Power Integrations (NASDAQ:POWI) reported higher third-quarter revenue and earnings as demand for gallium nitride products and industrial applications offset weakness in appliances. The company also forecast fourth-quarter revenue growth from a year earlier, while cautioning that elevated channel inventory and supply constraints could weigh on shipments.
Revenue rose 6% from a year earlier and 5% sequentially to $125.5 million. Non-GAAP earnings were $0.46 per diluted share, up 28% year over year, while non-GAAP operating margin reached 21.4%, more than six percentage points above the year-earlier level.
CEO Jen Lloyd said industrial demand remained healthy, particularly in energy infrastructure and rail. Demand for the company’s gate drivers exceeded available supply, she said, while personal electronics and computing benefited from new GaN design wins and seasonal product ramps.
Consumer demand was softer, particularly for appliances, as weak housing markets and higher prices affected sales. The consumer market accounts for about a third of the company’s revenue, Lloyd said.
Inventory rises as appliance demand softens
CFO Nancy Erba said communications and computer revenue each grew more than 20% sequentially, while industrial revenue increased 6%. Consumer revenue fell 7%, primarily because of seasonally lower air-conditioning sales.
Channel inventory rose to 11.8 weeks from 7.3 weeks at the start of the quarter. Erba attributed the increase to soft appliance demand, delays in metering projects in India and channel partners holding more buffer stock at customers’ request amid wider supply-chain constraints.
Erba said appliance inventory could take one to two quarters to improve, while metering sell-through had already begun to improve in the fourth quarter. The additional buffer stock is harder to predict, she said, and channel inventory could remain at nine to 10 weeks next year until customers reduce those requirements. The company’s target is eight weeks.
Power Integrations also faces its own supply constraints in high-power products, including printed circuit boards and packaging. Erba said the shortage reflects an increase in demand and that the company is working with suppliers to expedite materials.
Data center and automotive opportunities
Lloyd said Power Integrations is on track for a record year of GaN revenue and secured its first three major appliance design wins for TOPSwitchGaN, introduced earlier this year. The company also won designs for a smart home product and a television.
In data centers, Lloyd described auxiliary power as the company’s most immediate opportunity in emerging 800-volt architectures. Power Integrations had five new auxiliary-power design wins for existing server architectures in the quarter and four design-ins for 800-volt sockets scheduled to begin production in 2027.
The company is also developing high-voltage GaN products for the main power path. Those products are expected to be sampled in 2027 and rolled out in the 2028–2029 period. Lloyd said customers are interested in the technology’s potential to improve efficiency and power density, though its uniqueness presents sourcing challenges that the company will need to address with customers.
Power Integrations and Ideal Power are co-developing a solid-state circuit-breaker solution for 800-volt data centers. Lloyd said the work is in an early stage, with the companies developing reference platforms and demonstrating the technology to customers.
In automotive, the company secured 10 new designs in the quarter. Lloyd said changing vehicle power architectures could increase Power Integrations’ available dollar content from single-digit dollars to nearly $100 per vehicle over the next four to five years. That is a potential opportunity, rather than a revenue forecast.
Fourth-quarter outlook and capital returns
For the fourth quarter, Power Integrations forecast revenue of $118 million to $126 million. At the midpoint, revenue would rise 18% from a year earlier and bring full-year growth to 7%, Erba said.
The company expects non-GAAP gross margin of 55%, plus or minus half a percentage point, and non-GAAP operating expenses of $43 million, plus or minus $500,000. It forecast non-GAAP operating margin of 19% to 21%.
Third-quarter operating cash flow was $43 million, and free cash flow was $37 million after $6 million in capital spending. Cash and investments rose $25 million during the quarter to $288 million. The board raised the quarterly dividend to $0.22 per share beginning in the first quarter of 2027.
Lloyd also announced that Tony Stratakos will join as chief technology officer and senior vice president of engineering. The company plans to discuss its strategy and target business model at an investor day on March 8, 2027, in New York.
About Power Integrations (NASDAQ:POWI)
Power Integrations, Inc designs and manufactures high-performance semiconductor technologies used in energy-efficient power conversion. Its products help convert and control electrical power in applications such as consumer electronics, appliances, industrial equipment, communications infrastructure, renewable-energy systems, and electric vehicles.
The company’s product portfolio includes integrated circuits for AC-to-DC and DC-to-DC power supplies, LED lighting drivers, power-factor correction, motor drives, and high-voltage gate driving.
