Good morning and welcome to the Analog Devices third quarter fiscal year 2026 earnings conference call, which is being audio webcast via telephone and over the web. I'd now like to introduce your host for today's call, Mr. Jeff Ambrosi, head of investor relations. Sir, the floor is yours.

Thank you, Danny, and good morning, everybody. Thank you for joining our third quarter fiscal 2026 conference call. Joining me today is ADI's CEO and chair, Vincent Roche, and ADI's CFO, Richard Puccio. For anyone who missed the release, you can find it at investor.analog.com along with related financial schedules. The information we're about to discuss includes forward-looking statements which are subject to certain risks and uncertainties as further described in our earnings release, periodic reports, and other materials filed with the SEC. Actual results could differ materially from the forward-looking information as these statements reflect our expectations only as of the date of this call. We undertake no obligation to update these statements except as required by law. References to gross margin, operating and non-operating expenses, operating margin, tax rate, earnings per share, and free cash flow in our comments today will be on a non-GAAP basis, which excludes special items. When comparing our results to our historical performance, special items are also excluded from prior periods. Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures and additional information about our non-GAAP measures are included in today's earnings release. References to earnings per share are on a fully diluted basis. and with that, I will turn the call over to ADI's CEO and Chair, Vincent Roche.

Thank you, Jeff, and a very good morning to you all. Well, as you've seen, third quarter revenue margin and earnings all exceeded our outlook with growth across all of our end markets, led by data center and industrial, propelling us to the first $4 billion quarter in ADI's history. Demand for our solutions continues to grow, supported by robust AI and defense spending, cyclical momentum, and underlying secular content growth across our diversified end markets. Through targeted R&D, we continue to extend the limits of technology performance and accelerate the pace with which we are delivering more comprehensive solutions to our customers' toughest problems. In tandem, investments in our hybrid manufacturing network have enabled us to increase the agility and responsiveness of our supply chain and consistently capture above seasonal growth for more than two years. Now, for the rest of my remarks today, I'll focus on how we're helping customers meet unprecedented and still accelerating demand for AI infrastructure and energy systems. The fact that data center capacity is now measured in gigawatts rather than flops and tops underscores one of the most defining challenges of the AI era. Our availability has become the primary constraint to further AI progress. Solving this challenge requires more than simply adding more energy, however. It demands a grid-to-chip system-level approach that encompasses both improving the availability and delivery of energy and extracting the maximum computing power from every watt delivered. Now, let me walk you through some of the key elements of our grid to chip strategy, starting at the grid where the AI bottleneck begins. As electricity networks become more complex, visibility, efficiency, and resilience are becoming critical challenges. Customers are turning to ADI's grid monitoring solutions to illuminate the flow of energy across the network, providing real-time insight into voltage, current, power quality, and system health. And our higher value solutions are helping utilities, energy operators, and infrastructure providers to improve efficiency, reliability, and utilization. An increasingly essential part of the grid and one of the fastest-growing sectors is energy storage. Here, customers choose ADI's industry-leading battery management technology to help maximize usable energy, improve system efficiency, extend battery life, enhance safety, and, of course, improve ROI. Expanding and modernizing the traditional grid alone, however, Thank you very much. Importantly, our strong and growing positions across both energy and data center make us a more critical AI ecosystem player, spanning the entire electricity value chain from generation, transmission, and storage to distribution through rack power and ultimately processor power delivery, essentially the vascular system of the data center. Now once the grid makes contact with the data center, AI's extreme energy and information density requirements make ADI's deep expertise and innovation in high performance power management, sensing and telemetry, as well as optical connectivity even more critical. So let me start with our optical franchise as I begin to unpack for you how we're growing our data center business and opportunity by helping our customers resolve The tremendous challenges of energy and information density. When we think about the journey of data through the infrastructure, there are two critical pathways, the data path of electro-optics and the control path, which guides, optimizes, and ensures the integrity of the data path. Our focus is on the control path, where we've been setting and extending the industry's performance envelope for decades. Today, the complexity of efficiently moving data at ever higher speeds within and between racks and across data center campuses is growing exponentially. Customers are increasingly relying on ADI to provide essential timing, power management, data conversion, monitoring, and control capabilities that enable lasers and transceivers to operate with precision, reliably, efficiently, and at the necessary