- Revenue & Earnings Growth Fiscal '25 revenue hit $11B (+17% YoY), EPS rose to $7.79 (+22% YoY), with Q4 revenue at $3.08B (+26% YoY).
- Industrial Dominance Industrial revenue accounted for 46% of Q4 sales, surging 34% YoY and 12% sequentially.
- Shareholder Returns $4.1B returned via dividends/buybacks, with $4.3B in free cash flow (39% of revenue) in fiscal '25.
- Gross Margin Expansion Annual margin reached 69.3% (+140 bps), though Q4 dipped slightly from 70% due to lower industrial mix.
Segment Performance
Industrial revenue was 46% of Q4 revenue, up 12% sequentially and 34% year-over-year. The company is seeing significant growth in the data center and ATE businesses, with data center growing 50% in '25 and ATE growing 40%. The company expects double-digit growth in both areas over the next few years. The aerospace and defense market is expected to more than double by the end of the decade, driven by increasing capital deployment to build defense systems globally.
Outlook and Guidance
For fiscal '26, revenue is expected to be $3.1 billion, plus or minus $100 million, with operating margin at the midpoint expected to be 43.5%, plus or minus 100 basis points. The company expects broad-based growth in '26, led by industrial and communications, with cyclical and idiosyncratic factors providing tailwinds. Analysts estimate next year's revenue growth at 13.2%, indicating a positive outlook for the company's future performance.
Valuation and Returns
With a P/E Ratio of 54.56 and an EV/EBITDA of 29.1, the company's valuation appears to be reflecting its strong growth prospects. The company returned $4.1 billion to shareholders through dividends and share repurchases and generated record free cash flow of $4.3 billion or 39% of revenue. The Dividend Yield is 1.54%, and the Free Cash Flow Yield is 3.42%, indicating a decent return for shareholders.
R&D Priorities and Lead Times
The company is prioritizing R&D spend in areas such as power management and doubling down on certain areas while possibly deemphasizing others. Lead times are mostly sub-13 weeks, which reduces visibility. The Q2 seasonal trend is up mid-single digits, and the company doesn't have a ton of visibility beyond the current quarter plus one.