Monolithic Power Systems Q2 2026 Earnings Call Transcript

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Provided by Quartr
July 30, 2026

Key Takeaways

  • Positive Sentiment: Record Q2 revenue reached $981 million, up 22% sequentially and 48% year over year, with growth across all markets and particularly strong performance in enterprise data and communications.
  • Positive Sentiment: Enterprise data revenue rose 45% sequentially, prompting management to raise its full-year growth floor for the segment from 85% to 130%; executives cited low channel inventories, strong bookings, new customers, platform refreshes and rising module content.
  • Positive Sentiment: Communications revenue increased 80% sequentially, driven by optical-module power solutions and expanding power products for switches, TPUs and NIC cards. Management also sees continued adoption of 48-volt vertical power modules and further share-gain opportunities.
  • Positive Sentiment: MPS is broadening its addressable market with initial DDR5 high-speed memory-controller orders, sampling 800-volt data-center AC-to-DC solutions using its silicon-carbide technology, and expanding automotive design wins; the board also authorized an additional $500 million in stock repurchases.
  • Neutral Sentiment: Management remains cautious about consumer markets and notebook-related storage and compute in the second half, while industrial growth is expected to be modest and primarily design-win driven. The company said 2027 growth remains structurally attractive but is too early to quantify, and new opportunities such as RCDs, building automation and robotics are not expected to materially affect 2026 revenue.
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Earnings Conference Call
Monolithic Power Systems Q2 2026
00:00 / 00:00

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Operator

Good day, and thank you for standing by. Welcome to Monolithic Power Systems Inc's second quarter earnings conference call. At this time, all participants are on a listen-only mode. After the speakers' 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 that your hand is raised. Please be advised that today's conference is being recorded. Now, I would like to turn the conference over to Arthur Lee to read the safe harbor statement. Please go ahead.

Arthur Lee
Arthur Lee
Finance Manager at Monolithic Power Systems

Earlier today, MPS released a written commentary on the results of its operations for the second quarter ended June 30th, 2026. This document can be found on our website. 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 Q2 2026 earnings commentary and in our SEC filings, including our Form 10-K and Form 10-Q, which can be found on our website. All statements are made as of today. We assume no obligation to update this information. Now, I would like to turn the call over to Tony.

Tony Balow
Tony Balow
VP of Finance at Monolithic Power Systems

Thanks, Arthur. Good afternoon, and welcome to our Q2 2026 earnings call. In Q2, MPS achieved record quarterly revenue of $981 million, 22% higher than the first quarter of 2026 and 48% higher than the second quarter of 2025. Our performance was a result of our continued innovation, our consistent execution, and the resilience of our diversified market strategy. Let me take a moment to call out a few of the highlights from the quarter. All-in markets grew sequentially, with enterprise data growing 45% as we continue to see strong, broad-based ordering patterns. We extended our capacity goals significantly beyond $6 billion to support future revenue growth and our transformation into a full-solution provider. We received initial orders for high-speed DDR5 memory components, which we expect to grow our SAM into next year.

Tony Balow
Tony Balow
VP of Finance at Monolithic Power Systems

We began sampling high-voltage AC to DC products for 800-V data center architectures as we expand beyond our current AI and server core power solutions. Finally, in our automotive market so far this year, we have shipped products for over 1,500 new sockets as we increase our footprint in both ADAS as well as in other applications within the vehicle. Overall, while we continue to adjust for the fluid geopolitical and macroeconomic environment, our diversified market strategy remains unchanged. MPS focuses on innovation and solving our customers' most challenging problems. We consistently invest in new technologies that open new end markets and applications and accelerate our transition from chip-only to a full-service silicon solution-based provider. Finally, we continuously expand and diversify our global supply chain, allowing us to capture future growth opportunities, maintain supply stability, and rapidly adapt to market changes as they occur.

Tony Balow
Tony Balow
VP of Finance at Monolithic Power Systems

Before moving to Q&A, I am also pleased to announce that our board of directors has authorized an additional $500 million for stock repurchases, increasing our total current authorization to $1 billion. Operator, you may now open the webinar for questions.

Operator

Ladies and gentlemen, to ask a question at this time, you will need to press star one one on your telephone and wait for your name to be announced. Please stand by while we compile the Q&A roster. Our first question coming from the line of Rick Schafer with Oppenheimer. Your line is now open.

