Semiconductor designer Power Integrations (NASDAQ:POWI) met Wall Streets revenue expectations in Q3 CY2025, with sales up 2.7% year on year to $118.9 million. On the other hand, next quarter’s revenue guidance of $102.5 million was less impressive, coming in 11.5% below analysts’ estimates. Its non-GAAP profit of $0.36 per share was 4% above analysts’ consensus estimates.
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Power Integrations (POWI) Q3 CY2025 Highlights:
- Revenue: $118.9 million vs analyst estimates of $118.4 million (2.7% year-on-year growth, in line)
- Adjusted EPS: $0.36 vs analyst estimates of $0.35 (4% beat)
- Adjusted EBITDA: $24.87 million vs analyst estimates of $27.8 million (20.9% margin, 10.5% miss)
- Revenue Guidance for Q4 CY2025 is $102.5 million at the midpoint, below analyst estimates of $115.9 million
- Operating Margin: -3.3%, down from 10% in the same quarter last year
- Inventory Days Outstanding: 277, down from 295 in the previous quarter
- Market Capitalization: $2.22 billion
StockStory’s Take
Power Integrations delivered third-quarter results that aligned with Wall Street’s revenue expectations and slightly outperformed on non-GAAP earnings per share. Management attributed the quarter’s performance to a sharp slowdown in appliance orders, which are sensitive to tariffs and macroeconomic weakness, particularly in the U.S. and China. CEO Jennifer Lloyd explained that "appliances make up the bulk of our consumer category," and highlighted that tariffs and preloading of inventory earlier in the year led to significant volatility. Despite these challenges, industrial and data center markets demonstrated resilience, with Lloyd noting continued growth in high-power and automotive segments as bright spots.
Looking ahead, management set cautious expectations for the next quarter, citing ongoing softness in the consumer segment, especially appliances, and seasonal declines in industrial demand. Lloyd stated, "We expect our consumer business to get back to growth in 2026," but acknowledged the timing remains uncertain as inventory normalization continues. The company is prioritizing investments in data center, automotive, and high-power applications, supported by new design wins and collaborations, particularly in AI data center architectures. Lloyd emphasized the need to adapt the organization and focus R&D on higher-growth markets to drive long-term value.
Key Insights from Management’s Remarks
Management attributed the quarter’s results to weakness in appliance demand and inventory dynamics, while highlighting momentum in industrial, automotive, and data center-related products.
- Appliance volatility from tariffs: The consumer segment, particularly appliances, experienced a sharp decline due to extensive preloading in the first half of the year and the impact of tariffs on high-value goods. Lloyd noted this led to "volatility in our revenues" and a sequential drop in consumer sales.
- Industrial and high-power momentum: Despite seasonal headwinds, industrial sales grew nearly 20% year-to-date, driven by electrification trends, grid modernization, and renewables. The high-power gate driver business saw revenues increase over 30% year-to-date, reflecting robust demand in applications like electric locomotives and heavy vehicles.
- Automotive design wins: The company reported new automotive design wins, adding to over 40 electric vehicle models using Power Integrations’ products. Content gains in heavy vehicles were noted as especially meaningful, with Lloyd highlighting "about 10x" the product content per unit compared to passenger vehicles.
- Data center opportunity and collaboration: Power Integrations expanded its presence in AI data centers, publishing a white paper on high-voltage gallium nitride (GaN) technology and announcing collaboration with NVIDIA for 800-volt DC architectures. Management emphasized the reliability and automotive qualification of its GaN as key differentiators.
- Focus on cost control and capital allocation: Management stressed disciplined spending, limiting hiring to critical needs, and aligning R&D and go-to-market resources with strategic growth markets. The company returned nearly $150 million to shareholders via buybacks and dividends and announced a modest dividend increase effective next year.
Drivers of Future Performance
Looking ahead, management expects near-term challenges from appliance demand and seasonality, but sees growth opportunities in data center, automotive, and industrial segments as key drivers for future performance.
- Consumer recovery timing uncertain: Management expects the consumer segment, particularly appliances, to remain weak in the near term due to lingering channel inventory and macroeconomic headwinds. Lloyd pointed out that a return to growth is anticipated in 2026, but visibility on timing depends on housing activity and broader demand recovery.
- Strategic focus on high-growth markets: The company is reallocating R&D and commercial efforts towards data center, automotive, and high-power industrial applications. Lloyd underscored the need to "adapt our organization" to align with the distinct requirements and opportunities in these markets, aiming to capture long-term secular trends like electrification and AI infrastructure.
- Margin outlook and cost discipline: Gross margin is expected to be pressured in the next quarter due to less favorable sales mix and lower production volumes, but management forecasts a rebound as industrial and appliance mix improves and currency headwinds ease. Ongoing efforts to constrain operating expenses and capital spending are intended to support profitability as revenues recover.
Catalysts in Upcoming Quarters
Going forward, the StockStory team will closely monitor (1) the pace of inventory normalization and demand recovery in the consumer appliance market, (2) progress on major design wins and revenue traction in AI data center and automotive applications, and (3) execution of organizational realignment to focus on high-growth end markets. The impact of tariffs and macroeconomic trends on core segments will also be important to watch.
Power Integrations currently trades at $40.22, up from $38.94 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members).
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