scale for AI workloads. And as customers seek to further increase the amount of optical lanes, signal bandwidth, or both, to accelerate network speeds from 800 gig to 3.2 terabits per second, we believe that we're very well positioned to benefit threefold, from unit growth and pluggables and coherent light modules, increasing BOM content, and greater share as these transitions unfold. As new architectures such as optical circuit switching and co-packaged optics gain traction in next-generation large-scale AI clusters, complexity expands even further, and our long-term opportunity continues to grow. Based on current design wins and customer commitments, our OCS revenue is poised to approximately double this year, and we're targeting a similar level of growth in 2027. In the nascent CPO space, which we view as a semi-expander, the criticality of ADI's precision control technology further increases as thermal and serviceability challenges rise. So in short, the combination of market growth, expanding content, increasing share, and differentiated value creation across data center optics reinforces our confidence that this segment will remain a strong growth vector for ADI over the coming years. Now let me turn to our power franchise. The need for customers to convert and deliver precise, increasing levels of power at the rack and compute layers efficiently and safely is driving continued broad-based growth across our portfolio. Customers are leveraging ADI's products and solutions to push for greater than 98% conversion efficiencies, multi-kilowatt power delivery, with peak power levels up to two times the rated load and comprehensive protection, telemetry, and fault recording capabilities that enhance system reliability and maximize uptime. To put just one of those differentiators in context, the 1% difference between 97% and 98% efficiency may not sound like very much, But a 97% conversion efficiency loses roughly 50% more energy through heat than a 98% solution. Over time, of course, that difference compounds in terms of the need for additional cooling infrastructure, stress on equipment, and operating costs. And we believe our opportunity will continue to grow substantially as power density demands of AI clusters continue to increase. The industry's architectural transition toward 800 volt DC power distribution, for example, plays directly into ADI's power management expertise and portfolio. And we're seeing a significant design and uptake for our protection and 800 volt to intermediate power conversion technologies, which can deliver 20 kilowatts of power at industry leading power densities, exceeding 2.5 And at the intermediate to core conversion layer, which is one of the fastest and largest growing analog opportunities in the AI era, our combination of advanced power conversion, intelligent system control, and real-time telemetry is critical to achieving the necessary power density, efficiency, and reliability requirements for next-generation processors to operate at 6000 amps and sub-1 volt. Our MPower acquisition further enhances ADI's vertical power story by enabling us to take power into the processor package itself. In large-scale AI deployments, these architectural advantages can reduce compute power consumption and temperature by approximately 10 to 15%, which equates to roughly $30 million in annual savings in a one gigawatt data center. As with optical, Our power pipeline is growing rapidly, and the direction and rate of our R&D investments reflects our belief in the size of the SAM opportunity before us and our confidence that data center power can remain a strong growth vector for ADI over the coming years. So in summary, we believe the architectural shifts underpinning the evolving AI era are increasing ADI's role as a critical partner across the grid-to-chip ecosystem and driving extraordinary opportunity. Our current assessment is that our 2030 data center and energy SEM has more than doubled from what we had envisioned just one year ago. This dramatic expansion is not simply a function of increased AI infrastructure capex. It reflects the impact of new markets and architectures that require orders of magnitude more analog content. delivered via higher value solutions. Stepping back to frame this growth on the larger landscape of ADI's continued evolution, grid-to-chip is but one facet of the first generation of AI characterized by applications largely focused on data centers. The ATE growth we've recently spoke to on these calls is yet another facet. As great As the impact of Generation 1 AI has been so far for ADI, however, we continue to believe that the bigger prize may be in the second generation as AI extends its reach from the data center to the physical world in the form of pervasive robotics, digital health, autonomous mobility, and so on and so forth. In this now emerging phase, AI must not only support higher level learning and analytics, but also real-time sensing, inference, and responsiveness to complex real-world signals. Our ability to tackle this challenge through our products and solutions in edge-based reasoning informed by deep physical intelligence will extend our AI value proposition across the entire addressable space. We're able to pursue this horizon of AI opportunity as a result of the tremendous optionality built into ADI's business model, which is designed to support both upside growth asymmetry as well as cyclical downside resiliency. This optionality is founded by leveraging our cutting-edge technology stack and domain expertise at the electrophysical interface, as well as long-term partnerships with our customers. Our success in AI to date is the latest proof point, and I believe the best is yet to come. And with that, I will hand it over to Rich.

