Monolithic Power Systems — Q3 2026 Earnings Summary

Financial Performance:

• Q3 2026 revenue reached $1,202.4 million, representing a 22.6% sequential increase from Q2 2026 ($980.6 million) and a 63.1% year-over-year increase from Q3 2025 ($737.2 million).
• GAAP gross margin was 55.4%, up 0.2 percentage points sequentially and 0.3 percentage points year-over-year.
• Non-GAAP gross margin was 55.7%, up 0.1 percentage points sequentially and 0.2 percentage points year-over-year.
• GAAP operating expenses were $307.9 million, up 29.8% sequentially and 45.9% year-over-year.
• Non-GAAP operating expenses were $205.3 million, up 15.6% sequentially and 38.4% year-over-year.
• GAAP operating margin was 29.7%, down 1.3 percentage points sequentially but up 3.2 percentage points year-over-year.
• Non-GAAP operating margin was 38.6%, up 1.1 percentage points sequentially and 3.2 percentage points year-over-year.
• GAAP net income was $271.1 million, a 5.4% sequential increase and a 50.8% year-over-year increase.
• Non-GAAP net income was $402.7 million, a 25.8% sequential increase and a 77.3% year-over-year increase.
• Diluted EPS was $5.51 (GAAP), up 5.6% sequentially and 47.3% year-over-year; non-GAAP diluted EPS was $8.19, up 26.0% sequentially and 73.2% year-over-year.
• Total stock-based compensation and related expenses were $106.3 million in Q3 2026, compared to $53.5 million in Q2 2026.
• Operating cash flow for Q3 2026 was $289.9 million, compared to $227.9 million in Q2 2026.
• Cash, cash equivalents, and short-term investments totaled $1,091 million at the end of Q3 2026, down from $1,414 million at the end of Q2 2026.
• Accounts receivable were $461.6 million at quarter-end, representing 35 days of sales outstanding.
• Internal inventories were $764.9 million at quarter-end, representing 130 days of inventory based on current quarter revenue.

Guidance and Future Outlook:

• Q4 2026 revenue is forecasted between $1,315 million and $1,385 million.
• Q4 2026 GAAP gross margin is projected between 55.2% and 55.8%.
• Q4 2026 Non-GAAP gross margin is projected between 55.5% and 56.1%.
• Q4 2026 GAAP operating expenses are expected to be between $334.0 million and $342.0 million.
• Q4 2026 Non-GAAP operating expenses are expected to be between $216.8 million and $220.8 million.
• Q4 2026 total stock-based compensation and related expenses are projected between $121.0 million and $125.0 million.
• Q4 2026 interest and other income is forecasted between $7.8 million and $8.2 million.
• The non-GAAP tax rate for the full year 2026 is expected to remain at 15%.
• Fully diluted shares outstanding for Q4 2026 are projected between 48.9 million and 49.3 million.
• Capacity is expected to reach $8 billion in annual revenue support by the second half of 2027, with a long-term goal of $10 billion.
• Strong demand in the Enterprise Data end market is expected to continue into 2027.
• 48V power solutions and Zonal architectures in Automotive are expected to drive growth in 2027.
• A large data converter design win is expected to ramp in 2027.

Business Segments and Product Lines:

• Enterprise Data revenue was $506.7 million (42.1% of total), up 33.2% sequentially and 164.6% year-over-year, driven by AI and server applications.
• Storage & Computing revenue was $192.2 million (16.0% of total), down 3.8% sequentially but up 3.0% year-over-year.
• Communications revenue was $187.4 million (15.6% of total), up 42.5% sequentially and 134.7% year-over-year, driven by optical modules and switches.
• Automotive revenue was $180.7 million (15.0% of total), up 15.0% sequentially and 19.2% year-over-year, driven by ADAS power solutions.
• Industrial revenue was $71.4 million (6.0% of total), up 30.2% sequentially and 29.0% year-over-year, driven by power sources.
• Consumer revenue was $64.0 million (5.3% of total), up 12.6% sequentially but down 11.6% year-over-year.
• MPS received first orders for 48V power solutions in the Automotive segment.
• Robotics solutions with sensor and motor control products are being ramped across multiple geographies.
• High-speed memory products are ramping to increase the Serviceable Addressable Market (SAM).
• GaN-based solutions for 800V data center architectures are being sampled to complement existing SiC designs.
• In-house developed AI design tools were used to expand the customer base in traditional areas and new applications like desktop AI designs.

Market and Competitive Landscape:

• MPS is transforming from a chip-only supplier to a full-service solution provider.
• The company continues to expand and diversify its global supply chain to capture growth opportunities and maintain stability.
• The Enterprise Data segment now represents the largest portion of revenue at 42.1%.
• MPS focuses on innovation to solve challenging customer problems and invests in new technologies to open new end markets.

Risks and Challenges:

• Forward-looking statements involve risks including global economic uncertainties, global conflicts, tariffs, export controls, and inflation.
• Risks include adverse regulatory changes, export controls particularly in China, and difficulties in predicting customer demand or channel inventories.
• Potential challenges include supply constraints from third-party manufacturers, ability to expand manufacturing capacity, and adverse changes in the cyclical semiconductor industry.
• Risks also include litigation, tax provision adequacy, and the ability to manage growth and retain personnel.
• The company notes a material weakness that it must timely and adequately remediate.

Management Commentary and Tone:

• CEO Michael Hsing stated, "Overall, we see accelerated growth. Our diversified growth strategy is paying off."
• Management highlighted that Q3 revenue of $1.2 billion was a significant milestone, exceeding $1 billion for the first time.
• The tone reflects confidence in the continued growth of the Enterprise Data market and the success of the diversified strategy across Automotive, Industrial, and other sectors.

Other Key Points:

• MPS repurchased $453.4 million of its stock in Q3 2026, compared to $4.0 million in Q2 2026.
• In October 2026, the Board authorized an additional $500 million for stock repurchases, bringing the total current authorization to $1 billion.
• There were 49.2 million fully diluted shares outstanding at the end of Q3 2026.
• The company reported a non-GAAP tax rate of 15% for Q3 2026, which was flat to the previous quarter.
• MPS is a fabless global company founded in 1997 by Michael Hsing.