Monolithic Power Systems, Inc.

Good day and thank you for standing by. Welcome to Monolithic Power Systems, Inc.'s second quarter earnings conference call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising that your hand is raised. 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, NPS released a written commentary on the results of its operations for the second quarter and the June 30th, 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 risk and uncertainties. The risk, uncertainties, and other factors that could cause actual results to differ from these forward-looking statements are identified in the safe harbor statements contained in the Q2 2026 earnings commentary and in our SEC filings, including our Forms 10-K and Forms 10-Q, which can be found on our website. Our statements are made as of today, and we assume no obligation to update this information. Now, I would like to turn the call over to Tony.

Thanks, Arthur. Good afternoon and welcome to our Q2 2026 earnings call. In Q2, MPS achieved record quarterly revenue of $981 million, 22% higher than the first quarter of 2026 and 48% higher than the second quarter of 2025. Our performance was a result of our continued innovation, our consistent execution, and the resilience of our diversified market strategy. Let me take a moment to call out a few of the highlights from the quarter. All-in markets grew sequentially, with enterprise data growing 45% as we continued to see strong broad-based ordering patterns. We extended our capacity goals 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 SAN into next year. We began sampling high voltage AC to DC products for 800 volt data center architectures as we expand beyond our current AI and server core power solutions. And finally, in our automotive market, so far this year, we have shipped products for over 1,500 new sockets as we increase our footprint in both ADAS as well as in other applications within the vehicle. Overall, while we continue to adjust for the fluid geopolitical and macroeconomic environment, Our diversified market strategy remains unchanged. MPS focuses on innovation and solving our customers most challenging problems. We consistently invest in new technologies that open new end markets and applications and accelerate our transition from chip only to a full service silicon solution based provider. And finally, we continuously expand and diversify our global supply chain, allowing us to capture future growth opportunities, maintain supply stability, and rapidly adapt to market changes as they occur. Before moving to Q&A, I am also pleased to announce that our board of directors has authorized an additional $500 million for stock repurchases, increasing our total current authorization to $1 billion. Operator, you may now open the webinar for questions.

Ladies and gentlemen, to ask a question at this time, you will need to press Star 1-1 on your telephone and wait for your name to be announced. Please stand by while we compile the Q&A roster. And our first question coming from the line of Rick Schaefer with Oppenheimer, Yolanda Snowden.

Thank you, and congrats on the feat you guys. I guess I don't have to ask about capacity, Tony. Communications was up 80%. I think last quarter it was up about 50% of memory serves. So that's a pretty big step up. You know, I'm just curious, is that mostly transceiver power or are you seeing meaningful contribution now from the other, you know, the other sockets of Switch, DPU, SmartNIC? I mean, does that kick in? Is that helping drive that? And then any call you can give on how the second half sets up. I mean, does that momentum continue to grow into 3Q?

Yeah, we see a lot of growth and a lot of demand. Modules, chips, and we see from multiple of our customers Tony, you want to have the detail?

Yeah, 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, NIC cards, and other things in the rack. So you're starting to see that grow as well. Optical is still the bigger portion just because it's had a longer runway since last year, but you are seeing growth from both of those really driving the comms on market.

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

Thanks. It's more than a couple of customers, okay? And we see new customers who are coming online, so, okay, we start to ship.

Yeah, 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.

Thanks, you guys.

Thank you. Our next question in queue, coming from the line of Joshua Buckalter with TD Cowan, New Orleans Mountain.

Hey, guys. Thank you for taking my question, and let me echo the congrats on the fantastic results. Maybe to start, I mean, you gained nearly $120 million in the enterprise data segment in one quarter, which is pretty astounding. Can you walk through the drivers of that upside and growth? And I think importantly, you know, you had the inventory dynamics play out a couple years ago. Can you speak to, you know, your confidence that there's no inventory building here and, you know, the overall visibility in that segment? Thank you.

Thanks for remembering the last couple of years. We have all these shortages in the industry we pulled off. Okay. Thanks for remembering that. We will continue to. There's no reason not to believe we will not pull it off. Although it is very difficult. Okay. But we're going to make it happen.

Yeah, and I'll just add, if you look at kind of the underlying growth drivers for that particular end market, they really haven't changed from what we've talked about. You know, we've talked about ramping existing customers, ramping new customers, seeing the module content increase per its question previously, seeing platform refreshes that drive content, and then, of course, CPU. And we saw all that be very, very strong in Q2. And I think since, you know, you're kind of talking about the sustainability of that, There's probably a couple of different ways, additional Michael said, at least 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, you know, we're willing to raise the floor for that particular end market from 85% for the year to 130% for the year. Yeah, I want to add

in this enterprise data centers and then it's relatively new. And we start to see these significant business about six, about two, three years ago, three 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.

Thank you both for all the color. I will, you know, take the hint and not ask about AI servers again. You know, that said, I guess, you know.

Thank you very much.

