Monolithic Power Systems Q3 2026 Earnings Results & Report

Monolithic Power Systems EPS Results

• Actual EPS: $8.19
• Consensus EPS: $7.79
• Beat/Miss: Beat by +$0.40
• One Year Ago EPS: $4.73
• EPS Beat Rate: 7 of last 8 quarters

Monolithic Power Systems Revenue Results

• Actual Revenue: $1.20 billion
• Expected Revenue: $1.16 billion
• Beat/Miss: Beat by +$40.80 million
• YoY Revenue Growth: +63.10%

Monolithic Power Systems (NASDAQ:MPWR) (MPS) designs, develops and markets semiconductor-based power management solutions. Its products include power management integrated circuits, DC-to-DC converters, power modules, battery chargers, LED drivers and motor drivers, which help control and convert electrical power in electronic systems.

The company’s products serve a range of markets, including computing and data storage, automotive, communications, consumer electronics and industrial applications. MPS sells to customers around the world through direct sales and distribution channels.

Founded in 1997, Monolithic Power Systems is headquartered in Kirkland, Washington. Founder Michael Hsing has led the company as its chief executive officer.

Monolithic Power Systems Q3 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Record growth: Q3 revenue reached $1.2 billion, up 22% sequentially and 63% year over year, marking MPS’s first quarter above $1 billion. Management said it sees no signs of slowing and described the coming years as an “explosive growth period.”
• Positive Sentiment: Enterprise data remains the primary driver: Management raised its year-over-year growth floor for the enterprise data business from 130% to 150%, supported by existing-customer demand, new ASIC-related wins, higher module content and AI-driven customer expansion. It expects these growth drivers to remain intact into 2027.
• Positive Sentiment: Broader growth opportunities are ramping: Communications growth is benefiting from both optical modules and a rapidly expanding switching business, while automotive design wins in 48V and zonal architectures, robotics, high-speed memory and data converters are expected to contribute increasingly in 2027 and beyond.
• Neutral Sentiment: Capacity and new technologies are being built ahead of demand: Annual revenue-supporting capacity has surpassed $6 billion, with $8 billion targeted by the second half of 2027 and $10 billion thereafter. MPS is sampling internally developed 800V GaN solutions, but meaningful revenue is not expected until late 2027 or more likely 2028 as reliability is validated.
• Positive Sentiment: Operating leverage remains favorable: Management expects gross-margin expansion to continue gradually within its 55%–60% target range, while rapid revenue growth is causing operating expenses to run below the company’s historical model. MPS also repurchased more than $450 million of stock in Q3.

Presentation

[Operator]

Good day, and thank you for standing by. Welcome to the Monolithic Power Systems Third Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again.

[Operator]

Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Arthur Lee. Please go ahead.

[Arthur Lee, Finance Manager at Monolithic Power Systems]

Earlier today, MPS released a written commentary on the results of its operations for the third quarter ended September 30, 2026. This document can be found on our website.

[Arthur Lee, Finance Manager at Monolithic Power Systems]

Before we begin, I would like to remind everyone that in the course of today's presentation, we may make forward-looking statements and projections within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risk and uncertainties. The risk, uncertainties, and other factors that could cause actual results to differ from these forward-looking statements are identified in the safe harbor statements contained in the Q3 2026 earnings commentary and in our SEC filings, including our Form 10-K and Forms 10-Q, which can be found on our website. Our statements are made as of today, and we assume no obligation to update this information.

[Arthur Lee, Finance Manager at Monolithic Power Systems]

Now, I would like to turn the call over to Tony.

[Tony Balow, VP and CFO at Monolithic Power Systems]

Thanks, Arthur. Good afternoon, and for us, good morning from Shanghai, and welcome to our Q3 2026 earnings call.

[Tony Balow, VP and CFO at Monolithic Power Systems]

In Q3, MPS achieved another significant milestone, exceeding $1 billion in quarterly revenue for the first time. Q3 revenue of $1.2 billion was 22% higher than the second quarter of 2026 and 63% higher than the third quarter of 2025. During the quarter, our capacity surpassed $6 billion in annual revenue support. We expect to have $8 billion of capacity in place by the second half of 2027 on our way to $10 billion in support of our rapidly expanding business.

[Tony Balow, VP and CFO at Monolithic Power Systems]

In our enterprise data end market, we saw strong demand across existing customers, which we expect to continue into 2027. In addition, using our in-house developed AI design tools, we significantly expanded our customer base in traditional areas, as well as landing new wins in applications such as desktop AI designs.

[Tony Balow, VP and CFO at Monolithic Power Systems]

Beyond our strong enterprise data growth in automotive, we received first orders for our 48V power solutions and expect design wins for 48V and zonal architectures to be a driver of growth in 2027. We started ramping robotic solutions with sensor and motor control products across multiple geographies. We continue to increase our SAM with the ramp of our high-speed memory products.

[Tony Balow, VP and CFO at Monolithic Power Systems]

We landed our first large data converter design win, which we expect to ramp next year, and we continued to build out our high-voltage portfolio and began sampling GaN-based solutions for use in 800 volt data center architectures, complementing our existing silicon carbide-based designs.

