Analog Devices (NASDAQ:ADI) has revealed its fourth-quarter revenue projections, falling below expectations set by Wall Street. The company’s forecast suggests that the ongoing chip industry inventory surplus, exacerbated by a decline in consumer demand, could hinder the influx of new orders.
Pre-market trading saw the company’s shares plummet by 6.6% to $165, as it also failed to meet revenue and profit estimates for the third quarter.
The semiconductor sector experienced a downturn last year due to inflation putting a damper on tech expenditures. The situation has been compounded by a bleak economic outlook in China. Counterpoint Research, a market analysis firm, reported an 8% drop in smartphone shipments during the June quarter, further intensifying the challenges.
Analog Devices CEO, Vincent Roche, acknowledged, “The customer inventory adjustments we mentioned last quarter have accelerated as economic conditions deteriorate…”
Analog Devices, headquartered in the U.S., projected its fourth-quarter revenue to be in the range of $2.70 billion, with a variance of plus or minus $100 million. This projection falls short of analysts’ average estimation of $3.01 billion, according to Refinitiv data.
Similarly, competitor Texas Instruments (NASDAQ:TXN) also anticipates third-quarter revenue below market expectations, driven by caution among electronics manufacturers due to weakened consumer demand for chips.
Shares of related companies like Texas Instruments, ON Semiconductor (NASDAQ:ON), and NXP Semiconductors (NASDAQ:NXPI) have all experienced declines ranging from 2.5% to 3.1% prior to market opening.
Analog Devices’ fourth-quarter adjusted earnings are anticipated to be around $2 per share, with a potential deviation of 10 cents, falling short of analysts’ projected profit of $2.39 per share.
The company’s third-quarter revenue witnessed a slight decrease of about 1%, amounting to $3.08 billion, failing to meet expectations. This dip was primarily attributed to the consumer sector’s performance.
While the consumer and communications segments saw declines of 21% and 23% in revenue respectively, robust demand persisted in the company’s major segments: automotive and industrial.
Analog Devices reported adjusted earnings of $2.49 per share for the three months ending on July 29, slightly below the expected $2.52 per share.
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Author Faith Yakubu 
