How does Analog Devices' operating cash flow and free cash flow conversion rates compare to its main competitors in the analog and mixed‑signal space?

Fundamentals – cash‑conversion advantage

Analog Devices (ADI) generated $4.2 bn of operating cash flow and $3.7 bn of free cash flow on a trailing‑12‑month basis, which translates to ≈ 40 % and 35 % of revenue, respectively. In the analog‑and‑mixed‑signal arena the two biggest peers are Texas Instruments (TI) and Infineon Technologies (or STMicroelectronics as a broader comparator).

• TI reported FY2024 operating cash flow of roughly $1.2 bn on $3.8 bn of revenue (≈ 31 % conversion) and free cash flow of $1.0 bn (≈ 26 %).
  
• Infineon’s FY2023 cash conversion hovered around 30 % operating‑cash‑flow‑to‑revenue and 20 % free‑cash‑flow‑to‑revenue.
  

Thus, ADI’s operating‑cash‑flow conversion is ~9 pp higher than TI and ~10 pp above Infineon, while its free‑cash‑flow conversion is about 9 pp higher than TI and 15 pp higher than Infineon. The superior cash generation reflects ADI’s higher‑margin product mix, strong demand across industrial, automotive and communications end‑markets, and disciplined capital‑expenditure discipline.

Trading implications

The higher cash‑conversion rates give ADI a larger “share‑holder‑return buffer” (it returned $1.6 bn to investors in Q3) and more flexibility for future buy‑backs or dividend growth—an advantage the market typically rewards with a premium valuation. In a sector where peers are constrained by lower free‑cash yields, ADI can sustain upward‑bias catalysts (e.g., new mixed‑signal platforms, AI‑edge solutions) without diluting balance‑sheet strength.

From a technical standpoint, ADI is trading near its 52‑wk high, but the cash‑strength narrative supports a bullish stance on any pull‑back to the 55‑day moving average. A modest long position or a “buy‑the‑dip” on a 3–5 % retracement could capture upside as the market re‑prices the cash‑conversion premium relative to TI and Infineon. Conversely, a breach below the 200‑day trend line would warrant a defensive trim, given the sector’s cyclical exposure.