Power Integrations, Inc. (POWI) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals strong financial performance with significant growth in PowiGaN product revenue and a healthy gross margin. The Q&A highlights optimism in GaN and industrial growth, though automotive and consumer segments face challenges. The management's strategic R&D focus and partnerships, like with NVIDIA, bolster future prospects. Despite some uncertainties in inventory management and automotive timelines, the overall sentiment is positive, supported by a strong market strategy and shareholder value focus. Given the company's market cap, a positive stock price movement of 2% to 8% is expected over the next two weeks.
Key Financial Performance
Q4 Revenue $103 million, down 13% from the prior quarter. Reasons: Sell-through exceeded sell-in, and channel inventory was worked down.
Full Year Revenue (2025) Up 6% year-over-year. Reasons: Growth in 3 of 4 end market categories, despite tariffs disrupting the appliance market and lumpiness in the industrial business.
Non-GAAP EPS (2025) $1.25, up 8% year-over-year. Reasons: Higher industrial revenues and improved back-end manufacturing volumes.
Cash Flow from Operations (2025) $112 million, up $30 million from the prior year. Reasons: Improved operational performance.
Industrial Revenue (2025) Up 15% year-over-year. Reasons: Growth driven by electrification, renewable energy, and grid modernization.
Consumer Revenue (2025) Slightly up year-over-year. Reasons: Volatility due to appliance inventory overhang from U.S. tariffs.
Communications Revenue (2025) Up 6% year-over-year. Reasons: New design ramps in cell phone and India 5G broadband business.
Computer Revenue (2025) Down 2% year-over-year. Reasons: Lower tablet revenue offset by higher notebook sales.
PowiGaN Product Revenue (2025) Up more than 40% year-over-year. Reasons: Strong demand in power supply market and notable design wins.
Non-GAAP Gross Margin (2025) 55.1%, up 70 basis points year-over-year. Reasons: Higher industrial revenues and increased back-end manufacturing volumes.
Free Cash Flow (2025) $87 million. Reasons: Strong cash flow from operations and controlled CapEx.
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Operating Highlights
TinySwitch-5 ICs: Customers have shown a positive response with a healthy pipeline of designs scheduled to begin production in the second half of 2026.
InnoMux-2 integrated circuits: Strong design traction in the TV market, enabling sustained growth in the core IC business.
PowiGaN technology: Revenue from PowiGaN products grew more than 40% in 2025, with notable design wins including dual USB-C charging ports and server auxiliary designs for a U.S. cloud services provider.
Industrial market: Key driver of recent booking upticks, with industrial revenue growing 15% in 2025. High-power industrial business achieved double-digit growth driven by electric rail and high-voltage DC transmission projects.
Automotive market: Steady progress in EV market penetration with design wins at top Chinese and European EV makers.
Renewable energy and grid modernization: Revenue outside cell phone applications averaged 12% growth over two years, driven by electrification, renewable energy, and grid modernization.
Restructuring: Reduced global workforce by 7% to align expenses with revenue and create flexibility for investments in products, people, and markets.
Operational efficiency: Reduced non-GAAP expenses by over $2 million in Q4 2025. Curtailing OpEx growth remains a priority.
Shift to high-growth markets: Reoriented investment priorities towards AI data center, industrial, and automotive markets.
Customer-focused approach: Streamlined R&D pipeline to focus on high-priority products and faster time-to-market.
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Risk or Challenges
Restructuring and Workforce Reduction: The company carried out a restructuring, reducing its global workforce by about 7% to align expenses with revenue. This could impact employee morale and operational efficiency in the short term.
Appliance Demand Challenges: Appliance demand faces headwinds due to low existing home sales in the U.S., the effect of tariffs on appliance prices, and ongoing softness in China housing.
Revenue Fluctuations: Revenue fluctuated significantly over the year due to tariffs disrupting the appliance market and variability in the industrial business.