Thank you. I know your policies, Michael. You know, great to see the initial orders for the DDR5 high-speed interface controller. You know, you mentioned that could be SAM expansive. Can you maybe help us with how much? And, you know, 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? Thank you.

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

Yeah, in terms of the second part of your question, which was how expansive it could be, I'd still say we're very much early innings. We want to prove ourselves in this particular market. So I think it's too early for us to call any kind of revenue ramp on our side. We're just signaling that we continue to run our playbook and look for new sockets out there that can expand overall, Sam, over time.

But in the history, when we're mentioning something, it will bring in total revenue.

Thank you both, and congratulations again.

Thank you. Our next question in queue, coming from the line of Tori Sandberg with Stiefel, Yolanda Smallfin.

Yes, thank you. And 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, you know, give us some color on each segment into Q3.

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

Now I'll just add a little bit. I think the story is going to feel pretty similar. You're certainly being led by the data-centric businesses with enterprise data and comms, of course, leading the pack. I think industrials could grow a little bit with the market, but again, we primarily said that's a design win type year for us this year where we continue to pile up additional sockets that will turn into revenue in the future. I think the areas that we're cautious on are the ones Michael had pointed out, and then we said this last quarter as well. consumer being one. And then I think the notebook side of storage and compute will continue to remain cautious on that one as we go into the second half.

Yeah, that's great, Colin.

As a follow-up, you mentioned you're now sampling the 800-volt solution. When should we expect to see some revenues from Electric Power there? And are these products based on silicon, GAN, and silicon carbide, or is it one or the other? Thanks.

We are, we have a, we have a, or in the past, Tori, you know, and I'll openly say I don't believe gangs, and okay, now I think it's approved, I'm wrong, but it's up to a point where we can't ignore a gang. And we, since last year, we developed our own gang, and we have a working device. and in terms of an 800-volt solution, now we totally rely on NPS's own silicon-carbide device. And revenue-wise, probably you will know or the market will know where the data center transition happened. When that happens, we will have a revenue. In terms of the wins, we know as much as you know.

Great. Thank you very much. Congrats again. Okay.

Thank you. Our next question coming from the line-up, Williamson with Truth Security, CLN is now open.

Great. Thanks for taking my question. 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?

Yeah, I know what you mean, whether we increase the price or not. And we don't, NPS never gouges price when the supply chain is tight. And we want to build a consistent model or we execute consistently within within our models. And when the supply chain is tight and raised price, how about the way oversupply, the way we reduce price? We don't. And we're operating consistent weight. And our customers appreciate that. So in terms of whether due to the price increase, definitely not. It's all product.

Yeah, 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 one of three areas in general, right? Where we've seen input costs go up to make sure that we don't get diluted on the margin line, where people are asking for expedites, because obviously that can influence our own supply chain. And then finally, where people might be asking for specific supply chains outside of China, which can be naturally more expensive. So will 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 two emerging markets?

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

Thank you.

Thank you. Our next question in the queue coming from the line of Quinn Bolton with Needham & Company. Your line is now open.

Hey guys, I'll offer my congratulations as well. Tony or Michael, just wanted to come back to the optical transceiver part of the business since I think that's the biggest part of comms. Can you just sort of discuss what you're seeing on the competitive landscape? Is the competition mostly PMX? 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. Over the last few years, we talk about power modules. I think you realized those very early on. It's more than five years ago now. We have these... Power Modules, and very high power density modules. And these are encapsulated modules. And since we have highest power density ICs, and we integrate, fully integrate it into these modules with the inductors, and with all the capacitors, it's a total power solution, plug-in power solutions in a very small form factor. And I said with 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 I know we provide the best power density, we will win all these markets. and including optical modules.

As far as the share comment goes, obviously we want to 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 that of both the town growth and share, I think it can absolutely be a primary growth driver in the con 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.

Yeah, I think in 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 comp 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, you know, in the past, I think when you went from $2 billion to $4 billion, you talked about the incremental growth Thank you for joining us.

depending on our customers' requirements, at this time, wherever all we need, it goes. And wherever we can provide a product, they will buy it. 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 You know, when you just quote 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 business, but also the back end part of the business. Because as Michael's 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 them on geographically balanced way, that goes for both the front end and the back end.

Understood. Thank you.

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

Thank you. Our next question coming from the line of Joka Troche with Wells Fargo. Your line is now open.

Thanks for taking the questions. 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 year-to-date. Just how we should think about the revenue from those new wins as well.

Yeah, I think the year's still playing out pretty much as expected. And just to repeat what we 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'll land 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 one or two customers for what Michael was talking about in sort of diversification that we look for in all of our end markets right now. We called out the 1500 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 it broadening out in the portfolio for other sockets in the vehicle.

Yeah, these are what we focus on. These are ZONOs, the 48 volt systems, and also we'll address the battery side, okay? And LiDAR, and so these are the emerging market and emerging requirements from automotive. I think in the next few years, they all will be in the car and will be very popular on the market and I always see NPS revenue growth. Thanks for that.

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?