Rick Schafer
Rick Schafer
Analyst at Oppenheimer

Thank you, congrats on the big raise, you guys. I guess I don't have to ask about capacity, Tony. Communications was up 80%. I think last quarter it was up about 50%, if memory serves. That's a pretty big step-up. I'm just curious, is that mostly transceiver power, or are you seeing meaningful contribution now from the other sockets, switch, DPU, SmartNIC? Has that kicked in? Is that helping drive that? Any color you can give on how the second half sets up? Does that momentum continue to grow into 3Q?

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

Hi, Rick. We see a lot of growth and a lot of demand, modules, chips, we see from multiple of our customers. Tony, you want to have a detail?

Tony Balow
Tony Balow
VP of Finance at Monolithic Power Systems

I'll just add a little more color. Rick, you do see contribution from both optical module solutions as well as from what we've generally bucketed as switches. As I think as I'd mentioned previously, that's kind of a big bucket that would include power solutions for not only top-of-rack switches but TPUs, NIC cards, and other things in the rack. You're starting to see that grow as well. Optical's still the bigger portion, just because it's had a longer runway since last year, but you are seeing growth from both of those really driving the comms end market.

Rick Schafer
Rick Schafer
Analyst at Oppenheimer

As my follow-up, I'm just curious. I believe you're shipping 48-V vertical power modules to a couple of customers now. I don't know if you could update us on that. Do you expect to add any more this year? Maybe a sense of what your expectations are for 48-V vertical power mods, in terms of maybe the mix versus VR this year or next year, however you want to count it. Thanks.

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

It's more than a couple of customers. We see new customers who are coming online, we start to ship.

Tony Balow
Tony Balow
VP of Finance at Monolithic Power Systems

I think over the long term, as power requirements continue to increase across our end markets, Rick, we've talked about the fact that modules and solutions will increasingly be an important part of our business. I think you'll see that trend continue over the next couple of years.

Rick Schafer
Rick Schafer
Analyst at Oppenheimer

Thanks, you guys.

Operator

Thank you. Our next question in queue, coming from the line of Joshua Buchalter with TD Cowen. Your line is now open.

Joshua Buchalter
Joshua Buchalter
Analyst at TD Cowen

Hey, guys. Thank you for taking my question. Let me echo the congrats on the fantastic results. Maybe to start, you gained nearly $120 million in the enterprise data segment in one quarter, which is pretty astounding. Can you walk through the drivers of that upside and growth? I think importantly, you had the inventory dynamics play out a couple of years ago. Can you speak to your confidence that there's no inventory building here and the overall visibility in that segment? Thank you.

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

Thanks for remembering last couple of years. We have all these shortages in the industry, we pull off. Thanks for remember that. There's no reason not to believe we will not pull it off, although it is very difficult. We're going to make it happen.

Tony Balow
Tony Balow
VP of Finance at Monolithic Power Systems

I'll just add, if you look at the underlying growth drivers for that particular end market, they really haven't changed from what we've talked about. We've talked about ramping existing customers, ramping new customers, seeing the module content increase, to Rick's question previously. Seeing platform refreshes that drive content, then, of course, CPU. We saw all of that be very strong in Q2. I think since you're talking about the sustainability of that, there's probably a couple of different ways additional to what Michael said. Obviously, our channel inventory is one indicator, and that remains very low. We believe that's continuing to sell through over time. I think right now, based on what we can see, we're willing to raise the floor for that particular end market from 85% for the year to 130% for the year.

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

I want to add, in this enterprise data centers, it's relatively new, and we start to see these significant business, about two, three years ago, starting. We don't have any concentrated customers. Pretty much we engage from a large to small. That's where you see the revenue happen now. It will continue that way in the next year.

Joshua Buchalter
Joshua Buchalter
Analyst at TD Cowen

Thank you both for all the color. I will take the hint and not ask about AI servers again. That said, I guess maybe-

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

Thank you very much.

Tony Balow
Tony Balow
VP of Finance at Monolithic Power Systems

Thank you.

Joshua Buchalter
Joshua Buchalter
Analyst at TD Cowen

I know your policies, Michael. Great to see the initial orders for the DDR5 high-speed interface controller. You mentioned that could be SAM expansive. Can you maybe help us with how much? It does seem like quite a new capability for monolithic. Are there other applications that you could use this technology for beyond memory controllers as well? Thank you.

