Monolithic Power Systems, Inc. Stock

Good day, and thank you for standing by. Welcome to the Monolithic Power Systems Third Quarter 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Arthur Lee. Please go ahead.

Earlier today, MPS released a written commentary on the results of its operations for the third quarter ended September 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 Q3 2026 earnings commentary and in our SEC filings, including our Form 10-K and Form 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 for us, good morning from Shanghai, and welcome to our Q3 2026 earnings call. In Q3, MPS achieved another significant milestone, exceeding $1 billion in quarterly revenue for the first time. Q3 revenue of $1.2 billion was 22% higher than the second quarter of 2026 and 63% higher than the third quarter of 2025.

During the quarter, our capacity surpassed $6 billion in annual revenue support. We expect to have $8 billion of capacity in place by the second half of 2027 on our way to $10 billion in support of our rapidly expanding business. In our enterprise data end market, we saw strong demand across existing customers, which we expect to continue into 2027. In addition, using our in-house developed AI design tools, we significantly expanded our customer base in traditional areas as well as landing new wins in applications such as desktop AI designs.

Beyond our strong enterprise data growth in automotive, we received first orders for our 48-volt power solutions and expect design wins for 48-volt and zonal architectures to be a driver of growth in 2027. We started ramping robotic solutions with sensor and motor control products across multiple geographies. We continue to increase our SAM with the ramp of our high-speed memory products.

We landed our first large data converter design win, which we expect to ramp next year. And we continue to build out our high-voltage portfolio and began sampling GaN-based solutions for use in 800-volt data center architectures, complementing our existing silicon carbide-based designs. And finally, in Q3, we repurchased over $450 million of our own stock. Overall, we see accelerated growth. Our diversified growth strategy is paying off.

Operator, you may now open the webinar for questions.

[Operator Instructions] Our first question comes from Tore Svanberg with Stifel.

Michael and Tony, congratulations on that $1 billion milestone. And to you, Tony, congratulations on your CFO appointment. I guess for my first question, you talked about accelerated growth. I was hoping you can maybe elaborate a little bit of that. I mean I'm sure you're not going to give us calendar '27 guidance, but you are on track to growing 50%, 60% this year. And especially in light of your $8 billion capacity and then $10 billion, when could we potentially see $10 billion capacity in place?

Yes. Thanks, Tore. See as Tony mentioned is only a few items, so we see beyond that. And I see this explosive growth period in the next few years. And even this year, you see the first 9 months, okay? And we don't see anything -- any signs of the slowdown.

Yes. The other thing I'd add is I think as we've come into the second half, you started to see growth across multiple of our end markets, including like auto, which the ramp started here in Q3, and we've talked about continuing here through the second half.

And then as we start to see applications like robotics begin to ramp, we'd expect that then to continue into the future. So I think it's not just the existing businesses, it's adding on the additional growth areas over time, which is really giving us confidence going forward.

Very good. And as my follow-up, you mentioned the 800-volt GaN product sampling. Now that you are sampling GaN, could you maybe elaborate a little bit more, help us understand a little bit more the positioning there? Is this vertical GaN? Is it horizontal GaN? Is it your own process? Any more color you can help us there? And when do you expect to start to see some 800-volt GaN revenue?

Yes. We let -- it is based on MPS own development, which is later than we developed silicon carbide device. And we start to sampling that this type of solutions. We let our customers choose in either using GaN, the GaN is a new technology for everyone, okay? And for everyone adopting it in the data centers and the industrial automotive type of applications, okay? This is the first time.

And we are always very cautious about the reliability. We want to achieve below 1 ppm failures and for these modules. And we let our customers choose, okay? GaN or silicon carbide. Silicon carbide is known, we know the data. And so that's a very high reliability product and GaNs we have to ship somewhere 50 million units before we can say this is a good -- this is a new one for GaN, but we let our customers choose.

Yes. I'll just add on it, I think all of the experience -- I was just going to add a few things there. This is just the experience we've already gained in data center, I think, puts us in a really good position to do what Michael is talking about in terms of making sure we can meet all the standards that customer requires.

You asked a question on the timing of it. I think right now, we're still -- we've always kind of been late in '27 for I think kind of the 800-volt kind of architecture ramps with probably more in '28. I don't think our thinking on that has changed. We're just obviously getting ahead of that design work now.

Even for our customers, they use both. They don't want to have a failure either. They use both solutions.

Our next question comes from Rick Schafer with Oppenheimer & Co.

Congratulations to you guys and congratulations, Tony, on the appointment. If I could ask a question on storage and compute for my first one, I was hoping maybe you could level set us on some of the moving parts in there. I mean, how does that segment split now if you look at SSD, HDD, DDR5, PMIC versus the PC, the VCore power piece? Because I know we all see PC units tracking down about 20% here in the second half. So I'm just curious, is that kind of what you guys are seeing on the PC side of that segment? And then how much is the storage piece growing? And what's it contributing?

Yes, Rick, let me start, and then I'll let Michael come in. I think just kind of mechanically, if you look at it, the big driver of growth in that segment has been the DDR5, primarily on the PMIC solution. As we said, we're just starting the high-speed journey on the DDR5. We have seen pretty healthy growth over the past year or so on the hard disk drive and SSD part of that storage business as well. But clearly, DDR5 is the biggest portion of that.

On notebook, sort of tactically, yes, I think we're -- we've been talking about this, and that's what we're seeing as well, right? We're seeing not the same strength on notebook due to what's happening downstream with some of the memory constraints. But I think, if you look forward, I think we're still pretty bullish on notebook in the long term because we have really good technology and good share -- and then I think there's applications around AI that will continue to build out over time at the edge, of which notebook will play a part. So I think what you're seeing in the short term around notebook tracks with what you're seeing, Rick. But I think long term, I think we're still pretty high on what notebook could be for the company.

Yes. For that segment, we have a new products like a clock drivers and RCD. These all lined up and other than in addition to our power management product. These will be lined up for revenue in 2027 or '28. And we see even '28, these products will really ramping up, okay? So that's part of a TAM is much bigger than power management.

And the notebooks, as Tony mentioned it, we will see this as a very fast growing market segments because after the manufacturing capacity opens up, that the segment will grow along with the desktop.

If you sum that up a little bit, what we said for kind of the segment overall is with the puts and takes, it could be kind of flattish, up a couple of points year-over-year is kind of how we positioned it, but it's really a tale of 2 cities, as we've talked about with really strong storage and then the TAM just being limited on the notebook side.

Got it. And then if I could -- this is your first call with the CFO moniker. And I'm curious how you look at OpEx growth going forward? I mean, any meaningful changes to the prior targets that you guys have laid out? I mean, at these type of top line growth rates that Tore called out, 50%, 60% type top line, how fast can you actually scale R&D, et cetera? It seems like we're -- it seems like you guys are set for some pretty material operating leverage to be flowing through the model. Is that the right way to be thinking about it? Any rules of thumb in there?

Let me answer that part of the question, Rick. I never believe the big dollars R&D equivalent to a bigger result. It's -- for our business, it's inversely proportional to that. We just need some good ideas, good people that we're going to make everything happen.

So yes, I think, Rick, you're not going to see us necessarily change our model. What we've seen pragmatically, though, as we start to get to higher levels of growth that we start to fall below our model range in terms of we just can't spend money that fast. But I completely can agree with Michael on that. It's about the efficiency of the R&D and the people that you get versus just spending more. But in general, I'd say at the growth rates that we've seen, for example, this year, you're going to fall below the model from an OpEx perspective.

Our next question comes from Quinn Bolton with Needham & Company.

I'll echo my congratulations and Tony, congratulations on the new role. I guess I want to start with the enterprise data. Last quarter, you gave us a floor of 130%. With September results and December guidance, it kind of looks like you're tracking to maybe 150% growth. But wondering, Tony, if you might be able to level set us what a new floor growth for enterprise data might be? And then I know it's early, but any sort of thoughts on that segment as you look into 2027, what kind of growth rate you might be looking at in the forward case? And then I've got a follow-on in the comms business.

Sure. Let me start just kind of with the -- to answer your question, straight. I think at this point, given what we've seen in Q3 and Q4, we're comfortable raising the floor from -- we were at 130% year-over-year. But to your point, I think we're comfortable with a floor of 150% year-over-year now going forward.

On 2027, I think it's a little early for us to go put a percentage out at this time, but I'll start and Michael, I'm sure, will follow up in that. Structurally, the growth drivers that we're seeing this year are all intact, right, whether you see the diversification of customers, the growth in modules, the content gains as new platforms roll out. And I think over time, as you start to see even stronger growth in GPU potentially driven by the Agentic AI workloads, that's going to be even a further tailwind out in time. So while a little early to call next year, I feel really good about the growth drivers.

Well, I see in the next years and beyond next years, and I'm very excited to see that we build our own data centers. And as Tony mentioned earlier, the result is a tremendous improvement. And so this is not in the data centers, but in MPS own servers. And all these server, we believe -- I believe it will change and change to a a GaN type of servers, and again the hardware will change and that will trickle down to desktops and even the notebook I said earlier.

And this type of growth, it will trickle down in the next year and the year after. We see those trends, these design activities is really happening. And so this is not only this year, not only in the data centers, it will trickle down to all other areas.

Do you have a follow-up on comms?

Yes. It's obviously congrats on the nice growth. I think it was 43% sequentially. It really looks like it was a breakout quarter in September. Wondering if that was primarily driven by optical modules? Or are you seeing a broader set of contributors to that growth? And just any thoughts into the December quarter? Does that sort of pace of growth continue into December?

It's a great question. And to take us back here, obviously, coming into the year, we obviously had very strong growth in optical modules. And what we added beginning of the year is what we've been calling the switch business. And I know I've talked about this before. But to answer your question, why are you starting to see the accelerated growth in that particular end market is because you are adding both of those growth drivers together, and we saw the effect really in Q3.

And I think for the year, we've been positioning it is it's -- I think comms is going to be our second fastest-growing end market for sure. It won't be quite as fast as enterprise data, but certainly won't be far behind. And just like enterprise data, I think if you go into next year, all of those growth drivers are intact. On optical modules, you see the transition to 1.6. That's not just a volume play, but there's a content play there as well.

And then certainly, as we continue to build out additional sockets in the switch business, that's going to be a driver of growth as well. So I think right now, we really like the comms business, not just this year, but going into next year.

And on the macro economy and market segment predictions, I only care what is the design activity and what our customers are excited about it, what we're excited about it, all these new technology, new product introductions. And as I said earlier to [ market ], all these segments, we introduced the new product and all the design activities that give us an indication clearly the growth for even beyond next year.

Our next question comes from Joshua Buchalter with TD Cowen.

Congrats on the results and echoing the congrats to Tony on the CFO gig. Best of luck. I'll stick with policy and ask one on enterprise data and then one on another segment. Maybe can you comment on the diversity of enterprise data? Like how has that business evolved over the last year or 2 and looking into 2027? I would just be curious to hear how much you see coming from GPUs versus ASICs or even any comments you can help us on how much is coming from modules versus discrete at this point and expectations into '27?

Yes. Modules versus the chip design, chip power supplies, and then ICs on the chip all of them, okay? I mean even for the server side, and okay, we see some -- many activities and going through using modules because of the high current high-power demand. That's my comment, okay? And it's all segments -- from growth -- the real growth percentage, I'll let Tony to...

Yes, I think -- and that -- I think it's an important point around this customer diversity that starting in the middle of 2025 until now, what we've seen is a really rapid growth in a lot of ASIC customers, which again are primarily using modules over time. And so that's benefited from a revenue diversity perspective as those carry the higher ASP associated with that.

I think furthermore, what Michael was talking about in terms of how we've been using AI to create scale to allow us to go address even a longer tail of small customers over time, which may be big customers in the future. And that's really what we try to do, go in every socket, not knowing who ultimately in the long term might grow into a sizable customer.

Yes. All we clearly see is that we have the huge beneficial from these artificial environment, these artificial intelligence based on these large language model. Of course, MPS [indiscernible] is internal. And it benefit us, it will benefit for everybody. And that's where I'm very optimistic about this and our growth trend will continue.

Maybe in the same theme of starting with small sockets that become big opportunities. Any context you can provide on how much revenue contribution we can expect from the initial high-speed data converter design win? And how big is that TAM as we think about you growing into this new market?

Yes. This is -- we can't tell because we have -- we just counted, these are over -- conservatively well over 6,000 products, okay? And we continue to develop newer products. So what we do is we do every segment in our best, far better than -- or to meet the new market demand. And we are much faster than any of our competitors.

And as long as we do, the segments do the best and the revenue will come. And we don't -- we just don't know what -- which segment. 7, probably 8 years ago, we look at our product lines, look at the optical market segment, one of the perfect example. We didn't know today was that high demand. And we got it in there. We serve our customers regardless of the large or small. And that's what happened today. I cannot predict next 10 years, next 5 years, we will be bigger, and we serve our small customers well.

Yes. I think -- and again, to Michael's point, we're not ready to call the long term. We're just beginning that process. So I wouldn't necessarily say it moves the needle here in 2026. And I think as we get into next year, we'll talk more and see how that ramp goes.

Our next question comes from Will Stein with Truist Securities.

First, on data center vertical power. I think there's still one meaningful customer doing lateral and I'm wondering if you can comment as to whether you think that converts to vertical in the coming year and whether that would necessarily require a module from you instead of some other sort of solution.

Certainly, okay, I don't want to speak for our customers, in particular that one customer. But I said earlier, and you know that what we did in the -- we predicted in the 2016 -- and for the server market, MPS solution is so small, and we have to use the adapter to meet the common footprint. And so when -- for the server market segment, we predicted and if you go above 600, 700 watts and you run out of peripheral and you have to use a smaller footprint.

But the server GPU never get that never get to the 600, 700 watts, but the GPU did it, okay? And as GPU power increase, I don't have a generalized numbers, okay? It will -- the power goes up, you run out of peripheral, you have to do vertical. And we said this many years earlier, okay? I still believe that very logical to me.

Yes. I mean I'm just going to echo Michael. I think that we won't speak for that. Most of the industry has already moved to modules, right? And that's what we've seen in terms of content gains as well as the volume gains as we've gone through enterprise data. And I think that will be a great question for our customers. Yes, take a last jump [indiscernible].

Great. And a different topic. Someone asked about the OpEx leverage. And I guess I understand that for the time being, with the rapid growth, you're going to sort of undershoot on spending, overshoot on margins. What about gross margin? I think the company has talked for a long time about 10 to 20 bps per quarter gross margin expansion. There was a time when you weren't in that range, and it seems like you are today. Any likelihood that because of the growth, you could exceed that expansion rate? Or should we still think about 10 bps to 20 bps is likely? Or any update there would be helpful.

