Monolithic Power Systems, Inc. (MPWR) Earnings Call Transcript & Summary

Good day and thank you for standing by. Welcome to Monolithic Power Systems, Inc. Second Quarter Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. Now I'd like to turn the conference over to Arthur Lee to read the safe harbor statement. Please go ahead.

Earlier today, MPS released a written commentary on the results of its operations for the second quarter ended June 30, 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 risks and uncertainties. The risks, 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 Forms 10-K and Forms 10-Q, which can be found on our website. Our statements are made as of today, and we assume no obligation to update this information. Now I would like to turn the call over to Tony.

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 end markets grew sequentially with enterprise data growing 45% as we continue to see strong broad-based ordering patterns. We extended our capacity goal 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. We began sampling high-voltage AC to DC products for 800-volt data center architectures as we expand beyond our current AI and server core power solutions. And 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. And 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. 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 Instructions] Our first question coming from the line of Rick Schafer with Oppenheimer.

Congrats on the beat and 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. So 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 of switch, DPU, SmartNIC? I mean has that kicked in? Is that helping drive that? And then any color you can give on how the second half sets up? I mean does that momentum continue to grow into 3Q?

Yes. We see -- Rick, we see a lot of growth and a lot of demand, modules and chips, and we see from multiple of our customers.

And Tony, do you want to have the detail?

Yes, I'll just add a little more color. Rick, you do see contribution from both optical module solutions as well as from what we generally bucketed as switches. And as I think as I've mentioned previously, that's kind of a big bucket that would include power solutions for not only top-of-rack switches, but DPUs, NIC cards and other things in the rack. So you're starting to see that grow as well. Optical is 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.

Okay. And then my follow-up, I'm just curious, I mean, I believe you're shipping 48-volt vertical power modules to a couple of customers now. And I don't know if you could update us on that. I mean do you expect to add any more this year? Maybe a sense of what your expectations are for 48-volt vertical power mods in terms of maybe the mix versus VR this year or next year, how does ...?

It's more than a couple of customers. And we see new customers coming online, and we start to ship.

Yes. And 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. So I think you'll see that trend continue over the next couple of years.

Our next question in queue coming from the line of Joshua Buchalter with TD Cowen.

And let me echo the congrats on the fantastic results. Maybe to start, I mean, you gained nearly $120 million in the Enterprise Data segment in 1 quarter, which is pretty astounding. Can you walk through the drivers of that upside and growth? And 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 build in here and the overall visibility in that segment?

Thanks for remembering the last couple of years, we have all these shortages in the industry, we pulled off, okay? Thanks for remembering that. We will continue to -- there's no reason not to believe we will not pull along, although it is very difficult, okay, but we're going to make it happen.

Yes. And I'll just add, if you look at kind of 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 and then, of course, CPU. And we saw all that be very, very strong in Q2. And I think since you're kind of talking about the sustainability of that, there's probably a couple of different ways in addition to what Michael said. Obviously, our channel inventory is one indicator, and that remains very low. So we believe that's continuing to sell through over time. And 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.

Yes. I want to add in this enterprise data centers is relatively new. And we start to see these significant business since about 2, 3 years ago -- 3 years ago starting. And we don't have any concentrated customers. And pretty much we engage from a large to small. And that's where you see the revenue happen now. And it will continue that way in the next year.

I will take the hint to not ask about AI servers again. That said, I guess...

Thank you very much.

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? And 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?

Yes. Yes. This is a new to us. This is a high speed, high -- very high speeds into the gigahertz kind of things and very positioning pretty much as a analog circuitry. And we can expand the technology to other communications. And now we established a know-how. So that's -- these are true fundamental know-hows. And other business we haven't -- we want to get this one to launch first, and then we will migrate to other applications.

Yes. 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 ourselves in this particular market. So 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 our overall SAM over time.

But in the history, when we were mentioning something, it will turn into our revenue.

Our next question in queue is coming from the line of Tore Svanberg with Stifel.

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

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

I'll just add a little bit. I think the story is going to feel pretty similar. You'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 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 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.

Yes, that's great color. As a follow-up, you mentioned you're now sampling the 800-volt solution. When should we expect to see some revenues from Monolithic Power there? And are these products based on silicon GaN and silicon carbide? Or is it one or the other?

We have -- in the past, Tore, I openly said I don't believe GaN and okay, now I think it's proof I'm wrong, but it's up to a point where we can't ignore GaN. And we -- since last year, we developed our own GaN and we'll have a working device. And in terms of 800-volt solution, now we totally rely on MPS' own silicon carbide device. And revenue-wise, probably you will know and all the market will know where is the data center transition happened. When that happens, we will have revenues. In terms of when, we don't know -- we know as much as you know.

Our next question coming from the line of William Stein with Truist Securities.

I want to add my congrats to the fantastic results and outlook. I'm wondering if you could talk about whether pricing meaningfully influenced the sequential growth or the outlook in Q3.

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

Yes. The only thing I would add to that at all is for us on pricing, it's very consistent to Michael's point. We have raised some prices, but it's primarily been kind of 1-of-3 areas in general, right, 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. And then finally, where people might be asking for specific supply chains outside of China, which can be naturally more expensive. So we're maintaining a very consistent approach to what you've heard previously as we look at our pricing.

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 2 emerging markets?

Thank you very much. Speaking, 1 million square feet building is installing our building controls. But I have to tell you we're still lagging of the software. The hardware is all done with some minor revisions, but the software is the ease of use and how we implement it. And by the end of this year, we should be able to complete everything. And there's multiple of our customers -- it's not our customers, potential customers, they are waiting for us to install in their building. And we're looking at -- we're not in the market segment, but we are looking at this opportunity, to my surprise, it's about $40 billion to $50 billion. And MPS has all the key products and the technology. The software is what we will build. And that's again, you're exactly talking about the topics that I'm working on. The other one is the robotics. The robotics, there's a lot of -- especially a lot of Chinese companies show a lot of entertainment and we will see. We have -- all our design-in solutions, they all happen in the U.S. sites and also China sites. And they're all using MPS solutions. And now the next question is, how we're going to -- where the robot is going to use. And from our own factory and this is not humanoid robot, we use our own product to improve especially the modules, not the production but testing, and also the reliability test. And we use our own motion controls and robotics and it's the same as equivalent to robots to make all these things happen. And our customers is, actually, our [ suppliers ] to these -- to our own automations. They will use those solutions everywhere else.

Our next question in queue coming from the line of Quinn Bolton with Needham & Company.

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 the competition mostly PMICs? 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.

That's a very boring topic, okay? That's -- over the last few years, we talk about power modules. I think you realized those very early on. I mean it's more than 5 years ago now. And we have these power modules, very high power density modules. And these are encapsulated modules. And since we have highest power density ICs, we integrated -- fully integrated into these modules with the inductors and with all the capacitors, it's a total power solution -- plug-in power solutions in a very small form factor. And I said with straight face, we are the highest power density company in the world now. And I don't know about optical market segment. As long as we provide the best power densities, we will win all these sockets, including optical modules.

As far as the share comment goes, obviously, we won't talk about specific customers. But certainly, I think if you look at the overall market, there's still room for us to grow. And 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.