[Tony Balow, VP and CFO at Monolithic Power Systems]

Finally, in Q3, we repurchased over $450 million of our own stock. Overall, we see accelerated growth. Our diversified growth strategy is paying off.

[Tony Balow, VP and CFO at Monolithic Power Systems]

Operator, you may now open the line for questions.

[Operator]

As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. In the interest of time, we ask that you please limit yourself to one question and one follow-up. Please stand by while we compile the Q&A roster.

[Operator]

Our first question comes from Tore Svanberg with Stifel. Your line is now open.

[Tore Svanberg, Analyst at Stifel]

Yes. Thank you, Michael and Tony. Congratulations on that billion-dollar milestone, and to you, Tony, congratulations on your CFO appointment.

[Tore Svanberg, Analyst at Stifel]

I guess for my first question, you talked about accelerated growth. Was hoping you could maybe elaborate a little bit on that. I am sure you are not going to give us kind of 2027 guidance, but you are on track to growing 50%-60% this year. Especially in light of your $8 billion capacity and then $10 billion, when could we potentially see $10 billion capacity in place? Thank you.

[Michael Hsing, Chairman of the Board, President, and CEO at Monolithic Power Systems]

Yeah. Thanks, Tore. As Tony mentioned, there is only a few items, so we see beyond that, and I see this explosive growth period, okay, in the next few years. Even this year, you see the first nine months, okay. We do not see any signs to slow down.

[Tony Balow, VP and CFO at Monolithic Power Systems]

Yeah. The only thing I'd add is I think as we've come into the second half, you started to see growth across multiple of our end markets, including auto, which the ramp started here in Q3, and we've talked about continuing here through the second half.

[Tony Balow, VP and CFO at Monolithic Power Systems]

Then as we start to see applications like robotics begin to ramp, we'd expect that then to continue into the future. So I think it's not just the existing businesses, it's adding on the additional growth areas over time, which is really giving us confidence going forward.

[Tore Svanberg, Analyst at Stifel]

Very good, and that's my follow-up. You mentioned the 800 volt GaN product sampling. Now that you are sampling GaN, could you maybe elaborate a little bit more, help us understand a little bit more the positioning there. Is it vertical GaN? Is it horizontal GaN? Is it your own process? Any more color you could help us there, and when do you expect to start to see some 800 volt GaN revenue? Thank you.

[Michael Hsing, Chairman of the Board, President, and CEO at Monolithic Power Systems]

Yeah. It is based on MPS's own development, which is later than we developed a silicon carbide device. We start to sampling this type of solutions. We let our customer choose either using GaN, the GaN is a new technology for everyone's market and for everyone adapted in the data centers and the industrial automotive type of applications. Okay. This is the first times.

[Michael Hsing, Chairman of the Board, President, and CEO at Monolithic Power Systems]

We're always very cautious about the reliability. We want to achieve below 1 PPM failures for these modules. We let our customer choose, okay. GaN or silicon carbide. Silicon carbide is known, okay, we know the data. So that's a very high reliability product. GaNs, we have to ship somewhere sort of 50 million units before we can say there's a good, it's a new one. Okay. But we let our customer choose.

[Tony Balow, VP and CFO at Monolithic Power Systems]

Yeah. I'll just add on, I think all of the experience, I'm just going to add a few things there. Is just the experience we've already gained in data center, I think puts us in a really good position to do what Michael's talking about in terms of making sure we can meet all the standards the customer requires.

[Tony Balow, VP and CFO at Monolithic Power Systems]

You asked a question on the timing of it. I think right now we're still, we've always kind of been late in 2027 for any kind of the 800 volt kind of architecture ramps, with probably more in 2028. I don't think our thinking on that has changed. We're just obviously getting ahead of that, design work now.

[Michael Hsing, Chairman of the Board, President, and CEO at Monolithic Power Systems]

Yeah. Even for our customers, they use both. They do not want to have a failure either. They use both solutions.

[Tore Svanberg, Analyst at Stifel]

Makes a lot of sense. Thanks again. Thank you.

[Operator]

Thank you. Our next question comes from Rick Schafer with Oppenheimer & Co. Your line is open.

[Rick Schafer, Analyst at Oppenheimer & Co.]

Thanks, and congratulations you guys, and congratulations Tony, on the appointment.

[Rick Schafer, Analyst at Oppenheimer & Co.]

If I could ask a question on storage and compute, for my first one. I was hoping maybe you could level set us on some of the moving parts in there. I mean, how does that segment split now if you look at SSD, HDD, DDR5 PMIC, versus the PC, the vCore power piece? Because I know we all see PC units tracking down about 20% here in the second half. I am just curious, is that kind of what you guys are seeing on the PC side of that segment? And then, how much is the storage piece growing and what is it contributing? Thanks.

[Tony Balow, VP and CFO at Monolithic Power Systems]

Yeah, Rick, let me start and then I will let Michael come in. I think just kind of mechanically, if you look at it, the big driver of growth in that segment has been the DDR5, primarily on the PMIC solution. As we have said, we are just starting the high speed journey on the DDR5.