Thank you, Vince, and let me add my welcome to our third quarter earnings call. Revenue in the third quarter was $4.02 billion, finishing above the high end of our outlook and increasing 11% sequentially and 40% year over year. Growth was broad-based across markets and regions. Industrial, which represented 49% of our third quarter revenue, finished up 10% sequentially and 53% year over year. We saw year over year growth across all our industrial businesses, led by ATE, electronic test and measurement, aerospace and defense, and automation. Automotive represented 25% of revenue, finishing up 14% sequentially and 16% year over year. Our higher content and share positions globally continue to result in growth well above SAR. We are seeing diversified strength across customers and products in key secular growth areas, including next-gen ADAS and infotainment systems, and also in electric powertrains. Communications represented 16% of revenue, finishing up 18% sequentially and 84% year over year. Data Center, which now accounts for 80% of our communications revenue, continued to accelerate with more than 100% year-over-year growth in both optical and power. In wireless, we delivered more than 25% year-over-year growth as we continued to execute against cyclical tailwinds. Lastly, consumer represented 10% of quarterly revenue, flat sequentially, and up 6% year-over-year. Our diversified consumer business showed strong resilience despite memory-driven challenges. We achieved year-over-year growth across smartphones, hearables and wearables, and saw accelerated growth in our B2B-like prosumer franchise. Now on to the rest of the P&L. Third quarter gross margin was 72.5%, down 50 basis points sequentially, and up 330 basis points on a year-over-year basis, driven by higher revenue, utilization, and favorable mix. OPEX in the quarter was $907 million, resulting in an operating margin at the high end of our outlook, or 50%, which is up 100 basis points sequentially and 780 basis points year over year, driven by improved gross margin and execution discipline. Non-operating expenses were $69 million, and the tax rate for the quarter was 13.1%. All told, EPS finished at the high end of our outlook for a record $3.45. up 12% sequentially and 68% year-over-year. Now I'd like to highlight a few items from our balance sheet and cash flow statements. Cash and short-term investments decreased to $2.3 billion, driven by the successful closing of our Empower semiconductor acquisition on July 7, where we paid $1.5 billion in an all-cash transaction. Our net leverage ratio now sits at 0.9. We increased inventory $83 million sequentially as we continued to build strategic die bank to support accelerating demand. We exited fiscal Q3 with record balance sheet inventory and increased inventory at our distributors. Despite the increases, our days declined to 156 and channel weeks fell below our six to seven week target. Over the trailing 12 months operating cash flow and CapEx were 5.5 billion and 0.6 billion respectively, We continue to expect fiscal 26 CapEx to be within our long-term model of 4% to 6% of revenue. Free cash flow over the trailing 12 months was a record $4.9 billion, or 36% of revenue. Over that same period, we returned more than 100% to shareholders through dividends and share repurchases. As a reminder, the durability and strength of our financial model allows us to target 100% free cash flow return over the long term. aiming to use 40 to 60% to support our annual dividend and the remainder for share count reduction. Now moving on to our fourth quarter outlook. Revenue is expected to be 4.3 billion plus or minus 100 million. Operating margin at the midpoint is expected to be 52% plus or minus 100 basis points. We expect non-operating expenses of approximately 80 million and a tax rate of 12 to 14%. Based on these endpoints, Inputs, adjusted EPS is expected to be $3.86 plus or minus 15 cents. In closing, our record results and outlook underscore our ability to capitalize on cyclical and secular tailwinds across the AI ecosystem, defense, core industrial, and automotive markets. We will continue to balance execution discipline with strategic growth investments to navigate a dynamic macro and geopolitical environment while delivering on our attractive financial model. With that, I'll give it back to Jeff for Q&A.

