(Reuters) -Analog Devices forecast third-quarter revenue above Wall Street expectations on Wednesday, helped by a rise in demand for its industrial chips after a prolonged slump, sending its shares up more than 8%.
The upbeat forecast signals that the chipmaker's clients, working through existing inventory, are placing 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," CEO Vincent Roche said, adding that the company is at the beginning of a cyclical recovery.
The company expects revenue of $2.27 billion, plus or minus $100 million, for the third quarter, compared with estimates of $2.16 billion, according to LSEG data.
Analog Devices (NASDAQ:ADI) also touted its artificial intelligence efforts on a post earnings conference call and expects to drive "record revenues" for its chip testing segment in the near to mid term due to strong demand for high-bandwidth memory chips.
The company's results follow a strong forecast from chipmaker Texas Instruments (NASDAQ:TXN), fanning optimism for a rise in analog chip demand.
Analog Devices reported revenue of $2.16 billion in the second quarter ended May 4, 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, driven by strong performances in aerospace and defense.
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 of $1.50, plus or minus 10 cents, compared with estimates of $1.34 per share.
Adjusted profit for the second quarter came in at $1.40 per share, compared with estimates of $1.26 per share.