No. And thanks for calling out. Yes, you saw that we obviously did increase 10 basis points here in Q3. The midpoint of our guide in Q4 is kind of another 10 basis points. So I think we're kind of squarely in the model that we like, right? 55% to 60% is the sweet spot for sure. And within that being kind of slow, methodical about expansion. I think we're going to continue on that path.

Structurally, I feel pretty good about that. We'll see what happens in the future. But remember, what we don't want to do ever is put a bunch of gross margin in one quarter and then take it away the next quarter and move it around a bunch...

During the capacity constraint, we don't gouge our customers. And so we want to deliver to you guys a very consistent story. And I don't want to answer a question when the margins drops? And I want our MPS to keep it same business, same performance year-over-year -- quarter-over-quarter, year-over-year.

That's right. So I think the model still holds. I'm very comfortable with that. And I think you called it out, but I'll highlight it again. I think if you look at the flow-through to operating margin, we've been growing operating margin, it's kind of a point a quarter almost. So we've seen a lot of expansion on the operating margin line.

We are in a making money business. And that's all I would point here.

Next question comes from Chris Caso with Wolfe Research.

Just following from the prior discussion, maybe you could talk about how you're dealing with rising costs. And obviously, costs are going up a lot of different places. There's a lot of talk of foundry wafer prices going higher. So to what extent are you passing that along? And as you go forward, does any of that result in pricing or any kind of revenue tailwind as you have to absorb some of those costs and pass them along to customers?

We definitely absorb some of the cost increase. And not that we don't increase the price, okay? And we some -- we share the cost with -- the cost increase with our customers.

Yes, I think that's right, Chris. And I think if what you're asking is from some of the results, how much of that is from pricing, it's really not a significant contributor to the revenue growth that we've had. We are more just making sure that we don't dilute ourselves on the gross margin line.

Yes. Our customers have a very long memory.

Right. Okay. As a follow-up, it's a question on the 800-volt transition. And I know there's a lot of noise out there with regard to the pace of that transition. What -- in terms of MPS, how important is that to you in '27? And I guess maybe the question is, is it really 800 volts a very material driver of content in the EV segment? Or is the majority of that still going to wind up in the existing low power -- I'm sorry, low-voltage designs?

Yes, we don't want to add more voices, okay? We don't talk about it until the revenue for sure will come, okay? I do see the revenue for sure will come. Not this quarter, not next quarter, probably end of the '27 and 2028. And it's clearly the DC supply for high power demand and will be the trend, will be the data center, all will convert it to that. And the power savings is, I think, beyond like single digit -- single-digit percentage improvement versus the traditional power supply.

I see this is even beyond the data center. And if the data center can improve, let's say, 5%, where do you get the 5% money returns? And all the commercial building, even residential, they all can be like this, 400 volt these are in -- there will be -- in Europe will be 800 volts in U.S. will be 400 volts. And that these will be a significant power savings across the board. That's what I'm excited about this opportunity now.

Yes. I mean I'll even try to just address the question the other way, which is when we talked about our -- how we are excited about growth in enterprise data, it's not because we're -- we have a big built-in ramp on 800 volt. It's really around the existing customers, the new customers, transition to modules, all the things that we've been talking about, Chris. So if you're kind of trying to figure out how much of that excitement was just at 800 volt, I really think the business we have today is what we're confident in.

Yes. MPS now we're using our own building do a lot experiment, using these 800 volts and using the technology and see what the power saving is.

Our next question comes from Sebastien Naji with William Blair.

Congratulations, Tony, on your appointment. I wanted to maybe just ask my first question, given some of the news around integrated voltage regulators and the acquisition of Empower by Analog Devices, maybe could you just give us your view on this technology and whether you see it as a competitive risk in the AI data center or the larger data center?

Yes, we don't comment on other companies' activities. And we have our own solutions. We have our own and we can deliver whatever customer wanted. And this is not BS talks, we do have multiple beyond what you guys beyond the noise levels. And we have those technologies and we can deliver. And the GPU evolves very quickly, the power levels, the architecture and in terms of the power delivery. And we don't talk about those until we have -- we see -- clearly see where the revenue will come.

Okay. Okay. Great. That's helpful. We'll look forward to those announcements when those products are ready. Maybe moving to something that's a little bit closer to your heart, Michael, which is the building automation opportunity. I think last quarter, you talked about $40 billion to $50 billion in size, but that the real bottleneck was the software still needed to catch up. Can you maybe just talk a little bit about the progress that's been made here as we get to the end of the year?

Well, good questions, okay? That's my baby project. And we just have installed in our 1 million square feet building. That's in China. And we -- as I said just a minute ago, we're experimenting our own AC to DC power. These are for 800-volt supply. And for across the building, -- and that project -- these projects just started. But in terms of turning to a $50 billion revenue will take some time. We don't know how to get there yet, but the goal is very clear.

And we will get there. There's a lot of software involved in it, okay? But on the hardware side, we pretty much have every single component. And our single -- our components, our chips, our module technology is far better than -- sorry to say these are the current existing technology. These are 50-year old, and we will do some significant improvement on it.

Our next question comes from Kelsey Chia with Citi.

Congrats on the great results again. And Tony, congrats on your well-deserved appointment. So my question is on the switching business. So to what extent is that contributing to the strong communications growth that we saw in third quarter? And how should we think about the ramp as we head into 2027 and if that business is accretive to gross margins?

Yes, I'll start on that one. So we're obviously not going to start guiding sub end markets a little bit. But certainly, from just a percentage basis, it's been growing very quickly, probably on a percentage basis, the fastest-growing sub end market inside of communications just because it started from a very low amount at the beginning of the year. As we go forward, again, I still think that and optical modules are going to be significant growth drivers for communications into 2027.

On the margin side, I think if you look at all of our end markets, plus or minus, they'll all operate around the corporate average because to Michael's point, we have north of 6,000, 7,000 products. And so if you look at the distribution of that, basically, what we said is as we grow this, we don't think growing one end market over another will necessarily take us out of our model. And so right now, I would still take MPS as a total kind of in that 55% to 60% range with sort of the slow methodical expansion when we can provide it versus worrying about whether growth in one end market would take you out of model.

And my second question is on the industrial end market. I mean, very strong growth this quarter as well. What drove that strong growth this quarter? And if you could talk about the ramp of the robotic solutions? And how do you see that ramping in '27?

The robotics, we -- I tried to enter the robotics in 2016. On the Analyst Day, we talked about robotics, that's the area we're focused on. We have a product for these sensors and motor controls -- and I didn't know what I was talking about, the revenue didn't come, okay? And now it shows up.

And I think this is still at the very beginning, once the vision for the recognition and visual recognition and improved from using the AI-based vision improvement technology. These robots, as you know, they will propagate in everyday life. So I see this -- that's the future. And the revenue would be significantly higher than that.

Yes. I think the only thing I'd add kind of on the overall segment is, I think this year, we still look at it as just piling up design wins in robotics and other places and really look for more of that in 2027. The growth in the quarter was fairly broad-based, but I think you start to see a lot of these other design wins come to turn into revenue in the future. So I think that in kind of consumer and industrial, 2026, I think, really does still remain mostly about winning all the designs that support future growth.

Our next question comes from Joe Quatrochi with Wells Fargo.

My congrats as well, Tony. Maybe just kind of a finer point on the expansion of capacity to $8 billion. I can appreciate that you can't grow OpEx as fast and you don't need to grow as fast. But how do we think about like maybe some of the investments you have to make on the working capital side or go-to-market side to support that?

Yes. I think on -- one of the nice things about being in a fabless model, right, is we don't have to dig a hole and pour concrete into it.

We don't make it and it will wake our brain generally.

That's right. So we -- I don't anticipate at this point seeing a large increase in capital intensity just to go ramp this capacity, right? So it gives us a lot of flexibility. As a matter of fact, I am personally just amazed at the amount of capacity we've been able to put on just even over the last year.

And I think the operations team has done a tremendous job. But I don't see it necessarily reflecting the overall OpEx at this point or any kind of change to our capital structure just to put on that extra capacity.

Okay. And then maybe as a follow-up, I think auto is continuing to see some inflection. Can you just talk about the breadth of demand you're seeing there from a geographic perspective and how we think about like the design pipeline looking into '27?

It's of course, geographic in U.S. side, Europe side and also in Asia, China. We see -- in China, particularly, we see a lot of activities. And so that's probably the world. And we -- as we said -- as I said earlier, we can't predict which market segment. And that's our diversified growth strategy.

And some years, one segment is good, even with a mature market and some years, one market segment is good and the other one is not so good, okay? And in the last few years, all of a sudden, the GPU market happened or the optical market and the revenue happened. And so we didn't anticipate it. We just provide the best highest performance product. Our customers will realize it.

Yes. The only thing I'd add is I think the reason we've been pretty confident on the ramp in the second half is because it is so diverse amongst customers and regions and not dependent just on one. You've seen that same level of customer diversity grow in auto over the past several years, like we've been talking about in enterprise data. And the pipeline is similar, right? It's very geographically diverse and very customer diverse. We were just very excited to start seeing some of the architectural transitions that we've been talking about in sort of 48-volt and zonal because those sort of form the next wave of growth for us.

We're not predicting what the market is.

Our last question comes from Gary Mobley with StoneX.

Congrats Tony, again. I wanted to ask about what you might be signaling in your capacity milestones. You're currently at $6 billion in production capacity, which I assume supports your 2027 outlook. It doesn't take much to get there, just extrapolating out Q4 revenue guidance. And you're expected to be at $8 billion in capacity exiting fiscal year '27. So should we think about that in terms of the revenue velocity exiting fiscal year '27?

It doesn't take much to get there, oh, come on, this is the market that move the numbers. There's a lot of work behind it.

Yes. I'll add, so right now, I think what we're trying to strongly signal is that just like we've been doing in the past 20 years, we're making sure that capacity stays ahead of the business. And in a world where there's a lot of narrative around there being tightness, we wanted to be very clear to you and our customers how we're growing capacity to support that business.

So I think, again, it's too early to go right into a quarterly revenue ramp and what that means for 2027. But we wanted to make sure it was loud and clear was that we see the demand coming, and we're going to make sure capacity is there to deal with it.

And on inventory, I just want to confirm that the distribution inventory is still within that normal 5- to 8-week range. And then it looks like your internal inventory is down to 117 days based on a forward revenue guide basis, and that's been trickling down. Are you inventoried properly to support sales, I guess, is really the question.

I think right now, we're still on the channel side, certainly in the lean end of our range like we've been for some time now. And internally, I think we grew dollars on a gross basis, right? But obviously, as the revenues ramp, that's come down from a days perspective. So I think that our range certainly hasn't changed, and it's something that as we increase our capacity and our wafer starts, we'll make sure that we're positioned for the business. But right now, it's not limiting us on the business.

This concludes the question-and-answer session. I would now like to turn it back to Tony Balow for closing remarks.

All right. Thank you, operator, and thank you all for joining us for this conference call today. I look forward to speaking with you on the next call for the fourth quarter and full year '26 revenue guidance. Thank you again, and have a great day.

This concludes today's conference call. Thank you for participating. You may now disconnect.

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.

All 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 few moment to call out a few of the highlights for 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 they expand beyond our current AI and server core power solutions. And finally, in our automotive markets, 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 the 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 big raise you guys. I guess I don't have to ask about capacity, Tony. Communications was up 80%. I think last quarter, it was 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, Smart NIC.

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 lot of demand, modules, chips and we see from a 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 TPUs and 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 coms end market.

Okay. And 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 can 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 [indiscernible] calculate... .

It's more than a couple of customers, okay? I mean we see new customers that were coming online, okay, we'll start to ship.

Yes. 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 Josh Buchalter with TD Cowen.

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 have the inventory dynamics play out a couple of years ago. Can you speak to your confidence that there's no inventory building 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 pull off, okay? Thanks for remembering that. We will continue to -- there's no reason not to believe we will not pull it off, although it's very difficult, okay, but we're going to make it happen. .

Yes. And I would 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 of that be very, very strong. And I think since you're kind of talking about the sustainability of that, there's probably a couple of different ways initially 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 and then it's relatively new. And in -- We start to see this significant business [indiscernible] 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 and not ask about AI servers again. That said, I can...

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 expensive. 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. This is new -- to us, this is a high speed [indiscernible] gigahertz kind of things. I mean in a very precision and pretty much the analog circuitry. And we can expand the technology to other communications and announce that we established a know-how. So that's -- these are a true fundamental know-hows. In other business, we have -- we want to get this on the launch year 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 learn our playbook and look for new sockets out there that can expand overall SAM over time.

But in the history, when we mention something, it will come into our revenue.

Our next question in queue 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 give us some color on each segment in Q3?

Well, I don't know all markets, maybe Tony can point out the some. I think the consumer kind of still lagging because of all the efforts that we're focused on it in the consumer market, it doesn't mean we give it up, okay? And we'll continue a very diverse so far the way of growing our business. And as we talked -- as I talked about in the past, MPS is a transitioning from a chip company, a semiconductor company to be a semiconductor-based solution provider with our solutions.

So other segments in automotive continue to grow. Other ones, communication side will continue to grow. Industrial is kind of lagging a little bit, but it doesn't mean we defocus on t.

I'll just add a little bit. I think the story is going to still 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, and we continue to pile up additional sockets that will turn into revenue in the future. .

I think the areas that we're cautious on the ones, Michael had pointed out. And then we've 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. Just 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 are -- we have in the past that, Tore, you know, I don't believe GaN. And okay, now I think it's a [indiscernible]. But it's up to a point where we can't ignore a GaN. And we think last year, we developed our own GaN and we'll have a working device. And in terms of 800-volt solution, now we totally -- 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, and where we'll have the revenues. In terms of the wins, we don't know -- we know as much as you know.

Our next question coming from the line of Williamson Stein 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. We want to build a consistent models consistently within our models. And when the supply chain is tight and raise price, we oversupply, we will reduce price, we don't. And we operate in a consistent way and our customers appreciate that. So in terms of whether due to the price increase, definitely, it's 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 they all 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 maintain 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 markets.

Thank you very much. As I'm speaking, million square feet building is installing building controls. But I have to tell you, we're still lagging with the software. The hardware is all done and with some minor revisions. But the software is the key, 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 -- our -- it's not our customers, the potential customers that are waiting for us to install in their buildings. .

And I'm looking at -- we're not in a 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 my -- the topic is that I'm working on. The other one is the robotics, again, the robotics, look, there's a lot of -- especially a lot of Chinese companies shows a lot of infotainments? And we will see. We have all our designing solutions, they're all happening in the U.S. sites and also China sites. And they're all using MPS solutions.

Now the next question is, how are we going to -- where the robot is going to be used . And from our own factory and this humanoid robots, we use our own product to improve especially the modules, not the production but testing, also the reliability test. And we use our own motion controls and the robotics. It's the same as -- equivalent to a robots to make all these things happen. Our customers is actually our supply to these -- to our own automation. They will use those solutions like everywhere else. Okay.