Thank you, Rich. Now let's get to our Q&A session. We ask that you limit yourself to one question in order to allow for additional participants on the call this morning. If you have a follow-up, please read Q, and we'll take your question if time allows. With that, operator, can we have our first question, please?

For those participating by telephone, dial in. If you have a question, please press star 1-1 on your phone to enter the queue. If your question has been answered and you wish to be removed from the queue, please press star 1-1 again. If you're listening on a speakerphone, please pick up the handset when asking your question. We'll pause for just a moment to compile the Q&A roster. Our first question comes from Harlan Sir with JPMorgan. Your line is open.

Good morning and congratulations on the continued solid execution. On the strong operating margin guidance and therefore strong implied gross margins, I'm sort of rolling up to about 73.5% gross margins for October, 100 basis points improvement. Your utilizations are already at high levels. You've talked about mix in volume as the primary drivers going forward. Are these two dynamics driving most of the 100 basis points plus step up in gross margins in October? is the team implementing more price increases beyond the actions that you took at the beginning of the year? And this is also maybe contributing to the strong gross margin profile as well.

Thanks for the question, Harlan. I'll take this one. So as we described for Q3, gross margin came in as expected. We are actually expecting a gross margin increase of about 150 bps to about 74%. And you were spot on. This is driven by favorable mix. higher fixed cost absorption, obviously following the higher revenue and our price adjustment. So if we look to sort of medium term, I'd remind you that we do have a seasonal shutdown coming up in our first quarter, which does create some drag on gross margin and are expecting more cost increases coming. Inflation is still a persistent factor. That said, the full extent of our price action, which has been announced is not captured in Q4. So we will get a full quarter of shipments in Q1 with some trailing impact as we review contracts. So overall, we see gross margin hanging in at the Q4 exit level as long as we maintain the revenue and mix that we expect.

Thank you, Harlan. Move to our next question, please.

Thank you. Our next question comes from Vivek Arya with Bank of America Securities. Your line is open.

Thanks for taking my question. Winston, I'm very interested to hear your thoughts about fiscal 27. You know, if I look over the last two years, ADI's top line has accelerated, I think, almost every quarter on an year-on-year basis. And how much of that do you think has been kind of secular? How much of that has been cyclical? How much of that has been pricing? And if I were to just take your Q4 Outlook Midpoint, and just assume normal seasonality, it suggests at least like a 20% or so plus growth year into fiscal 27. So just curious to hear what your high-level thoughts are. Are there any areas of constraint? And if I could seek in something related to that, is there more operating leverage left if indeed your top line were to grow 20%? Thank you.

Well, we'll take the rest of the call if I can answer those questions. So what I'll say is, let me unpack a little bit of the story and then Rich can add some of his own commentary as well. So, you know, since we called the bottom in the second quarter of 24, we've seen our particular strengths manifest through the following kind of areas. So we're clearly a beneficiary of the defense and the AI super cycles, which I think will Persist for many, many years to come. You know, who knows what the trajectories will look like. But, you know, the right now, the aerospace and defense, the ATE and data center businesses, they're about 30 percent of ADI. And our portfolio is exposed and I think poised for greater growth and more content and more share gains. Although, of course, we're gaining share right across the spectrum of the car types, the combustion as well as EVs. Also in consumer, you know, we turned a corner in consumer two or three years ago, and we're seeing both content and share gains there right across the high-end, mid-to-high-end smartphone, gaming, hearables, wearables, and so on and so forth. I've mentioned several times before as well the max and synergies. So we had said our expectation when we announced the acquisition of Maxim that we would generate a billion dollars worth of synergies. Well, we're well on track. We'll generate about 700 million dollars this year. And I expect that we'll hit a billion plus in 27 as well. So, you know, I think as well. The the overall cyclical tailwind, I think, is also very, very strong across the board and given the breadth of our portfolio. that lifts all the bolts aside from the asymmetric tailwinds that we have. And as Rich talked a little bit about as well, we've got a very favorable backdrop in terms of pricing. And so I think we've capitalized on the vectors of growth. And I think our portfolio is more critical than ever to our customers. I will point out as well, that you know our our lead times are in good shape as Rich said we're sitting on on record inventories but at the same time our inventories are very intentionally placed built in place and that's thanks to the manufacturing agility that we've built in with our hybrid model and that we continue to extend the the uh the scope of so um Rich maybe you'll want to add uh A little more color.

