Analog Devices Inc. (NASDAQ:ADI)

The analysis of the financial data over the periods reveals significant developments in the valuation of goodwill and intangible assets.

Goodwill

There is a sharp increase from 12,278 million USD in 2020 to approximately 26,918 million USD in 2021, after which the value remains relatively stable, fluctuating slightly but staying close to 26,910 million USD through 2025.

Customer Relationships

This asset shows a considerable rise from 4,700 million USD in 2020 to over 10,336 million USD in 2021, maintaining the same level steadily until 2025 without significant changes.

Technology-based Intangibles

There is a dramatic increase from around 1,137 million USD in 2020 to approximately 7,560 million USD in 2021. From 2021 onward, it shows minor increases year on year, stabilizing near 7,618 million USD by 2025.

Trade-name

The value remains constant at 72.2 million USD across all periods, indicating no impairments or revaluations for this intangible asset.

Backlog and Assembled Workforce

Values for backlog and assembled workforce are only reported starting in 2021, with backlog at approximately 361.2 million USD and workforce at 1.8 million USD, both maintaining consistent levels through 2024 or 2025 where data is present.

IPR&D (In-Process Research & Development)

This asset is reported only in 2021 and 2022 with a value of roughly 28.2 million USD before disappearing from subsequent years, suggesting it was either fully capitalized or impaired.

Intangible Assets, Gross Carrying Amount

There is a notable jump from approximately 5,909 million USD in 2020 to over 18,359 million USD in 2021, remaining fairly stable through 2024, followed by a slight decrease to around 18,028 million USD by 2025.

Accumulated Amortization

The accumulated amortization consistently increases in magnitude over time, from about -2,259 million USD in 2020 to -10,014 million USD in 2025, indicating ongoing amortization expense charged against intangible assets.

Net Intangible Assets

After accounting for amortization, net intangible assets show a peak in 2021 at approximately 15,267 million USD, followed by a steady decline year over year to about 8,013 million USD by 2025, reflecting the impact of amortization and/or asset retirements.

Goodwill and Intangible Assets Combined

The sum of goodwill and intangible assets also peaked in 2021 at over 42,185 million USD but then shows a gradual decrease, ending near 34,959 million USD in 2025. This suggests either amortization, impairment, or disposals impacting net balances despite the initial increase.

Overall, the data shows a major recognition or acquisition event between 2020 and 2021 that significantly boosted goodwill and intangible assets. Subsequent years reflect ongoing amortization and stabilization of these asset values, with no further large acquisitions indicated by the data. The persistence of constant values for certain intangibles such as customer relationships and trade-name suggests stable asset valuation, while the drop in net intangible assets points to regular amortization being a key factor in asset reduction over time.

The financial data indicates a notable divergence between reported and goodwill-adjusted figures over the examined periods, highlighting the impact of intangible assets on the company's balance sheet.

Total Assets

The reported total assets initially showed a significant increase from 21.47 billion US dollars in 2020 to 52.32 billion in 2021. Following this peak, total assets declined moderately across subsequent years, descending to approximately 47.99 billion by 2025. Conversely, adjusted total assets, which likely exclude goodwill and other intangible assets, also experienced a sharp rise between 2020 and 2021, increasing from approximately 9.19 billion to 25.40 billion. Subsequently, these adjusted assets steadily decreased each year, reaching about 21.05 billion in 2025. This pattern suggests that a significant portion of the increase and subsequent decreases in reported assets may be attributed to goodwill adjustments or reclassifications.

Shareholders' Equity

Reported shareholders' equity exhibited a similar trend to total assets, with a substantial rise from nearly 12 billion in 2020 to about 38 billion in 2021, followed by a gradual decline to roughly 33.82 billion in 2025. In contrast, adjusted shareholders' equity started with a negative value of approximately -280 million in 2020, which turned positive and surged to 11.07 billion in 2021, before progressively decreasing over the following years to approximately 6.87 billion in 2025. The initial negative adjusted equity suggests that prior to adjustments, liabilities or goodwill impairments may have outweighed tangible equity. The subsequent positive adjusted equity growth and later decline reflect changes in the company's underlying net asset value after removing goodwill effects.

