Revenue Recognition
A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. For product sales, typically each product sold to a customer represents a distinct performance obligation. We recognize the majority of our revenue from performance obligations outlined in contracts with our customers that are satisfied at a point in time. Our revenue satisfied over time is not material. We have contract liabilities of $41 million and $40 million as of December 31, 2025 and 2024, respectively, which primarily relate to deferred revenues associated with the ADI Global Distribution operating segment. Additionally, contract assets were not material as of December 31, 2025 and 2024.
The timing of satisfaction of performance obligations does not significantly vary from the typical timing of payment. For some contracts, we may be entitled to receive an advance payment.
We have applied the practical expedient to not disclose the value of remaining performance obligations for (i) contracts with an original expected term of one year or less or (ii) contracts for which we recognize revenue in proportion to the amount we have the right to invoice for services performed.
Disaggregated Revenue
We have two operating segments: Products and Solutions and ADI Global Distribution. Disaggregated revenue information for Products and Solutions is presented by product grouping, while ADI Global Distribution is presented by region.
The following table presents revenue by business line and geographic location, as we believe this presentation best depicts how the nature, amount, timing, and uncertainty of net revenue and cash flows are affected by economic factors:
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| (in millions) | 2025 | | 2024 | | 2023 |
| Products and Solutions | | | | | |
| Safety and Security | $ | 963 | | | $ | 885 | | | $ | 965 | |
| Air | 841 | | | 858 | | | 862 | |
| Energy | 563 | | | 512 | | | 525 | |
| Water | 321 | | | 309 | | | 320 | |
| Total Products and Solutions | 2,688 | | | 2,564 | | | 2,672 | |
| | | | | |
| ADI Global Distribution | | | | | |
Americas (1) | 4,189 | | | 3,680 | | | 3,085 | |
International (2) | 595 | | | 517 | | | 485 | |
| Total ADI Global Distribution | 4,784 | | | 4,197 | | | 3,570 | |
| | | | | |
| Total net revenue | $ | 7,472 | | | $ | 6,761 | | | $ | 6,242 | |
(1)Americas represents North, Central, and South America.
(2)International represents all geographies that are not included in Americas.
About Revenue Disclosures
Revenue disclosures under ASC 606 explain how a company identifies performance obligations, allocates transaction prices, and determines when revenue is recognized. This section is essential for understanding whether reported revenue reflects genuine economic activity or aggressive accounting choices. Analysts examine the mix of point-in-time versus over-time recognition, which directly affects revenue timing and comparability.
Key signals: rising contract liabilities (deferred revenue) suggest strong future revenue visibility, while declining contract assets may indicate slowing project milestones. Watch for variable consideration estimates — rebates, returns, and performance bonuses that require management judgment. Significant changes in disaggregated revenue by geography or product line can reveal shifting business mix before it appears in headline numbers. Compare revenue growth against contract liability growth to assess sustainability, and scrutinize any changes in the timing of recognition that coincide with earnings pressure.