Yeah, I guess what I would add is, you know, as we've been talking about this, the inventory position, you know, the important piece to consider is, you know, with the significant demand we're seeing, we still think that we have not seen really any restocking activity from inventory from our customers. They continue to run very lean. And I think that our work over the last two years to balance out the inventory, both on our balance and in the channel, has really been helpful. So as we look into the next quarter, we will continue to stage more inventory in the channel given the acceleration going there. So I think there's still a lot of opportunity. And if you look at where we are from a consumption pattern, as Vince described, those three big secular drivers that are specific to our business, we can see real and demand, right? We're seeing the massive increase in AI infrastructure spend. We're seeing the aerospace and defense business grow. So if you extract those pieces out and then look at the broader parts of our business, most of our business is still shipping well below historical consumption levels. So we think we're still have room here on both the cyclical part of the upturn. When we look at the broader markets I just described, and we continue to see strength across, obviously, the aerospace defense, ATE and data center businesses.

So I think in summary, we believe we're very, very well positioned as a company. But I think the things that are under our control, I think we're executing well on. But there's a lot of things that can happen with the macro. There's heightened geopolitical risk and rate hikes, of course. There's a lot of volatility, as we all know, in the financial markets. Perhaps AI CapEx could slow or decrease. But all that said, our expectation is that we'll have a brisk growth year in 27. All right.

Thank you, Vivek.

We'll move to our next caller, please. Thank you. Our next question comes from Stacy Raskin with Bernstein Research. Your line is open.

Hi, guys. Thanks for taking my question. On the data center side, you said that 80% of your comm business was now data center. which I found interesting. And I mean, that data center piece is, I don't know, it's doubling, you know, ish, growing 100%. Is that the kind of growth rate I ought to be thinking about now for at least the comm segment next year, 27, given the vast majority of it is data center? Do you think that that comm segment should be growing, you know, close to 100% year over year as I start to think about 27? And I guess maybe within that question, if you could give us any color on what you're expecting for the segment, at least in the near term into Q4, that'd be helpful as well.

Yes, Stacey, maybe we'll start with the near-term stuff and kind of the end market outlook, and then we can maybe pass it to Vince for the AI outlook or the data center.

Great, thank you.

What would that be?

Yeah, so, yeah, I guess I can take that one. So, basically, at the midpoint of our outlook, you know, we're expecting industrial to be up high single digits, communications to lead the growth. Obviously, led by data center up about 10%, consumer up high single digits, and automotive to be up low single digits. And then as for the growth and kind of how to model data center, which is basically your question on a longer term basis, you know, at a high level, there's many growth vectors. You know, first of all, the market's strong. The end market's growing double digits. If you look at CapEx, what have you. And then importantly, as Vince talked to you on his call, right, the analog bomb content is increasing significantly, particularly as we transition and many more.

an extended runway to at least 2030 for strong double-digit growth across the data center market, as well as the energy space, by the way, which today is about a half-billion-dollar revenue for ADI. I think by the end of the decade, that business will double.

Okay, Stacey, move to our next question, please. Thank you. Our next question comes from Tori Swanberg with Stiefel. Your line is open.

Yes, thank you. Vince, I had a bit of a longer term question for you as it relates to analogs. I mean, it's an industry that historically has grown high single digits, but with analog now benefiting significantly more from AI infrastructure and then to your point, eventually from physical AI, should we assume that the underlying growth of the analog industry is clearly shifting upwards here, both from a unit and a pricing perspective? Thank you.

Yeah, I think it is. Tori, thanks for the question. You know, I think it's possible for the analog business to be in the double-digit zone compounded for several years to come. And, you know, you just look at data center alone. If I just take data center, you know, there's expected to be 100 gigawatts equivalent infrastructure built for data centers between now and kind of 2031. Each gigawatt generates a billion to a billion and a half analog SAN. And the problems are becoming more complicated in data center. So, you know, it's going to increase the sophistication and the pricing capabilities of the solution. So my sense is it's not unreasonable. You know, we had in our earnings day, which was, what, 2021, I think it was. We had said we thought our business could grow 5% to 7%. You know, we're contemplating something higher in the out years from here.