Next question in the 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 competition mostly PMIC? 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. over the last few years, we talked 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 and very high-power density modules. And these are encapsulated modules. And since we have a highest power density ICs, we integrate -- fully integrated into these module -- with the inductors and with all the capacitors, total power solution, plugging power solutions in a very small form factor. And I said with a straight face, we're 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 are weighing all these buckets and 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 comm segment going forward. I don't think we can actually quote the exact percentage of share at this time.

Okay. But you certainly still see share gain opportunities in that market, it sounds like? .

Yes. I think it's some customers, we absolutely would see additional opportunity to gain share in some of the sockets. But I think the net of this is that within the comm segment between TAM and share, there's still a very substantial growth opportunity ahead of us.

Great. And then, I guess, just coming back to the capacity support. In the past, I think when you went from $2 billion to $4 billion, you talked about the incremental capacity largely coming from outside of China. As you've now built capacity up to and beyond $6 billion, can you give us some sense of what the geographic split of that capacity is? Is it fairly balanced between China. And non-China, does it lean 1 way or the other?

It's not settled down yet, okay? We can now depending on our customers' requirements, okay, at this time, whatever all we need, it goes And wherever we can provide the products, and they will buy. But we built a very balanced approach. And what is the percentage in the end? it's difficult to call now. .

The only thing I'd add on that is when you just go to a total number, it sometimes gets lost in the detail. But I think we've been increasingly focused not just on the foundry side of the business. But also the back end part of the business because as Michael alluded to, modules and solutions will become increasingly important. And so that's actually a more complicated back-end process as well.

So as we look to bring out new partners and look to bring out geographically balanced way, that goes to both the front end and the back end.

Yes, especially our module assembly, it's the most difficult. It's a 3D effect. It's a more complicated than the assembly of phone even. And so it requires a lot of experiment and a lot of know-how to getting all these modules. So we now expand to anywhere in the world, so we'll find these equipments and these capabilities to make it happen. .

Our next question coming from the line of Joe Quatrochi with Wells Fargo.

I was wondering if maybe you could just kind of give us an update on how you're thinking about automotive demand through the second half of this year. You talked about 1,500 new design sockets or sockets year-to-date. Just how we should think about the ramp of revenue from those new wins as well.

Yes. I think the year is still playing out pretty much as expected. And just to repeat what you said in the past, we thought the first half would be flat with the second half ramping up. And I think we feel pretty comfortable with that second half overall ramp. I think we lay out on a year-over-year basis, we're still thinking the end market can be in the mid-teens kind of year-over-year. The one thing about the ramp that gives us additional confidence is that it's very broadly based. It's not isolated to 1 or 2 customers from what Michael was talking about, and so the diversification that we look for in all of our end markets right now.

We called out the 1,500 specifically to show that, that's not just very much focused on ADAS, which has been a historical strength for us, but we continue to see a broadening out in the portfolio for other sockets in the vehicle.

Yes, we focus on them. These are 48-volt systems. And also, we address the battery side, okay? And LiDAR. So these are the emerging markets -- emerging requirements from automotive. I think in the next few years, they all will be installed in the car and you will see very popular on the market and we see MPS revenue growth.

And then as a follow-up, I think last quarter you talked about plans to enter the RCD market and starting to sample with customers. Just curious, any update in terms of how that's going.

With sampling? We are still developing lot of new products and this is very new to us. But we're confident that it will be turning to revenue, although we have some revenue now. .

Yes, just -- to keep it from a model basis, we have not -- that's not going to be a needle mover in 2026 for us, right, in terms of revenue.

Yes.

Our next question coming from the line of Chris Caso with Wolfe Research.

I guess the first question is an update on where CPU server power stands right now. I know that you guys have gained a lot of share over the years on that market. It is heating up because of the agentic CPU. So how impactful has that been to the ED segment? And where do you see that going as you go into the end of the year into next year?

Yes. Thanks, Chris. Let me Start and then Michael and Rob can jump in as well. I think one of the things is we've been talking about it for close to a year that CPU has been one of the growth drivers for us in enterprise data. So it's something that has been and I think will continue to be part of the overall growth story. To the extent that agentic AI drives further CPU growth. That will continue to be a tailwind for us. As you know, for us to separate sometimes AI sale from a CPU sale. So it's a little difficult for us to parse those specifically.

But if we start to see some of the forecasts come to play that you're seeing from some others the industry, we think that could be an additional growth factor for us even going forward. From a share perspective, again, I think we'll probably pass on specific share. I think we're very broadly indexed across both x86 and ARM players. And so no matter who sort of wins in that race, we think we can participate. .

I think I answered your question one time in terms of what is the percentage. At the time in CPU, we want to get in the CPU market segment. I think I was asked what the share -- market share we want to be. I mentioned in earnings calls if it's lower than 30%, I call a failure. I think that we're comfortably say now we're past that. And that's where the good position we are in now, and we'll continue that. .

As a follow-up, maybe a bit of a longer-term question. And maybe as we look out, say, over the next 2 years, 2-plus years, do you still expect that -- I mean enterprise data has been the fastest-growing part of your business because it's been the fastest end market. Do you expect that to continue to be the case? And I know, Michael, you like to run a diversified business, but that end market is just growing so quickly. So I guess maybe the question is, is the growth in that end market and enterprise data make it more difficult to diversify the business?

Good questions. We never focus on any market segments. And we provide [indiscernible] blue jeans. And as long as we're making these best of it, we will win those segments. So we are not really a gold diggers, okay, out there to find out the empty. But we don't do that kind of things. And we just provide basically the best elements for other people to succeed. And one time, automotive was big. And other times, consumer was big.

We let our customers -- we let market demand -- to decide that. As long as we focus on the fundamental development, I think that we will win the very long term. And a clear example was a couple of years ago, the AI go sideways or enterprise data go sideways, even dropped slightly? And that year, all the other businesses grow tremendously, including automotives. And that's exactly where we want to see, and we want to provide to our investors very consistent way of a growth NPS.

I mean even in last Q2, right, outside enterprise data, the rest of the businesses saw double-digit growth. So I understand your comment on what TAM might be growing faster than you can see you're still seeing pretty substantial growth outside of ED.

Our next question coming from Delina Kelsey Chia with Citi.

So based on the strong and broad-based ordering patterns you guys have, may I know how much visibility do you have in the enterprise data end market? And I was wondering if you can provide any color as to how 2027 outlook would look like based on the design wins, visibility, expected product ramps or elaborate on any incremental revenue opportunities and ramp within that segments?

Yes, I'll start on that one. And I think in general, 2027 is a bit far away. We're still trying to land 2026. But I think if you -- to answer the first part of your question and the visibility again, the longer-term ordering patterns that we saw begin late last year has really maintained. And our book-to-bill this cycle was again well above. So we do have more than a quarter type visibility like we were dealing with maybe midway through 2025.

That doesn't mean you necessarily have visibility all the way out to the end of 2027, though. But I think the way I would address that is I think the underlying structural growth drivers haven't really changed, right? We have best-of-breed from a current density and modules. You see more and more of our end markets adopting those high current density modules for their applications, and we continue to win new sockets. So I think our ability to continue to grow into '27 is still structurally very solid. But I think it's too early to put a number at it.

Here is the true demand is determined by the market. And we don't want our customers to end up a lot of waste for inventories. At the same time, we will watch us, our own inventory will end up a lot of inventory we cannot sell. So we clearly balance that. And what is the forecast? We don't do. Even though we have NCR, and we don't shove it into our customers' throat. There is a [indiscernible] relationship. And our relationship is very long term. And so it cannot -- order bookings are very, very good as Tony said it. But we don't see the business in that way. And we do see some swiftly according to our customer demand.

Got it. And also with such strong revenue outlook, could you help us think about gross margins and OpEx trajectory? It seems that you guys are landing somewhat below your long-term OpEx guidance right now.

Well, we're in the model. And we're still in the model although in the low end, I said I was in -- I'd be happier. higher. I wasn't -- I said I wasn't happy, okay? Look at this, okay, we focus on growing revenue and growing the net profit, EPS. That's the key reason. The other one is nobody want us to have a higher gross margin with less of a -- lack of growth, okay? Nobody want us to do that.

And our shareholders doesn't want us to do that, certainly. And so we focus on this. Gross margins, and we will figure out, we will grow higher. Certainly, in the near future, where [indiscernible] stays similar or maybe slightly higher.

This is Rob. I'll add to what Michael was saying -- to what Tony was saying about the strong order levels, which continued into Q2 give us the ability to incrementally expand our guidance on gross margin again, just slightly, but it's there. So as Michael said, we're at the low end of where we want to be, but we're feeling comfortable about where we're at for Q3.

And Telsey, the last part of your question was a little bit on OpEx. And I think in general, we haven't changed any of our thesis around how we're trying to invest for the future. I think what you see is when you get to higher levels of revenue, it's difficult to keep the levels of spending up to that model. And so you see some additional leverage as you flow through to operating margin. And I think you see pretty healthy expansion in operating margin over the past couple of quarters. .

Our last question will come from the line of Sebastien Naji with William Blair.

Congrats on a great quarter here. It's great to see the momentum across the business. AI data center is clearly a strong tailwind for the enterprise data business, also in communications, a little bit even in storage and compute. I mean if I start to add up all these segments, you're looking at data center exposure that's approaching roughly 50%. I mean is that the right way to think about it across your different end markets? .

I think you're picking the right components as you go in there, right? Obviously, the optical module business, the switch business can be [indiscernible] a data center, all of enterprise data. And then remember, inside of storage, you really kind of have 3 big sub-buckets, DDR5, HDD and SDD. HDD and SDD, I think, over time is becoming increasingly enterprise focused, whereas at one point, they might have more consumer-based. So we haven't broken out storage and compute versus notebook in there, but I think you're picking components as you look at those things that could ride some of the healthy demand pull through my data center right now. .

Okay. Great. And maybe just as a quick follow-up on the incremental supply capacity that you're bringing online. Is that -- is any of that on newer node processes like 40-nanometer or is that mostly on existing 65-nanometer solutions.

I think it's mostly it's existing. We're talking about sometimes from now we have to increase all this capacity. Again, Tony said, this is not about -- only about the silicons and the wafers, We're building a lot more -- we're building systems. And that changes the complexity of by silicon only. I mean we have been on this journey for since 2017 and all the procurement, vendor qualification, component qualification where it became mature. I mean we had to pull some more new tricks in the next year or so to increase all these capacities.

Right. Right. Would you say it's the worst or the hardest to increase capacity over the last 10 years that you've seen? .

it's different periods, different times, okay, and qualified vendors. And again, in the silicon side, we have a lot of experience. You move to a system, how you assemble all these systems and how you qualify all these vendors and how you take the yield loss in completely different models that we have to operate on it. And we became -- I would say that we became a lot more mature and then there's a lot more room to go, a lot more improvement to go.

Thank you. And I'm Showing there are no further questions in the queue at this time. I will now turn the call back over to Tony Balow for any closing comments.

All right. Thank you, operator, and thank you all for joining us for the conference call today. We look forward to speaking with all of you for our next call for our third quarter 2026 results. Thank you again, and have a nice day.

This concludes conference call. Thank you for your participation, and you may now disconnect.

Good morning, and welcome to the 2026 Annual Meeting of Stockholders of Monolithic Power Systems. Please note that today's meeting is being recorded. It is now my pleasure to turn today's meeting over to Ms. Saria Tseng, Executive Vice President, General Counsel. Ms. Tseng, you may begin.

Thank you. Good morning, ladies and gentlemen. My name is Saria Tseng, and I'm the General Counsel of Monolithic Power Systems. I will act as the Secretary of the meeting and record the minutes. It is a pleasure to welcome you to the MPS Annual Meeting of Stockholders. The meeting is now called to order.

I have an affidavit signed by Computershare that the annual meeting notice mailing was completed on May 1, 2026, to all registered stockholders of record at the close of business on April 15, 2026. Additionally, I have an affidavit signed by Broadridge Financial Solutions that the annual meeting notice mailing to the beneficial stockholders was completed on April 30, 2026. These affidavits, together with copies of the annual meeting notice, proxy statement and proxy card will be filed with the minutes of the meeting.

The Board of Directors have designated me as Inspector of Election. I have executed an oath to carry out the duties impartially and to the best of my ability. The oath of inspection -- inspector of election will be filed with the minutes of this meeting.

We have present by proxy a sufficient number of shares to constitute a quorum, so I declare the meeting to be duly convened for purpose of transaction of such business as may properly come before it. If you have already cast your votes, we have counted your votes. Those of you who have not yet voted and have properly registered with Computershare to attend this annual meeting, you may vote during this webcast, and your votes will be counted.

The first item of business is the nomination and election of 2 directors to serve until the Annual Meeting of Stockholders in 2029 and until their successors are duly elected and qualified. The following 2 directors are nominated by the Board of Directors, Victor Lee and Jeff Zhou.

The second item of business is ratification of the independent auditors. The Board of Directors has appointed Ernst & Young independent auditors to audit the company's financial statements for the fiscal year ending December 31, 2026. The stockholders are voting on whether to ratify this appointment.

The third item of business is an advisory vote on a 2025 compensation of the company's executive direct officers as disclosed in the compensation discussion and analysis in the proxy statement. This item is commonly referred to as a say-on-pay vote.

With no additional matters, I now declare the polls closed. As inspector of election, I would like to report on the preliminary results of vote cast. I hereby report that there are 45.4 million shares of common stock entitled to vote represented at this meeting, either in person or by proxy, comprising 92% of the outstanding common stock of the company as of the record date of April 15, 2026.

In voting for directors, I hereby report that 39.3 million shares were in favor of the appointment of Victor Lee and 41.1 million shares were in favor of the appointment of Jeff Zhou. Both directors are reelected.

In voting for the ratification of Ernst & Young as auditors of the company, I hereby report that 45.4 million shares were in favor of the appointment. The appointment of Ernst & Young as the company's independent auditors is ratified.

In voting for the say-on-pay proposal, I hereby report that 42.2 million shares were in favor of the proposal. The executive compensation is approved.

The final number of votes will be included in the minutes of the meeting and in an 8-K that will be filed with the SEC within 4 business days.

This concludes the formal proceedings. The meeting is now open for questions. Tony and Alfred, are there any questions?

Saria, there's no question.

Thank you. The meeting is now adjourned. Thank you.

This concludes the meeting. Have a great day, everyone.

Good day, and thank you for standing by. Welcome to the Monolithic Power Systems, Inc. First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

We are joined by speakers, Michael Hsing, CEO and Founder of MPS; Rob Dean, Interim CFO; Tony Balow, Vice President of Finance. And now I would like to turn the conference over to Arthur Lee to read a safe harbor statement. Please go ahead.

