Bank of America Tech Conference: ADI's CFO Flags Vertical Power as the Next Big Data Center Opportunity — and Auto Is Already Inflecting
Bank of America 2026 Global Technology Conference, June 2, 2026 — Analog Devices CFO Richard Puccio
Analog Devices CFO Richard Puccio used his appearance at the Bank of America 2026 Global Technology Conference to deliver two messages investors had not fully priced in: vertical power architecture inside data centers represents a material, underappreciated TAM expansion opportunity for ADI, and the automotive business inflected faster and more broadly than the Street expected — not just in China, but in Europe and Japan too. Neither point was widely anticipated entering the year.
Vertical Power: The Data Center Angle Wall Street Is Still Undermodeling
The most forward-looking portion of Puccio's remarks centered on the shift toward vertical power delivery inside AI infrastructure, which he positioned as a larger growth opportunity than the company's already-strong optical business. ADI currently splits its data center revenue roughly equally between optical interconnect and power, with ATE making up the balance — a segment Puccio confirmed is growing in lockstep with the big ATE platform providers. But it is vertical power where he sees the asymmetric upside.
The key technology here is integrated voltage regulation, or IVR. Puccio described it directly: the IVR technology "can reduce power consumption 10% to 15%, reduces the footprint on the board, eliminates some of the ancillary structures that have existed in the current vertical power, and makes it a highly efficient structure." As rack power densities march toward and eventually beyond one gigawatt, that last-millimeter efficiency gain becomes non-negotiable. ADI's acquisition of Empower Semiconductor is the vehicle here, and Puccio was unusually candid about why it was done: "It gave us a massive acceleration on the timeline for a technology we think is going to be a really important technology for power delivery going forward."
Puccio acknowledged that six to nine months ago, vertical power was a single design win and a conceptual discussion. Today, he said, "more and more of the discussions our data center team is having is that vertical power is going to be a key part of this build." He framed the strategic logic simply: getting into the first revision of a product means being part of the road map conversation for every subsequent generation. Given the pace of hyperscaler capex commitments, being locked into that design cycle early is worth considerably more than any individual product win.
Auto: Bottom Called on Content, Not Units
Puccio pushed back on the consensus view that automotive would be a quiet year for ADI. He confirmed that order acceleration in the final month of the fiscal second quarter was both unexpected in its timing and genuine in its nature — driven by visible content gains rather than inventory restocking. "We didn't think this was a prebuy. We could see the content increasing and the very specific drive," he said.
China remains the largest single piece at 30% of ADI's automotive revenue, and the ADAS penetration story there is far from mature. Puccio noted that Level 2 ADAS adoption in China is currently around 10% and that Chinese OEMs are targeting 20% to 30% — each incremental percentage point of penetration translates directly into more ADI content per vehicle. Separately, ADI reported record automotive revenues in Europe and Japan during the most recent quarter, providing geographic breadth to what had previously looked like a China-specific story.
Perhaps most tellingly, ADI posted its first year-over-year growth quarter in battery management systems in two years. BMS is the highest-content application in ADI's EV portfolio, making this a useful leading indicator. Puccio was measured on units — "every forecast I see still shows auto units coming down, probably closer to '24 levels" — but clear that the unit cycle is essentially irrelevant to his P&L outlook. Over the past five years, ADI's automotive revenue has grown 15 percentage points better than the underlying SAAR unit trend, driven entirely by content and share gains.
Industrial: Still Room to Run, Channel Lean
Industrial remains 50% of ADI's business and the most important indicator for assessing whether demand quality is real. Puccio made a point of addressing double-ordering concerns head-on. Channel inventory is running at six to seven weeks, leaner than historical norms. More importantly, 60% of the industrial segment is still approximately 20% below prior peak revenue levels, meaning there is structural catch-up remaining before the business even approaches the demand-consumption crossover line that would signal inventory risk.
The other 40% of industrial — aerospace, defense, and energy infrastructure — is, in Puccio's framing, ordering directly to current-period demand because growth in those verticals is so rapid that there is no motivation to build ahead. The broader infrastructure halo effect from AI data center buildout is now spilling into industrial customers building power and electrical infrastructure — an indirect AI exposure that Puccio characterized as "one of the nice upside pieces."
Pricing: Cost Recovery, Not Shortage Exploitation
ADI executed its first broad-based price increase in 2026, and Puccio was deliberate in framing it as margin-neutral cost recovery rather than opportunistic pricing. "This was not a go-improve-our-margin strategy. We're basically trying to hold the margin given the inflation" — specifically citing gold and petroleum-based materials used in back-end manufacturing. He confirmed that supply shortages played no role: lead times remain within standard ranges for the vast majority of products, with only minor extensions in high-velocity SKUs.
Looking ahead, Puccio said pricing will remain dynamic and tied to input cost trajectories, with ongoing uncertainty around Middle East logistics adding a variable to watch. He noted that the more strategically significant pricing mechanism for ADI is not broad list price adjustments but the innovation premium captured at the design-in stage — a stickier and more durable source of ASP advantage. ADI's newer products (less than ten years old) carry ASPs roughly double those of its legacy portfolio, and the company's blended ASP already runs at approximately four times the industry average.
Gross Margin and Capital Allocation
At 72.5% gross margin — the highest in the analog peer group — the question for investors is how much further expansion remains. Puccio was honest that utilization-driven gains, which powered the trough-to-current recovery, are largely exhausted. Going forward, the levers are mix shift (industrial as a percentage of revenue is currently 50%, versus 53–54% at prior peak margins) and operating leverage on revenue growth. He expects continued accretion, but incremental rather than step-change.
On capital allocation, Puccio dismissed the prospect of large-scale M&A as structurally more difficult given regulatory concentration concerns. The near-term priority is delivering on $1 billion of revenue synergies from prior acquisitions by 2027 — with hundreds of millions already realized in 2025 and more expected in 2026. Tuck-in acquisitions in software, digital capabilities, and AI tooling remain on the table, with Empower cited as the template: targeted, technically strategic, and accelerating an existing internal road map rather than creating a new one.
Capacity and Demand Quality
ADI will complete its internal capacity doubling by the end of fiscal 2026, a ramp that began in earnest around 2022. Ongoing capex is guided at 4% to 6% of revenue, implying roughly $700 million annually at current Street estimates — directed toward tooling modernization and incremental capacity expansion rather than a new greenfield build cycle. Foundry relationships remain functional, though Puccio flagged that incremental external capacity will be increasingly expensive as the analog supply chain tightens broadly.
On demand visibility, Puccio noted that customers are now placing orders one quarter further out than historical norms, a behavioral shift consistent with a tightening supply environment. ADI is layering AI-based forecasting tools on top of its already-extensive statistical order tracking to improve signal quality — important because keeping lead times stable, while operationally desirable, also reduces the urgency for customers to book ahead, creating a forecasting blind spot that the company is actively working to close.