Thank you so much.

Thank you. Our next question comes from Mark Lepasas with Evercore. Your line is open.

Hi. Great. Thanks for taking my question, and maybe if I could follow up on that. and Vince, thanks for putting a number out there in a double-digit range. The last time ADI revenues were above that long-term 5% to 7% trend line was back in the late 90s to early 2000s. And there were similar arguments being made about the build-out of the Internet and there's telecom deregulation. Yeah. I'm wondering, Vince, if you could just go back in time and compare what is the difference between the secular dynamics you see today and what many people saw back then, which ended up bringing analog revenues, not just yours, but the industry, back down to that 5% to 7%. Thank you.

Yeah, I think first off, because I looked through that myself, the... The concentration was quite high at the time. What I'm seeing now, I mean, if you look at the industry in the intervening period of time, more and more intelligence has been brought into the world of information technology. More edge, more intelligent edge. And that's increased. I think just the SAM, the time on the SAM for the analog sector, with every bit of information that's been processed, the value of that content has increased with every bit, with every watt. So what we're seeing, and if you look at ADI just as a company, the portfolio, the breadth of our portfolio, the depth of our portfolio, the number of places in which we play is far, far greater. So as I said in my prepared remarks, What we've built into this company's business model is optionality. We get to pick or the markets choose us for the asymmetries. And then we have these compounding businesses that make the company extremely resilient. So I think from our perspective, the industry is just, it's broader, it's deeper. Analog is much, much more important. And the whole, we think over the next 25, 50 years, A lot of economic growth is going to be built on externalized intelligence, the gravity field of AI pulling everything with it. But I think the pervasiveness of what the analog industry offers now in general is much, much greater. And we've got this gravity field, irrespective of what might happen from a cyclical perspective in the coming years. My sense is We have never, ever had a cycle like we've now got, just its breadth, its depth, and this gravity field of AI to pull it along.

Thank you, Mark.

Appreciate the thoughts.

Take our next question, please. Thank you. Our next question comes from Blaine Curtis with Jefferies. Your line is open.

Hey, morning, guys. Thanks for taking my question. I wanted to ask, just going back to the data center, but I guess you in the past have referred to AI exposure that includes ATEO. Just trying to, as you look at the growth calculus

I mean, you have the data center part growing triple digits. Curious how to frame the opportunity for ATE, and I don't know if you're willing to break out how big that was.

Yeah, Blaine, so in the past, you're right. We've talked about this AI exposure as ATE plus our data center business combined. Those are 20% of ADI. You know, without giving numbers for four years of growth, I mean, I think clearly we've got a lot of confidence, which importantly is backed up by our design and activity, right? It's not just hopes and dreams. If we look at our pipeline, the design activity with customers is strong in ATE as well as across data center, not just Empower, but Optical as well, right? You heard Vince on the prepared remarks. So at a high level, I mean, that 20% of ADI has got a really strong growth tailwind behind us, and we feel like it's multi-year, right? And again, that's confidence because of our design activity, because of our backlog, our pipeline, and the bookings momentum.

Okay, thank you.

Thanks, Blaine. We'll take our next question, please.

Thank you. Our next question comes from Matthew Prisco with Cantor. Your line is open.

