Silicon Motion Technology Q4 Earnings Call Highlights

Key Points

• Silicon Motion beat Q4 expectations with revenue of $278.5 million (up >45% YoY), non-GAAP gross margin of 49.2%, and guided Q1 revenue of $292–$306 million, while expecting a record revenue year in 2026.
• Management highlighted product ramps and share gains — notably PCIe Gen5 client SSD controllers, growing enterprise traction for the MonTitan family (targeting 5–10% of revenue exiting 2026), and plans to tape out a 4‑nm PCIe6 MonTitan in 2026.
• Executives warned that AI-driven demand is tightening DRAM/NAND supply and lifting component prices, but said long-standing relationships with major flash vendors should help mitigate supply constraints and support continued growth.

Silicon Motion Technology NASDAQ: SIMO executives struck an upbeat tone on the company’s fourth-quarter 2025 earnings call, citing strong demand across key markets, new product ramps, and market share gains that they said position the company for record annual revenue in 2026.

CEO Wallace Kou said the company exceeded its fourth-quarter revenue outlook and landed near the high end of margin guidance, while continuing to invest in next-generation products and expanding engineering resources. CFO Jason Tsai added that the December-quarter results surpassed the company’s $1 billion run-rate target set at the start of 2025, driven by strength in mobile and growth in PCIe Gen5 client SSD controllers.

Industry backdrop: AI-driven memory tightness and rising component prices

Management emphasized that the rapid adoption of AI is increasing demand for memory and storage technologies, including DRAM, NAND flash, HBM, and hard drives. Kou said the resulting supply constraints are driving price pressure across markets that rely on NAND, including AI and enterprise storage as well as PCs and smartphones.

Kou said cloud service providers are attempting to lock up DRAM and NAND supply through 2026, contributing to intra-quarter price increases and prompting some analysts to take a more cautious view on 2026 unit growth in smartphones, automotive, and PCs. Despite those headwinds, Kou argued Silicon Motion’s longstanding relationships with major flash vendors and its expanding share in multiple end markets should help it secure supply and maintain growth.

Product and segment highlights: mobile, client SSD, enterprise, and boot drives

In mobile, Kou said Silicon Motion’s eMMC and UFS business grew 25% for full-year 2025, outperforming the broader smartphone and embedded market. He attributed part of the opportunity to NAND makers redirecting internal resources toward DRAM, HBM, and customized AI memory needs, as well as a continuing shift in mobile supply toward module makers. Kou also described the eMMC market as “vast,” citing annual shipments of more than 900 million units, spanning automotive, industrial, commercial, IoT, and consumer devices.

In client SSD controllers, Kou said 2025 was a turning point due to the ramp of new PCIe Gen5 controllers. He highlighted an 8-channel PCIe Gen5 controller introduced at the end of 2024 and said the company expects to grow its client PC market share over the next several years. He also said a DRAM-less, 4-channel PCIe Gen5 controller introduced in the prior quarter is expected to ramp significantly throughout 2026, targeting mainstream SSDs and helping customers build SSDs despite DRAM shortages. Management acknowledged PC demand risk tied to NAND and DRAM price increases and availability, but said Silicon Motion expects to grow the client SSD controller business through market share gains and higher ASPs as PCIe Gen5 adoption increases.

In enterprise SSD controllers, Kou said interest in the company’s MonTitan portfolio is increasing as data center workloads demand higher speed and lower latency. He said Silicon Motion began end-user qualification in the December quarter for a TLC-based high-performance compute SSD using MonTitan with multiple customers, with qualification continuing through the first half of calendar 2026 and a commercial ramp expected in the second half. Kou also said the company remains on track with multiple customers to begin qualification of high-capacity QLC storage SSDs this year and noted demand has increased amid HDD supply shortages.

Kou added that Silicon Motion plans to tape out its first 4-nanometer chip in 2026: a PCIe 6 version of MonTitan targeted at hyperscalers and other Tier 1 customers. He said the company has already secured design wins with multiple Tier 1 customers for this next-generation controller, which is expected to ramp significantly in 2028. Kou reiterated the company’s expectation that MonTitan will represent at least 5% to 10% of revenue exiting 2026.