Inventory Management: Channel inventory levels remain high, with days of inventory on hand rising to 313, which could lead to inefficiencies and increased holding costs.
Tax Rate Increase: The effective tax rate is expected to increase in 2026 due to the expiration of solar credits and higher taxes on foreign earnings, potentially impacting net income.
Operational Efficiency: The company is focusing on streamlining R&D and operational processes, but these changes take time and may temporarily disrupt operations.
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Guidance & Outlook
Sequential growth in consumer category: The company expects sequential growth in the consumer category in Q1, partly due to the dissipation of preloaded appliance inventory in the U.S.
Industrial market growth: The industrial market is expected to be the fastest-growing market in 2026, starting with strong growth in Q1.
Design win value growth: The company generated 10% growth in design win value in 2025, with particular strength in GaN and high-power products, and expects continued growth in 2026.
New product launches: The company plans to launch new TinySwitch-5 ICs and multi-output GaN-based InnoMux-2 integrated circuits, with production scheduled to begin in the second half of 2026.
High-power industrial business growth: The high-power industrial business is expected to see continued growth in 2026 and beyond, driven by recent design wins in renewable energy, electric rail, and power grid projects.
Automotive market penetration: The company is making progress in the EV market with its auto-qualified InnoSwitch products and expects further growth in this segment.
Revenue growth in industrial and non-cell phone applications: Revenue outside of cell phone applications has averaged 12% growth over the past two years, with industrial revenue growing 15% in 2025. Continued strong growth is expected in 2026.
Q1 2026 revenue and gross margin outlook: The company expects Q1 2026 revenue to be between $104 million and $109 million, with non-GAAP gross margin between 53% and 54%.
Inventory reduction: The company expects wafer inventory reductions and revenue growth to contribute to a reduction in overall inventory days over the course of 2026.
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Shareholder Return Plan
Dividends: In 2025, the company returned $145 million to shareholders via buybacks and dividends, which represented 167% of their free cash flow.
Share Buybacks: The company returned $145 million to shareholders in 2025 through buybacks and dividends, amounting to 167% of their free cash flow.
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Key Q&A
Q:Can you talk about the plans to reduce channel inventory and its impact on subsegment guides for the first quarter and growth rate expectations for the year?
A:Nancy Erba stated that they are focusing on rigorous cadences to manage inventory levels, both in terms of weeks in the channel and absolute value on the balance sheet. They aim to bring inventory to healthier levels, but this depends on Q1 and first-half bookings, their mix, and timing. It remains a key objective to reduce inventory levels.
Q:When will high-power business, auto, data center, and GaN become meaningful enough to impact aggregate revenues and accelerate growth?
A:Jennifer Lloyd mentioned that GaN is already meaningful, growing 40% year-over-year. High power is a significant driver of industrial business and will continue to accelerate. Automotive and data center will take more time, with automotive facing slower market conditions and design ramp delays. Data center progress is ongoing but will take a couple of years to become material.
Q:Where do you think we are in the demand cycle across all segments, and how does inventory digestion affect this?
A:Jennifer Lloyd noted that the consumer business, particularly appliances, still faces headwinds, though there has been some improvement. They are cautiously optimistic for 2026, planning for similar growth levels year-over-year but will be cautious in investments until bookings materialize. They see opportunities for growth in the outer years.
Q:How will the reorganization and reprioritization of R&D efforts unfold over the next few quarters and year?
A:Jennifer Lloyd explained that restructuring provides flexibility to strengthen operations. They are focusing on acting with urgency and agility, particularly in the data center space, where they are collaborating with NVIDIA and aligning product development with customer needs. This approach aims to accelerate growth.
Q:Is automotive revenue expected to reach low tens of millions this year, or is it more of a 2027 target?
A:Jennifer Lloyd and Nancy Erba indicated that while there is potential, delays in the EV market and the need for customer wins to translate into volumes make it more likely to be a 12-18 month target, aligning closer to 2027.
Q:Should we expect OpEx to decrease further in the June quarter following the restructuring?