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

Yes, this is new to us. This is a high speed, very high speed into the gigahertz kind of a thing. Pretty much the analog circuitry. We can expand the technology to other communications. Now, we establish a know-how. These are a true fundamental know-how. Other business, we want to get this one launched first, and then we will migrate to other applications.

Tony Balow
Tony Balow
VP of Finance at Monolithic Power Systems

In terms of the second part of your question, which was how expansive it could be, I'd still say we're very much early innings. We want to prove ourself in this particular market. I think it's too early for us to call any kind of revenue ramp on our side. We're just signaling that we continue to run our playbook and look for new sockets out there that can expand overall SAM over time.

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

In the histories, when we're mentioning something, it will turn into a revenue.

Joshua Buchalter
Joshua Buchalter
Analyst at TD Cowen

Sure. Thank you both, and congratulations again.

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

Good.

Operator

Thank you. Our next question in queue, coming from the line of Tore Svanberg with Stifel. Your line is now open.

Tore Svanberg
Tore Svanberg
Analyst at Stifel

Thank you. Let me echo the congratulations for another record quarter. How should we think about the segments for Q3? It sounds like all markets are growing right now. Just wondering on a relative basis, give us some color on each segment into Q3.

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

Well, I don't know. The oil market is, maybe Tony can point out some of the not so good ones. I think the consumer one, we're kind of still lagging because of all the efforts that we focus on it, and the consumer market, it doesn't mean we give it up. We'll continue a very diversified way of growing our business. As I talk about it in the past, MPS is transitioning from a chip company, a semiconductor company, to be a semiconductor-based solution providers. We sell solutions. Other segments and automotive continue to grow, and other ones, communication side will continue to grow. Industrials kind of are lagging a little bit, but doesn't mean we're defocused.

Tony Balow
Tony Balow
VP of Finance at Monolithic Power Systems

I'll just add a little bit. I think the story is going to feel pretty similar. We're certainly being led by the data-centric businesses, with enterprise data and comms, of course, leading the pack. I think industrials could grow a little bit with the market, but again, we've primarily said that's a design win type year for us this year, where we continue to pile up additional sockets that will turn into revenue in the future. I think the areas that we're cautious on are the ones Michael had pointed out, and then we'd said this last quarter as well, consumer being one, and then I think the notebook side of storage and compute will continue to remain cautious on that one as we go into the second half.

Tore Svanberg
Tore Svanberg
Analyst at Stifel

That's great color. As my follow-up, you mentioned you're now sampling the 800-V solution. When should we expect to see some revenues from Monolithic Power there? Are these products based on silicon GaN and silicon carbide, or is it one or the other? Thanks.

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

Well, in the past, Tore, I'll openly say I don't believe GaNs and now, I think it's approved, I'm wrong, but it's up to a point where we can't ignore GaN. Since last year, we develop our own GaN, and we have a working device. In terms of a 800-V solution, it's now we totally rely on MPS's own silicon carbide device. Revenue-wise, probably you will know, or the market will know, where is the data center transition happened. When that happens, we will have revenues. In terms of a when, again, we know as much as you know.

Tore Svanberg
Tore Svanberg
Analyst at Stifel

Great. Thank you very much. Congrats again.

Operator

Thank you. Our next question coming from the line of William Stein with Truist Securities. Your line is now open.

William Stein
William Stein
Analyst at Truist Securities

Great. Thanks for taking my question. I want to add my congrats to the fantastic results and outlook. I am wondering if you could talk about whether pricing meaningfully influenced the sequential growth or the outlook in Q3.

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

I know what you mean, whether we increase price or not. MPS never gouge price when the supply chain is tight. We want to build a consistent models, or we execute consistently within our models. When the supply chain is tight, and raise the price. How about we oversupply, we reduce price? We don't. We operate in a consistent way, and our customers appreciate that. In terms of whether due to the price increase, definitely it is not. It is all products.