Earlier today, MPS released a written commentary on our results of operations for the first quarter ended March 31, 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 Q1 2026 earnings commentary and in our SEC filings, including our Form 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 Q1 2026 earnings call. In Q1, MPS achieved record quarterly revenue of $804 million, 7% higher than the fourth quarter of 2025 and 26% higher than the first quarter of 2025. Our quarterly performance was a result of our continued innovation, our consistent execution and the resilience of our diversified market strategy.

Let me call out a few highlights from the quarter. Our communications end market grew 33% sequentially on the strength of our power solutions for optical modules and switches. The pipeline for our automotive and enterprise data end markets, including server continue to accelerate as we won multiple new projects across customers and regions. We sampled our first high-speed interface products for DDR5 at major customers and MPS continued to grow our capacity past our original $4 billion plan with a new goal of reaching $6 billion in the near future.

We continue to adjust to the fluid geopolitical and macroeconomic environment, but 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 chips only to a full-service silicon-based solution provider.

And finally, we continue to 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.

Operator, you may now open the webinar for questions.

[Operator Instructions] Our first question comes from Ross Seymore with Deutsche Bank.

I just want to dig a little bit into the enterprise data side of things. Can you just talk about the different trends you're seeing between kind of the XPU side versus the CPU -- server CPU side? I know you mentioned in your preamble that the backlog and visibility was improving in both. But given the strength of demand we're hearing elsewhere in the server CPU side of things, I wondered how you guys are doing there. .

Both are good. Yes. Tony, you can talk about that.

Yes. I'll give a little more color. And Ross, if you recall, even last year in 2025, we had talked about CPU being a tailwind, and we continue to see that here in 2026. But if you look across enterprise data, for us, right, as we've said, it's increasingly hard to differentiate between sort of AI solutions and CPU. But in general, all the growth drivers are intact. We're ramping new customers. We've been ramping existing customers. We continue to see the transition to modules. And like I said, plan server has been a tailwind, and we think it will continue to be so.

And I guess the second question would be on the storage and computing side of things that seem to be a little bit better than feared in the first quarter. Talk about the tailwinds or headwinds given what's happening from a macro perspective and then potentially the difference between what you guys do on the storage side versus the computing side? .

Yes. I'll start on that one, and then I'll let Michael and Rob jump in. But as you know, right, that segment really has sort of 2 separate businesses in it. The storage side obviously has remained strong as it's really been indexed to a lot of the data center business. And we see strength in DDR5. We see strength in HD and SD continue out of last year and into Q1.

On the notebook side, we're still more cautious on that side. As you know, there's really 2 dynamics there. I'm sure you've heard other companies talk about potential TAM headwinds associated with memory shortages or elasticity from memory prices. But remember, we also selectively play in that part of the market that has lower margins around consumer. And so I think -- and we look forward to those 2 -- on that business going through the year, I think we're still very optimistic about storage staying strong, probably much more cautious on the notebook side.

But the note was notesand we don't really care this quarter or next quarter as long as we develop -- we developed the best solutions of power density and our customers ease of use. And these design wins that we have, the revenue will [indiscernible].

Our next question comes from William Stein with Truist Securities.

Great. First, I'd like to ask about manufacturing. You noted in the press release that you passed the $4 billion target, you're now working to $6 billion capacity, maybe you can update us as to the strategy around geographic placement of your capacity? And maybe remind us what's going on from a technology perspective. This used to be a big focus of the various BCD iterations that you produce. But can you bring us up to speed as to what is the latest BCD generation? .

I'll answer your last question first. We are still around 60 nanometers and maybe will go down to 40, 45 nanometers. And -- these ones as a power density as a market trend, the power increases and we increase the power densities. And it's just old stories. We keep doing the same thing in the last 20 years. And we just do better than our competitors.

For the $6 billion gold for manufacturing pipeline. We -- clearly, and we have -- we see our near features. We see a lot more activities of normal potentials and all these design wins is imminent -- come turning to our revenues.

And maybe just to add. Well, I think Tony, what you know, but on the $4 billion of capacity, we talked about that being very geographically diverse. -- both inside and outside of China. And remember, our strategy really is to maintain that supply chain diversity. So we'll continue to try to have that balance going forward.

Our next question comes from Joshua Buchalter with TD Cowen.

Congrats on the results. Maybe just can you just help us a little bit with the models? Any help you can give us on the guidance by segment as we think about sort of a 12% sequential growth for the June quarter, which segments should be above and below?

Well, I think -- let me start you guys are more interested in the most, okay? [indiscernible], last time okay, talk to you guys that we have a 50% of floors, so 50% floor. So again, I'll let Tony talk about -- give you a better news today, okay? And I'm more excited about the other projects that are people involved, okay? I mean the building automations and audio project site and -- as well as robotics.

And these ones will pave the way for our next 2 to 3 years out in the [indiscernible] remain on the same growth trajectory.

Yes. I'll follow up a little bit is kind of marching through. And Josh, I know the first thing people are interested is enterprise data, so I'll start there. And as you recall, we -- we tend to be fairly conservative in how we look at these things, waiting for the backlog to be in place. So late last year, we talked about 30% to 40% growth year-over-year. In the last call, we kind of rose that to a 50% floor. And the strong ordering patterns that we saw start last year has kind of continued through Q1. So at this point in time, I think we're comfortable raising that for up to around 85% year-over-year growth. And that will certainly be one of the drivers of growth for the year for MPS. If you look sorry, Michael.

I'll let Tony have better better than our last CFO.

Okay. If you look at the others, Josh, I think we've been signaling on communication as we've become increasingly excited about that end market with not only the optical module growth, but due to switches as well. So we certainly would expect those to be drivers. Auto, I think is a very consistent story. We said that would be roughly flat for the first half of the year and ramping in later in the year. And then storage and compute, we talked about a bit already with Ross, right? There's really 2 different dynamics going in there where we're still very optimistic on storage pulled through by data center, more cautious on notebook.

But again, overall, we cannot predict which quarter goes ramp volumes. And that's not our business to to do that. And we're winning strategy is same to the last 20 years as long as we deliver the best product and service our solving our product problem for our customers. And I don't see we lose any socket, okay, and the major stock at least again, and we'll keep winning. And those business -- those design wins will take into revenues.

Thank you both for all the color there. Unfortunately, when you deliver good news, you still get annoying follow-up questions. But I guess if we think about the incremental upside since last quarter, any help you can give us on how much of that's coming from CPUs, as Ross mentioned earlier, versus more confidence into either content or visibility into share on the AI accelerator side. Congratulations again. .

That's a good try, okay? I'm not going to give it to you. Okay.

Yes, Josh, I think we just fall back and we've talked about all the growth drivers and say they're intact. I don't think we want to try to parse out between volume and content because it can be very specifically.

In reality, it's very difficult, okay, to to separate it, okay. What is call it AI, what is called servers, okay? There's a lot of aging, okay, in a small segment, okay. And these are very small small utility box, okay? We see a lot happening. I mean maybe I don't use the right word you guys use I mean these are portable AI devices, okay? And just based on GPUs. These are happening. And that's clearly overlapped with the CPU and GPU powered.

Our next question comes from Rick Schafer with Oppenheimer & Co.

I'll add my congratulations just a while, I guess, on the outlook. Maybe if I could just for a second and talk about interface data. I've got a follow-up, Michael, that you like better, but I think -- the top 4 CSPs, I think just last night, I mean now we're over $700 billion in CapEx just from them. I mean it seems like you guys are clearly seeing that increased order velocity my real question is, are you able to cater all of that upside? I mean is there anything curbing your supplier, your ability to capitalize, Michael? Because in years past, you guys have kind of major bones on always being ready for that upside and kind of never be caught short. So I'm just kind of curious if that's still the case or kind of what you're seeing?

I think it's the exactly the way I mean that -- although we have a few more players and well, let me go back a few quarters ago. in these AI game in GPU power in a given time, will be the performance and also the manufacturing capabilities and reliability will remain as only a few players. And after a year -- a couple of years, it's is being very clear. So MPS is one of our players. And as I promised over a year ago or so, and we continue to do well in many aspects, okay, especially for the power density side. We are the best in the market segment because we provide a total monolithic power solutions. And we can use a single piece of silicon versus our competitor use of multiple pieces of silicons. And that clearly shows our advantage. And yet, we don't want to be the dominant suppliers that well just want to be a part of it. And our goal is diversified growth.

Got it. And for my follow-up, Michael, I'm just curious on physical AI. Obviously, it's getting a lot more people talking about it and seeing a lot more focused. And just if you could flesh out maybe a little more on your plans for that segment. What kind of TAM do you -- have you guys identified there? I mean you called out robotics a minute ago on the call. I mean, can that be a meaningful revenue contributor next year? Or when would we start to see robotics start to drive top line? .

We see this year and -- but the volume is still are still low, but it can kind of move the needle slightly. And if we go up the trains and okay, this is still at the very beginning, and it's very difficult to predict, okay? And many companies have launched the first high-volume robotics, okay, that we clearly benefited from it. And after that, we can call -- we cannot call the market segment growth. But the future is there. Clearly, when more AI adopted it in robotics, the application will be widened.

And I think what you see is us try to run the typical MPS playbook, which right now we're trying to engage broadly and win all the designs we can. We can't control when the customers ramp, but we can't control winning the sockets, and that's the broad engagement you really see happening in 2026.

That's very good point. Yes.

Our next question comes from Quinn Bolton with Needham & Company.

I'll offer my congratulations as well on the results and outlook. Michael, Tony, I guess I wanted to ask on the comms segment. It was up 33% sequentially and March, it sounds like it's going to be one of the faster-growing segments in the June quarter. When I look at optical modules, I think 800 gig modules are more than doubling in '26. So -- my question is, do you think the comms segment could actually grow as fast, if not faster, than enterprise data this year given those trends? .

Yes. Again, I'll follow in for Tony's answer the last one. So we're in the business to predicting what the market trend is, okay. I mean we we provide -- this happens in this particular segment. And we saw a lot of activities and a lot of demand for high-power density product and especially modules. And I think, as I mentioned about maybe a few quarters ago. And so this quarter and it just jumps out. And I from what we learn the power density of the module in with a very confined area and the data rate keeps increasing and with the opticals or with other type of format, okay, the power will keep increasing, okay?

And in what rate, I cannot predict. But -- in the small confirmed [indiscernible] and the power density is critical. And that's our basic technologies that we could apply in that segment and that we execute fast and we capture the market.

Yes. And I think as order and patterns have continued to be strong and extend, we still don't have them all the way through the year. So I think it's pretty tough for us to call all the way through the back half right now. But certainly, we'd put that end market above the corporate average.

Got it. Okay. And then.

Same way, I'll go back to servers and go back to the server side, okay. We -- in the last years, we don't know the server market will pick it up or not picking up, okay? As far as we listen to our customers, we get our inventory reading when they need -- they have those products. And so we just focus on deliver better product, winning more socket.

Yes. I I'm a broken record, but I think it's a great example of, again, diversified approach, you land and you sort of look at the other sockets available and applications and continue to grow your SAM.

My follow-up question. Michael, you guys have been sampling your products for 800 or plus minus 400 volts for a few quarters now. Wondering if you could provide any feedback on how that activity is going. And can you give us any thoughts on -- there's a lot of debate between whether those higher power conversion steps will be more GaN-based or silicon carbide based. If it goes GaN, will you guys have GaN-based solutions ready for that opportunity?

No, we're based on silicon carbide and our -- that's our solutions. We do -- in the past, I openly said I don't believe in GaN, okay? Now start -- I didn't know what I was talking about, I guess, okay? We -- in the last -- started last year, we developed our GaN, but it's not for 800 volts, it's for low voltage and lower power and lower power segments. We start to develop these fundamental technologies in GaN. .

To answer the first part of your question, yes, we're sampling and the game made rather simple or [indiscernible] developed the systems with our customers and also our customers' customers. And it's we don't talk about those until -- I guess, you guys ask us, okay, and 800 volts became a household names in on the Wall Street in GaN. And so we start to talk about it. And our product is working. And I think the overall the environment -- and in the new 800 volts power bus data centers, they -- a lot of things has to be resolved. And we just have our -- for that application that's already, okay, and also have 800 volts can go to 10,000 votes, okay? That's another segment and has to be developed a lot more efficient fishing the power conversions. And these are all part of the pictures, MPS will play in those segments.

[Operator Instructions] Our next question comes from Tore Svanberg with Stifel.

Congrats on another record quarter. I had a question, maybe as a follow-up to a previous question on power. So I do realize there's a lot of focus on 800-volt, but before we get there, there's the move to 2,000-watt GPUs. And I know there's a lot of sort of wanna be power management companies out there, Michael. So -- just hoping you could touch on 2 of the 3 things that really make MPS so unique and differentiated to handle those types of power levels because that is not like a 2028 time frame, right I mean, that's already next year. So Yes, if you could give us some color there, that would be great.

Yes. Okay. That's a good question. I can touch it. And one of them I already said earlier, MPS is a focus on the monolithics. And we do what is the most cost effective and we do and how we do the integrations. And we have the capabilities to integrate or disintegrate, okay? And the integration that we can put it in on modules. And that's a huge advantage. And with the multiple other chips, okay, and if we use particularly discrete power components, okay, discrete power fabs, -- and it's very difficult to do for manufacturing the modules.

The second thing that I should mention that we invested in a module development you note -- for other segments, actually, and since 2016, we want to move up, okay, from providing silicon-only power conversion. And again, we do a plug-and-play solution. That journey we started 2016. And immediately, we know how we test these devices and how we qualify these devices can not -- and if there's a higher volumes and the high qualities can be touched by humans. We develop our own test systems and on reliability systems. These are fully automated. And actually, it's all based on MPS Motion product.

And these ones are very unique. And they -- before these systems putting in production, we can't find anything like this on the market. And that's to me, this is a huge advantage. And the other one is the last one is, I go back to semiconductors, like we talked about this. We use 16-nanometer in that [indiscernible], and now we move to 40 nanometers. And those increased the power density by last time we talked about 3M per millimeter cube and -- now I will pass that.

Great. And as my follow-up, when you mentioned a new product, I always listen to you because I remember you talked about 800 gig optical components being in your market. And before you knew it, you had a huge business there. And you now mentioned you have your first high-speed interface product sampling for DDR5. So -- just curious, when should we start to see material revenue from that business? And could that also grow into a several hundred million dollar business over the next few years?

That's absolutely right, okay? And frankly, I don't know anything about this high speed. And we just hire best engineers that cut them loose and then they created this, okay? And -- but the [indiscernible] business side is our natural way of expanding the service, total service market that increased [indiscernible] SIM. And we we have a pretty good position in PMIC in memory, then we introduced timing drivers, okay, on a timing control, whatever is in the [indiscernible] and also temperature sensors.