[Tony Balow, VP and CFO at Monolithic Power Systems]

We have seen pretty healthy growth over the past year or so on the HDD and SSD part of that storage business as well. Clearly DDR5 is the biggest portion of that.

[Tony Balow, VP and CFO at Monolithic Power Systems]

A notebook, sort of tactically, yeah, I think we have been talking about this, and that is what we are seeing as well, right? We are seeing not the same strength on notebook due to what is happening downstream with some of the memory constraints.

[Tony Balow, VP and CFO at Monolithic Power Systems]

But I think if you look forward, I think we are still pretty bullish on notebook in the long term because we have really good technology and good share. Then I think there are applications around AI that will continue to build out over time at the edge of which notebook will play a part.

[Tony Balow, VP and CFO at Monolithic Power Systems]

So I think what you are seeing in the short term around notebook tracks what you are seeing, Rick. But I think long term, I think we are still pretty high on what notebook could be for the company. Michael?

[Michael Hsing, Chairman of the Board, President, and CEO at Monolithic Power Systems]

Yeah. For that segment, we have a new product, like a clock, the drivers and RCD, these all lined up. Other than in addition to our power management product. These are what we are lined up for revenue 2027 or 2028. We see even 2028, these products will really ramping up. Okay. So that part of a TAM is much bigger than power management.

[Michael Hsing, Chairman of the Board, President, and CEO at Monolithic Power Systems]

The notebooks, as Tony mentioned, we will see this is the very fast growing market segments because after the manufacturing capacity opens up, that is the segment will grow even along with the desktops.

[Tony Balow, VP and CFO at Monolithic Power Systems]

If you sum that up, Rick, a little bit. What we have kind of said for kind of the segment overall is with the puts and takes, it could be kind of flattish up a couple of points year-over-year is kind of how we positioned it, but it is really a tale of two cities, as we have talked about, with really strong storage and then the TAM just being limited on the notebook side.

[Rick Schafer, Analyst at Oppenheimer & Co.]

Got it. If I could, Tony, this is your first call with the CFO moniker, and I am curious how you look at OpEx growth going forward. Any meaningful changes to the prior targets that you guys have laid out? At these type of top-line growth rates that Tore called out, 50%, 60% type top line, how fast can you actually scale R&D, et cetera? It seems like you guys are set for some pretty material operating leverage to be flowing through the model. Is that the right way to be thinking about it? Any rules of thumb in there?

[Michael Hsing, Chairman of the Board, President, and CEO at Monolithic Power Systems]

Let me answer that part again. Question marker. I never believe the big dollars R&D equivalent to a bigger result. For our business, it is inversely proportional to that. We just need some good ideas, good people, that is going to make everything happen. Okay.

[Tony Balow, VP and CFO at Monolithic Power Systems]

Yeah.

[Michael Hsing, Chairman of the Board, President, and CEO at Monolithic Power Systems]

Tony, you can add to that as well.

[Tony Balow, VP and CFO at Monolithic Power Systems]

No, no. I think, Rick, you are not going to see us necessarily change our model. What we have seen pragmatically, though, as we start to get to higher levels of growth, that we start to fall below our model range in terms of just cannot spend money that fast.

[Tony Balow, VP and CFO at Monolithic Power Systems]

But I completely can agree with Michael on that. It is about the efficiency of the R&D and the people that you get versus just spending more. But in general, I would say at the growth rates that we have seen, for example, this year, you are going to fall below the model from an OpEx perspective.

[Rick Schafer, Analyst at Oppenheimer & Co.]

Got it. Thanks again, and congrats to you guys.

[Operator]

Thank you. Our next question comes from Quinn Bolton with Needham & Company. Your line is open.

[Quinn Bolton, Analyst at Needham & Company]

Hey, guys. I will echo my congratulations, Tony, congratulations on the new role.

[Quinn Bolton, Analyst at Needham & Company]

I guess I want to start with enterprise data. Last quarter, you gave us a floor of 130% with September results and December guidance. It kind of looks like you are tracking to maybe 150% growth, but wondering if, Tony, if you might be able to level set us what a new floor growth for enterprise data might be.

[Quinn Bolton, Analyst at Needham & Company]

Then, I know it is early, but any sort of thoughts on that segment as you look into 2027? What kind of growth rate you might be looking at in a floor case? Then I have got a follow on in the comms business.

[Tony Balow, VP and CFO at Monolithic Power Systems]

Sure. Let me start just to answer your question straight. I think at this point, given what we have seen in Q3 and Q4, we are comfortable raising the floor from, we were at 130% year-over-year, but to your point, I think we are comfortable with a floor of 150% year-over-year now going forward.

[Tony Balow, VP and CFO at Monolithic Power Systems]

On 2027, I think it is a little early for us to go put a percentage out at this time, but I will start, Michael, I am sure, will follow up in that structurally, the growth drivers that we are seeing this year are all intact, right? Whether you see the diversification of customers, the growth in modules, the content gains as new platforms roll out.

