ADI's 2024 Q2 Conference Call Shows the Company is Achieving Innovation Breakthroughs in All Directions

ADI recently held a conference call for the second quarter of 2024 earnings. The company's CEO Vincent Roche said that with the strong execution of key tasks, ADI's quarterly revenue reached US$2.16 billion, and both earnings and earnings per share exceeded the highest expected values. With the end of the second quarter, ADI believes that it has passed the trough of this economic cycle. It is worth mentioning that the global manufacturing PMI index, which is closely related to ADI's core business, is improving, customer inventories are stabilizing, and ADI's order volume has increased for the third consecutive quarter.

At the same time, the CEO also pointed out that due to the uncertainty in the short-term economy and geopolitics, we remain cautious about the growing optimism. Therefore, ADI will continue to manage short-term affairs strictly and self-disciplinedly, while investing and operating according to our long-term strategic priorities to enhance the value of all stakeholders.

Vincent also specifically shared ADI's achievements in various industries in the second quarter, including medical, industrial, and automotive. He also introduced and looked forward to ADI's opportunities for AI from sensors to the cloud.

The following is an excerpt from Vincent’s speech:

In the healthcare sector, we have achieved encouraging results, such as in the fast-growing surgical robotics market, where our precision signal processing and connectivity solutions play a vital role. In the fast-growing continuous glucose monitoring field, we have successfully won multiple cooperation opportunities with multiple customers. Our unique digital analog front-end solution improves the accuracy and energy efficiency of sensors, extending battery life from days to weeks.

In industrial automation, the growth of digital factories is driving an upgrade to higher bandwidth, deterministic, real-time Industrial Ethernet (10BASE-T) capable of supporting up to 10 times the number of edge devices on the factory floor. We believe our leadership position with key customers will create a durable revenue stream that could grow to hundreds of millions of dollars starting next year as deployments ramp.

Turning to the automotive industry, our solid performance was driven by the widespread adoption of high-volume vehicles that use more power management, more connectivity, and a growing number of sensor platforms, which provide ADI with new signal processing opportunities. The increase in capacity per vehicle is a universal trend across all vehicle types, including internal combustion engines, hybrids, and pure electric vehicles.

In advanced safety, for example, we increased our GMSL design wins among the top 20 OEMs from 12 to 15 and expanded our work with two European OEMs and one Korean OEM who intend to deploy our high-performance, high-bandwidth connectivity solutions in a larger percentage of their vehicle models.

We also saw strong demand for functional safety power supplies used in sensors and display systems in ADAS systems, with recent market share gains among leading global automakers. In electrification, we expanded our battery management system share with a leading Chinese OEM and more than doubled our BMS share in an upcoming European OEM model, with both manufacturers intending to deploy our higher performance wireless solutions starting next year.

Artificial Intelligence and ADI

Now, I'd like to use the rest of my prepared time today to share our thoughts on the role AI will play at ADI today and in the future. Clearly, the technology has reached a tipping point, and our AI opportunities extend from the sensor to the cloud. While we have been adding algorithms and software intelligence to our products for decades, in recent years we have expanded the scope and pace of our investments.

Today, we are increasingly leveraging AI in our products, our operations, and our operations to better meet customer needs and extend our leadership in our industry. We apply AI internally to help accelerate engineering development, improve manufacturing efficiency, and create a better customer experience. But the majority of our activities revolve around innovation in our product portfolio, allowing us to fully leverage the tremendous potential of AI.

We believe this business opportunity will arrive in two distinct waves. The first wave, focused on the infrastructure side, is now underway and, as we all know, is developing very rapidly. To handle the growing energy and processing demands of AI computing systems, data center customers are investing in new vertical power architectures.

As we have previously highlighted, our vertical power technology, which reduces power consumption by up to 35% compared to existing architectures, is gaining attention from hyperscalers. We will continue to leverage our heterogeneous integration expertise to create more efficient and smaller vertical power solutions, thereby creating more value and enabling us to capture more share in this emerging market.

However, energy-efficient computing is only part of the challenge facing the AI ​​ecosystem. Data must also be transmitted efficiently and securely at faster speeds. This is driving cable customers to upgrade their connectivity infrastructure, sparking a transition to 800Gbps and 1.6Tbps optical modules.

Our ability to deliver high-performance solutions that integrate analog, digital, and memory technologies into smaller form factors is truly a key strength in the optoelectronics interface space. Our high-precision controllers were recently used to design a 1.6Tbps optical module for a high-performance computing leader’s next-generation AI system.

In the industrial sector, artificial intelligence is driving huge demand for high-bandwidth memory and high-performance computing. This in turn is creating new growth opportunities for our instrumentation and test business, particularly in SoC and memory test. We are working with major global companies to achieve faster digital scan speeds, higher channel density, and greater energy efficiency, which are necessary to scale up production of artificial intelligence systems.

这些系统中ADI内容的显著增加将促使我们的高性能计算和内存测试部门在近期至中期内实现创纪录的收入。ADI未来的机会在于通过将特定于应用的AI模型和高性能计算引入物理边缘，从而扩大第一波浪潮所带来的影响、创造更大的系统价值，同时提高延迟性能、功率效率、安全性和成本效益。

Allow me to share some examples of how we are working to expand the reach of the second wave. For example, in acoustic systems, we are combining application-specific algorithms with ultra-low-power processing hardware to enrich our audio platform offerings. In addition, we are developing a mixed-signal processor with an embedded neural network that enables the system to learn and adapt to the high variability of sound in real time. It is exciting that we are in close contact with multiple customers in this area.

Likewise, we are leveraging our extensive domain expertise and growing processing power to enhance our advanced connectivity platforms in next-generation 5G radios. For example, we implemented the first AI-enabled technology approach that combines energy-efficient real-time neural networks with AI-assisted development tools, enabling customers to solve linearization challenges in a fraction of the time.

In our power management platform, we use artificial intelligence to solve the difficult challenge of tuning the power tree for erratic power patterns in data centers. Our solution reduces the complexity of the problems faced by power engineers and reduces the time required from weeks to hours, which helps reduce costs and, of course, speeds up time to market.

ADI is always operating at the physical edge, where the world’s most important real-world data is generated. As multimodal AI becomes more prevalent at the edge and multiple types of sensors are used to uncover deeper insights, we expect its demand to surge. This will accelerate faster growth in our broad signal chain and power product portfolios. In short, from the sensor to the cloud, ADI’s future in AI is bright.

Finally, I'm extremely proud of our team's outstanding performance during one of the largest downturns the semiconductor industry has ever experienced.