Tony Balow
Tony Balow
VP of Finance at Monolithic Power Systems

The only thing I would add to that at all is for us on pricing, that we're very consistent, to Michael's point. We have raised some prices, but it's primarily been a kind of one of three areas in general. Where we've seen input costs go up to make sure that we don't get diluted on the margin line, where people are asking for expedites, because obviously that can influence our own supply chain. Finally, where people might be asking for specific supply chains outside of China, which can be naturally more expensive. We're maintaining a very consistent approach to what you've heard previously as we look at our pricing.

William Stein
William Stein
Analyst at Truist Securities

That's really helpful. Michael, I want to shift for a second to some things that I think are closer to your interest, some of the smaller but emerging growth opportunities like robotics, humanoid robotics, and home automation or building automation. Can you talk about your traction in those two emerging markets?

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

Thank you very much. As I'm speaking, a million square feet building is installing our building controls. I have to tell you, we're still lagging over the software. The hardware is all done, with some minor revisions, but the software is the key, the ease of use and how we implement it. By the end of this year, we should be able to complete everything. There's multiple of our customers. The potential customers, they are waiting for us to install in their building. I'm looking at that. We're not in a market segment, but we are looking at this opportunity, and to my surprise, it's about $40 billion-$50 billion. MPS has all the key product and the technology. The software is what we will build.

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

That's, again, you're exactly talking about the topics that I'm working on. The other one is the robotics. Again, the robotics, there's especially a lot of Chinese companies, shows a lot of other entertainment. Even with seats, we have all our designing solutions. They all happen in U.S. size and also China size. They're all using MPS solutions. Now, the next question is, where the robot is going to be used. From our own factory, and this is not humanoid robot, we use our own product to improve, especially the modules production. Not the production, the testing, and also the reliability test. We use our own motion controls and the robotics, and it's equivalent to a robot, and to make all these things happen. Our customers is actually our supplier to our own automations.

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

They all use those solutions that are everywhere else.

William Stein
William Stein
Analyst at Truist Securities

Thank you.

Operator

Thank you. Our next question in the queue, coming from the line of Quinn Bolton with Needham & Company. Your line is now open.

Quinn Bolton
Quinn Bolton
Analyst at Needham & Company

Hey, guys. I'll offer my congratulations as well. Tony or Michael, just wanted to come back to the optical transceiver part of the business, since I think that's the biggest part of comms. Can you just sort of discuss what you're seeing on the competitive landscape? Is competition mostly PMIC? Is it mostly discrete DC-to-DC converters from folks like TI or Analog Devices? And then can you give us any sense what you think your share might be for power management within those optical transceivers? And then I've got a follow-up.

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

That's a very boring topic. That's why over last few years, we talk about power modules. I think that you realized those very early on. It's more than five years ago now. We have these power modules and very high power density modules, and these are encapsulated modules. Since we have highest power density ICs, and we fully integrate it into these module with the inductors and with all the capacitors, it's a total power solution, plug-in power solutions, in a very small form factor. I said with straight face, we're the highest power density company in the world now. I don't know about optical market segment. As long as I know, we provide the best power density. We are weighing all these sockets, including optical modules.

Tony Balow
Tony Balow
VP of Finance at Monolithic Power Systems

As far as the share comment goes, obviously, we won't talk about specific customers. Certainly, I think if you look at the overall market, there's still room for us to grow. I think just net of both the TAM growth and share, I think it can absolutely be a primary growth driver in the comms segment going forward. I don't think we can actually quote the exact percentage of share at this time.

Quinn Bolton
Quinn Bolton
Analyst at Needham & Company

You certainly still see share gain opportunities in that market, it sounds like.

Tony Balow
Tony Balow
VP of Finance at Monolithic Power Systems

I think at some customers, we absolutely would see additional opportunity to gain share in some of the sockets. I think the net of this is that within the comms segment, between TAM and share, there's still a very substantial growth opportunity ahead of us.

Quinn Bolton
Quinn Bolton
Analyst at Needham & Company

Great. I guess just coming back to the capacity support. In the past, I think when you went from $2 billion to $4 billion, you talked about the incremental capacity largely coming from outside of China. As you've now built capacity up to and beyond $6 billion, can you give us some sense what the geographic split of that capacity is? Is it fairly balanced between China and non-China? Does it lean one way or the other?

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

It's not settled down yet. We now do, depending on our customers' requirements, at this time, wherever all we need, it goes. Wherever we can provide a product, and they will buy it. We built a very balanced approach. What is the percentage in the end? It's difficult to call now.