Overall, the data reveals that the company experienced a significant increase in asset base and equity in 2021, followed by a moderate contraction thereafter. The larger magnitudes of reported figures compared to adjusted indicate substantial goodwill or intangible assets are included in reported balances. The decreasing adjusted assets and equity over time might suggest impairment charges, asset sales, or depreciation effects impacting tangible book value. These trends highlight the importance of analyzing both reported and adjusted financials to understand the company's true asset and equity position.

The analysis of the financial ratios over the six-year period reveals several distinct trends related to asset utilization, leverage, and profitability, both in reported terms and when adjusted for goodwill.

Total Asset Turnover

The reported total asset turnover ratio shows variability with an initial drop from 0.26 to 0.14 between 2020 and 2021, followed by a recovery peaking at 0.25 in 2023, then declining to 0.20 in 2024, and partially rebounding to 0.23 in 2025. In contrast, the adjusted total asset turnover, which excludes goodwill effects, consistently demonstrates higher efficiency, starting at 0.61 and declining sharply to 0.29 in 2021, before recovering to peak at 0.56 in 2023. It dips again in 2024 to 0.44 and climbs to 0.52 in 2025. This pattern indicates that when goodwill is excluded, the company shows stronger asset utilization, though still subject to fluctuations, possibly driven by changes in operational efficiency or asset base composition.

Financial Leverage

Reported financial leverage decreases from 1.79 in 2020 to a lower and stable range around 1.37 to 1.42 through the subsequent years. This suggests a reduction and stabilization in reliance on debt or leveraged funding in reported terms. However, the adjusted financial leverage, available from 2021 onward, is significantly higher, increasing steadily from 2.29 to 3.06 by 2025. The rising adjusted leverage indicates that once goodwill is removed, the company’s financial structure appears more leveraged, which could imply higher risk but potentially greater capacity for return.

Return on Equity (ROE)

Reported ROE declines sharply from over 10% in 2020 to a low of 3.66% in 2021, recovers moderately to 9.32% in 2023, then falls again below 5% in 2024 and increases slightly to 6.7% in 2025. These fluctuations suggest volatility in shareholder returns during the period. The adjusted ROE, however, is markedly higher and more variable, with a strong upward trajectory from 12.56% in 2021 to a peak of 38.31% in 2023, followed by a decline to 19.78% in 2024, with an increase again to 33% in 2025. This highlights that excluding goodwill, the company demonstrates significantly enhanced profitability for equity holders with pronounced peaks and troughs, indicating sensitivity to underlying business performance dynamics.

Return on Assets (ROA)

The reported ROA reflects similar volatility to ROE, beginning at 5.69% in 2020, dropping to 2.66% in 2021, and rebounding to 6.79% in 2023 before falling again to below 3.5% in 2024 and rising to 4.72% in 2025. The adjusted ROA consistently outperforms the reported figures, starting at 13.28% in 2020 (adjusted data missing for that year but implied by continuity), falling to 5.47% in 2021, then improving to a high of 15.15% in 2023, followed by a dip to 7.67% and a partial recovery to 10.77% in 2025. Such results underline stronger operational efficiency when goodwill effects are excluded, with pronounced volatility that may suggest changed income streams or asset productivity over time.

Overall, the adjustment for goodwill consistently results in higher ratios for turnover, leverage, and returns, emphasizing the significant impact that goodwill has on the reported financial metrics. The company’s operational efficiency, measured by asset turnover, demonstrates recovery over time but remains subject to fluctuations. Financial leverage appears reduced in reported terms but shows an increasing trend when adjusted, indicating greater inherent leverage risk once intangible assets are excluded. Profitability metrics reveal a pattern of volatility with generally improved returns after adjustment, reflecting more favorable core asset and equity performance absent goodwill considerations.

The analysis of the data over the reported periods reveals notable trends in the company's asset base and efficiency ratios, both on a reported and goodwill-adjusted basis.

Total Assets

The reported total assets experienced a significant increase from 21.47 billion USD in 2020 to a peak of approximately 52.32 billion USD in 2021, followed by a gradual decline each subsequent year to about 48.0 billion USD by 2025. In contrast, the adjusted total assets, which exclude goodwill, also show a similar trend but with smaller absolute values. They increased markedly from around 9.19 billion USD in 2020 to approximately 25.40 billion USD in 2021, then steadily decreased to about 21.05 billion USD by 2025. This pattern suggests that while there was a substantial rise in assets during the 2021 period, the company's asset base has somewhat contracted in later years, with adjustments for goodwill indicating consistent shrinkage in tangible asset levels.

