Monolithic Power Systems (NASDAQ:MPWR) Surprises With Q2 Sales, Provides Optimistic Revenue Guidance for Next Quarter

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Power management chips maker Monolithic Power Systems (NASDAQ:MPWR) announced better-than-expected revenue in Q2 CY2025, with sales up 31% year on year to $664.6 million. On top of that, next quarter's revenue guidance ($720 million at the midpoint) was surprisingly good and 5.7% above what analysts were expecting. Its non-GAAP profit of $4.21 per share was 2.2% above analysts' consensus estimates.
Is now the time to buy Monolithic Power Systems? Find out in our full research report.
Monolithic Power Systems (MPWR) Q2 CY2025 Highlights:
Revenue: $664.6 million vs analyst estimates of $652.1 million (31% year-on-year growth, 1.9% beat)
Adjusted EPS: $4.21 vs analyst estimates of $4.12 (2.2% beat)
Adjusted Operating Income: $231.2 million vs analyst estimates of $226.4 million (34.8% margin, 2.1% beat)
Revenue Guidance for Q3 CY2025 is $720 million at the midpoint, above analyst estimates of $681 million
Operating Margin: 24.8%, up from 23% in the same quarter last year
Inventory Days Outstanding: 150, up from 146 in the previous quarter
Market Capitalization: $34.98 billion
'Our proven, long-term growth strategy remains intact as we continue our transformation from being a chip-only, semiconductor supplier to a full service, silicon-based solutions provider,' said Michael Hsing, CEO and founder of MPS.
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.
Revenue Growth
Examining a company's long-term performance can provide clues about its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Thankfully, Monolithic Power Systems's 29.9% 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 17.3% 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 wonderful year-on-year revenue growth of 31%, and its $664.6 million of revenue exceeded Wall Street's estimates by 1.9%. Beyond the beat, this marks 6 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 16.1% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 10.1% over the next 12 months, a deceleration versus the last two years. Despite the slowdown, this projection is commendable and implies the market sees success for its products and services.
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Product Demand & Outstanding Inventory
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 150, which is 12 days below its five-year average. These numbers show that despite the recent increase, there's no indication of an excessive inventory buildup.
Key Takeaways from Monolithic Power Systems's Q2 Results
It was great to see Monolithic Power Systems's revenue guidance for next quarter top analysts' expectations. We were also happy its adjusted operating income outperformed Wall Street's estimates. On the other hand, its inventory levels increased. Overall, we think this was a solid quarter with some key areas of upside. The stock traded up 4.9% to $747.50 immediately after reporting.
Indeed, Monolithic Power Systems had a rock-solid quarterly earnings result, but is this stock a good investment here? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it's free.
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