Silicon Motion Technology NASDAQ: SIMO reported record second-quarter revenue of $451 million, up 32% sequentially and 127% from a year earlier, as growth in automotive storage, enterprise boot drives, embedded controllers and new enterprise SSD products exceeded the company’s expectations.
President and CEO Wallace Kou said the company’s results reflected its expansion beyond its historical role as a NAND flash controller supplier into a more diversified provider of storage controllers and solutions serving artificial intelligence infrastructure, automotive applications and edge devices. The company reported its third consecutive quarter of record revenue.
“We delivered another outstanding quarter,” Kou said, citing revenue growth across the company’s core markets and gross margin above 50%.
Second-Quarter Results
CFO Jason Tsai said second-quarter sales exceeded the high end of Silicon Motion’s prior guidance range of $393 million to $411 million. Non-GAAP gross margin was 50.2%, above the company’s forecast of 48.5% to 49.5%, while operating margin reached 23.1%, exceeding guidance of 21% to 22%.
- Revenue: $451 million, up 32% sequentially and 127% year over year.
- Non-GAAP gross margin: 50.2%.
- Non-GAAP operating expenses: $122.1 million.
- Non-GAAP operating margin: 23.1%.
- Earnings per ADS: $2.43.
- Cash equivalents and restricted cash: $181.8 million at quarter-end, compared with $210.9 million at the end of the first quarter.
Tsai said cash declined during the quarter partly because of $16.9 million in dividend payments and higher inventory to support business growth. Stock-based compensation, excluded from the company’s non-GAAP results, was $3.4 million in the June quarter.
The company attributed its margin performance partly to the initial commercial ramp of its MonTitan enterprise SSD controllers. Tsai said MonTitan controllers are margin accretive and helped offset pressure associated with the company’s solutions business. Growth in PCIe 5.0 controllers is also expected to support margins in the second half.
Despite the stronger near-term mix, Tsai said Silicon Motion remains comfortable with a long-term gross-margin target of 48% to 50%, with results varying depending on product mix.
Enterprise and Automotive Storage Expansion
Silicon Motion said its Ferri automotive and enterprise boot-drive solutions more than doubled sequentially in the second quarter and represented nearly 30% of total revenue, compared with 4% a year earlier. Kou said the business is benefiting as NAND makers reduce their focus on automotive storage, while module makers may lack the infrastructure and certifications needed to provide automotive-grade products.
The company said its enterprise boot-drive products are gaining adoption in AI infrastructure, including for data processing units, tensor processing units, networking switches and other systems. Kou said Silicon Motion’s DRAM-less enterprise boot-drive technology offers security and cost advantages for applications that do not require conventional DRAM-equipped boot drives.
During the question-and-answer session, Kou said boot-drive demand is growing across multiple customers rather than a single customer. He also said the company has a large share supplying boot drives for Nvidia BlueField products and expects benefit as BlueField 4 ramps in the second half of 2026, though he did not provide specific revenue figures.
Silicon Motion entered commercial production of MonTitan enterprise SSD products with two Tier 1 customers in the second quarter and expects five additional Tier 1 customers to begin ramping in the second half of the year. Tsai said the company remains on track for MonTitan to account for 5% to 10% of total revenue exiting 2026.
Initial MonTitan demand is expected to be led by TLC-based products for AI compute-storage applications, including storage supporting GPU- and CPU-adjacent key-value cache workloads. The company expects QLC-based solutions to begin initial shipments late in 2026, but Tsai said QLC is not expected to become more meaningful until late 2027 into 2028, when 2-terabit QLC NAND dies become more affordable.
Kou said the delay in higher-capacity QLC adoption stems from NAND availability and industry investment priorities, rather than a controller issue. He said NAND makers have focused more capital spending on DRAM and high-bandwidth memory amid strong AI-related demand.
Consumer Markets and Product Roadmap
In embedded eMMC and UFS controllers, Silicon Motion said it is gaining share even as it expects smartphone unit demand to decline 10% to 15% in 2026. Kou said rising NAND and DRAM prices have made low-end smartphones more difficult to build affordably, but Silicon Motion has limited exposure to the lowest-end handset segment.
The company expects mobile-related growth to be driven by share gains and higher average selling prices as customers adopt newer UFS controllers. Tsai said UFS generates the majority of embedded-business revenue because of its higher average selling prices, while eMMC unit volumes remain strong in IoT and connected-device applications.
Silicon Motion’s edge SSD business grew 40% to 45% year over year in the second quarter, according to Kou. The transition from PCIe 4.0 to PCIe 5.0 SSDs has moved more slowly than anticipated, as OEMs continue pairing more cost-effective NAND with PCIe 4.0 products for value and mainstream PCs. Still, the company expects its four-channel, DRAM-less PCIe 5.0 controller to support higher edge SSD average selling prices through the remainder of the year.
The company also expects to complete tape-out of a 4-nanometer PCIe Gen 6 enterprise controller in August. Kou said Silicon Motion has secured multiple design wins with flash makers and cloud service providers, and expects the product to become a significant growth driver in 2028.
Third-Quarter Outlook
For the third quarter, Silicon Motion forecast revenue of $519 million to $541 million, representing sequential growth of 15% to 20%. The company expects growth across nearly all product segments, led by Ferri automotive products, enterprise boot-drive solutions and MonTitan controllers.
Silicon Motion expects third-quarter gross margin of 50% to 51% and operating margin of 27.5% to 28.5%. Tsai said the company expects its effective tax rate to be 22%, while stock-based compensation and dispute-related expenses are projected to total $14.9 million to $15.9 million.
The company said it expects 2026 revenue to more than double from the prior year and anticipates operating margins could exceed 30% exiting the year, despite continued investment in research and development for advanced controller and storage-solution products.
About Silicon Motion Technology (NASDAQ:SIMO)
Silicon Motion Technology Corporation, together with its subsidiaries, designs, develops, and markets NAND flash controllers for solid-state storage devices. The company offers controllers for computing-grade solid state drives (SSDs), which are used in PCs and other client devices; enterprise-grade SSDs used in data centers; eMMC and UFS mobile embedded storage for use in smartphones and IoT devices; flash memory cards and flash drives for use in expandable storage; and specialized SSDs that are used in industrial, commercial, and automotive applications.
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