A:Nancy Erba stated that they aim to reduce OpEx growth to about half of revenue growth, targeting a $3-5 million reduction for the year. They are assessing the business model to focus on high-growth areas and ensure returns on investments.
Q:Are there areas within the consumer segment that you might consider exiting?
A:Jennifer Lloyd stated that they have not identified any areas for exit within the consumer segment. It remains an important business, and they will continue to support it while pivoting investments toward higher-growth segments over time.
Q:Can you elaborate on the cloud provider win for aux power and potential applications for GaN and silicon in data centers?
A:Jennifer Lloyd explained that the aux power win validates their latest products and serves as an entry point for broader customer engagement. They aim to expand into main power supplies, which offer a more significant market opportunity. Development is ongoing.
Q:What is driving optimism for industrial growth in 2026?
A:Jennifer Lloyd highlighted the high-power business as a key driver, supported by strong go-to-market efforts. Growth in the metering business and other industrial areas is also expected to continue, backed by win growth.
Q:Review of Unclear Management Responses
A:Management avoided providing a direct answer to the question about when automotive revenue would reach low tens of millions, citing delays in the EV market and the need for customer wins to translate into volumes. They also used vague language when discussing the timing and specifics of inventory reduction and growth acceleration in certain segments, making it difficult to ascertain clear timelines or metrics.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AC outlet
Africa win
CEO fact
CFO Immersion
CFO moment
CFO role
Changes urgency
Communications afternoon
Culture Transformation
EV carmaker
EV maker
EV market
Europe Africa
GaN solution
Head
ICs design
PowiGaN
Technology
battery storage
center
consumption
energy grid
month CFO
port
position
power ecosystem
priority
production
project
sale
success
tariff appliance
technology power
term value
theme
tool
win power
POWI Transcript
Power Integrations, Inc. (POWI) Q4 2025 Earnings Call Transcript
Positive2-5
The earnings call reveals strong financial performance with significant growth in PowiGaN product revenue and a healthy gross margin. The Q&A highlights optimism in GaN and industrial growth, though automotive and consumer segments face challenges. The management's strategic R&D focus and partnerships, like with NVIDIA, bolster future prospects. Despite some uncertainties in inventory management and automotive timelines, the overall sentiment is positive, supported by a strong market strategy and shareholder value focus. Given the company's market cap, a positive stock price movement of 2% to 8% is expected over the next two weeks.
Power Integrations, Inc. (POWI) Q3 2025 Earnings Call Transcript
Positive11-5
The earnings call summary and Q&A highlight strong growth in industrial and GaN products, a focus shift towards promising markets like data centers and automotive, and significant shareholder returns through buybacks and dividends. Despite some short-term uncertainties in consumer segments, the company shows strong financial health and optimistic guidance for future growth. The market cap suggests a moderate reaction, leading to a positive stock price movement prediction.
Power Integrations, Inc. (POWI) Q2 2025 Earnings Call Transcript
Unknown8-6
The earnings call shows mixed signals: revenue and EPS growth, but cautious guidance due to market dynamics and tariffs. The Q&A reveals concerns about inventory adjustments and market uncertainties, though there's optimism in new CEO strategies and technology differentiation. Share buybacks and dividends are positive, yet the market cap suggests limited stock movement. Overall, the sentiment is neutral due to balanced positive and negative factors.
Power Integrations, Inc. (NASDAQ:POWI) Q1 2025 Earnings Call Transcript
Positive5-13
The earnings call highlights strong financial performance, with revenue and EPS exceeding expectations and improved gross margins. The company is also making strategic moves in the automotive and industrial segments, which are expected to drive growth. Despite some uncertainties related to trade policies and competitive pressures, the management's guidance remains optimistic, and additional share repurchases indicate confidence. The market cap suggests a moderate reaction, but overall sentiment is positive due to strong financial metrics, strategic growth initiatives, and shareholder return plans.
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