Yeah, thanks for taking the question. So, you know, lots of talk about this really strong demand backdrop for years to come. So how do we think about ADI's supply capabilities today as these revenues continue to higher? At what point do we need to start thinking about capacity additions? And are there any constraints arising in the supply chain today or any areas that you see potential pressure in as we move forward? Thank you. Yeah, well, clearly, Rich, I'll start, Matt, and then Vince maybe can talk some more about the longer term piece. But, you know, from our perspective, we really are executing well from a supply chain. As we've talked about, we've been able to deliver above seasonal growth for nine straight quarters, and we're guiding to a tenth. We're continuing to build inventory, reflecting our ability to expand are internal capacities we've talked about. We continue to install new tools in available spaces as we are, and we're also getting more wafers externally. So we feel like we're very well positioned for the near and medium term demand. You know, obviously across the industry, there's some soft spots and, you know, lead times have started to extend, but we're working really hard to keep them in check. Obviously, this demand acceleration is Pretty unprecedented in recent memory, but we think we're very well positioned. We have a book to bill, as we've talked about, that's above one. We're not in that sort of unusually high space from a book to bill perspective. We are also, and this helps us from a manufacturing efficiency perspective, we are getting a bit better visibility. We have some more orders coming in a bit longer term. Now, frankly, we asked Our customers help us by doing that. It gives us the ability to be more precise in leveraging the capacity we have. So we feel like we're in a good position. We do continue to add capacity as we go. I'll give my two cents. We are scenario planning what this could look like if this kind of growth sustains and how we would balance across our hybrid manufacturing with additional external wafers, but also whether we need to add and many more.

to take a long view to how we support all the various nodes that are critical to ADI from the lithographically insensitive nodes, if you like, kind of six micrometers, that kind of level right down to five nanometers and three nanometers. So that's what we did during the COVID cycle, just that we continued to extend the capability of that hybrid manufacturing system. That is our strategy going ahead. and, you know, just remember a couple of years ago, it was expected that the selling industry in totality might reach a trillion dollars by 2030. Well, that's kind of in the wake at this point and we're looking to something much, much bigger. So the industry has a big, big task to get ahead of what we now think the new growth trajectory is, including ADI.

Thank you.

We'll take our last question, please. Thank you. And our last question comes from Joshua Buckhalter with TD Cowan. Your line is open.

Hey, guys. Congratulations on the very strong results and guidance. Thanks for squeezing me in. The 74% gross margin outlook is pretty staggering, and we're back to those 2022 peak levels. It's also coming without all that much incremental utilization torque. I guess bigger picture, is that a number that you think you can sort of hold and grow off of and I guess as we think longer term can you speak to how you're prioritizing revenue growth versus margins if you are like is this low to mid 70% level one that you intend to manage to long term I guess thank you sorry so I do think as I previously mentioned Justin we can continue to grow excuse me continue to maintain that sort of roughly 74% level and we will continue to focus, and I said this in the last call, we will continue to focus on growth investments, which some of them may put some pressure on margins as we expand revenue growth dollars. But when you look at the balance of our portfolio and the parts of the portfolio that continue to grow, the opportunity to maintain that margin exists. We are getting, as you mentioned, a ton of benefit by running the factories at the higher utilizations, which we expect will and many more. So, you know, we feel pretty good. We're going to balance the investments we need to make to grow with maintaining that, you know, relatively maintaining that margin. I said this last quarter and I'll repeat it here. I don't think, for instance, there's a ton of room to get more margin accretion out of utilization. But we are, you know, we are still only in a 49 percent industrial mix. So if the mix shifts, there's potential for upside or at least to be able to offset any potential headwinds. Because the other thing that is going to happen is we expect that the inflationary environment will continue. Now, we'll continue to monitor and track and focus on that as we have historically. But I do think we're in a pretty balanced position for the medium and long term here. Yeah, I think just one other comment.

I mean, the origin of the high gross margin structures is the innovation premium that we attract. So our job is to keep that premium moving and then, you know, the psychos help get the efficiency in manufacturing and so on and so forth. So those two things, one is obviously very strategic, the other operational. But those two parts we see having a lot of legs for a lot of years to come. Our customers are asking us to tackle more difficult problems, take on more of the work, so to speak, and the breadth and the depth of the high-performance portfolio have positions as well to continue Thank you both and congrats again.

Thank you. Thanks, Josh.

Thank you. This concludes the question and answer session. I would now like to turn it back to Jeff Ambrosi for closing remarks.

Hey, thanks everyone for joining us. A copy of the transcript will be available on our website and all available reconciliations and additional information can also be found in the quarterly results section of our investor relations website, investor.analog.com. Thank you for your continued interest in Analog Devices and have a good day.

This concludes today's Analog Devices conference call. You may now disconnect.