Tony Balow
Tony Balow
VP of Finance at Monolithic Power Systems

The only thing I'd add on that is, when you just quote a total number, it sometimes gets lost in the detail. I think we've been increasingly focused not just on the foundry side of the business, but also the back-end part of the business, because as Michael alluded to, modules and solutions will become increasingly important. That's actually a more complicated back-end process as well. As we look to bring on new partners and look to bring it on geographically balanced way, that goes for both the front end and the back end.

Quinn Bolton
Quinn Bolton
Analyst at Needham & Company

Understood. Thank you.

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

Especially our module assembly, it's more difficult. It's a 3D effect. It's more complicated than to assemble a phone, even. It requires a lot of experiment and then a lot of know-hows to getting all these modules. We now expand to anywhere in the world that we'll find these equipments and these capability to make it happen.

Operator

Thank you. Our next question coming from the line of Joe Quatrochi with Wells Fargo. Your line is now open.

Joe Quatrochi
Joe Quatrochi
Analyst at Wells Fargo

Thanks for taking the question. I was wondering if maybe you could just give us an update on how you're thinking about automotive demand through the second half of this year. You talked about 1,500 new design sockets year to date. Just how we should think about the ramp of revenue from those new wins as well.

Tony Balow
Tony Balow
VP of Finance at Monolithic Power Systems

I think the year's still playing out pretty much as expected. Just to repeat what we've said in the past, we thought the first half would be flat with the second half ramping up. I think we feel pretty comfortable with that second half overall ramp. I think where we land on a year-over-year basis, we're still thinking the end market could be in the mid-teens year-over-year. The one thing about the ramp that gives us additional confidence is that it's very broadly based. It's not isolated to one or two customers from what Michael was talking about and sort of the diversification that we look for in all of our end markets right now.

Tony Balow
Tony Balow
VP of Finance at Monolithic Power Systems

We called out the 1,500 specifically to show that that's not just very much focused on ADAS, which has been a historical strength for us, but we continue to see a broadening out in the portfolio for other sockets in the vehicle.

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

We focus on these are like a zonals or the 48-V systems, also we address the battery side. The LiDAR. These are the emerging market and emerging requirements from automotive. I think in the next few years, they all will be installed in the car and will see very popular on the market. I always see MPS revenue growth.

Joe Quatrochi
Joe Quatrochi
Analyst at Wells Fargo

Thanks for that. As a follow-up, I think, Michael talked about plans to enter the RCD market, starting to sample with customers. Just curious, any update in terms of how that's going?

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

We are sampling, we are still developing a lot of new product. This is very new to us, but we're confident that we'll be turning to revenue, although we have some revenue now.

Tony Balow
Tony Balow
VP of Finance at Monolithic Power Systems

Just to keep it from a model basis, that's not going to be a needle mover in 2026 for us, in terms of revenue.

Joe Quatrochi
Joe Quatrochi
Analyst at Wells Fargo

Thank you.

Operator

Thank you. Our next question coming from the line of Chris Caso with Wolfe Research. Your line is now open.

Chris Caso
Chris Caso
Analyst at Wolfe Research

Thank you. Good evening. I guess the first question is, an update on where CPU server power stands right now. I know that you guys have gained a lot of share over the years, that market is heating up because of agentic AI. How impactful has that been to the ED segment and where do you see that going as you go into the end of the year into next year?

Tony Balow
Tony Balow
VP of Finance at Monolithic Power Systems

Thanks, Chris. Let me start and then, Michael and Rob can jump in as well. We've been talking about it for close to a year, that CPU has been one of the growth drivers for us in enterprise data. It's something that has been, and I think will continue to be part of the overall growth story. To the extent that agentic AI drives further CPU growth, that will continue to be a tailwind for us. As you know, it's difficult for us to separate sometimes a pure AI sale from a CPU sale. It's a little difficult for us to parse them specifically. If we start to see some of the forecasts come to play that you're seeing from some others in the industry, we think that could be an additional growth vector for us even going forward.

Tony Balow
Tony Balow
VP of Finance at Monolithic Power Systems

From a share perspective, again, I think we'll probably pass on specific share. I think we're very broadly indexed across both x86 and Arm players. No matter who sort of wins in that race, we think we can participate.