[Tony Balow, VP and CFO at Monolithic Power Systems]

I think over time, as you start to see even stronger growth in CPU, potentially driven by the agentic AI workloads, that is going to be even a further tailwind out in time. While we are early to call next year, I feel really good about the growth drivers.

[Michael Hsing, Chairman of the Board, President, and CEO at Monolithic Power Systems]

Well, I see even in the next years and beyond next years, I am very excited to see that we built our own data centers. As Tony mentioned earlier, the result is a tremendous improvement. This is not in the data centers, okay? In MPS' own servers. All these server, I believe it will change to again, a type of servers. The hardware will change, they will trigger down to a desktop and even a notebook, I said earlier.

[Michael Hsing, Chairman of the Board, President, and CEO at Monolithic Power Systems]

This type of growth, it will trigger down in the next year and the year after. We see those trends of these design activities, it is already happening. This is not only this year, not only the data centers, it will trigger down to all other areas.

[Tony Balow, VP and CFO at Monolithic Power Systems]

You had a follow-up on comms?

[Quinn Bolton, Analyst at Needham & Company]

Yeah. Obviously, congrats on the nice growth. I think it was 43% sequentially. It really looks like it was a breakout quarter in September. Wondering if that was primarily driven by optical modules or are you seeing a broader set of contributors to that growth and just any thoughts into the December quarter? Does that sort of pace of growth continue into December?

[Tony Balow, VP and CFO at Monolithic Power Systems]

No, it's a great question. To take us back here, obviously coming into the year, we obviously had very strong growth in optical modules. What we added beginning of the year is what we've been calling the switch business. I know I've talked about this before, but to answer your question, why are you starting to see the acceleration of growth in that particular end market is because you are adding both of those growth drivers together, and we saw the effect really in Q3.

[Tony Balow, VP and CFO at Monolithic Power Systems]

I think for the year, we've been positioning it is, I think comms is going to be our second fastest growing end market for sure. Not quite as fast as enterprise data, but certainly won't be far behind. Just like enterprise data, I think if you go into next year, all of those growth drivers are intact.

[Tony Balow, VP and CFO at Monolithic Power Systems]

In optical modules, you see the transition to 1.6. That's not just a volume play, but there's a content play there as well. Then certainly as we continue to build out additional sockets in the switch business, that's going to be a driver of growth as well. So I think right now we really like the comms business, not just this year, but going into next year.

[Michael Hsing, Chairman of the Board, President, and CEO at Monolithic Power Systems]

So we are not an interest, not a plan on a macro economy, not a market segment predictions. I only care what is the design activity and what our customers excited about it, what we excited about it. We are all these new technology, new product introductions.

[Michael Hsing, Chairman of the Board, President, and CEO at Monolithic Power Systems]

As I said earlier, all these segments we introduced the new product and all the design activities that gave us the indication clearly the growth for even beyond next year.

[Quinn Bolton, Analyst at Needham & Company]

Thank you, Michael.

[Michael Hsing, Chairman of the Board, President, and CEO at Monolithic Power Systems]

Okay.

[Operator]

Thank you. Our next question comes from Joshua Buchalter with TD Cowen. Your line is open.

[Joshua Buchalter, Analyst at TD Cowen]

Hey, guys. Thank you for taking my question. Congrats on the results, and echoing the congrats to Tony on the CFO gig. Best of luck.

[Joshua Buchalter, Analyst at TD Cowen]

I will stick with policy and ask one on enterprise data and then one on another segment. Maybe can you comment on the diversity of enterprise data? How has that business evolved over the last year or two and looking into 2027? I would just be curious to hear how much you see coming from GPUs versus ASICs or even any comments you can help us on how much is coming from modules versus discretes at this point and expectations into 2027. Thank you.

[Tony Balow, VP and CFO at Monolithic Power Systems]

[inaudible]

[Michael Hsing, Chairman of the Board, President, and CEO at Monolithic Power Systems]

Yeah. Modules versus the chip design, chip power supplies and the ICs and all of it. Even for the server side, we see many activities, and are going through it using modules because of the high power demand. That is my comment. It is all segments from a [audio distortion] The growth, the real growth percentage are left Tony to that.

[Tony Balow, VP and CFO at Monolithic Power Systems]

Yeah, I think it is an important point around this customer diversity that starting in the middle of 2025 until now, what we have seen is a really rapid growth in a lot of ASIC customers, which again, are primarily using modules over time. That has benefited us from a revenue diversity perspective as those carry the higher ASP associated with that.

[Tony Balow, VP and CFO at Monolithic Power Systems]

I think furthermore, what Michael was talking about in terms of how we have been using AI to create scale to allow us to go address even a longer tail of small customers out over time, which may be big customers in the future. That is really what we try to do, go in every socket, not knowing who and ultimately in the long term, might grow into a sizable customer.

[Michael Hsing, Chairman of the Board, President, and CEO at Monolithic Power Systems]

Yeah. All we clearly see is we have the huge beneficial from these artificial intelligence, these artificial intelligence, or based on these large language model, of course, MPS are always the internal, and it benefit us or benefited for everybody. That is the world I am very optimistic about this, and our growth trend will continue.

