NVE NASDAQ: NVEC reported second-quarter fiscal 2027 revenue that declined 8% from a year earlier, as lower product sales offset growth in contract research and development revenue. The company said the product-sales decline reflected a short-term inventory adjustment by a large medical-device customer and a sharp drop in defense-related product sales.
Net income for the quarter ended Sept. 30, 2026, was $3.17 million, or $0.65 per diluted share, compared with $3.31 million, or $0.68 per share, in the prior-year quarter. Despite the revenue decline, NVE reported a 54% net margin, supported by a lower effective tax rate.
Principal Financial Officer Daniel Nelson said total product sales declined 9% year over year, while contract R&D revenue increased 25% due to progress on existing contracts. Defense product sales fell 95%, which Nelson attributed to the variability of government procurement cycles.
Outlook Calls for Second-Half Revenue in Line With First Half
Management characterized the medical-device order disruption as temporary. Nelson said the variability was primarily related to orders being pulled into the fiscal first quarter from the second quarter, rather than an indication of continuing demand weakness.
“We do not see any further disruptions looking forward,” management said during the question-and-answer session. NVE expects medical-device and defense sales to recover in the current quarter and expects revenue in the second half of fiscal 2027 to be consistent with the first half.
For the first six months of fiscal 2027, revenue totaled $16.9 million, up 36% from the comparable period a year earlier. Net income for the six-month period was $9.57 million, or $1.97 per diluted share.
Nelson said revenue increased toward the end of the September quarter, with September stronger than August. He added that receivables declined 12% due to the timing of customer payments, while inventory fell 3% because of higher first-half product sales.
Distributor Sales Rise as Automation Demand Strengthens
While direct medical-device sales were affected by the timing adjustment, NVE said distributor sales rose 67% year over year in the second quarter. The company attributed the increase to strengthening industry conditions and demand for both newer and legacy commercial products.
Management said distributor sales grew by approximately 40% for the first half of the fiscal year, indicating that the growth rate accelerated in the second quarter. Distributor sales can vary as a percentage of total revenue from quarter to quarter, particularly when direct sales fluctuate, but management said the channel typically represents between roughly one-third and two-thirds of total revenue.
President and CEO Pete Eames said NVE is seeing strong growth in power-conversion and robotics applications. The company said its high-isolation products could benefit as voltages increase in power supplies and power-conversion systems, including data-center applications.
NVE also said it has been seeing growing interest and increasing order sizes from newer customers, particularly in robotics, factory automation and humanoid-robotics applications. Management described several design wins for wafer-level chip-scale products as small and early stage, beginning with samples and low-thousand-unit purchases before potentially developing into larger orders.
Eames said NVE can produce millions of sensors and has capacity to scale to tens of millions of sensors. For humanoid robotics, he said a typical NVE sensor has an average selling price of about $1 to $2 and that a robot could use sensors “in the tens” for precision-motion applications.
New Sensor Products Target Robotics and Industrial Automation
NVE introduced two product lines during the quarter. The first was a new wafer-level chip-scale sensor designed to provide analog information, including position, based on motion or changes in external magnetic fields. The company said the sensor measures 0.55 millimeters square and is intended for precision-motion uses in medical devices, industrial automation and robotics.
The company also released a family of gear sensors for motion speed and position sensing in industrial automation and robotics. The sensors use a small magnet and detect gear teeth as they pass the device, with seven versions intended to match common gear sizes. NVE said the products are designed for linear and rotational encoders and closed-loop servo systems.
Eames said the gear sensors are intended for both industrial and humanoid robotics and that the company is seeing strong interest in those applications. NVE is also developing more precise robotics sensors, along with more power-efficient isolators and power-conversion products.
Margins, Cash and Leadership Changes
NVE’s gross margin was 78% in the quarter, while operating margin was 55% and pretax margin was 63%. Operating expenses rose 4%, as a 44% increase in selling, general and administrative expense was partially offset by a 17% decrease in R&D expense. Nelson said R&D expense declined because of staffing redeployment, while SG&A increased due to higher director option grant-date stock prices.
The company’s effective tax rate declined to 14% from 20% a year earlier, primarily because of favorable tax-law changes. NVE expects its effective tax rate to range from 14% to 16% for at least the remainder of the fiscal year.
Operating cash flow was $11.1 million for the first six months of fiscal 2027, compared with $8 million a year earlier. Cash and marketable securities increased to $44.4 million from $43.5 million. The company paid a $1-per-share quarterly dividend during the quarter and declared another dividend for payment at the end of November.
Separately, Eames said he was elected a director and appointed president and CEO at NVE’s August annual shareholders meeting. Former CEO Dan Baker replaced Terry Glarner as board chairman, and Carolyn Valentine joined the board, expanding it from five to seven directors.
About NVE (NASDAQ:NVEC)
NVE Corporation NASDAQ: NVEC develops and manufactures spintronic devices that use electron-spin properties to acquire, transmit, and store data. The company's technology is designed to provide high sensitivity, low power consumption, and electrical isolation in applications that require the transfer or detection of digital signals.
Its product portfolio includes magnetic sensors, digital isolators, and couplers. These components are used in industrial equipment, factory automation, medical devices, energy systems, transportation, and other applications that require sensing, signal isolation, or communication between electrically separated circuits.
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