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

I think I answered your question one time in terms of what is the percentage. At the time, in the CPU side, we want to get in the CPU market segment. I think I was asked what the market shares we want to be. I mention it in earnings call, so that if it's lower than the 30%, I call it failures. I think that we're comfortably there now, so that we're past that. That's where the good position we are in now, and we'll continue that.

Chris Caso
Chris Caso
Analyst at Wolfe Research

Thank you for that. As a follow-up, maybe a bit of a longer-term question. Maybe as we look out, say, over the next two years, two plus years, do you still expect that, I mean, enterprise data has been the fastest-growing part of your business because it's been the fastest end market. Do you expect that to continue to be the case? I know, Michael, you like to run a diversified business, but that end market is just growing so quickly. I guess maybe the question is is the growth in that end market and enterprise data make it more difficult to diversify the business?

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

Good question. We never focus on any market segments. We provide picks and shovels and blue jeans. As long as we're making these the best of it, we will win those segments. We are not really a gold diggers out there to find out the empty mountains. We don't do that kind of things. We just provide basically the best elements for other people to succeed at that. One time automotive was big. Other times, consumer was big. We let our customers, we let the market demand to decide that. As long as we focus on the fundamental development, I think that we will win the very long terms.

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

A clear example was a couple of years ago, the AI go sideways, or enterprise data went sideways, even drop it slightly. That year, all the other business grow tremendous, including automotives. That's exactly what we want to see. We want to provide to our investors a very consistent way of a grow MPS.

Tony Balow
Tony Balow
VP of Finance at Monolithic Power Systems

Even this last Q2, right outside enterprise data, the rest of the businesses saw double-digit growth. I understand your comment on what TAM might be growing faster, but you can see you're still seeing pretty substantial growth outside of ED.

Chris Caso
Chris Caso
Analyst at Wolfe Research

Thank you.

Operator

Thank you. Our next question coming from the line of Kelsey Chia with Citi. Your line is now open.

Kelsey Chia
Kelsey Chia
Analyst at Citi

Hi, good evening. Based on the strong and broad-based ordering patterns you guys have, may I know how much visibility do you have in the enterprise data end market? Was wondering if you can provide any color as to how 2027 outlook could look like based on the design wins, visibility, expected product ramps, or elaborate on any incremental revenue opportunities and ramp within that set wins.

Tony Balow
Tony Balow
VP of Finance at Monolithic Power Systems

I'll start on that one. I think in general, 2027 is a bit far away. We're still trying to land 2026. I think to answer the first part of your question on the visibility, again, the longer-term ordering patterns that we saw begin even late last year have really maintained. Our book-to-bill this cycle was, again, well above 1. We do have more than a quarter-type visibility like we were dealing with maybe midway through 2025. That doesn't mean we necessarily have visibility all the way out to the end of the 2027, though. I think the way I would address that is I think the underlying structural growth drivers haven't really changed. We have best-of-breed from a current density and modules.

Tony Balow
Tony Balow
VP of Finance at Monolithic Power Systems

You see more and more of our end markets adopting those high current density modules for their applications, and we continue to win new sockets. I think our ability to continue to grow into 2027 is still structurally very sound, but I think it's too early to put a number on it.

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

Well, here is the true demand is determined by the market. We don't want our customers to end up with a lot of wasteful inventories. At the same time, we will watch us, our own inventory. We will end up a lot of inventory we cannot sell. We clearly balance that. What is the forecast? We don't do them, even though we have NCNR. We don't shovel into our customer's throat. That is a bad relationships. Our relationship is very long-term. Although the order booking is very good, as Tony said it, but we don't see the business in that way. We do things swiftly according to our customer demand.

Kelsey Chia
Kelsey Chia
Analyst at Citi

Got it. Also, with such strong revenue outlook, could you help us think about gross margins and OpEx trajectory? It seems that you guys are landing somewhat below your long-term OpEx guidance right now.

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

Well, we're in the models. We're still in the models, although in the low end. I said I would be happier if they we're higher. I said I wasn't happy. Look at it this, we focus on growing the revenue and growing the net profit, EPS. That's the key reason. The other one is that nobody want us to have a high gross margin, but less of a lack of a growth. Nobody want us to do that. Our shareholder doesn't want us to do that, certainly. We focus on this. We'll be at a gross margins, as I said, and we will figure out, and we will grow higher, certainly. In the near future as well, probably stay similar or maybe slightly higher.