Total Asset Turnover Ratios

The reported total asset turnover ratio dropped notably from 0.26 in 2020 to 0.14 in 2021, indicating a decrease in asset efficiency despite the reported asset growth. Subsequently, it improved progressively to 0.25 in 2023 but showed slight fluctuation thereafter, ending at 0.23 in 2025. This pattern suggests a temporary inefficiency gain during the 2021 spike, followed by a gradual recovery in asset utilization efficiency.

The adjusted total asset turnover ratio follows a somewhat parallel but distinct trend, starting higher at 0.61 in 2020 and sharply declining to 0.29 in 2021. It then increased steadily through 2023 to 0.56, declined to 0.44 in 2024, and rose again to 0.52 in 2025. These adjusted ratios, being consistently higher than the reported ones, suggest better underlying asset efficiency when goodwill is excluded. The fluctuations point to varying operational and asset utilization efficiency across periods but with an overall trend of recovery and sustained relatively higher efficiency compared to the reported basis.

Insights

The disparate patterns between reported and adjusted asset values and turnover ratios underscore the impact of goodwill on the reported figures. The significant jump and subsequent decline in reported assets may reflect acquisition activity or asset revaluation followed by write-downs or disposals. The adjusted data highlight more conservative and arguably more accurate measures of asset efficiency. The recovery of turnover ratios after the 2021 low suggests operational adjustments to better leverage asset bases over time. Overall, the company demonstrates a cycle of asset base expansion followed by consolidation, with improving efficiency in utilizing both reported and tangible assets in recent years.

The analysis of the financial data over the reported periods reveals several notable trends in both the reported and goodwill adjusted figures for total assets, shareholders' equity, and financial leverage.

Total Assets

Reported total assets exhibit considerable volatility, peaking at approximately $52.3 billion in 2021, followed by a gradual decline to around $48.0 billion in 2025. In contrast, adjusted total assets (excluding goodwill) show a consistent decreasing trend from roughly $9.2 billion in 2020 to approximately $21.0 billion in 2025, despite a noticeable jump between 2020 and 2021. The substantial difference between reported and adjusted figures suggests a significant goodwill component impacting total assets.

Shareholders' Equity

Reported shareholders’ equity mirrors the total assets trend, with a sharp increase from about $12.0 billion in 2020 to nearly $38.0 billion in 2021, followed by a gradual decline to around $33.8 billion by 2025. Conversely, adjusted shareholders’ equity started with a negative balance in 2020 but transitioned to positive territory from 2021 onward. However, the adjusted equity values show a consistent downward trajectory after 2021, falling from approximately $11.1 billion to nearly $6.9 billion by 2025. This divergence highlights the impact of goodwill on equity and suggests weakening underlying equity value once goodwill is excluded.

Financial Leverage

The reported financial leverage ratio exhibits moderate fluctuation, starting at 1.79 in 2020, dropping to about 1.38 by 2021, and maintaining relative stability near 1.37 to 1.42 through 2025. In contrast, the adjusted financial leverage ratio shows an increasing trend over the same period: rising from 2.29 in 2021 to a high of 3.06 by 2025. The upward movement in adjusted leverage indicates an increasing reliance on debt or liabilities relative to net assets when goodwill is removed, potentially signaling higher financial risk.

Overall, the data suggest that while reported figures portray stability or moderate decline after a peak in 2021, the adjusted metrics excluding goodwill show a consistent pattern of asset and equity reduction coupled with increasing financial leverage. This implies that the company's intrinsic financial strength may be diminishing over time, and the presence of goodwill significantly influences the perception of its financial position. The rising adjusted leverage ratio may warrant attention due to the associated higher financial risk.

The financial data presents both reported and goodwill adjusted figures for shareholders' equity and return on equity (ROE) over a six-year period. Several key trends emerge from the data indicating shifts in the company's equity position and profitability metrics.

