Monolithic Power Systems (MPWR) Q4 2025 earnings review
Record Revenue Meets Management Friction
MPS delivered a beat-and-raise quarter, closing FY25 with record revenue of $2.8B (+26%). Q4 revenue grew 21% YoY to $751M, driven by broad strength across Enterprise Data, Automotive, and Communications. However, the call revealed a rare public disconnect: CFO Bernie Blegen guided for 30-40% Enterprise Data growth in 2026, which CEO Michael Hsing immediately undercut, refusing to endorse the specific forecast. Despite this internal friction, the business fundamentals are robust, with Q1 guidance implying continued sequential acceleration.
🐂 Bull Case
Enterprise Data revenue grew ~20% QoQ and YoY to $233.5M. Management noted a 'layering of additional customers' providing momentum into 2026, validating the transition to module-based power solutions for AI/Data Centers.
Growth was not reliant on a single vertical. Non-Enterprise Data markets grew >40% YoY in FY25. Automotive (+18% YoY) and Industrial (+34% YoY) proved resilient despite broader sector weakness.
🐻 Bear Case
The public disagreement between the CEO and CFO regarding 2026 Enterprise Data growth (CFO: 30-40%; CEO: 'I don't know how to make that call') introduces unnecessary uncertainty into the narrative and questions internal visibility.
Despite record revenue, Non-GAAP gross margins remain range-bound at ~55.5% with no upward movement guided for Q1. Management cited short-term ordering patterns preventing mix optimization.
⚖️ Verdict: 🟢
Bullish. While the CEO/CFO squabble is a governance quirk to watch, the numbers are undeniable. Accelerating revenue, diverse growth drivers, and a 28% dividend hike signal a company firing on all cylinders.
Key Themes
Internal Guidance Disconnect
A significant point of friction emerged during the Q&A. CFO Bernie Blegen explicitly projected Enterprise Data could grow 30-40% in 2026. CEO Michael Hsing immediately pushed back, stating he was uncomfortable making such a specific call and preferred to 'let the numbers show it.' This suggests either a difference in visibility or a clash in communication philosophy as the CFO prepares to retire.
Transition to Solutions Provider
MPS is successfully moving up the value chain. The company announced its first full Battery Management System (BMS) design win for a robotics platform and is sampling 800V power solutions for data centers. This validates the 'Greenfield' strategy of products released 2-3 years ago now driving revenue, moving beyond component sales to higher-value modules.
Automotive & Industrial Resilience
In a period where peers (e.g., TI, ADI) have struggled with industrial/auto inventory corrections, MPS posted 18% YoY growth in Automotive and 34% in Industrial. Wins in ADAS and body electronics are driving content expansion independent of SAAR (vehicle production volumes).
Inventory Levels Rising
Internal inventories rose to $565M (153 days) from $506M (139 days) in Q3. While management claims this is to manage market uncertainty and capture upturns, days of inventory are now significantly higher than the 138 days seen a year ago. Operating cash flow dipped sequentially to $105M from $239M in Q3, largely due to working capital builds.
Limited Visibility Persists
Management reiterated that they see no long-term backlog buildup; orders remain short-term/turns-based. This lack of visibility limits margin optimization (mix management) and keeps the company in a 'reactionary' mode despite strong growth.
Other KPIs
Accelerating. Up 20% QoQ and 20% YoY. After a dip in H1, this segment has recovered strongly, driven by AI and server power management solutions. Management cites a 'layering' of new customers ramping up.
Stable. Flat QoQ and down slightly from 55.8% YoY. Despite revenue leverage, margins are stuck in the mid-55s due to product mix and lack of long-term visibility to optimize manufacturing. Guidance for Q1 (55.5% midpoint) suggests no near-term expansion.
Decelerating. Operating Cash Flow fell to $104.9M (vs $239.3M in Q3) while CapEx trends remain steady. The decline is driven by inventory builds ($60M increase). Cash balance remains robust at $1.26B.
Guidance
Accelerating. The midpoint ($780M) implies +3.8% sequential growth and +22% YoY growth. This contrasts with historical seasonality and suggests strong momentum carrying into the new year.
Stable. The midpoint (55.5%) is identical to Q4 2025 actuals. Management expects margins to remain in this 'steady range' (+/- 20-30 bps) for the foreseeable future.
Accelerating. Midpoint of $158M implies a ~6.7% increase sequentially from Q4's $148M, outpacing revenue growth. This reflects continued aggressive R&D investment.
Key Questions
Enterprise Data Forecast Clarity
CFO Blegen guided for 30-40% growth in Enterprise Data for 2026, which CEO Hsing refused to endorse. Which outlook is built into the operational plan for capacity and inventory?
Inventory Build vs. Visibility
Inventory days expanded to 153 days while management claims limited visibility and short-term ordering. Is this inventory build speculative for a specific anticipated ramp (e.g., AI/Data Center)?
Gross Margin Leverage
With revenue at record highs and a shift toward higher-value 'solutions' and modules, why are gross margins not breaking out of the mid-55% range? When does the mix shift become accretive?