And now the RCD or whatever the things came and I know it's very difficult. This is beyond my understanding and our engineers okay, and our people's they pull it off. And -- so we have a few people that are -- other companies like they have 50 people that design groups [indiscernible], and we will be able to pull it off in a few years. These are brilliant guys, okay, and they want to make things happen. That's -- and the revenue, usually we don't talk about it, I can and talk about the product and we sample those products clearly in that market segment, our customers are very much welcomed we have another player.

And I'll just with the model a little bit. I wouldn't really have that as being a contributor to 2026 revenue. I think we're really highlighting it as we continue to expand our footprint in that market. .

Our next question comes from Gary Mobley with Loop Capital.

Let me also extend my congratulations. I'm curious about the comms business that definitely will stand out for the quarter in terms of growth, upside, and I presume carrying through the -- into the second quarter and for the balance of the year as you previewed already. So what I'm most curious about is how much content you have in these 800-gig optical modules and I assume maybe top [indiscernible] switches, maybe if you can put it in the context of by how much you see your content increasing in Rackscale solutions for accelerated compute given this beachhead in these 2 new applications.

I think it's more than a bit share than not. We're pretty well in the in -- well beyond the beach now. Tony, you want to.

Yes, I think we're going to stop short of kind of giving a dollar content. But obviously, in the optical modules, right, we have a module in the module doing that. So we obviously look at more of that than a discrete device.

If you talk about switches and things of that sort, you have a whole different number of trays, for example, you have switches, you have NIC cards, you have other things like that, which all require power. And so I think the opportunity is right, is you have a number of different processors in these [indiscernible] that we can provide power for and that we've been expanding that all sit within our Communications segment. But I think we're -- as usual, right, we're not going to talk about specific content layers, especially for specific customers.

Okay. As my follow-up, I wanted to ask about distribution channel inventory. I know it's been running lean. Is it still lean relative to where you would normally place your distribution inventory and then as well, maybe if you can talk about the sort of inflationary relating pricing trends that you have to pass along. .

I'll take that one. With regards to our distribution channel, we don't have a great deal of perfect visibility there. But what we have seen at least in 2025 and carrying into 2026, is that the channel has been very lean. And that implies to us that we're shipping to what demand is at the end market. But beyond that, we're looking good.

For the pricing, okay, cost, the pricing came -- some of the cost is higher, okay? And we see the a lot of activities, okay? So we will keep -- the goal is that we're keeping our margin profiles.

Yes. I think and just to add to Michael, I think we don't -- we're not looking at it a broad-based across the board, but there are places where input costs have gotten higher, people are asking for expedited supply chains and things of that sort. And in those cases, yes, you could see us raise prices to stay within our gross margin model.

Thank you. Our next question comes from Joe Quatrochi with Wells Fargo.

Maybe just a follow-up there on the gross margin. Wondering if you could just share any of the puts and takes on the guide. It seems like obviously very positive revenue acceleration in kind of not a ton of follow through on gross margin kind of still stay in that range.

Yes. Okay. I -- again, I said the margins in the last couple of quarters. So margins on the low end. And although it's in our model -- on the low end. And we still improve the yields on the modules. And I think that we don't -- don't have much of a headwind, we're moving up. But I don't want to give you a fourth thought, but we're going to jump very high. So okay, that's not NPS. We don't do that kind of thing, okay.

I'll expand a little bit on what Michael just said. Historically, we've been very consistent with delivering to our gross margin guidance. For the last 4 quarters, we've been flat at 55.5 million. which is at the low end of our gross margin model for growth, which ranges 55 -- mid-50s to upper 50s -- for Q2, as you know, we did have the confidence to increase incrementally our gross margins, mainly because we've gotten better visibility to our backlog. We saw this happening in the fourth quarter of last year, and it's continued into the first quarter of this year. So that has again given us some confidence.

We do, however, do see some strong headwinds potentially in the second half. And so we're not remaining cautious for the guidance in the second half of the year.

Right. That's helpful. Maybe just on the robotics socket opportunities. You talked about up for grabs or to win this year. Are those -- do we think about those as being incremental -- so I think you talked about $150 of content like for humanoid back at the Analyst Day. Is that the right way to think about it? Or are those expanding opportunities?

It really varies. I mean, humanoid is the most visible. You see some dancing robots can those kind of -- and the -- what we focus on is in robotics. If it's remote without power call plug-in the robot and those had battery operations. And so our battery management product plays a role in there. And the other one is the AI side, the compute side for power the GPUs, okay. And these automated control units and also as we as well as these sensors.

And the -- the other segment is the actuators, the motion side. That's overall we offer for the robotic companies. And -- many applications and is in [indiscernible] and they can be in a medical assist for we for rehab purposes, we're seeing those kind of things happening. And -- for the dollar content, as I go back to your dollar content, it's very difficult to say. It's a variety of applications. We sell a chip and to selling modules, okay? And so the dollar content is also different, and it's very difficult to judge.

But the trend is this robot work happened and it will be a lot -- the world will be a lot more automated, and it can assist the human to do a lot of things, okay?

[Operator Instructions] Our next question comes from Chris Caso with Wolfe Research.

Yes. I guess the first question would be about the ED segment. And if you could talk about the growth on Merchant Solutions versus ASIC solutions this year? And what you're expecting with regard to content? I know you've got a strong position in both, but do you expect outsized growth in one area or the other? Any color you could provide would be helpful.

We don't -- we don't divide it into it, and these are the learning side, infroncing size and frankly, we don't know how to to separate and they could use the similar product. What we do is -- while we're winning all these segments is because the power density, as I said earlier, okay? And nobody wants to waste power and efficiency is -- is power densities directly related to power efficiency. And so they want a smaller size and they want to have a high efficiency. It really doesn't matter to us which segment.

Chris, the only thing I'd add, right is, I think we're comfortable raising the floor from 50% to 85%, not because there's been a fundamental change in the growth drivers for how we're approaching the market. It's really, as you know, are more comfort about what's in backlog, and we've seen that extended ordering pattern. So I think to Michael's point, I don't think we subdivide it to content and volume.

But I just want to make sure you know that I don't think anything has changed other than being to see more orders in the books going forward.

Got it. As a follow-up, if I could ask about the auto segment, and you talked about that being flattish in the first half with some growth in the second half. Obviously, auto has been a little more variable in terms of its recovery. There was some data out of China, which was a little weaker in the beginning of the year, perhaps you give some color on the visibility you have at auto and why you think that starts to grow again in the second half?

I don't pay attention to these which were the strong -- which segment is strong, which which continent in a more strong or weaker again, because these are chasing the market. We're not chasing the market. Whatever happened happens and, okay, we have the product ready, we can deliver. But Tony, you can talk about the near term. So okay, I don't pay any attention to it.

Yes. I mean I can add a little bit more there. I think, Chris, the shape of the year, as you said, right, our expectation hasn't necessarily changed. And while we've talked about seeing that ramp later in the year is really on our belief on one of some of these designs that we previously won coming to market. We can't control when our customers ramp. But the pipeline in auto has been expanding. And based on our current belief, we would expect to see that ramp later in the year. So again, as always, right, we'll monitor as things go through, but that's our belief at the moment.

Well, the bottom line is we're winning socket and we're expanding our market share.

Our next question comes from Kelsey Chia with Citi.

Congrats on the results. Could you talk about the rationale behind focusing on silicon carbide, 400-volt step down well focused on alum market just for the lower voltage, lower power segments. It seems like some of your peers are also been gone for higher volt step down, how would that influence your competitive positioning?

It's a long question. Okay, the low starting okay, I didn't -- I said I didn't believe again, okay? And -- and I still don't believe that at for high power, I mean, we still have to be that in the market segment. The reason we use the silicon carbide is these devices are proven in the -- in the history, they got 20 years ago, they're making [indiscernible] materials a lot more reliable. And -- and there's some fundamental issues. And okay, we started this -- try to improve at start of 2016.

And as a result, we have a deep know-how and to make -- to use the silicon carbide in the [indiscernible]. And the MPS is unlike other company, we're selling -- we don't sell silicon carbide sets and these are passive semiconductor pass-through device. And we always integrate into our modules. So that's a kind of a short story for you. Okay.

Got it. And I know that the team historically has been able to gain share in pace supply environments. Could you talk more about your supply chain management strategy and also your confidence in meeting customer demand if other suppliers face capacity constraints.

Throughout our history, if you look at it and especially during 2021, and these are after COVID [indiscernible] happens. And MPS always listen to our customers. We don't play a passive growth when customers tell you to pull it too late, okay? And we have actively preemptively to build these inventory, get these inventory ready and our product life cycle is very long. So we don't have any materials -- a large amount and scrapping -- and we know this sooner will sell.

And again, like you asked me where these products ramping, I don't know, plus/minus years it will say. And we don't mind and have a little higher inventory, although in the last recent quarters, we cannot have enough to build up

Yes, I just think the last thing I'd add, just so it's really clear is nothing about our outlook or anything we said about enterprise data floors because we see any constraints in the supply chain. It's something we've continuously stayed ahead of. So the root of your question, [indiscernible], was whether or not the 85% flow was limited by something, that's not an issue right now.

I'm showing no further questions at this time. I would now like to turn it back to Tony Balow for closing remarks.

Thank you, operator, and thank you all for joining us on this conference call today. I look forward to speaking with you on our next call for our second quarter 2026 results. Thanks, and have a great day.

This concludes today's conference call. Thank you for participating. You may now disconnect.

[Audio Gap]

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 Q4 2025 earnings call. Today, we made an announcement that after 15 years at MPS [indiscernible] CFO, Bernie will be retiring. Before we begin our prepared remarks, I'd like to turn the webinar over to him for his thoughts on his time at MPS and the transition ahead. Bernie?

Thanks, Tony. As I was preparing for today, I realized that this is my 40th earnings call as MPS' CFO. That's a nice round number to finish up with. It's been my pleasure and honor to work closely with Michael for so long and to have been a part of MPS' leadership team.

I want to thank our investors and analysts who trust you placed in me. It is natural for all businesses to go through cycles. Your support has been consistent regardless of the circumstances, and I have greatly appreciated it. As I look ahead, MPS' prospects remain bright.

With our unique culture, our dedicated employees in a fantastic portfolio of products, MPS is well positioned to sustain the broad-based growth you've come to expect from us during the last 10 years. I have a lot of confidence in the team. I am transitioning my responsibilities to.

Starting with Rob Dean, who will be our interim CFO, while many of you may not know Rob, we have been partners in this enterprise for the last 9 years. And like my predecessor and for myself, Rob continues the MPS tradition of transitioning from MPS' controllership to CFO. This ensures a lot of continuity in the role. Likewise, I will remain with the company to support the successful transition. Rob, would you like to say a few words?

Yes.

Thanks, Bernie, and I'm grateful to you and Michael for this opportunity to continue the tradition and to have been part of the MPS finance team where you been CFO. I know I speak for the entire finance team when I thank you, Bernie, for everything you've done over the last 15 years.

He's not only helped guide the business to consistent growth and execution, but he's grown a great team around him. I work closely with Michael and the executive team for close to a decade. We've developed a strong relationship, which I expect to continue as we grow the company and take on the opportunities ahead. I appreciate the confidence they have placed in me in this new role. I look forward to meeting all of you in the coming days and weeks. With that, I'll pass it over to Tony.

Thanks, Rob. I'll now move to our prepared remarks before going to Q&A. In 2025, MPS posted its 14th consecutive year growth with a full year revenue of $2.8 billion, up 26.4% from 2024. For Q4 2025, we had a record quarterly revenue of $751.2 million, 1.9% above Q3 2025 and 20.8% higher than the fourth quarter of 2024. This performance reflected our consistent execution, continued innovation and less customer focus.

Let me call out a few highlights from 2025. Our nonenterprise data end markets grew by over 40% year-over-year, showcasing the strength of our diversified business model. We achieved our milestone of securing more than $4 billion of geographically balanced capacity and continue to add additional supply chain partners to support future growth.

We had record module revenue and positioned ourselves for a further shift to solutions by sampling our 800-volt power solution for data center. In automotive, we launched solutions for 48-volt and zonal architectures, including the first fully integrated 48 volt eFuse and a kilowatt level zonal controller that will support growth in 2026 and beyond. We expanded our customer base and data center for power solutions across AI, server, memory, optical modules and switch applications with leading-edge current density, power efficiency and packaging.

I am also pleased to announce that our quarterly dividend will increase 28% to $2 per share. For the 3 years ending with December 2025, and MPS has returned over 72% of free cash flow to stockholders through share repurchases and dividends. Our proven long-term growth strategy remains intact as MPS focuses on innovation and solving our customers' most challenging problems. We continue to invest in new technology, expand into new markets and to diversify both our end market applications and global supply chain.

This will allow us to capture future growth opportunities maintain supply chain stability and quickly adapt to market changes as they occur. I will now open the webinar for questions.

Thank you, Tony. [Operator Instructions] Our first question is from Chris Caso of Wolfe Research.

Thank you. And Bernie, I'm lucky to be the first to congratulate you on your retirement and wish you all the best. It's been a pleasure all these years. Chris. So for my first question, I guess, as we look into the March quarter, could you give some color on what you're seeing with respect to the different segments, what do you see within the various market segments?

Sure. Let me start to call this by talking a little bit about Q4 '25. We saw a good step-up in the ordering patterns in the quarter. Our book-to-bill ratio was well in excess of 1 -- and that's really reflected in our backlog, which is starting to extend out into Q2 and Q3 of '26.

We also finished with fairly routine rather our channel inventory stayed at the low end of our range. So we feel that we're servicing real demand and that we're seeing a lot of strong ordering trend. So as we look at the fourth quarter.

You can see that we saw some pretty good strength, particularly as it relates to enterprise data and also to the communications. We expect that those trends, along with automotive should continue to extend into Q1 and into the remainder of the year.

As a follow-up, and you mentioned enterprise data. And obviously, that's been a focus of attention, not just for you, but the whole market. you had made some comments on enterprise data for 26 on the last earnings call. And if I just annualize the Q4 numbers, you pretty much get to where that guidance was. So what are your thoughts on that in the year? And perhaps is there a seasonal element to enterprise data as we go through the year?

Sure. I'll start off on this one. As I said, in Q4, we saw some fairly pronounced changes in ordering patterns which has given us a fair amount more of confidence as far as what the outlook for enterprise data could be in '26. Now I think for those who worked with me for the last 10 years, you know that I like to stay pretty conservatively profiled when I make an estimate. So I probably say that whereas last quarter, I talked about a range of between 30% and 40%. Maybe I can increase that to a floor of 50% growth for 2025.

Well, I thought that we can do a lot more than that.

Well, I see -- this is the 1. Okay. We won the many design wins -- and across the board, not from 1 company, 1 large company okay, we have multiple customers. They're all very big. They call [indiscernible] 7 or 8 or whatever, okay, we won all the designs again. And we are proven well 1 of the variable AI power supply.

