ADI’s artificial intelligence-driven data center solutions are seeing increased adoption: What does the future hold?

Analog Devices Sees Strong Growth in Data Center Solutions

Analog Devices (ADI) is witnessing significant momentum in its data center segment, which has become a major driver of AI-related expansion. Over the past year, ADI’s data center revenue surged by 50% in fiscal 2025 and continued to accelerate into the first quarter of fiscal 2026, fueled by increased investments in AI infrastructure.

As artificial intelligence systems demand greater processing power, higher power density, and faster data transfer, the complexity of these systems grows. This trend directly benefits ADI’s broad range of analog, mixed-signal, power, and optical products. The company has a strong presence in both power delivery and power management, with its hot-swap and protection solutions making up roughly one-third of its data center power sales.

Market expansion is also being driven by the adoption of higher-voltage architectures, such as 48V and 54V, as well as vertical power solutions. ADI’s DC power control and multiphase controllers are essential for efficiently managing the power needs of GPUs and CPUs in modern data centers.

Another area of opportunity is optical connectivity, as AI networking increasingly shifts toward optical circuit switching. ADI’s advanced control and monitoring technologies help boost bandwidth density and lower the cost per bit, supporting this transition.

Given these factors, ADI anticipates that the combined market for automated test equipment (ATE) and data center products will exceed a $2 billion annual run rate, accounting for about 20% of the company’s revenue and supporting sustained double-digit growth in the coming years.

Competitive Landscape: How ADI Stacks Up

Broadcom (AVGO) stands out as a leader in custom silicon solutions for data centers. Its cutting-edge 3.5D XDSiP packaging platform is vital for delivering high performance and efficiency in custom AI processors. Broadcom’s semiconductor division, which includes these custom solutions, has seen substantial growth over recent quarters.

Advanced Micro Devices (AMD) is another key player in the custom silicon and AI accelerator market. AMD provides semi-custom system-on-chips (SoCs) and Instinct Accelerators tailored for data center applications. Additionally, AMD’s Alveo Adaptable Accelerator Cards are crucial for handling compute-intensive workloads in these environments.

With the rapid expansion of AI-powered data centers and the networking infrastructure required to support them, companies like Analog Devices, AMD, and Broadcom are well-positioned to capitalize on significant growth opportunities in this sector.

ADI’s Stock Performance, Valuation, and Analyst Outlook

Over the past year, ADI’s share price has climbed 58.3%, outpacing the 49.4% gain seen by the broader Semiconductor - Analog and Mixed industry.

ADI’s 12-Month Stock Performance

Source: Zacks Investment Research

From a valuation perspective, ADI is currently trading at a forward price-to-sales ratio of 12.31, which is higher than the industry average of 9.34.

Forward 12-Month Price-to-Sales Ratio

Source: Zacks Investment Research

According to Zacks Consensus Estimates, ADI’s earnings are projected to grow by 42.49% in fiscal 2026 and by 11.16% in 2027. Estimates for fiscal 2025 and 2026 have remained steady over the past week.

Source: Zacks Investment Research

Currently, ADI holds a Zacks Rank #2 (Buy).