[Joshua Buchalter, Analyst at TD Cowen]

Thank you both for the color there. Maybe in the same theme of starting with small sockets that become big opportunities. Any context you can provide on how much revenue contribution we can expect from the initial high-speed data converter design win, and how big is that TAM as we think about you growing into this new market? Thank you.

[Michael Hsing, Chairman of the Board, President, and CEO at Monolithic Power Systems]

Yeah. We cannot tell because we just counted. These are conservatively well over 6,000 products. We are continuing to develop newer product. So what we do is we do every segment in our best, far better than or to meet the new market demand. We are much faster than any of our competitors. As long as we do these segments do the best, the revenue will come. We just do not know which segment.

[Michael Hsing, Chairman of the Board, President, and CEO at Monolithic Power Systems]

Seven, eight, probably eight years ago, we are looking at our product lines, look at the optical market segment. One of the perfect example, we did not know today will that high demand. We got it in there. We serve our customers regardless of large or small. That is what happened today. I cannot predict next 10 years, next five years, what will be bigger. We serve our small customers well.

[Tony Balow, VP and CFO at Monolithic Power Systems]

Yeah, I think, again, to Michael's point, we are not ready to call the long term. We are just beginning that process. So I would not necessarily say it moves the needle here in 2026. I think as we get into next year, we will talk more and see how that ramp goes.

[Joshua Buchalter, Analyst at TD Cowen]

Understood. Thank you both.

[Operator]

Thank you. Our next question comes from Will Stein with Truist Securities. Your line is now open.

[Will Stein, Analyst at Truist Securities]

Great. Thanks for taking my question. First, on data center vertical power, I think there's still one meaningful customer doing lateral. I'm wondering if you can comment as to whether you think that converts to vertical in the coming year, and whether that would necessarily require a module from you instead of some other sort of solution.

[Michael Hsing, Chairman of the Board, President, and CEO at Monolithic Power Systems]

Certainly. Okay. Well, I don't want to speak for our customers, in particular one customer. I said earlier, and you know that what we did in the 2000, we predicted in the 2016. For the server market, MPS solution is so small, and we have to use the adapter to meet the common footprint.

[Michael Hsing, Chairman of the Board, President, and CEO at Monolithic Power Systems]

When for the server market segment, we predicted it, and if you go above 600, 700 watts and you run out of perimeter and you have to use a smaller footprint, but the server CPU never get that, never get to the 600, 700 watts, but the GPU did. Okay.

[Michael Hsing, Chairman of the Board, President, and CEO at Monolithic Power Systems]

As GPU power increase, I don't have a generic numbers. Okay. It will, as the power goes up, you run out of perimeter, you have to do vertical. We said this many years earlier. Okay. I still believe that. Very logical to me.

[Tony Balow, VP and CFO at Monolithic Power Systems]

Yeah. I'm just going to echo Michael. I think that we won't speak for that most of the industry has already moved to modules, right? That's what we've seen in terms of content gains as well as the volume gains as we've gone through enterprise data. I think that will be a great question for our customers.

[Michael Hsing, Chairman of the Board, President, and CEO at Monolithic Power Systems]

Okay. Take a look at them next time.

[Will Stein, Analyst at Truist Securities]

Great. A different topic. Someone asked about the OpEx leverage, and I guess I understand that for the time being, with the rapid growth, you are going to sort of undershoot on spending, overshoot on margins. What about gross margin?

[Will Stein, Analyst at Truist Securities]

I think the company has talked for a long time about 10-20 bps per quarter gross margin expansion. There was a time when you were not in that range, and it seems like you are today. Any likelihood that because of the growth you could exceed that expansion rate, or should we still think about 10-20 as likely or any update there would be helpful. Thank you.

[Tony Balow, VP and CFO at Monolithic Power Systems]

No, thanks for calling it out. You saw that we obviously did increase 10 basis points here in Q3. The midpoint of our guide in Q4 is kind of another 10 basis points. So I think we are kind of squarely in the model that we like, right? 55%-60% is the sweet spot for sure. And within that being kind of slow and methodical about expansion.

[Tony Balow, VP and CFO at Monolithic Power Systems]

I think we are going to continue on that path structurally. I feel pretty good about that. We will see what happens in the future. But remember, what we do not want to do ever is put a bunch of gross margin in one quarter, then take it away the next quarter and move it around a bunch.

[Michael Hsing, Chairman of the Board, President, and CEO at Monolithic Power Systems]

Yeah. We are not doing that. During the capacity constraint, we do not gouge our customers. We want to deliver to you guys a very consistent stories. I do not want to answer question when the margins drops, okay? I want our MPS to keep it same business, same performance year-over-year, quarter-over-quarter, year-over-year.

[Tony Balow, VP and CFO at Monolithic Power Systems]

That is right. I think the model still holds. I am very comfortable with that. I think you called it out, but I will highlight it again. I think if you look at the flow through to operating margin, we have been growing operating margin. It is kind of a point a quarter almost. We have seen a lot of expansion on the operating margin line recently.

[Michael Hsing, Chairman of the Board, President, and CEO at Monolithic Power Systems]

We are in a making money business. That is all I would believe in.

