Monolithic Power Systems (MPWR) Q3 2026 Earnings Call: Q&A Summary

Q: Tore Svanberg with Stifel asked for more details on accelerated growth and when $10 billion in capacity could be reached.

A: Michael Hsing stated they see an explosive growth period in the next few years with no signs of slowdown. Tony Balow added that second-half growth is supported by multiple end markets like automotive and emerging robotics, which gives them confidence going forward.

Q: Tore Svanberg with Stifel asked about the positioning, technology choice, and revenue timing of the 800-volt GaN products.

A: Michael Hsing explained that GaN is developed in-house and they let customers choose between silicon carbide and GaN while aiming for high reliability below 1 ppm failures. Tony Balow added that 800-volt architecture ramps are expected to start late in 2027 with more meaningful impact in 2028.

Q: Rick Schafer with Oppenheimer and Co. asked about the moving parts within storage and compute, specifically regarding SSD, HDD, DDR5 PMICs, and weaker notebook trends.

A: Tony Balow responded that DDR5 PMICs are the biggest growth driver in that segment, and while notebook demand is constrained in the short term, they remain bullish long term. Michael Hsing noted that new products like clock drivers and RCDs will ramp for revenue in 2027 or 2028.

Q: Rick Schafer with Oppenheimer and Co. asked if there are changes to OpEx targets given the high top-line growth rates.

A: Michael Hsing stated that big R&D dollars do not necessarily equal better results. Tony Balow added that at these high growth rates, operating expenses will fall below the model range because they cannot spend money that fast, resulting in operating leverage.

Q: Quinn Bolton with Needham and Company asked if a new growth floor could be established for enterprise data and what growth rate to expect in 2027.

A: Tony Balow raised the year-over-year growth floor from 130% to 150%. While it is too early to give a specific 2027 percentage, he noted that structural growth drivers like customer diversification and module growth remain intact.

Q: Quinn Bolton with Needham and Company asked whether the sequential growth in comms was driven primarily by optical modules or a broader set of contributors and if that pace continues into December.

A: Tony Balow answered that the growth came from combining optical modules and the switch business, noting that comms will be their second-fastest-growing end market and that growth drivers like the transition to 1.6 optical modules will continue into next year.

Q: Joshua Buchalter with TD Cowen asked about the evolution of enterprise data diversity, specifically between GPUs and ASICs, and modules versus discrete solutions.

A: Tony Balow stated that rapid growth in ASIC customers using modules has benefited revenue diversity and carried higher ASPs. Michael Hsing added that modules are increasingly used due to high current and high-power demands.

Q: Joshua Buchalter with TD Cowen asked about the expected revenue contribution and TAM for the initial high-speed data converter design win.

A: Michael Hsing stated they have over 6,000 products and cannot predict which specific segment will dominate, comparing it to the optical market years ago. Tony Balow added that it will not move the needle in 2026 and they will discuss the ramp further next year.

Q: Will Stein with Truist Securities asked if a meaningful customer doing lateral power is expected to convert to vertical power next year and if that requires a module.

A: Michael Hsing explained that as GPU power increases and peripheral space runs out, transitioning to vertical power is a logical step. Tony Balow added that most of the industry has already moved to modules.

Q: Will Stein with Truist Securities asked if high growth could cause gross margin expansion to exceed the historical 10 to 20 basis points per quarter range.

A: Tony Balow responded that they are squarely in their sweet spot of 55% to 60% gross margins with slow, methodical expansion, aiming to keep results consistent. Michael Hsing emphasized that they do not gouge customers during capacity constraints.

Q: Chris Caso with Wolfe Research asked how the company is dealing with rising costs, such as foundry wafer prices, and whether that results in pricing tailwinds.

A: Michael Hsing stated they absorb some cost increases and share costs with customers. Tony Balow added that pricing is not a significant contributor to revenue growth and is only used to protect gross margins.

Q: Chris Caso with Wolfe Research asked how important the 800-volt transition is for 2027 and whether it is a material content driver in the EV segment.

A: Michael Hsing stated that revenue from 800-volt power supplies will come towards the end of 2027 and into 2028, offering significant power savings across data centers and commercial buildings. Tony Balow emphasized that their current enterprise data confidence relies on their existing business rather than a built-in 800-volt ramp.

Q: Sebastien Naji with William Blair asked for views on integrated voltage regulators as a competitive risk and for an update on building automation software progress.

A: Michael Hsing declined to comment on other companies' activities, noting they have their own advanced solutions. Regarding building automation, he stated they are experimenting with 800-volt AC to DC power in their own 1 million square foot building, though reaching a $50 billion revenue goal will take time due to required software development.

Q: Kelsey Chia with Citi asked about the contribution of the switching business to comms growth and how to think about the robotics ramp in 2027.

A: Tony Balow stated that the switching business is growing quickly from a low base and operates around the corporate average gross margin. Michael Hsing added that robotics is at the very beginning and will grow significantly as AI-based vision recognition improves.

Q: Joe Quatrochi with Wells Fargo asked about investments needed in working capital or go-to-market to support $8 billion in capacity, and inquired about geographic auto demand.

A: Tony Balow stated that a fabless model does not require large capital intensity increases or heavy infrastructure spending to ramp capacity. Michael Hsing and Tony Balow noted that automotive demand is geographically diverse across the U.S., Europe, and Asia, with the pipeline supported by 48-volt and zonal architectural transitions.

Q: Gary Mobley with StoneX asked what capacity milestones signal regarding revenue velocity and whether internal inventory is properly positioned to support sales.

A: Tony Balow explained that capacity is kept ahead of the business to ensure support for incoming demand, though it is too early to project exact quarterly revenue ramps for 2027. He added that channel inventory is at the lean end of the 5- to 8-week range and internal inventory is properly positioned without limiting business.