And Also, I see the other end we have all the capacities. We can deliver this year to our customers' needs. And I don't see why not [indiscernible]

Maybe just 1 last thing to add. Chris, you've heard us talk about the drivers for growth, which is really around growing existing customers adding new customers, seeing new platforms coming to market and then, of course, just server tailwinds. I think we always knew those were in place and now we're just seeing some of the backlog to go along with it.

The only other thing I'd add, right, is we focus a lot on enterprise data, but I think we've seen a strong data center demand, which is really also pulled through storage growth optical modules, switches and other areas we've talked about. So I think overall, we've seen strong data center demand through the end of the year.

Our next question is from Joe Quatrochi of Wells Fargo.

And my congrats to Bernie as well. Thanks for all the help. Maybe just to follow up on that, in the enterprise data and the increase in outlook. How much of that is related to like traditional server CPU demand that it seems like it is accelerating as well.

Well, as I said, we have a lot of new design wins in the game in -- particularly last 1.5 years. And we see continuously change and adopt our modules and even from a changing from silicon to modules. And we see the trend. And with our power densities, I mean we're winning the market.

Yes. I think to go back to part of your question, which had to do with the traditional maybe CPU data center. The lines between AI, GPUs and CPU are getting pretty blurry because they're so integral to 1 another these days.

They're using the same kind of a poly supply now.

Exactly. But I would say that we've been trending very well in both categories. So I can talk to a trend line, but I can't really give you an absolute figure.

Okay. That's helpful. And then as a follow-up, as I think about just kind of like storage and compute and maybe the exposure to like PC, are you seeing anything related to just kind of memory prices increasing and just kind of maybe some pressure on some demand destruction around that part of the market?

Oh, you're talking about PC. The PC is a different animal than then the data centers. Okay. I mean new question is asking about memory and the constraints there, whether we're seeing that effect is. memory constraints.

As I said earlier, we don't have constraints on the capacity side.

I think where you're going, Joe as well is also is there are any demand destruction in PCs. I think as you looked at Q4 into Q1, remember, we're coming off a very strong first half of 2025. so we expected that to be down a bit as well as we are participating more selectively in the emerging parts of that business.

I don't think we know how it's going to play out through the rest of this year at this point. So I don't think it's possible to say how that market might trend. We hear a lot of the same, but I think it's too early for us to tell.

On the memory constraint on the PC?

Yes.

I don't know we don't know those markets. Okay. We don't know what our customers do. We deliver our customers ask, I care less.

Our next question is from Josh Buchalter of Cowen.

I want to echo the congrats and best wishes to Bernie after an incredible run and a long, sometimes straight trip. I very much appreciate the support over the year, and congrats and best of luck to Rob.

Maybe just to start the incremental confidence in enterprise data is great to see. And it seems like you guys are suggesting, you feel better about visibility there than you have in the past. Is that a fair read? And if so, as part of this, it's just the market is maturing and scaling and also just the capacity needs are so great. I was just hoping you could maybe speak to how visibility compared to maybe a year ago or something?

Yes. I think in prior quarters, I've said that we've been experiencing a turnaround, much of which has been around the enterprise data or more broadly AI markets. but that the anomaly had been that we've been seeing very short lead times and that they were not putting a lot of backlog in our books. And I'd say that the fundamental change that also making us more confident right now is that we are seeing longer ordering patterns because some of our customers are concerned about capacity constraints, not necessarily with us, but just in general.

Okay. That's helpful color. And the 40% on enterprise data growth number for 2025 is obviously huge and above your historical algorithm of I think it was 10% to 15% above the analog industry. Is that still the right way we should be thinking about the non-compute exposed verticals into 2026 as well? Congrats again.

I will try to manage your expectation. We're not going to -- not a 26%, we have a 40% growth, okay? And this growth, okay, we are still a small players in the overall markets compare all the market size, okay? And some growth in some years, we see the opportunities we can grow better than any other years, okay? But the long-term trade or even short-term trade and even '26, we will grow.

Our next question is from Quinn Bolton of Needham.

And Bernie, it's been a great run, a great decade. So thank you for all your help along the way. welcome Rob. I wanted to ask, some of your competitors in the AI power space, you're talking about their business is doubling in 2026. And I know your business and their businesses don't overlap 100%. There's different compositions. My question is, do you guys think that you're gaining share as you look into 2026 broadly in the AI power segment.

Yes. I'll refuse to get in to a [ pleasing ] context, and the whole -- who were less on the stage, okay? We let the numbers speak self. As always, as our [indiscernible] 21 years history, we never do that.

I do think that we clearly have great products, broad engagement across the customers. We have design wins in a broad swath. So how the market then plays out remains to be seen, I think. But I think we're very confident in our product portfolio and the engagements we have right now.

That as a much better small talk -- that's much.

Well, as you said, we'll see where the numbers shake out at the end of the year. Michael, I wanted to ask -- you talked about sampling your [indiscernible]

You probably see much early.

I wanted to ask you about the 800-volt solutions for 800-volt racks, some of the participants in the market are suggesting NVIDIA and others are looking for GaN-based solutions. I think you guys are offering a silicon carbide-based solution. And so -- just wondering if you can talk about what you're seeing in the market. Is there a preference for GaN or silicon carbide? Do you think there will be a mix of compound semiconductor solutions for that 800-volt to 12 or 6-volt stage in those 800-volt racks.

Yes,yes. Okay. Again, okay. And this is not a good venue to talk about technical terms. Actually, I'm happy I'm happy to be a person who really knows the semiconductor device. And we are developed silicon carbide, okay? And 10 years ago, I was wrong about GAN . But in the last few years, we developed our own GAN devices, okay? And since Tony is mentioning about it and we're entering a [indiscernible] context, okay, that revenue is not for this year, not for even for next year. So I can maybe end of them next year. However, we are the first company to sample it. Now that's a part of a [indiscernible] talking .

And again, we've done a good job and shown ourselves to be very adaptive changes to the market. So whether it turns out to be GaN or silicon carbide that is what's demanded I'm sure that we'll be well positioned to take advantage of it..

Our next question is from Rick Schafer of Oppenheimer.

Thanks. And I would just say, Bernie, it's been a genuine pleasure. You're going to be missed. And Michael, I just want to confirm for everybody that you're never retiring, right?

It happened to be today is my 86 earnings call. I'm working for double it. Okay. Well, be serious, okay? And I enjoy this MPS, okay. And immensely, okay, we actually created this platform. Everybody can maximize their capability. And the more interesting things to me as we company evolve. And we form -- we sell semiconductor, power management. Now in the semiconductor, we're getting to MCU, we get in to a data converters, we get to even high speed. These are a few gigahertz of stuff.

And you will see the revenue some -- and on the overall market segment address, we migrate from silicon to systems to a module to systems, and you will see a lot more. I may enjoy this process a lot. And every year, I'm a part of it, again, and I have on product line.

Thanks, Michael. It's reassuring. Also, I just had a quick clarification and then I've got a couple of follow-ups. But the clarification, Michael, you said earlier, that CPU and GPU and server are using the same power supplies now. So does that mean that server CPU is already migrating to 48 volt?

It stood -- they use mostly -- okay, if they have some advanced okay, and high-priced servers or special servers that have a special need. They you still use 12 volts. And -- but I'm aware of some models in the 48 volts, my guess is still small. I'm not very clear on that. But this is and the majority is still 12 and now they -- it's clear the modules, the way to go, and if we want to improve efficiency.

Thanks. So my first question really is on optical transceiver because that's basically a brand-new product line. A little over a year old, I believe and by our count, in our model, it's close to roughly 5% of sales exiting last year.

I think now, which is a pretty remarkable ramp. So I guess I'm not thinking we're asking what are your expectations for that business this year? And what does that imply for comp segment? What are sort of the puts and takes within the comp segment?

I can comment on -- give me -- this because we entered the module journey since 2016 or '17. And -- these happen to be the highest power density product on the market. Then optical modules, they wanted that because they have unlimited room. So okay, in terms of our business, I don't know the details and maybe Bernie -- Tony can answer it okay.

Yes. I'll just follow up. I think we have obviously seen great growth in optical modules over the past 1.5 years. I think the way we look at the market very typical for MPS is sort of interconnect. So it's not just optical modules, but engagements for CPO, active copper or other things as well because the market will then figure out what interconnect technology is actually going to succeed over the long term.

We obviously don't guide by some end market lead-load sub-end market, but we would expect optical module to continue to grow as you start to see the 1.6 ramp, as we go through. And for communications, it should be an area of growth for us in '26, both on optical modules and in switches because that's where our data center switches are as well.

And then if I can sneak in 1 on automotive. I mean, obviously, a great year in '25. And I'm just curious what are the -- what you see is the top drivers of segment growth this year. I know you highlighted 48 volt zonal, and I didn't hear you say much about ADAS, but I assume ADAS. I don't if you can update us on how big ADAS is within that segment now? Or -- and if there's any way to quantify sort of a shift this year that you expect in potential content per vehicle.

Sure. I want to take a victory lap on 2025 where automotive grew 43% year-over-year and...

But that's only the beginning.

That's exactly the point here is that what we saw in 2025 and is going to continue is that while ADAS certainly was a strong initial ramp, particularly in '23, '24 and '25 in I think we saw a lot more diversification into other content opportunities on the automotive platform. And so as we look ahead here, Keep in mind, we're not necessarily driven by the SAAR of the business but we are -- our growth is dependent upon how fast our customers implement these new technologies, particularly as it relates to Zonal and 48 volt?

Or even ADAS. In the majority of cars on the market is a no where anything close to what testament does, okay? And that's the car I drive, okay, you have a full -- I don't drive anymore. And I think a majority of people still drive. Okay. And that adoption rate that came in a large automotive company, they do things very slowly and much slower than the Tesla.

And for futures, we are up to this point after the next couple of years, I see our products provide the complete power supply chipsets, And also we have all the firmware, software win very much engaged with all the carmakers. And I don't see why not. That business is going to continue to grow. You actually guys okay, you know how many cars shipped with ADAS, which levels. You can count MPS in it.

And Rick, we're a little hesitant to probably call any numbers for the full year just because there is a lot of macro uncertainty still, great design wins, great engagement with Tier 1s and OEMs, but whether it's tariffs, whether it's the end of EV subsidies or whether you can talk about what the impact on the auto market is from the memory shortage, I don't think we know. So I think we're a little hesitant to actually put a growth rate on it for the year.

Our next question is from Gary Mobley of Loop Capital.

Bernie, your retirement is well deserved and look forward to working with you, Rob. I think everybody on the call would share the same sentiment that I have that you're definitely 1 of my favorite CFOs and for my retirement gift to you. I wanted to throw you a big softball question, but I think it's an important topic. Looking back over the past decade, when you've been CFO, you've outperformed the overall analog chip market, the overall voltage regulator market, consistently every year and seemingly for different reasons each year.

But thinking about the outperformance of the market in 2025. Maybe if you can give us a sense of what drove that? Was that just share gains in Volt's regulator die? Or was this something more substantial like moving into data converters, -- was it tied to the higher content associated with modules and related, can you give us some KPIs as it relates to sort of your module mix right now? Anything you can help us get a better understanding of that consistent market share growth.

Sure, Gary. And thank you for the kind words. They're appreciated. When you look at the overall performance for the company in 2025. We had -- what had been our largest revenue end market in enterprise data had actually declined 2%, and yet overall, the company grew 26%. And strategically, how we're differentiated from our competition is that we are represented with the best technology, the best services across all of the end markets that we service. And this is really just a reflection of our execution against that strategy over all of these years.

It wasn't that pardon my saying we pulled the rabbit out in the hat. We actually are able to adapt very quickly to changes in the market. So that's what this is really a reflection of in our performance in 2025.

As my follow-up, I wanted to ask about maybe some nuances in your increased visibility and incontinence regarding that. If I talk to you guys 3 months ago, I think you were thinking maybe the 2026 year was going to be a little more second half weighted just given the stronger bookings that you've seen, the stronger order backlog as you see here today, would you say the shape of the year is a little more linear, less dependent on the second half?

I'd say that the first half for enterprise data in particular, but for the company, it is more secure I think there's still a lot of variables that need to be shaped before we really understand what the second half trajectory is going to look like. But obviously, the initial signs that we saw from the ordering pattern in Q4 and continuing into the year have been exceptionally positive.

So now we have more of the high-level issue of trying to figure out what's real demand and what may be some double ordering on the part of our customers as they try to secure capacity. As I said, that's a high-level issue, and we've shown that we can adapt to that as well as anybody by the performance we gave in late 2020 and early 2021.

We work with the customers very -- especially all these large data center customers very closely. And they will give us a very good lead times and forecast. So we have the capacity ready given we just met demand.

Our next question is from Tore Svanberg of Stifel. Tore.

And congratulations, Perm. You're a class act, and I'm going to miss you tremendously.

My first question, Michael, I'm going to zoom in on -- in a market where there's perhaps less contests, which is storage and especially power. It seems to be an area that could see quite a bit of upside and growth in data centers this year. So I was hoping you could talk a little bit about the profile of that business? I mean I think historically, it's been more tied to client and edge devices. But again, what's the company's position, SSD for data center going into 2026.

Yes. These are the power management and also the single processes, okay, these are all in the consortium driven by JEDEC. I mean maybe to you are a lot more familiar than I do. And we are proud of it. And DDR4, we don't have much business, okay, very little. And DDR5s were in for were in on the dining table, before DDR4 wasn't, okay?

And -- so now this business is ramping. I mean, memories and that came in all shifted to DDR5 in the game. And we -- we clearly see the volumes now in last year and this year. And we're not stopping there.

We'll migrate on to -- we expanded our product lines to the single site. And this is all in the memory modules.

And -- so I think there was a portion of your question as well about the non-DDR5 part of that business, sort of SDD and HDD and we have seen an uptick in that part of the business as well. And I think you're right, it's being pulled through much more by the enterprise than consumer these days. And that's why we generally talk about storage being data center-driven, inside of the storage and compute segment.

Yes, that's what I was trying to get to. And as my follow-up, Michael, congratulations on getting to $4 billion in capacity, but it looks like you're going to need quite a bit more of that. So perhaps you could give us a little bit sense of what you're doing on the capacity front, especially in the next 3 years because you're clearly going to need much more than $4 billion.

Yes. We are very aware of that. Okay. And speaking, of course, and we're continuously expanding our capacity and NPS history, okay. the worst things are shutting customers down, okay? And fortunately, we haven't happened in the NPS, okay.

And now gets a little -- it gets a little more complicated, okay? We established the last -- from the beginning of the last year, we established our supply management. And this is not only for silicon and we -- and not for semiconductors, including, okay, silicon carbides and gaining nitrides and the materials and we do our modules and all the module components. And so we established that the supply chain management. So I think it's -- and also quality, don't -- okay, it's not everybody can play the game. Every supplier can play the game. These are -- we go through heavy audited. And so their standards, okay, the meet our standard ultimately is a reflect into our margins. And so the short answer is, yes, we are expanding very fast.

