Monolithic Power Systems, Inc. (MPWR) | The Buildout — AI Infrastructure
The Verdict
Monolithic Power Systems is a fabless designer of high-performance power electronics. It sells chips and increasingly complete power modules and integrated systems that convert and deliver power inside servers, AI accelerators, networking gear, and other electronics. In the AI buildout, MPS sits at multiple nodes of the rack power tree: core processor and accelerator power, 48V modules, optical and switch power, memory power, and early 800V front-end conversion. Management describes a transition from a chips-only supplier to a full-service, silicon-based solution provider.
| Market Cap | — |
| Revenue (TTM) | $3.3B |
| Revenue Growth | +28.7% |
| EBITDA Margin (TTM) | 30.0% |
| Net Cash | $1.4B |
| Earnings Beats | 7 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Enterprise Data FY2026 growth floor raised four times in roughly six months, from 30–40% to ~130% YoY.
- Q2 2026 revenue reached a record $981M, up 22% QoQ and 48% YoY, with all end markets growing sequentially.
- Book-to-bill stayed 'well above 1' in Q2 and distribution-channel inventory remained 'very low,' according to management.
- Capacity goals moved from $4B achieved to $6B and then 'significantly beyond $6 billion,' with deposits against assembly and wafer supply.
- Product milestones: DDR5 high-speed interface reached initial orders, 800V AC-DC began sampling, and 48V modules ship to more than a couple of customers.
What We’re Watching
- Management has not addressed the externally documented Nvidia cancellation claim or law-firm investigations on either recent call.
- Gross margin is guided only 'just slightly' higher in Q3, with management flagging strong H2 headwinds.
- Internal inventory rose $54.5M in Q1 to $619.2M, with days of inventory up 4 to 157; channel inventory remains 'very low' by management's account.
- Automotive is roughly flat in H1 and relies on a second-half ramp to reach mid-teens FY2026 growth.
The operating thesis is strengthening: record revenue, sequential growth across all end markets, repeated enterprise-data guide raises, and capacity expansion ahead of demand all align. But the external Nvidia cancellation report remains unaddressed, and management's 'no concentrated customers' comment conflicts with the documented third-party claim that Nvidia is its largest customer. The open question is whether the company can hold the raised enterprise-data floor while resolving that customer-relationship overhang.
Earnings Beat
Q2 2026 revenue reached $981M, up 22% sequentially and 48% year over year, $71M above the top end of the guided $890–910M range. All end markets grew sequentially, with enterprise data up 45% sequentially. Exact Q2 gross margin was not separately disclosed in the supplied material.
| Metric | Q2 FY2026 | Q1 FY2026 | Q2 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $981M | $804M | $665M | +47.5% |
| Gross margin | 55.2% | 55.3% | 55.1% | +10bps |
| EBITDA | $304M | $256M | $178M | +70.8% |
| EPS | $5.22 | $3.93 | $2.79 | +87.4% |
| Enterprise data sequential growth | +45% | +12.6% | n/a | — |
In Q2, MPS achieved record quarterly revenue of $981 million 22% higher than the first quarter of 26 and 48% higher than the second quarter of 25.— Tony Balow, July 30, 2026
Management tone: On the Q2 call, management shifted into a directly confident, founder-led register: Michael Hsing made declarative statements about power density and CPU share, while Tony Balow anchored guidance to backlog. Robert Dean spoke more substantively on gross margin after being largely quiet on the prior call.
Management Guidance
Management raised the FY2026 enterprise data growth floor to ~130% YoY from ~85%, guided communications above the corporate average for 2026, reaffirmed automotive at mid-teens YoY, and said Q3 gross margin should increase incrementally again while staying at the low end of the model. Capacity goals were extended 'significantly beyond $6 billion.'
Trajectory
Revenue is accelerating: $737M (+10.9% QoQ), $751M (+1.9%), $804M (+7.1%), then $981M (+21.9%) over the four most recent quarters. The driver is enterprise data, which grew 12.6% sequentially in Q1 and 45% sequentially in Q2. Gross margin has stayed broadly stable around 55% while operating and EBITDA margins are expanding on operating leverage; management still describes margin as at the low end of its model and flags second-half gross-margin headwinds.
The Model
The model projects FY+1 revenue of $3,700M and EBITDA of $1,206M, a 32.6% EBITDA margin. FY+2 steps to $4,700M of revenue and $1,593M of EBITDA, a 33.9% margin. The near-term anchor is the current data-center-led revenue acceleration; the FY+2 case carries the step-up forward with modest EBITDA-margin expansion.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $2.8B | $3.7B | $4.7B |
| YoY Growth | — | +32.6% | +27.0% |
| EBITDA | $781M | $1.2B | $1.6B |
| EBITDA Margin | 28.0% | 32.6% | 33.9% |
Projections are the median of 5 independent model runs. The model’s revenue sits 3.8% above analyst consensus.