[Will Stein, Analyst at Truist Securities]

Thank you.

[Operator]

Thank you.

[Tony Balow, VP and CFO at Monolithic Power Systems]

Next question operator.

[Operator]

Next question comes from Chris Caso with Wolfe Research. Your line is open.

[Chris Caso, Analyst at Wolfe Research]

Yes. Good afternoon. Just following from the prior discussion, maybe you could talk about how you are dealing with rising costs. Obviously costs are going up a lot of different places. There is a lot of talk of foundry wafer prices going higher. To what extent are you passing that along? As you go forward, does any of that result in pricing or any kind of revenue tailwind as you have to absorb some of those costs and pass them along to customers?

[Michael Hsing, Chairman of the Board, President, and CEO at Monolithic Power Systems]

We definitely absorb some of the cost increase, not that we do not increase the price, and we share the cost increase with our customers.

[Tony Balow, VP and CFO at Monolithic Power Systems]

Yeah, I think that is right, Chris. I think if what you are asking is from some of the results, how much of that is from pricing, it is really not a significant contributor to the revenue growth that we have had. We are more just making sure that we do not dilute ourselves in the gross margin line.

[Michael Hsing, Chairman of the Board, President, and CEO at Monolithic Power Systems]

Yeah, our customers have a very long memory.

[Chris Caso, Analyst at Wolfe Research]

Right. Okay, thanks for that. As a follow-up, it is a question on the 800 volt transition, and I know there is a lot of noise out there with regard to the pace of that transition. In terms of MPS, how important is that to you in 2027? I guess maybe the question is it really 800 volt, a very material driver of content in the ED segment, or is the majority of that still going to wind up in the existing low voltage designs?

[Michael Hsing, Chairman of the Board, President, and CEO at Monolithic Power Systems]

Yeah, we do not want to add more noises. Okay. We do not talk about it until when the revenue for sure will come. Okay. I do see the revenue for sure will come, not this quarter, not next quarter. It is probably end of 2027 and 2028. It is clearly that the DC supply for high power demand will be the trend, will be the data center. All will convert it to that.

[Michael Hsing, Chairman of the Board, President, and CEO at Monolithic Power Systems]

Power savings is, I think, beyond a single digit percentage improvement versus the traditional power supply. I see this as even beyond the data center, and if the data center can improve, let us say 5%, where do you get the 5% money returns? All the commercial building, even residentials, they all can be like this, 400 watts. In Europe will be 800 volt, in U.S. will be 400V. These will be a significant power savings across the board. That's what I excited about that, this opportunity now.

[Tony Balow, VP and CFO at Monolithic Power Systems]

Yeah, I'll even try to just address the question the other way, which is when we talked about how we were excited about growth in enterprise data, it's not because we have a big built-in ramp on 800 volt. It's really around the existing customers, the new customers, transition to modules, all the things that we've been talking about, Chris. So if you're kind of trying to figure out how much of that excitement was just at 800 volt, I really think the business we have today is what we're confident in.

[Michael Hsing, Chairman of the Board, President, and CEO at Monolithic Power Systems]

Yeah. MPS now, we're using our own building, do a lot of experiment, using these 800 volt and using these technology and see what the power saving is.

[Chris Caso, Analyst at Wolfe Research]

All right. Thank you.

[Michael Hsing, Chairman of the Board, President, and CEO at Monolithic Power Systems]

Next question.

[Operator]

Thank you. Our next question comes from Sebastien Naji with William Blair. Your line is open.

[Sebastien Naji, Analyst at William Blair]

Yeah. Good afternoon or good morning, for you guys. Thanks for taking the questions and congratulations, Tony, on your appointment.

[Sebastien Naji, Analyst at William Blair]

I wanted to maybe just ask my first question. Given some of the news around integrated voltage regulators and the acquisition of Empower by Analog Devices, maybe could you just give us your view on this technology and whether you see it as a competitive risk in the AI data center or the larger data center?

[Michael Hsing, Chairman of the Board, President, and CEO at Monolithic Power Systems]

Yeah. We don't comment in other companies' activities. We have our own solutions. We have our own, and we can deliver whatever customer want it. This is not a BS talk. Okay, we do have multiple beyond what you guys beyond the noise levels. We have those technologies, and we can deliver it. The GPU evolves very quickly, the power levels, the architect, and how to, in terms of power delivery. We don't talk about those until we clearly see where the revenue will come.

[Sebastien Naji, Analyst at William Blair]

Okay, great. That's helpful. I'll look forward to those announcements when those products are ready. Maybe moving to something that's a little bit closer to your heart, Michael, which is the building automation opportunity. I think last quarter you talked about $40 billion-$50 billion in size, but that the real bottleneck was the software still needed to catch up. Can you maybe just talk a little bit about the progress that's been made here as we get to the end of the year?

[Michael Hsing, Chairman of the Board, President, and CEO at Monolithic Power Systems]

Well, good questions. Okay. That's my baby project. We just have installed in our 1 million sq ft building, that's in China. As I said just a minute ago, we're experimenting our own AC to DC powers. These are for 800 volt supply and for across the building. These projects just started.