Our next question is from Kelsey Chia of Citi Research.

Bernie, congratulations to your retirement. Really appreciate the opportunity to work with you over the past year. So I think on my first question is with regards to the updated guidance for enterprise data. Is there any market share gains assumption there? Or is it just primarily due to this industry growth? -- and also MPS has demonstrated strong execution and historically been share during person supply constraints. So is it fair to assume that MPS could navigate any potential supply constraints and fee and to take share in December [indiscernible] ?

Sure. And I think that I'd be doing a disservice to this conversation if I tried to break it down in the formula that says what share gains or what's new business. And I'd rather sort of respond a little differently, that this is a large market. We talk about the large -- the top 6, 7 customers. And we are fully engaged with them in a strategic manner, where we're developing not just the release of the next generation, but the 1 beyond that.

But this also is end market with a long tail, and we're participating in the mid-market and the small size as well. So we're still very, very early in how this market is going to roll out and what our positioning is going to be. And I think that we're as well positioned as anybody to take advantage of the market opportunity but this is a long and very big story.

Well, the company is -- I'm thinking about beyond AI, beyond enterprise data centers. And you I'm not retiring, I'll say 15 years ahead.

That's great and continue the outperformance. And MPS outlined a gross margin target of 55% to 60%. Could you provide an update with regards to which end markets are currently above or below the corporate average or outline some of the specific gross margin drivers?

We're in the range, but on the low side, I noticed that.

Okay. Let me add a little bit of color there. So Michael said this earlier, when we look at all of the opportunities, we keep in mind what is the corporate model for gross margin, which is between 55% and 60%.

And I've been fairly consistent over the course of the last 4 to 6 quarters when we've been trending it between 55.5% and 55.8%, which as Michael said, is the low end of our model. that in order for us to show improvement, we really need to have a little longer time horizon as far as backlog to be able to manage in it. So we are starting to see a backlog developing, which I don't want to make too much out of 1 quarter's of experience but we should be able to resume at some time during the year, the cadence that we've historically shown of incremental sequential improvements at maybe 10 to 20 basis points quarter-over-quarter.

Our next question is from Jack Egan of Charter Research.

Great. I'll echo the congratulations for Bernie and Rob. I had a bit of a technical one. So during last year's Investor Day, you mentioned a packaging innovation that would allow you to basically double the current density of your modules to about 3-amp per millimeter squared I was just curious, are there any updates on that? Like is that still a work in progress? Or is there kind of a time line for that milestone?

We start sampling those products. And again, we expect to have a shipping in this quarter and next call, -- this call Yes. Those are already implemented already qualified, and our customers were a qualification on it.

Got it. Okay. Great to hear. And then kind of from a higher level then. Last quarter, you talked a bit about the gross margin implications of moving from a silicon supplier to a system provider over the long term I was a bit curious about the impact on OpEx as well. I mean is that going to require you to kind of bring on new teams with experience in systems? Or is there enough overlap between the chip design and system design processes that you can accomplish it organically, I guess, just any details on the impact that R&D dollars or SG&A leverage would be nice.

Well, We need to -- first thing, okay, first, okay, and we only gain not lose, okay? I never believe they get big dollars get investments and translates to the bigger game. Okay, that's a [indiscernible] . And so look at NPS. We're creating a few thousand 4 to 5,000 products, and I was tracking -- we address the multiple second market.

While we can put up all these 1 plus 1 is equals 3, and again, not just the 2 anymore. We can pull all these products put in the systems and we can provide higher values to users which doesn't mean we're building a refrigerated and we being TVs, okay. We're building some things to alleviate our customers' design effort, the manufacturing effort. And that's give us a high ASP. And I said earlier, there was a second [indiscernible] of selling silicon, and, okay, but why we can just put all the silicon together and migrates to system levels like modules and again like system, you will see more and more. So at least, I can say the net margins, net profit had to increase, [indiscernible] to be a company we're going to be a lot more efficient I want to touch on something that.

This transformation has been occurring now for well over 10 years. If you think about, we were pretty much completely an analog design house 10, 12 years ago. And then we've been able to migrate where we added both digital engineers and software engineers. And now we've had to take on new responsibilities and new skill sets related to packaging, and as Michael said, in testing.

And each time we've done this, we've maintained the same level of R&D efficiency of getting the most out of the dollars spent. So just changing to develop new skill sets around the new opportunities we've identified, does not necessarily mean that it's going to get more expensive or it's going to compress our operating margins.

And I'll just have 1 last comment. Even we made the model during Investor Day, Jack, that was fully aware of this transition. And so we talked about growing OpEx slower than revenue, and giving some leverage to the model. We knew this transition was happening when we put that guidance out there.

Our last question is from Sebastian Naji of William Blair.

I'll just echo the best wishes for you, Bernie on your retirement. My first question is really on the shift to vertical power solutions in the data center. As we move to 2026, what are your expectations for adoption of vertical power? And has that changed at all from your view in previous quarters?

That's a long -- that's everybody is going to vertical power I guess, okay. those ones don't get so later, they will.

This is just the direction of the market. It's the only energy-efficient solution you can put in place if you're going to operate in these high-voltage current. So that's just a natural evolution of the marketplace.

Got it. So you think that starts to drive revenue in 2026 then? Is that fair to say?

Yes, yes, yes.

Great. Great. That's helpful. And then maybe just as a follow-up on your optical module business. I think you talked about this a little bit in a previous question. But as we think about the shift to co-packaged optics that's getting a lot more attention these days, how does that potentially change your revenue opportunity in optics. Is it more revenue per port or the ASPs significantly higher? Any thoughts on that?

Higher current high density is always good for us. And we're smart in the increased power, and there's a lot more opportunity for us.

And a higher level of integration.

Yes, high-level integrations. And [indiscernible] The competition gap.

Yes, I think the only thing I'd add there is, again, I think that's, again, very long term. I don't think that necessarily moves the needle on '26, just to be sure, but it's certainly something we're engaged in over the longer term.

This concludes our Q&A session. I would now like to turn the webinar back over to Tony.

I'd like to thank all of you for joining us today on this conference call. Our first quarter 2026 conference call will likely be held in late April. Thank you, and have a great day.

Welcome, everyone, to the MPS Third Quarter 2025 Earnings Webinar. My name is Arthur Lee, and I will be the moderator for this webinar. Joining me today are Michael Hsing, CEO and Founder of MPS; Bernie Blegen, EVP and CFO, and Tony Balow, Vice President of Finance.

Earlier today, along with our earnings announcement, MPS release a written commentary on the results of our operations. Both documents can be found on our website. Before we begin, I'd 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 Q3 2025 earnings release, our Q3 2025 earnings commentary and in our SEC filings, including our Form 10-K, 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 Bernie Blegen.

Thanks, Arthur. Good afternoon, and welcome to our Q3 2025 earnings call. In Q3, MPS achieved record quarterly revenue of $737.2 million, 10.9% higher than the second quarter of 2025 and and 18.9% higher than Q3 of 2024. This performance reflected the ongoing strength of our diversified market strategy, consistent execution continued innovation and relentless customer focus. Let me call out a few highlights from the third quarter. Our diversified market strategy drove year-over-year revenue growth in all of our end markets. We continue to expand our automotive customer base with another major Tier 1 supplier adopting MPS for its next-generation ADAS solution. Additionally, we secured our first design win for a full BMS solution on a robotics platform, which further supports our transformation for being a chip only semiconductor supplier to a full-service silicon-based solutions provider. Overall, we continue to demonstrate our ability to grow and swiftly adapt to all aspects of our business to the fluid geopolitical and macroeconomic environment.

Our proven long-term growth strategy remains intact as MPS focuses on innovation and solving our customers' most challenging problems. We continue to invest in new technology, expand into new markets and to diversify both our end market applications and global supply chain. This will allow us to capture future growth opportunities maintain supply chain stability and quickly adapt to market changes as they occur. I will now open the webinar up for questions.

[Operator Instructions] Our first question is from Josh Buchalter of Cowen.

Congrats on another beat and raise. I guess to start, maybe you're guiding up about 1%. Can you give us the puts and takes of which end markets you expect to grow more or less? And -- of note, I think earlier, you mentioned enterprise data was expected to be flat to down 20%. Any updates to the guidance for that segment in particular?

Sure, Josh. When you look at Q3, I think that we saw a little bit better than anticipated performance in both our enterprise data and industrial markets. We had pretty much every other group was as we anticipated. Looking ahead, and I know that you're interested in enterprise data, we're seeing a layering of additional customers that began this layering effect in Q4 and is providing this good momentum as we look ahead into the early part of next year.

Well, I should add all these in script readout. Bernie mentioned a list of our market segment, they started growing. And we look back in the last few quarters, all these growths have come from the greenfield products that we released 2, 3 years ago. And now we see the result. And so in the near future in the next few quarters, we will see these will continue to enhance our revenues.

Maybe a follow-up on that, Michael. I think you've been pretty clear, like philosophically, you have some reservations and even frustrations with the AI market because of the concentration and visibility. Given all the massive announcements over the last quarter even in that space. Maybe you could spend a couple of minutes talking to us about just big picture philosophically, how you're approaching these huge forecasts. And I'm sure competitive sockets with massive scale how do you guys figure out which opportunities to go after and service and your thoughts on the market just given -- I think you've had frustrations about it distracting from your diversified growth.

Yes. As you said, yes, it is kind of a distraction, okay? But business is business, good money is good money, okay? We don't want to take a bad money. And -- but overall, the bottom line is NPS want to demonstrate in any segment of the market, we are the best, we have possessed the best technology and best customer service. And we're solving problems, we demonstrated that we can have qualities and shipments, okay, all these categories, we are the best company. And in terms of which AI company, we don't really care. We engage with the large companies and the small companies. And we want to demonstrate that this is the best technology. When revenue comes, it comes. And given times and , as we said it, given time, every -- all the true color will show.

Our next question is from Ross Seymore of Deutsche Bank.

I guess for my first question, the automotive side of things. You talked about getting an incremental design win in the ADAS side of things. Can -- there's a lot of choppiness in that end market across different geos and at different points in time, cyclically, geopolitically, all those sorts of things. But from a secular growth perspective, can you just talk about ADAS as a percentage of your revenues now versus user interface or USB and those sorts of things? And how ADAS penetrating more of that market changes the growth rate, the content, the diversity of it. Just kind of want to capture that ADAS theme and what it really means to you.

Sure. Why don't I take a start at this. So I think that we've demonstrated a history of establishing a strong presence in various markets with differentiated technology. You might recall going back ways USB ports for automotive. And now it's ADAS. And what this does is it has a cascading effect where we're able to get adoptions and the design wins, and we call out when these begin to ramp. And that's actually been more important to us then the -- necessarily the -- what the SAAR is for a particular end market. And in this one, in particular, we have started with a lot of ADAS opportunities, particularly in the EVs because they're faster to come to market. But what that's given us the opportunity has been is to showcase all of our other technologies and now we're starting to see those ramp, whether it's in body electronics or different applications. What we're more excited about is as we look ahead and the transformation of the end market for automotive as it moves into 48-volt and zonal electronics.

Yes, we don't know the breakdown, okay, to answer your question exactly. I mean maybe Bernie has some ideas in the game, I think it's less than half. And I think of the wellness in half.

It's considered less than half.

Yes, yes, yes. Okay. And I'm just looking at the number of cars and also our revenues, and it cannot be more than half. I can miss set in the ADAS side, more and more cars and including a combustion engine cars, they are adopting ADAS. We will see a significant growth in the next few years. That's where we anticipated, okay.

I guess as my follow-up, pivoting to another thing you talked about in your press release of moving from a silicon -- chip-based supplier to more of a solution provider, how do you think about the gross margin implications of that over time? You guys were a few points higher than you are now a couple of years ago. We've talked about what does it take to get you back to kind of the upper 50s from the mid-50s-ish where you are today. Does that system approach help? Or is that actually a headwind in the gross margin as you go forward as much as it might even be operating margin accretive?

I don't think there will be a headwind and a lot of the large systems that we're building, okay, we're kind of learning how to do it. And it is creating a lot of issues. And once the volume goes up. And so we are learning. And I think as things get a lot better since last year, I guess, okay? I mean -- and it will improve quite a bit. We actually making our own tested equipment as a lot of people know about it, okay. We eat our own dog food and creating the all fully automated test systems, those type of products have never existed before. And I think ultimately, we'll improve the yield and improve the gross margins.

Our next question is from Joe Quatrochi of Wells Fargo.

Maybe first, I just wanted to ask embedded within the 4Q guide, is there any help you can kind of provide on just thinking about the end markets I think there's some seasonality to maybe like a consumer in the fourth quarter. And then I think enterprise data you guys were previously thinking that would be up somewhere like high single digit sequentially in the December quarter. Is that still the case?

Okay, to anticipating a market, that's a very difficult card and you guys are betting on which stocks, okay? I mean, it's difficult, okay. But we have our way of operating our business. We do the best. We do the best developer technology, engage our customers closely and probably the same way that you pick -- how you pick the stocks, okay? And so you engage customers closely. Whatever happens and you can't predict what the market is. And we don't do that actually.

And if I could just add to that, that since we last talked about the second half of this year, nothing has fundamentally changed in our positioning.

Okay. That's helpful. Maybe just also following up, but I think in the press release or your prepared remarks, you had a comment around the first design win for a full BMS solution for robotics platform. Can you talk about what drove that and how you think about the revenue opportunity ramping there and more wins in the future?

We probably get too excited to talk about those. I mean in -- the fact is that we got excited is because we see robotics that's happening, okay, they kind of -- we kind of predicted it that's the BMS going to happen, okay. And we got in and we're designing and it's our customers engage with us, okay, there's a ground-up system that we developed. And we see more and more this type of a system what happened. So now this kind of system will be become a reality, and that's the reason we put out there to look.

Yes. And I'll just add on very specifically on that one. Clearly, we called it out because of the fact it was the first opportunity that we have the design went on. In terms of a revenue ramp, that's really starting in 2026 and it's not in and of itself a necessary needle move around the model. But I do think it starts the wave of these full solution design wins that we might have going forward.

Yes. That's kind of the same time making a point that is, okay, we do start to do robotics for actuators and the IC for actuators and BMS, charging, wireless chargings. And these are back a few years ago. We even don't know to the robotics were taking off, okay? I've been talking about robotics since 2017 or '18. And -- but the AR assist robot are more and more believe, okay, that will really start taking off and so that's kind of a project that we think is, oh, we pick the winners, okay? And we're glad to see it. And again, that's why we're probably too excited to talk about this.

Our next question is from Quinn Bolton of Needham.

