How To Trade Analog Devices Stock Ahead of Earnings?

Analog Devices (NASDAQ:ADI) is scheduled to announce its Q3 earnings on Wednesday, August 20, 2025 (October year). Earnings are expected to be approximately $1.95 per consensus estimates, reflecting a 23% increase compared to the previous year, while revenue is anticipated to rise by 20% to $2.76 billion. ADI is a highly diversified semiconductor producer with exposure to numerous high-growth markets, including AI infrastructure, electric vehicles (EVs), industrial automation, aerospace, and communications, and it is probable that these trends will bolster revenues during the quarter. Margins may also trend slightly higher to around 41.5%, plus or minus 100 basis points, according to guidance, supported by improved cost efficiency and pricing power. Historically, ADI stock has typically experienced negative performance after earnings announcements. Over the last five years, the stock has achieved a positive one-day return in 47% of cases.

The company has a current market capitalization of $115 billion. Revenue for the past twelve months was $9.8 billion, and it was operationally profitable, yielding $2.3 billion in operating profits and net income of $1.8 billion. While much will depend on how the results compare to consensus and expectations, recognizing historical patterns may increase the chances in your favor if you are an event-driven trader.

There are two approaches to achieve that: either understand the historical odds and position yourself before the earnings release, or examine the correlation between immediate and medium-term post-earnings returns and position yourself accordingly after the earnings are published. That said, if you prefer seeking upside with lower volatility than individual stocks, the Trefis High Quality portfolio offers an alternative – having outperformed the S&P 500 and delivered returns exceeding 91% since its inception.

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Analog Devices’ Historical Probability of Positive Post-Earnings Return

Observations regarding one-day (1D) post-earnings returns:

• Within the last five years, there have been 19 earnings data points recorded, with 9 positive and 10 negative one-day (1D) returns noted. In summary, positive 1D returns occurred about 47% of the time.
• Significantly, this percentage rises to 58% if we evaluate data for the last 3 years instead of 5.
• The median of the 9 positive returns = 5.0%, and the median of the 10 negative returns = -1.8%

Additional information regarding observed 5-Day (5D) and 21-Day (21D) returns post-earnings is summarized along with the statistics in the table below.

Correlation Between 1D, 5D, and 21D Historical Returns

A relatively lower-risk strategy (though not beneficial if the correlation is weak) is to ascertain the correlation between short-term and medium-term returns after earnings, identify a pair exhibiting the highest correlation, and make the suitable trade. For instance, if 1D and 5D exhibit the strongest correlation, a trader may choose to position themselves “long” for the succeeding 5 days if the 1D post-earnings return is positive. Here are some correlation statistics based on a 5-year and a 3-year (more recent) history. Note that the correlation 1D_5D denotes the correlation between 1D post-earnings returns and subsequent 5D returns.

Is There Any Correlation With Earnings from Peers?

Occasionally, the performance of peers can impact post-earnings stock reactions. In fact, the pricing-in might commence prior to the earnings announcements. Below is some historical data on the post-earnings performance of Analog Devices stock compared to the stock performance of peers that reported earnings just before Analog Devices. For a fair comparison, peer stock returns also reflect post-earnings one-day (1D) returns.

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