[Michael Hsing, Chairman of the Board, President, and CEO at Monolithic Power Systems]

But in terms of turning to a $50 billion revenue will take some time. We don't know how to get there yet, but the goal is very clear and we will get there. There's a lot of software involved in it. Okay.

[Michael Hsing, Chairman of the Board, President, and CEO at Monolithic Power Systems]

But on the hardware side, we pretty much have every single component and our single component, our components, our chips, our module technology is far better than, okay, sorry to say, these are the current existing technology. These are 50 year old, and we will do some significant improvement on it.

[Sebastien Naji, Analyst at William Blair]

Great. Thank you.

[Operator]

Thank you. Our next question comes from Kelsey Chia with Citi. Your line is open.

[Kelsey Chia, Analyst at Citi]

Hi, Michael and Tony. Congrats on the great results again. Tony, congrats on your well-deserved appointment.

[Kelsey Chia, Analyst at Citi]

My question is on the switching business. To what extent is that contributing to the strong communications growth that we saw in third quarter? How should we think about the ramp as we head into 2027 and if that business is accretive to gross margins?

[Tony Balow, VP and CFO at Monolithic Power Systems]

Yeah, I'll start on that one. We're obviously not going to start guiding sub-end markets a little bit. But certainly from just a percentage basis, it's been growing very quickly, probably on a percentage basis, the fastest growing sub-end market inside of communications, just because it started from a very low amount at the beginning of the year.

[Tony Balow, VP and CFO at Monolithic Power Systems]

As we go forward, again, I still think that optical modules are going to be significant growth drivers for communications into 2027. On the margin side, I think if you look at all of our end markets, plus or minus, they'll all operate around a corporate average. Because to Michael's point, we have north of 6,000, 7,000 products. If you look at the distribution of that, basically what we said is as we grow this, we don't think growing one end market over another will necessarily take us out of our model.

[Tony Balow, VP and CFO at Monolithic Power Systems]

Right now I would still take MPS as a total, kind of in that 55%-60% range with sort of slow, methodical expansion when we can provide it, versus worrying about whether growth in one end market would take you out of model right there.

[Kelsey Chia, Analyst at Citi]

Got it. My second question is on the industrial end market. Very strong growth this quarter as well. What drove that strong growth this quarter? If you could talk about the ramp of the robotic solutions and how you see that ramping in 2027?

[Michael Hsing, Chairman of the Board, President, and CEO at Monolithic Power Systems]

The robotics, okay. I tried to enter the robotics in 2016. On the Analyst Day, we talk about robotics. That is the area we focus on. We have a product for these sensors and motor controls and that. I did not know what I was talking about. The revenue did not come. Now it shows up.

[Michael Hsing, Chairman of the Board, President, and CEO at Monolithic Power Systems]

I think that it is still at the very beginning. Once the vision for the recognitions and visual recognitions will improve from using the AI-based vision improvement technology. These robots, as you know, they will propagate in our everyday life. So I see this as the future, and the revenue will be significantly higher than now.

[Tony Balow, VP and CFO at Monolithic Power Systems]

Yeah. I think the only thing I would add, kind of in the overall segment is, I think this year we still look at it as just piling up design wins in robotics and other places and really look for more of that in 2027. The growth in the quarter was fairly broad-based, but I think you start to see a lot of these other design wins come to turn into revenue in the future. I think that and consumer end and industrial, 2026 I think really does still remain mostly about winning all the designs that support future growth.

[Kelsey Chia, Analyst at Citi]

Got it. Thank you.

[Operator]

Thank you. Our next question comes from Joe Quatrochi with Wells Fargo. Your line is open.

[Joe Quatrochi, Analyst at Wells Fargo]

Yeah, thanks for taking the question. My congrats as well, Tony.

[Joe Quatrochi, Analyst at Wells Fargo]

Maybe just sort of the final point on the expansion of capacity to $8 billion. I can appreciate that you can't grow OpEx as fast and you don't need to grow as fast, but how do we think about maybe some of the investments you have to make on the working capital side or go-to-market side to support that?

[Tony Balow, VP and CFO at Monolithic Power Systems]

Yeah, I think one of the nice things about being in a fabless model, right, is we don't have to dig a hole and pour concrete into it.

[Michael Hsing, Chairman of the Board, President, and CEO at Monolithic Power Systems]

We don't make it that way. Our brain generate.

[Tony Balow, VP and CFO at Monolithic Power Systems]

That's right. I don't anticipate at this point seeing a large increase in capital intensity just to go ramp this capacity. It gives us a lot of flexibility. As a matter of fact, I am personally just amazed at the amount of capacity we've been able to put out this thing over the last year, and I think the operations team does a tremendous job. But I don't see it necessarily inflecting the overall OpEx at this point or any kind of change to our capital structure just to put on that extra capacity.

[Joe Quatrochi, Analyst at Wells Fargo]

Okay, thanks. Then maybe as a follow-up, I think autos continuing to see some inflection. Can you just talk about the breadth of demand you're seeing there from a geographic perspective and how we think about the design pipeline looking into 2027?