Congratulations, Michael, Berne and Tony. I just wanted to start with a big picture question, just looking through this earnings season. Intel has talked about sort of shortages of server CPUs, we've seen hyperscalers significantly increasing CapEx. NVIDIA talked about $0.5 trillion of demand in '25, '26. I guess my question is, about a year ago, I think you guys were seeing very, very short lead times in that business. and dealing with some level of pricing pressure. I'm wondering if you're looking at the second half and more importantly into next year, have you started to see any change in customer lead times? Are they giving you better forecasts across the enterprise data segment? And is the pricing on voltage regulators and vertical power, has that changed at all over the last quarter or so?

Quinn, thanks for the question. Let me start that this remains a very dynamic market. We're responding to a variety of requests when it comes to the orders and the expectations from our customers. So in some ways, we're getting improved predictability because we're adding we're layering, as I said, more customers into the mix. But as far as the market itself, and particularly with all the blockbuster announcements that have been coming out recently, you can see how quickly things are changing. And what our position is, is that we can't control our customers necessarily, but we can position the company to be as responsive as we can.

And is this sort of dynamic market? I mean if folks are scrambling sort of to get capacity. Has that had any lifting effect on pricing? And then I'll ask my second question.

Any market segment started from the ramp rapidly at the beginning always cause these imbalance, okay? Supply imbalance, okay? I mean -- so in the AI side, clearly, like that, okay. I mean once it goes on and okay, things will smooth out.

Yes. And then being specific to your question, I don't think we've seen any recent or sustainable trends in pricing one way or the other.

Okay. Perfect. And then a second question for you Bernie. Gross margins have been sort of on a sort of ticking down over the last year, can you give us any sense, do you think they sort of stay in this mid 55%, 55.5% range. Is there some point next year that you start to see gross margins starting to move higher, either driven by mix or new products? Or should we be thinking about margins being fairly flat over the next year or 2?

Sure. As I've commented on prior calls, we've seen about 3 or 4 quarters in a row, where I'd say that we have seen a strong uptick in demand, and that continues even today. What makes this cycle different than ones that we've experienced in the past is that the orders are more short term in nature. We're not seeing a large buildup in backlog in future quarters. And so without that visibility, it limits our capacity to be able to manage the mix of business that we want to be able to have expansion in gross margins. So for the foreseeable future, until the demand profile changes to elongate the buildup I believe that we're going to be in sort of the steady range, plus or minus 20, 30 basis points in the mid-55.

We have a lot of products, okay, a few thousand products, okay? And a few 40,000, 50,000 customers in to move -- and it's very stable margins. And with the transitions to more solution provided companies, okay, as I said earlier, and all this has to be automated in them, okay? And as time goes on and the margin will improve and -- but not quickly and that mass is very big. And so we know it's operated on the low end of our margin profiles. But the longer term will improve and we stick with a gross margin range.

Our next question is from Tore Svanberg of Stifel.

Yes. Michael, Bernie, Tony, congrats on another record quarter. By the way, some of that dog food, you're referring that must be pretty proprietary stuff. But my first question is on the Enterprise Data segment. So that's about an $800 million business right now. And my understanding is you're on a journey here, right, and you're still selling predominantly chips. You are obviously moving into module subsystems, eventually systems. So I'm not looking for any numbers per se, but could you just sort of let us know where we are in that journey. I mean building an $800 million of business with chips and where could we eventually go here with, obviously, more and more subsystem top solutions for enterprise data.

If I understood your question correct, [indiscernible], okay, I can answer that was we're anticipating building millions of millions, multiple millions units per month type of a shipment. And all these integrated, highly integrated modules never existed before. So how do we test this thing, how we achieve the single -- low single-digit PPM failures, okay? That is we never encounter that kind of issues before, okay. And so we started using our own robotic systems to make that happen. So now we achieved very high volume, 100% automated, including reliability test. And that's our features. And the goal is building multiple million units a month for that. 10 million a month for that. That's the near term goal.

Yes, that's very helpful. And did you also have a response to my question on the enterprise data again, where are we in this journey towards delivering more system-level solutions, especially talking about rack level power and so on and so forth.

This is at the very beginning, maybe I think it's a module power skills and less than [indiscernible] less than 1/3, okay? And less than 1/3 of our revenue and it grew in the last half year. And the -- we expected it to grow some got delayed and now started happening in the next year could be much more.

Maybe just to add on to the back of that, Tore, I think as you start talking about some of these solutions for 800 volts as we discussed, those are like 2728 revenue ramps. So I think it supports what Michael was saying that we're still at the front end of this opportunity in the data center for us.

No, I think in the investment communities, okay, it's -- if you have 800 volts technology data center transformer is like with, the life turns turn. It's not like that, okay, like to, it takes a couple of years, okay, more than a couple of years to make -- to see the revenues, okay. These take us 3, 4 years.

Our next question is from Rick Schafer of Oppenheimer.

And I'll have my congratulations to you guys. Just maybe if I could start with an auto question. Kind of a follow-up, but I know we talked about BMS robotics. But I know BMS becomes a bigger contributor for your auto segment next year. And you mentioned a couple of things, Michael, in an earlier question, but I'm just curious if you could give some guide rails or provide some guide rails about potential content trends for NPS as you start ramping some of those BMS opportunities? I mean again, not asking for dollar content per car, but does it double or triple those kinds of numbers, like what does it do to your potential content per vehicle moving into that VMS space in a more meaningful way?

And as part of your answer, I'm curious, here where some of the lowest-hanging fruit is for you guys? I mean, is it 48-volt, is it power solution, that kind of thing?

It's actually all of them, okay, BMS revenues for auto and for EVs and it's a bit far away, okay? And -- but our customer, it's a very -- this is a very concentrated market. There's a few players and a few, well it's not a few car makers and gradually, all of them, they have -- they want to BMS. And so our customers are glad to see NPS is to develop that series of that type of a product, too. And in terms of other low-hanging foods, okay, we see 48-volts as a trait. And we develop those products back a few years ago, like 5, 6 years ago, and we provide all these integrated solutions rather than these discrete ones, okay? And the size can be 6, 7x smaller and the other one is the 800 volts for EV and announce and okay, all goes up from 400 volts to 800 volts, okay?

And in the China market, a lot of cars already have 800 volts. So our silicon carbide solutions came in not for traction inverters and for control systems, these products will be shied and so that's -- I called out in my head at this moment.

And Rick, maybe just shape you a little bit on timing there to make sure. I think what we said is the layering of opportunities in auto really sort of out of the end of this year and next year starts with design wins that we have, bringing new content to market per vehicle. You start to see zonal designs market next year then ramping through into -- and then the BMS and traction inverter solutions they're really kind of more like 27% and beyond, just to make sure you understand sort of how those revenue opportunities are layering in.

And if I could ask my follow-up just is on HVDC. And I appreciate the timing and commentary you provided in a second ago, Tony. But I'm also curious, I mean, I'm just trying to figure out the right way to think about that emerging market. I mean, like can you give a sense of how HVA compares to sort of how you've described at your Analyst Day earlier this year. Maybe how you describe the 48-volt accelerator power opportunities or any terms or bond just to try to give a sense of what that market represents to you guys or what you think it could.

I think it's a 48-volt system is clear. And okay, there's a reason why the 48 volts, okay, it's going back to those telecom times, okay? And telecom systems, again, a 40 volts olds plus/minus 40 old, okay, in or plus or minus 45 volts. And First, to start with -- in the server side, okay, we talked about for years, this thing okay. And it has to be the solutions because once you current goes up, everybody remembers the car using 6 volts batteries and okay, then it became 12, okay, is ultimately okay, moving up to 48 volts. I mean these are all for control systems for the. And the data center is already happening 48 volts, I see that's why I predict all the building systems, all the building automations are going to be on 48 volts. And the building will be a DC power solutions. And so the opportunity is great. And as we put out to engage our customers with building automation systems, and we proved the point, actually, it's so welcome for that type of a product. And so that's came at this time and Rick,

I think part of your question was also on the 800-volt voltage DC for data center as well, right? And I think on that one, we've been pretty careful about trying to go size the opportunity because, one, it's very far out. Two, we don't know how it will ramp in the market. I think what we have said is since we don't play in that part of the market today, the business we get is sort of all accretive to our overall SAM going forward. But I think we want to be careful about size in the market yet, given how far out it is and not knowing how we will layer into the data centers going forward.

Our next question is from Gary Mobley of Luke Capital.

Let me extend my congratulations on the continued strong growth and been execution. I appreciate the fact that you still only have about 3 to 4 months of visibility given the capacity that you can support and the quick turns business you can support. But can you confirm whether bookings continue to improve sequentially in what are the seasonal considerations as we look out into the first quarter?

It's great. It's very difficult for us, okay, to predict that, okay, what's the booking, what's -- where are the bookings. We built our inventories. We try to build it, okay, look at the inventory now, we try to build up okay way below our models. And whatever comes we anticipate, again, we can swiftly to adopt -- just to add to that is that.

We really don't have a lot of visibility into the first half of next year. We can definitely point to the normal drivers as far as both enterprise data and automotive are very well positioned for new revenue ramps, but getting both the timing as well as getting that to balance out. We don't have a strong view on Q1 yet.

Okay. Appreciate that. And if I'm not mistaken, your distribution inventory as of midyear was at the low end of your 5- to 8-week target range and it decreased in the June quarter. What was the trend sequentially for the September quarter? And when might you take that distribution inventory back up to maybe the mid- to upper part of that normal range?

Yes. Currently, the Q3 channel inventory was unchanged in terms of days from where it was in the prior quarter. So we take from that, that we're satisfying real demand at this point, which again is a reflection of the quick turns business that we're working with.

Our next question is from Chris Caso of Wolfe Research.

Yes. The first question is on enterprise data. And what are sort of the puts and takes as you look into next year? And of course, this year, there was some changes in market share in that, which affected that business. But I guess I'm going to assume that things are cleaner as you go from this year into next year? And I mean, one, do you expect to grow that business as you go into next year?

You say that this year, the next year, this year is okay. We are doing pretty good this year. So I gave in -- see, we -- and as I said earlier, the module business is growing again. So all these -- this area, NPS technology shines and the power -- the higher power, the better it is. And because we provide the highest density, power density products that fits this market perfectly. And in the next couple of years, you will see it. NPS is a major player in this market segment. And also, the market is big. We it's not -- we don't want to place, we don't have a NPS only, okay? You want to have multiple competitors. It's good for the industry.

Yes, I could see enterprise data growing in the range of 30% to 40% in 2026 for us. Much of that, though, would be back in the second half of the year. So while we've seen a number of new players that have been layered in, I think the material ramps are more weighted to the second half of '26.

That's very helpful. If I could follow on to that since you provided a little bit of color on that, Bernie. When you look at that 30% to 40% growth -- is that -- because I know that some of the vertical power of designs, for example, you have more content. What's the driver of that? Is it fairly broad-based? Is it skewed towards some of the ASIC solutions more towards vertical power, whatever kind of color you can give behind that 30% to 40% expectation?

As a CEO, I don't know how to make a 30% to 40% cost, okay? I don't know it's okay. So opportunities are there, okay? If we didn't deliver 30% to 40%, the stocks are seen from $900 to $400, okay? That what kind of [indiscernible] is that, okay? And so I don't want to make them very hard just waiting for the numbers. Let the numbers show.

Our next question is from Kelsey Chia of Citi Research.

Micheal and Bernie, so my question is on the competitive landscape. And I was hoping if you could share more, especially with regards to material side of things like glum nitrides, silicon carbide, I think your biggest enterprise that customer has been signing a lot of partnerships with all these semiconductor companies and I was just wondering, MPS positioning in those. And if you actually see those materials as being important in the next generation of the power modules and chips.

We do our own silicon carbide and we're building on modules. And also, we are seeing -- we are using a gain, okay. And -- but that's a very, very early stage we are evaluating it. And also, don't forget about silicon, silicon power MOSFETs, okay, have the evolved. We engaged a lot of new development. And a lot of the data showed it can be very cost effective and also can compete with the silicon carbide. That's very new -- that's a very, very recent development.

Yes. Okay. Got it. And I would just like to have a sense of how do you guys feel today versus a quarter ago. Especially, you guys have come a long way since the start of the year when you're dealing with all these market share changes, visibility on the ASIC customers and things like that. And given the slew of announcements from all these big mega partnerships, how do you see that relative to opportunities? And also given the maturity of the supply chain, I believe, like things are probably -- the supply chain partners are getting to a good cadence. So how do you guys feel with regard to those recent announcements relative to your opportunity set?

I don't measure quarterly quarters, I measure by multiple years. So I can't tell you that.

I guess the simplest way is we're very broadly indexed across not just the merchant vendors or large ASICs, but medium and small time opportunities. And all of these need to find their way into the marketplace. And it's right now, we're still very, very early in the process. So as Michael said, it's very hard to sort out in any particular time period. But I think that we're as well indexed amongst all the opportunities as anybody in this market.

Our last question is from Jack Egan of Charter Equity Research.

I have one on enterprise data and then one on modules more broadly. So the shift to modules in vertical power delivery with the custom ASIC ramp should be a pretty big tailwind for I'm kind of wondering about what the main drivers have been at least so far for those customers that are switching from lateral to module the vertical power. So I'm not really sure if you have this level of granularity, but among the major benefits like higher power density, higher efficiency, smaller footprint on the top side of the board, et cetera. Is there any one characteristic that's kind of being cited by your customers as the main reason that they are moving to those modules or vertical power delivery.

Well, we don't see from a chip to module. Whoever stays the module state the model starts with the module, whoever says the chip stay with the chip, okay? And so the NPS provides both, okay, in both chip solutions and module solutions. And at this time okay? And so I don't know if it answered that question for you.

Got it. Okay. And then just kind of on the modules more broadly. I think I believe, if I understood it correctly, last quarter, you mentioned is that modules outside enterprise data could be like 10% to 15% of of your total revenues. And so I was curious how much of your revenue base or I guess, addressable market outside enterprise data would be eligible for switching to modules. I mean, even if you're looking several years into the future, how high could that mix of modules outside enterprise data go?

That's a good question, okay. And we want to -- we build those modules and again, very similar to enterprise modules, okay? And since 2017 in industrial markets adopting adoption is kind of slow, actually faster than telecom, okay. And these are 2 market segments that we focus on. And then to our surprise the auto industry also want to use it because it's easy to implement. And so -- they don't want the semi equipment. And that's a large segment, we didn't realize that okay? I mean now we see all these revenues are happening there. So I think that in the next couple of years, it will be growing faster than 3 or 4 years ago. And so we're picking up a business -- the rate of increase is picking up.

This concludes our Q&A session. I would now like to turn the weak over to Bernie.

I'd like to thank you for all joining us in this conference call. I look forward to talking to you again during our fourth quarter 2025 conference call, which will likely be held in early February. Thank you, and have a nice day.