The company also discussed its enterprise boot drive storage solutions, which management described as complete SSD products (rather than controllers), requiring Silicon Motion to procure NAND. Kou said the company started volume shipments in the fourth quarter to a “leading AI GPU maker” for its current DPU product and is working to qualify the next-generation version, as well as related switch platforms expected to launch in the second half of 2026. He said those next-generation products require higher capacities, higher ASPs, and higher unit volumes. Management noted the business increases exposure to NAND scarcity and pricing, requiring careful sourcing and customer negotiations.

Fourth-quarter financial results

Tsai reported that fourth-quarter sales increased 15% sequentially and more than 45% year over year to $278.5 million, “well above” the high end of the guided range. Non-GAAP gross margin rose to 49.2%, at the high end of guidance, benefiting from new product introductions and a mix shift toward client PC products.

Non-GAAP operating expenses increased sequentially to $83.2 million due to investments in AI- and enterprise-related initiatives, while operating margin increased sequentially to 19.3%, within guidance. Non-GAAP earnings were $1.26 per ADS. Stock-based compensation excluded from non-GAAP results was $15.8 million in the quarter.

Silicon Motion ended the quarter with $277.1 million in cash, cash equivalents, and restricted cash, up from $272.4 million at the end of the third quarter. Tsai said cash increased on improved operational performance, partly offset by $16.7 million of dividend payments and higher inventories to support expected ramps.

Outlook: Q1 growth expected, margins to dip on mix, record year expected in 2026

For the first quarter of 2026, management forecast revenue of $292 million to $306 million, representing 5% to 10% sequential growth—an increase Tsai noted would be counter to typical seasonality. Gross margin is expected to be 46% to 47%, slightly lower sequentially due to product mix, with operating margin expected at 16% to 18%. The effective tax rate is expected to be 19%, and stock-based compensation and dispute-related expenses are expected to total $10.8 million to $11.8 million.

Tsai said the company expects gross margin to recover to its target range of 48% to 50% over the year as newer products, including PCIe Gen5 controllers and enterprise SSD solutions, become a larger portion of revenue. Management reiterated expectations for sequential quarterly revenue growth throughout 2026 and said it anticipates a record revenue year, though it did not provide full-year guidance.

During the Q&A, executives offered additional details on segment mix and supply constraints:

• Mobile mix: Management said UFS controller revenue is mostly smartphone-driven, while eMMC is primarily in IoT, smart devices, streaming and set-top boxes, and automotive.
• Boot drive supply and margin: Kou said Silicon Motion must procure NAND for boot drive products and negotiates pass-through of NAND price changes with customers. He said the business can impact gross margin but is managed through pricing discussions.
• Boot drive timing: Management said next-generation DPU-related revenue is expected to begin in the back half of 2026, with greater volume anticipated in 2027.
• PC market assumptions: Kou said the company expects 2026 PC unit shipments to decline 5% to 10% and acknowledged the risk of “de-speccing” in value-line PCs due to cost inflation. However, management said Silicon Motion expects to grow through share gains and PCIe Gen5 ASP uplift.
• PCIe Gen5 dynamics: Kou said adoption of 8-channel PCIe Gen5 could be slowed by DRAM shortages, while DRAM-less 4-channel PCIe Gen5 demand is expected to be stronger, particularly in the second half of 2026.
• Boot drive revenue indication: Kou said boot drive revenue in 2026 is expected to be “relatively” around $50 million, with expectations for higher contribution in 2027, contingent on NAND sourcing and pricing arrangements.

Looking further ahead, Kou said the company is balancing growth and profitability in segments that require NAND procurement—such as automotive, Ferri storage solutions, and boot drives—sometimes opting not to pursue certain opportunities if margins do not meet corporate targets, while still prioritizing strategic programs. Management maintained that Silicon Motion’s controller position and NAND-maker relationships are key advantages as the industry navigates supply tightness and rising component costs.

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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