Monolithic Power Systems (MPWR)

Power management chips maker Monolithic Power Systems (NASDAQ:MPWR) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 18.9% year on year to $737.2 million. Guidance for next quarter’s revenue was optimistic at $740 million at the midpoint, 2% above analysts’ estimates. Its non-GAAP profit of $4.73 per share was 2.2% above analysts’ consensus estimates.

Company Overview

Founded in 1997 by its longtime CEO Michael Hsing, Monolithic Power Systems (NASDAQ:MPWR) is an analog and mixed signal chipmaker that specializes in power management chips meant to minimize total energy consumption.

Monolithic Power Systems’ peers and competitors include Analog Devices (NASDAQ:ADI), Texas Instruments (NASDAQ:TXN), Skyworks (NASDAQ:SWKS), Infineon (XTRA:IFX), NXP Semiconductors NV (NASDAQ:NXPI), ON Semi (NASDAQ:ON), Marvell Technology (NASDAQ:MRVL), and Microchip (NASDAQ:MCHP).

Longer manufacturing duration allows analog chip makers to generate greater efficiencies, leading to structurally higher gross margins than their fabless digital peers. The downside of vertical integration is that cyclicality can be more pronounced for analog chipmakers, as capacity utilization upsides work in reverse during down periods. Read More. The semiconductor industry is broadly divided into analog and digital semiconductors. Digital chips are what most people think of as the brains of almost every electronic device. Their primary purpose is to either store (memory chips) or process (CPUs/GPUs) data. By comparison, analog chips regulate real world signals, such as temperature, speed, sound, or electrical current, converting them into a stream of digital data that can be processed by digital semiconductors. Analog semiconductors are also used to manage power in any electronic device; they convert, store and distribute the electrical energy that comes from a battery or wall plug. Analog chips are found everywhere from household appliances like refrigerators or washing machines, to smartphones, cars and factory production lines.

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Thankfully, Monolithic Power Systems’s 27.9% annualized revenue growth over the last five years was incredible. Its growth surpassed the average semiconductor company and shows its offerings resonate with customers, a great starting point for our analysis. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions (which can sometimes offer opportune times to buy).

We at StockStory place the most emphasis on long-term growth, but within semiconductors, a half-decade historical view may miss new demand cycles or industry trends like AI. Monolithic Power Systems’s annualized revenue growth of 20.7% over the last two years is below its five-year trend, but we still think the results suggest healthy demand.

This quarter, Monolithic Power Systems reported year-on-year revenue growth of 18.9%, and its $737.2 million of revenue exceeded Wall Street’s estimates by 2%. Beyond the beat, this marks 7 straight quarters of growth, showing that the current upcycle has had a good run - a typical upcycle usually lasts 8-10 quarters. Company management is currently guiding for a 19% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 14.7% over the next 12 months, a deceleration versus the last two years. Still, this projection is admirable and suggests the market is forecasting success for its products and services.

Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business’ capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.

This quarter, Monolithic Power Systems’s DIO came in at 139, which is 24 days below its five-year average. At the moment, these numbers show no indication of an excessive inventory buildup.

Gross profit margin is a key metric to track because it shows how much money a semiconductor company gets to keep after paying for its raw materials, manufacturing, and other input costs.

Monolithic Power Systems’s gross margin is well ahead of its semiconductor peers, and its strong pricing power is an output of its differentiated, value-add products. As you can see below, it averaged an excellent 55.3% gross margin over the last two years. Said differently, roughly $55.26 was left to spend on selling, marketing, R&D, and general administrative overhead for every $100 in revenue.

In Q3, Monolithic Power Systems produced a 55.1% gross profit margin, in line with the same quarter last year. On a wider time horizon, the company’s full-year margin has remained steady over the past four quarters, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Monolithic Power Systems has been an efficient company over the last two years. It was one of the more profitable businesses in the semiconductor sector, boasting an average operating margin of 25.1%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Analyzing the trend in its profitability, Monolithic Power Systems’s operating margin rose by 5.7 percentage points over the last five years, as its sales growth gave it operating leverage.

In Q3, Monolithic Power Systems generated an operating margin profit margin of 26.5%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Monolithic Power Systems’s spectacular 29.1% annual EPS growth over the last five years aligns with its revenue performance. This tells us its incremental sales were profitable.

In Q3, Monolithic Power Systems reported adjusted EPS of $4.73, up from $4.06 in the same quarter last year. This print beat analysts’ estimates by 2.2%. Over the next 12 months, Wall Street expects Monolithic Power Systems’s full-year EPS of $17.07 to grow 13.8%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Monolithic Power Systems has shown terrific cash profitability, and if sustainable, puts it in an advantageous position to invest in new products, return capital to investors, and consolidate the market during industry downturns. The company’s free cash flow margin was among the best in the semiconductor sector, averaging 30% over the last two years.

Taking a step back, we can see that Monolithic Power Systems’s margin expanded by 2.9 percentage points over the last five years. This is encouraging because it gives the company more optionality.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Monolithic Power Systems’s five-year average ROIC was 45.7%, placing it among the best semiconductor companies. This illustrates its management team’s ability to invest in highly profitable ventures and produce tangible results for shareholders.

Companies with more cash than debt have lower bankruptcy risk.

Monolithic Power Systems is a profitable, well-capitalized company with $1.27 billion of cash and no debt. This position is 2.6% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

It was great to see a material improvement in Monolithic Power Systems’s inventory levels. We were also glad its revenue guidance for next quarter exceeded Wall Street’s estimates. Overall, we think this was a solid quarter with some key areas of upside. The stock traded up 1.5% to $1,103 immediately after reporting.

Updated: December 4, 2025 at 9:21 PM EST

Before investing in or passing on Monolithic Power Systems, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

There are multiple reasons why we think Monolithic Power Systems is an elite semiconductor company. First of all, the company’s revenue growth was exceptional over the last five years. On top of that, its astounding EPS growth over the last five years shows its profits are trickling down to shareholders, and its stellar ROIC suggests it has been a well-run company historically.

Monolithic Power Systems’s P/E ratio based on the next 12 months is 48.3x. Despite the higher valuation, we still like Monolithic Power Systems at this price given it’s one of the best businesses out there. We think it deserves a spot in your portfolio.

Wall Street analysts have a consensus one-year price target of $1,181 on the company (compared to the current share price of $956.03), implying they see 23.5% upside in buying Monolithic Power Systems in the short term.