[Michael Hsing, Chairman of the Board, President, and CEO at Monolithic Power Systems]

It's across geographic. Again, we in the U.S. side, Europe side, and also in Asia, China. We see in China particularly, we see a lot of activities. That's probably what the world drives it. We, as I said earlier, we can't predict which market segment. That's our diversified growth strategies.

[Michael Hsing, Chairman of the Board, President, and CEO at Monolithic Power Systems]

Some years one segment is good. Even when they're a mature market, in some years, one market segment is good, the other one's not so good. In the last few years, all of a sudden, the GPU market happened or the optical market, and the revenue happened. We didn't anticipate it. We just provide the best, highest performance product. Our customers will realize it.

[Tony Balow, VP and CFO at Monolithic Power Systems]

Yeah, the only thing I would add is, I think the reason we have been pretty confident on the ramp in the second half is because it is so diverse amongst customers and regions and not dependent just on one. You have seen that same level of customer diversity grow in auto over the past several years like we have been talking about in enterprise data, and the pipeline is similar, right?

[Tony Balow, VP and CFO at Monolithic Power Systems]

It is very geographically diverse and very customer diverse. We were just very excited to start seeing some of the architectural transitions that we have been talking about in sort of 48 volt and zonal, because those sort of form the next wave of growth for us.

[Michael Hsing, Chairman of the Board, President, and CEO at Monolithic Power Systems]

We are not predicting what the market is. Next question, ask that guy.

[Tony Balow, VP and CFO at Monolithic Power Systems]

Last question.

[Operator]

Thank you. Our last question comes from Gary Mobley with StoneX. Your line is open.

[Gary Mobley, Analyst at StoneX]

Good morning, gentlemen. Thanks for squeezing in my question. Congrats, Tony, again.

[Gary Mobley, Analyst at StoneX]

I wanted to ask about what you might be signaling in your capacity milestones. You are currently at $6 billion in production capacity, which I assume supports your 2027 outlook. It does not take much to get there. Just extrapolating out Q4 revenue guidance, you are expected to be at $8 billion in capacity exiting fiscal year 2027. Should we think about that in terms of the revenue velocity exiting fiscal year 2027?

[Michael Hsing, Chairman of the Board, President, and CEO at Monolithic Power Systems]

Does it take much to get there? Oh, come on. This is much of the move, just move the numbers. There is a lot of work behind it.

[Tony Balow, VP and CFO at Monolithic Power Systems]

Yeah. Right now, I think what we are trying to strongly signal is that just like we have been doing it the past 20 years, we are making sure that capacity stays ahead of the business. In a world where there is a lot of narrative around there being tightness, we wanted to be very clear to you and our customers how we are growing capacity to support that business.

[Tony Balow, VP and CFO at Monolithic Power Systems]

I think, again, it is too early to go write in a quarterly revenue ramp for what that means for 2027, but we wanted to make sure it was loud and clear was that we see the demand coming, and we are going to make sure capacity is there to deal with it.

[Gary Mobley, Analyst at StoneX]

Thanks for that. On inventory, I just wanted to confirm that distribution inventory is still within that normal five to eight week range, and then it looks like your internal inventory is down to 117 days based on a forward revenue guide basis, and that has been trickling down. Are you inventoried properly to support sales, I guess is really the question?

[Tony Balow, VP and CFO at Monolithic Power Systems]

I think right now we're still on the channel side, certainly on the lean end of our range like we've been for some time now. Internally, I think we grew dollars on a gross basis, right? But obviously as the revenues ramp, that's come down from a days perspective.

[Tony Balow, VP and CFO at Monolithic Power Systems]

I think that our range certainly hasn't changed, and it's something that as we increase our capacity and our wafer starts, we'll make sure that we're positioned for the business. But right now, it's not limiting us on the business.

[Gary Mobley, Analyst at StoneX]

Got it. Thank you all again.

[Michael Hsing, Chairman of the Board, President, and CEO at Monolithic Power Systems]

Sure.

[Operator]

Thank you. This concludes the question and answer session. I would now like to turn it back to Tony Balow for closing remarks.

[Tony Balow, VP and CFO at Monolithic Power Systems]

All right. Thank you, operator, and thank you all for joining us for this conference call today. I look forward to speaking with you on the next call for the fourth quarter and full year 2026 revenue guidance. Thank you again, and have a great day.

[Operator]

This concludes today's conference call. Thank you for participating. You may now disconnect.

Participants

Executives

• Arthur Lee, Finance Manager
• Tony Balow, VP and CFO
• Michael Hsing, Chairman of the Board, President, and CEO

Analysts

• Tore Svanberg, Analyst at Stifel
• Rick Schafer, Analyst at Oppenheimer & Co.
• Quinn Bolton, Analyst at Needham & Company
• Joshua Buchalter, Analyst at TD Cowen
• Will Stein, Analyst at Truist Securities
• Chris Caso, Analyst at Wolfe Research
• Sebastien Naji, Analyst at William Blair
• Kelsey Chia, Analyst at Citi
• Joe Quatrochi, Analyst at Wells Fargo
• Gary Mobley, Analyst at StoneX