We are sampling. We are still developing a lot of new product. And this is very new to us. and we're confident that we'll be turning to revenue, although we have some revenue now.

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

Yeah, thank you.

Thank you. Our next question coming from the lineup, Chris Casel with Wolf Research, Ilana Sullivan.

Yes, thank you. Good evening. 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, and that market is heating up because of the Gentix 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? Yeah, 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 and many more. Thank you. to parse them specifically. But if we start to see some of the forecasts come to play that you've seen from some of those in 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 wins in that race, we think we can participate.

I think I answered your question one time in terms of the okay what is the percentage at the time in the CPU side we want to get in the CPU market market segment I think though I was asked to know what the uh uh sharing uh market shares um we want to be okay I I mentioned it in the earnings class that if it's lower than a 30 percent I call it a failure. Okay. I think that we're comfortably saying now that we're past that. And that's where the good position we are in now. Okay. And we'll continue that.

Thank you for that. As a follow up, maybe a bit of a longer term question. And, you know, maybe as we look out, you know, say over the next, you know, two years, two plus years, Do you still expect that 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 picks and the shovels and the blue jeans. And as long as we're making the best of it, we will win those segments. So we are not really a gold diggers out there to find out the empty mountains. But we don't do that kind of things. And we just provide the basic, the best elements for other people to succeed at that. And one time, our motive was big. And other times, the consumer was big. We let our customers, we let the market demand to decide that. As long as we focus on the fundamental development, I think that we will win in the very long term. And a clear example was a couple of years ago, the AI go sideways or enterprise data go went sideways, even dropped it slightly. And that year, all the other businesses grew tremendously, including automotive. And that's exactly what we want to see. And we want to provide to our investors a very consistent way of growing NPS.

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

Thank you.

Thank you. Our next question coming from the line-up, Kelsey Cho with Citi. Your line is now open.

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

Yeah, 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 to answer the first part of your question and the visibility, again, the longer term ordering patterns that we saw begin even late last year have really maintained. And our book to build this cycle was, again, well above one. So we do have more than a quarter type visibility like we were dealing with maybe midway through 2025. That doesn't mean we necessarily have visibility all the way out to the end of the 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 2027 is still structurally very sound, but I think it's too early to put a number on it.

Well, here is the true demand is determined by the market. And we don't want our customers to end up in a lot of wasteful inventories. At the same time, we will watch us. Our own inventory, we will end up a lot of inventory we cannot sell. So we clearly balance that. What is the forecast? We don't do, even though we have an NCNR, and we don't shovel into our customer's throat. There's a bad relationship, and our relationship is very long-term, and so it cannot... Although the order booking is very good, as Tony said it, okay, but we don't see the business in that way. And we do things 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 lending somewhat below your long-term OPEX guidance right now.

Well, we're in the models. We're still in the models, although in the low end. I said I'll be happier when we're higher. I said I wasn't happy. And look at this. We focus on growing the revenue and growing the net profit. EPS. That's the key reason. The other one is that nobody want us to have a high growth margin, but less of a lack of a growth. Okay. Nobody want want us to do that. And our shareholders doesn't want us to do that. Certainly. And okay. And so we focus on this. It will be a growth margin. I said it. Okay. And We will figure it out, and we will go higher. So in the near future, we'll probably stay similar, but maybe slightly higher.

Hi, Kelsey.

This is Rob.

I'll add to what Michael was saying, and I'll add on to what Tony was saying about the strong order levels, which continued into Q2, gave 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 Kelsey, 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 pull through to operating margin. And I think just a pretty healthy expansion operating margin over the past couple of quarters.

Got it. Thank you. Thank you. Our last questioner will come from the line of with William Blair. Your line is now open.

Yeah, thanks for taking the questions and 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 a 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 pulled to the data center, all of enterprise data, and then Remember, inside of storage, you really kind of have three big sub-buckets, DDR5, HTD, and STD. HTD and STD, I think, over time, are becoming increasingly enterprise-focused, whereas at one point, they might have been more consumer-based. So we haven't broken out storage and compute versus notebook in there, but I think you're picking the right components as you look at those things that could ride some of the healthy demand pulled 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 any of that on newer node processes like 40 nanometer, or is that mostly on existing 65 nanometer solutions?

I think it's mostly the existing. We're talking about sometimes from now on, we have the increase in the capacity. Again, Tony said that. This is not only about the silicon and the wafers. We're building a lot more. We're building systems. And that changes the complexity by silicon only. We have been on this journey since 2017. And all the procurement, vendor qualification, component qualifications where it became a mature. And now we have 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, and the qualified vendors. In the silicon side, we have a lot of experience. You move up to a system, how you assemble all these systems, and how you qualified all these vendors. And how you're going to take the yield loss is in completely different models that we have to operate on. And we have become, I would say that we've become a lot more mature. And there's a lot more room to go, a lot more improvement to go.

Got it. Great. Thank you so much.

Thank you. and I'm sure 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. Thank you all for joining us for the conference call today. 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 this conference call. Thank you for your participation and you may now disconnect.