5.7 times; over goodwill 191.61 / 27.99 = 6.8 times; amortisation fall FY2026 to FY2030 1,537.5 - 404.2 = 1,133.3; Empower plus Alif 1.5 + 1.35 + 0.2 = 3.05bn; Empower 1.5 / total assets 48.4 = 3%. Cash: free cash flow = operating cash flow less capital expenditure: FY2015 907.8 - 154.0 = 753.8 (21.9% of revenue); FY2016 1,291.3 - 127.4 = 1,163.9 (34.0%); FY2017 1,154.4 - 204.1 = 950.3 (18.1%); FY2018 2,442.4 - 254.9 = 2,187.5 (35.1%); FY2019 2,253.1 - 275.4 = 1,977.7 (33.0%); FY2020 2,008.5 - 165.7 = 1,842.8 (32.9%); FY2021 2,735.1 - 343.7 = 2,391.4 (32.7%); FY2022 4,475.4 - 699.3 = 3,776.1 (31.4%); FY2023 4,817.6 - 1,261.5 = 3,556.1 (28.9%); FY2024 3,852.5 - 730.5 = 3,122.0 (33.1%); FY2025 4,278.6 / 11,019.7 = 38.8%; TTM August 2026 4,937.5 / 13,881.5 = 36%. Capital expenditure as a share of revenue: FY2015 4.5%, FY2016 3.7%, FY2017 3.9%, FY2018 4.1%, FY2019 4.6%, FY2020 3.0%, FY2021 4.7%, FY2022 699.3 / 12,014.0 = 5.8%, FY2023 1,261.5 / 12,305.5 = 10.3%, FY2024 730.5 / 9,427.2 = 7.7%, FY2025 533.6 / 11,019.7 = 4.8%, TTM 607.8 / 13,881.5 = 4.4%; FY2025 over FY2023 533.6 / 1,261.5 = 42%. Cash returned over free cash flow: FY2021 (1,109.3 dividends + 2,605.1 buybacks) / 2,391.4 = 155%; FY2022 (1,544.6 + 2,577.0) / 3,776.1 = 109%; FY2023 (1,679.1 + 2,964.0) / 3,556.1 = 131%; FY2024 (1,795.5 + 615.6) / 3,122.0 = 77%; FY2025 (1,924.4 + 2,164.6) / 4,278.6 = 96%; TTM 5,170 / 4,937.5 = 105%. Buybacks FY2024 615.6 / FY2023 2,964.0 = 21%, a fall of 79%; FY2021-FY2025 2,605.1 + 2,577.0 + 2,964.0 + 615.6 + 2,164.6 = 10,926.3, about $11bn. Dividends per share over diluted EPS: FY2015 1.57 / 2.20 = 71%; FY2018 1.89 / 4.00 = 47%; FY2020 2.40 / 3.28 = 73%; FY2022 2.97 / 5.25 = 57%; FY2023 3.34 / 6.55 = 51%; FY2024 3.62 / 3.28 = 110%; FY2025 3.89 / 4.56 = 85%. Dividend per share growth (3.89 / 1.57) ^ (1/10) - 1 = 9.5% a year. Shares outstanding 484,565,465 / 496,296,854 - 1 = -2.4%; 484,565,465 / 489,654,097 - 1 = -1.0%. Debt: net debt 1 November 2025 = long-term debt 8,145.1 + commercial paper 446.6 - cash 2,499.4 - short-term investments 1,152.9 = 4,939.4; 1 August 2026 = 6,771.6 + 1,344.9 + 1,005.1 - 2,165.9 - 159.1 = 6,796.6; net debt over trailing free cash flow 6,796.6 / 4,937.5 = 1.4 times; cash and short-term investments 2,499.4 + 1,152.9 = 3,652.3 (FY2025 end) and 2,165.9 + 159.1 = 2,324.9 (1 August 2026); commercial paper 1,005.1 / 446.6 = 2.25 times. Working capital: receivables 2,389.6 / 1,436.1 - 1 = +66.4%; inventories 1,931.5 / 1,656.3 - 1 = +16.6%. Earnings and valuation: trailing net income to August 2026 = FY2025 2,267.3 - nine months FY2025 1,479.6 + nine months