Rob Dean
Rob Dean
Interim CFO at Monolithic Power Systems

Hi, Kelsey, this is Rob. I'll add to what Michael was saying, and add on to what Tony was saying about the strong order levels, which continued into Q2, give us the ability to incrementally expand our guidance on gross margin. Again, just slightly, but it's there. As Michael said, we're at the low end of where we want to be, but we're feeling comfortable about where we're at for Q3.

Tony Balow
Tony Balow
VP of Finance at Monolithic Power Systems

Kelsey, the last part of your question was a little bit on OpEx, and I think in general, we haven't changed any of our thesis around how we're trying to invest for the future. I think what you see is when you get to higher levels of revenue, it's difficult to keep the levels of spending up to that model, you see some additional leverage as you pull through to operating margin.

Tony Balow
Tony Balow
VP of Finance at Monolithic Power Systems

I think you've seen pretty healthy expansion in operating margin over the past couple of quarters.

Kelsey Chia
Kelsey Chia
Analyst at Citi

Got it. Thank you.

Operator

Thank you. Our last questioner will come from the line of Sebastien Naji with William Blair. Your line is now open.

Sebastien Naji
Sebastien Naji
Analyst at William Blair

Thanks for taking the questions and congrats on a great quarter here. It's great to see the momentum across the business. AI data center is clearly a strong tailwind for the enterprise data business, also in communications, a little bit even in storage and compute. If I start to add up all these segments, you're looking at a data center exposure that's approaching roughly 50%. Is that the right way to think about it across your different end markets?

Tony Balow
Tony Balow
VP of Finance at Monolithic Power Systems

I think you're picking the right components as you go in there. Obviously, the optical module business, the switch business can be pulled to our data center, all of enterprise data. Then remember, inside of storage, you really have three big sub-buckets, DDR5, HDD, and SSD. HDD and SSD, I think over time, are becoming increasingly enterprise-focused, whereas at one point they might have been more consumer based. We haven't broken out storage and compute versus notebook in there, but I think you're picking the right components as you look at those things that could ride some of the healthy demand pulled through by data center right now.

Sebastien Naji
Sebastien Naji
Analyst at William Blair

Great. Maybe just as a quick follow-up on the incremental supply capacity that you're bringing online. Is any of that on newer node processes, like 40 nm, or is that mostly on existing 65 nm solutions?

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

I think it's mostly the existing. This thing we're talking about, sometimes from now on, we have the increase all in the capacity. Again, Tony said, this is not only about the silicons and the wafers. We're building systems, and that changes the complexities of the by silicon only. We have been on this journey from since 2017, and all the procurement, vendor qualification, component qualification, it became mature. Now, we have to pull some more new tricks in the next year or so to increase all these capacities.

Sebastien Naji
Sebastien Naji
Analyst at William Blair

Would you say it's the worst or the hardest to increase capacity over the last 10 years that you've seen?

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

It's different periods, different times, and the qualified vendors. In the silicon side, we have a lot of experience, and you move up onto a system, how you assemble all these systems, and how you qualify all these vendors, and how you take the yield loss is in completely different models that we have to operate on it. I would say that we became a lot more mature, and that there's a lot more room to go, a lot more improvement to go.

Sebastien Naji
Sebastien Naji
Analyst at William Blair

Got it. Great. Thank you so much.

Operator

Thank you. I'm showing there are no further questions in the queue at this time. I will now turn the call back over to Tony Balow for any closing comments.

Tony Balow
Tony Balow
VP of Finance at Monolithic Power Systems

Thank you, operator, and thank you all for joining us for the conference call today. Look forward to speaking with all of you for our next call for our third quarter 2026 results. Thank you again, and have a nice day.

Operator

This concludes today's conference call. Thank you for your participation, and you may now disconnect.

Executives
    • Arthur Lee
      Arthur Lee
      Finance Manager
    • Tony Balow
      Tony Balow
      VP of Finance
    • Michael Hsing
      Michael Hsing
      Chairman of the Board, President and CEO
    • Rob Dean
      Rob Dean
      Interim CFO
Analysts
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