Management raised the FY2026 enterprise data growth floor to ~130% YoY from ~85%, guided communications above the corporate average for 2026, reaffirmed automotive at mid-teens YoY, and said Q3 gross margin should increase incrementally again while staying at the low end of the model. Capacity goals were extended 'significantly beyond $6 billion.'
What Could Go Right — and Wrong
- Enterprise data holds at or above the ~130% FY2026 growth floor and extends beyond 2026.
- DDR5 high-speed interface moves from initial orders to visible revenue, expanding SAM into next year.
- 800V AC-DC sampling converts to production design wins as the industry shifts to 800V data-center power.
- 48V vertical power and module content rise enough to support the shift from chip supplier to full solution provider.
- Building-automation software completes by end of 2026 and converts waiting potential customers into installations.
- The externally reported Nvidia cancellation is confirmed or demand otherwise decelerates sharply in enterprise data.
- H2 gross-margin headwinds push margin below the low end of the model, breaking the projected margin path.
- Book-to-bill above 1 flips into an inventory air pocket while internal inventories are already rising.
- High-density power-module competition from Analog Devices, Texas Instruments, ON Semiconductor, or 800V entrants displaces sockets.
- A China/Taiwan supply or demand disruption hits the 74% of Q1 revenue that ships to those two regions.
Looking Ahead
The next twelve months turn on the data-center power order pattern. Management has set a FY2026 enterprise-data floor of ~130% YoY, expects communications above the corporate average, and needs automotive to ramp from a flat first half to mid-teens for the year. Product milestones—DDR5 high-speed interface revenue expected into next year and 800V AC-DC design wins tied to the industry transition—will show whether the new SAM expansions are converting.
- Q3 2026Q3 2026 earnings — Tests the ~130% enterprise-data floor, book-to-bill above 1, and Q3 margin increase.
- H2 2026Automotive ramp — Tests whether the second-half inflection follows the over 1,500 new sockets shipped year-to-date.
- End of 2026Building-automation software completion — Tests whether the one-million-square-foot installation converts waiting potential customers.
- Into 2027DDR5 high-speed interface revenue — Tests whether initial orders become visible revenue and SAM expansion begins.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $2.2B | $2.8B | $3.3B | +26.4% |
| Gross Margin | 55.3% | 55.2% | 55.2% | 10bps |
| EBITDA | $576M | $781M | $3.8B | +35.6% |
| EBITDA Margin | 26.1% | 28.0% | 30.0% | +189bps |
| Net Income | $1.8B | $616M | $799M | -65.5% |
| Free Cash Flow | $642M | $664M | $3.0B | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)55.2%
- EBITDA Margin (TTM)30.0%
- Net Margin (TTM)24.4%
- ROIC29.9%
- FCF Conversion44.8%
- SBC / Revenue-0.6%
The Company
Monolithic Power Systems designs high-performance, semiconductor-based power-electronics products: DC-to-DC converters, AC-to-DC converters, driver MOSFETs, power management ICs, current limit switches, and lighting controls. In AI infrastructure, those products convert and deliver power for AI accelerators, server CPUs, optical modules, top-of-rack switches, TPUs, NIC cards, and memory. Management's stated advantage is power density through monolithic integration—one piece of silicon where competitors may use multiple discrete chips.
MPS is fabless and depends on third-party suppliers for wafers and other key components. It sells mostly through distribution—88% of Q1 2026 revenue—and is geographically concentrated in Asia: China 51%, Taiwan 23%, and South Korea 10% of Q1 revenue. The company reports a single operating unit, and management describes a transition from selling chips only toward modules and full silicon-based systems.
Business Segments
Competitive Landscape
MPS's 10-K lists primary competitors including Analog Devices, Infineon Technologies, NXP Semiconductors, ON Semiconductor, Power Integrations, Renesas Electronics, ROHM Semiconductor, Semtech, STMicroelectronics, and Texas Instruments. Management's competitive stance is power density through monolithic integration, and it declines to quantify market share—'we let the numbers speak for themselves.'
- Analog DevicesAcquiring Empower Semiconductor for integrated voltage regulators; competes in the vertical-power space MPS targets.
- Texas InstrumentsData center revenue up about 90% YoY; application-specific power design-ins ramp in 2H 2026 into 2027.
- ON SemiconductorAI data center business grew >30% sequentially; positions into 800V front-end power with ~$115K estimated per-rack content.
- Power IntegrationsPositioned into 800V power; listed among MPS's primary competitors in the 10-K.
- DDR5 RCD incumbent with mid-40% share; competition for MPS's new high-speed interface products.
Supply Chain
MPS sits between third-party wafer and assembly suppliers and a distribution-heavy customer base, with AI server, networking, automotive, and memory end markets downstream. No supplied neighbor commentary mentions MPS by name, though peers independently confirm data-center power demand.
More on MPWR: Earnings recap