FY2026 3,347.3 = 4,135.0; market value 191.61bn / 4,135.0 = 46.3 times; FY2026 EPS build reported 6.83 + 3.14 = 9.97, adjusted 8.99 + 3.86 = 12.85; Q4 adjusted EPS guide low end 3.86 - 0.15 = 3.71. Year-end market value over fiscal-year net income: 17.26bn / 696.9 = 24.8 (FY2015); 32.82bn / 805.4 = 40.8 (FY2017); 31.77bn / 1,507.0 = 21.1 (FY2018); 54.58bn / 1,220.8 = 44.7 (FY2020); 92.34bn / 1,390.4 = 66.4 (FY2021); 83.54bn / 2,748.6 = 30.4 (FY2022); 98.54bn / 3,314.6 = 29.7 (FY2023); 105.44bn / 1,635.3 = 64.5 (FY2024); 132.79bn / 2,267.3 = 58.6 (FY2025). Additional: Q3 FY2025 shares of revenue Industrial 1,293.0 / 2,880.3 = 44.9%, Consumer 375.4 / 2,880.3 = 13.0%; Q3 FY2026 Industrial 1,971.9 / 4,021.9 = 49.0%; Industrial share Q1 FY2025 1,080.7 / 2,423.2 = 44.6%; Industrial Q3 FY2026 over Q1 FY2025 1,971.9 / 1,080.7 = 1.82 times, about 82% higher. Consumer growth Q1 FY2026 399.8 / 314.7 - 1 = +27%; Q2 FY2026 397.8 / 323.1 - 1 = +23%. Return on equity FY2025 2,267.3 / average (35,176.3 + 33,815.8) / 2 = 6.6%; FY2024 1,635.3 / average (35,565.1 + 35,176.3) / 2 = 4.6%. Customer relationships net of amortisation 10,335.9 - 5,311.2 = 5,024.7. Dividends paid 1,924.4 / 491.1 = 3.9 times. Regions FY2025 against FY2023: Japan 989.9 / 1,397.1 - 1 = -29.1%; Europe 2,285.6 / 3,001.9 - 1 = -23.9%; China 2,858.3 / 2,229.6 - 1 = +28.2%; rest of Asia 1,485.3 against 1,423.0; United States 3,238.1 against 4,165.3. Share price 395.43 / 445.91 - 1 = -11.3% from the 52-week high; 445.91 / 223.47 = 2.0 times; price-to-sales end FY2022 83.54bn / 12,014.0 = 7.0; trailing Communications 2,075.8 against FY2022 1,855.3. Competitors: Texas Instruments 2025 free cash flow 2,938 / revenue 17,682 = 16.6%; ADI 38.8% - 16.6% = 22.2 points; ADI revenue 11,019.7 / TI 17,682 = 62%; capital expenditure 4,550 / 533.6 = 8.5 times - end markets, channel and geography. — FY2015-Q3 FY2026 · publ. September 2026 · source ↗
    Method: Arithmetic on figures reported in Analog Devices Forms 10-K, 10-Q and results releases, SEC XBRL, and the Texas Instruments 2025 Form 10-K; each operand is stated in the source line.
  10. ReportedThe company said the higher distributor share was "primarily due to the increase in the percentage of revenue from our Industrial end market", and distributor revenue rose 46.1% against total growth of 40%.
    Analog Devices third-quarter fiscal 2026 results release, Form 8-K exhibit 99.1 - revenue by end market, margins, EPS, cash flow, balance sheet and fourth-quarter guidance - revenue by end market. — Q3 FY2026 · publ. 19 August 2026 · source ↗
Sources
Generated September 29, 2026