Shareholders’ Equity

The reported shareholders’ equity exhibits significant volatility, with an initial sharp increase from approximately $12 billion to nearly $38 billion between 2020 and 2021. Following this peak, reported equity gradually declines each year to about $33.8 billion by 2025. In contrast, the adjusted shareholders’ equity, which excludes goodwill impairment or adjustments, starts with a negative value in 2020, indicating a potential goodwill or intangible asset impairment at that time. From 2021 onward, adjusted equity grows substantially to approximately $11.1 billion, then experiences a steady decrease through 2025, reaching roughly $6.9 billion. This suggests that while the reported equity includes large intangible assets or goodwill that significantly inflate equity values initially, the underlying tangible equity presents a different trend marked by growth followed by decline.

Return on Equity (ROE)

The reported ROE begins at 10.17% in 2020, but it declines sharply to 3.66% in 2021. It recovers somewhat in the next two years to 9.32% in 2023 before falling again in 2024, and slightly improving to 6.7% in 2025. This fluctuating pattern in reported ROE may be influenced by the volatility in reported equity and associated earnings. On the other hand, the adjusted ROE data, which is available starting from 2021, shows a notably different trajectory. It commences at 12.56% in 2021 and then sharply rises to a peak of 38.31% in 2023, indicating a period of strong profitability relative to adjusted equity. Although it decreases in the subsequent years to 19.78% in 2024 and recovers somewhat to 33% in 2025, adjusted ROE consistently remains significantly higher than the reported ROE after 2021. This divergence reflects that the adjusted metrics, presumably excluding goodwill and other intangible assets, reveal higher net profitability and efficient equity utilization.

Insights

The disparity between reported and adjusted figures highlights the material impact of goodwill and intangible assets on the company's financial structure and performance metrics. The initial negative adjusted equity suggests impairment issues in 2020, which were corrected or revalued in subsequent years. The high fluctuations in both reported and adjusted ROE point toward underlying variability in net income generation relative to equity base. The steadiness in adjusted ROE's elevated levels compared to reported ROE may indicate that the company’s core operations are more profitable than what reported figures suggest, potentially obscured by large goodwill amounts in reported accounts. The gradual decline in both equity measures from 2023 onwards suggests pressures on the equity base that could relate to business performance, asset revaluations, or capital management decisions.

The analysis of the annual financial data reveals several notable trends in the company's total assets and return on assets (ROA), both reported and goodwill adjusted, over a six-year period.

Total Assets

Reported total assets increased significantly from approximately 21.5 billion US dollars in 2020 to a peak of about 52.3 billion in 2021. Subsequently, there is a gradual decline in reported total assets each year, decreasing to approximately 48.0 billion by 2025. This indicates a rapid expansion followed by a modest contraction or realignment of asset base over the period.

Adjusted total assets, which presumably exclude goodwill or similar intangibles, follow a similar but magnified pattern. They rise sharply from around 9.2 billion in 2020 to about 25.4 billion in 2021, then show a consistent decrease each year to approximately 21.0 billion in 2025. The adjustment reveals a material difference in asset size, highlighting the impact of goodwill on total asset valuation.

Return on Assets (ROA)

The reported ROA shows variability over the years, starting at 5.69% in 2020, dropping significantly to 2.66% in 2021, rebounding to 6.79% in 2023, then declining again to 3.39% in 2024 before improving to 4.72% in 2025. This volatility suggests fluctuations in profitability relative to asset size, possibly affected by changes in operational efficiency or income levels.

The adjusted ROA, reflecting returns excluding the effects of goodwill, maintains a higher level across the period compared to the reported ROA. It starts at 13.28% in 2020, declines sharply to 5.47% in 2021, then rises to a peak of 15.15% in 2023. Afterward, it falls to 7.67% in 2024 but increases again to 10.77% in 2025. This indicates that the underlying asset base excluding goodwill yields higher profitability, and the adjusted ROA exhibits similar cyclical behavior but with greater amplitude.

Overall, the data points to a phase of asset growth followed by contraction, accompanied by fluctuating returns on those assets. Adjustments for goodwill reveal that the company's tangible asset returns are substantially stronger than those indicated by reported figures, though both metrics demonstrate a pattern of recovery and decline throughout the analyzed timeline.