(Reuters) -Analog Devices forecast third-quarter revenue above Wall Street expectations on Wednesday, helped by a rise in demand for its automotive and industrial chips after a prolonged slump, sending its shares up nearly 6% in premarket trading.
The company expects revenue of $2.27 billion, plus or minus $100 million, compared with estimates of $2.16 billion, according to LSEG data.
Analog Devices’ upbeat forecast signals that the demand for the company’s industrial chips is improving as clients, working through existing inventory, place new orders amid signs of an easing economy.
“We believe inventory rationalization across our broad customer base is stabilizing, clearing a path for us to return to sequential growth in the third quarter,” said Analog Devices CEO Vincent Roche, adding that the company is at the beginning of a cyclical recovery.
The results follow a strong forecast from chipmaker Texas Instruments, fanning optimism for a rise in analog chip demand.
Analog Devices reported revenue of $2.16 billion in the second quarter, beating the average analysts’ estimate of $2.11 billion.
The revenue for the company’s industrial segment came in at $1.01 billion, higher than analysts’ expectations of $952.2 million, underscoring a recovery in the industrial chip end-market.
Automotive revenue of $658.2 million missed estimates of $666.5 million as the electric vehicle industry grapples with slowing purchases, prompting automakers to withhold spending on new chips.
The Wilmington, Massachusetts-based company expects third-quarter adjusted earnings per share (EPS) of $1.50, plus or minus 10 cents, compared with estimates of $1.34 per share.
Adjusted EPS came in at $1.40 for the second quarter, compared with estimates of $1.26 per share.
(Reporting by Zaheer Kachwala in Bengaluru; Editing by Vijay Kishore)
