Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that have been made pursuant to and in reliance on the provisions of the Private Securities Litigation Reform Act of 1995. These statements include, among others, statements concerning:

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the above-average industry growth of product and market areas that we have targeted;

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our plans to grow revenue in a diversified way across regions and increase revenue through the introduction of new products within our existing product families as well as in new product categories and families;

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our mission statement to reduce energy and material consumption to improve all aspects of quality of life and create a sustainable future;

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the effects of macroeconomic factors, global economic uncertainties, geopolitical tensions and global tariffs, export controls and retaliatory measures on the semiconductor industry and our business;

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the effect that liquidity of our investments has on our capital resources;

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the continuing application of our products in the storage and computing, automotive, enterprise data, communications, consumer, and industrial end markets;

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estimates of our future liquidity requirements and the sufficiency of our cash, cash equivalents and short-term investments to operate our business;

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the cyclical nature of the semiconductor industry;

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our belief that we may incur significant legal expenses that vary with the level of activity in each of our current or future legal proceedings;

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expectations regarding protection of our proprietary technology;

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the business outlook for the remainder of 2025 and beyond;

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the factors that we believe will impact our business, operations and financial condition, as well as our ability to achieve revenue growth;

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the expected percentage of our total revenue from various end markets;

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our ability to identify, acquire and integrate companies, businesses and products, and achieve the anticipated benefits from such acquisitions and integrations;

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the expected impact of various U.S. and international tax laws and regulations, including the H.R.1 Act signed into law on July 4, 2025, on our income tax provision, financial position and cash flows;

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our plan to repatriate cash from our foreign subsidiaries;

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our intention and ability to execute our stock repurchase program and pay cash dividends and dividend equivalents; and

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the factors that differentiate us from our competitors.

These forward-looking statements generally are identified by the words "would," "could," "may," "should," "predict," "potential," "targets," "continue," "anticipate," "expect," "intend," "plan," "believe," "seek," "estimate," "project," "forecast," "will," and similar expressions. All forward-looking statements are based on our current outlook, expectations, estimates, projections, beliefs and plans or objectives about our business, our industry and the global economy, including our expectations regarding the potential impacts of macroeconomic factors, global economic uncertainties, including tariffs, export controls and retaliatory measures, and geopolitical tensions on the semiconductor industry and our business. These statements are not guarantees of future performance and are subject to significant risks and uncertainties. Actual events or results could differ materially and adversely from those expressed in any such forward-looking statements. Risks and uncertainties that could cause actual results to differ materially include those set forth throughout this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K including, in particular, in the sections entitled "Risk Factors." Except as required by law, we disclaim any duty, and undertake no obligation, to update any forward-looking statements, whether as a result of new information relating to existing conditions, future events or otherwise or to release publicly the results of any future revisions we may make to forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Readers are cautioned not to place undue reliance on such statements, which speak only as of the date of this Quarterly Report on Form 10-Q and entail significant risks. Readers should carefully review future reports and documents that we file from time to time with the SEC, such as our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K.

Unless stated otherwise or the context otherwise requires, references to "we," "our," and "us" mean Monolithic Power Systems, Inc. and its consolidated subsidiaries.

Overview

We are a fabless global company that provides high-performance, semiconductor-based power electronics solutions. Our mission is to reduce energy and material consumption to improve all aspects of quality of life and create a sustainable future. Founded in 1997 by our CEO Michael Hsing, we have three core strengths: deep system-level knowledge, strong semiconductor design expertise, and innovative proprietary technologies in the areas of semiconductor processes, system integration, and packaging. These combined advantages are designed to enable us to deliver reliable, compact, and monolithic solutions that are highly energy-efficient, cost-effective, and environmentally responsible while providing a consistent return on investment to our stockholders.

We operate in the cyclical semiconductor industry. We are subject to industry downturns, but we have targeted product and market areas that we believe allow us to operate at above average industry performance levels over the long term.

We work with third parties to manufacture and assemble our ICs. This has enabled us to limit our capital expenditures and fixed costs, while focusing our engineering and design resources on our core strengths.

Following the introduction of a product, our sales cycle generally takes a number of quarters after we receive an initial customer order for a new product to ramp up. Typical supply chain lead times for orders are generally 16 to 26 weeks. These factors, combined with the fact that our customers can cancel or reschedule orders without incurring a significant penalty, make the forecasting of our orders, revenue and expenses difficult.

We derive most of our revenue from sales through distribution arrangements and direct sales to customers in Asia, where our products are incorporated into end-user products. Our revenue from sales to customers in Asia was 91% and 94% of our total revenue for the three months ended September 30, 2025 and 2024, respectively, and 93% of our total revenue for each of the nine months ended September 30, 2025 and 2024.

We believe our ability to achieve revenue growth will depend, in part, on our ability to develop new products, enter new markets, gain market share, manage litigation risk, diversify our customer base and continue to secure manufacturing capacity.

Macroeconomic Conditions and Regulations

The semiconductor industry is impacted by various macroeconomic challenges including fluctuations in consumer spending, fluctuations in demand for semiconductors, rising inflation, global tariffs and retaliatory measures and announcements regarding same, increased interest rates, and fluctuations in currency rates. We remain cautious in light of continued challenging macroeconomic conditions and will continue to monitor the potential impact on our operations. The extent and duration of the direct and indirect impact of macroeconomic events on our business, results of operations and overall financial position remain uncertain and depend on future developments.

We closely monitor changes to export control laws, tariffs, trade regulations and other trade requirements. To date, no restrictions or requirements have had a material impact on our revenue and operations. We believe that our diverse, agile and resilient supply chain is structured in a way to minimize the impact of tariffs; however, such restrictions or requirements can be enacted quickly and unexpectedly and could impact our business in the future. To the extent tariffs, trade regulations or retaliatory measures or announcements regarding same that affect us are implemented, we will seek to take mitigating actions in the near- and medium-term, as necessary, and are committed to complying with all applicable trade laws, regulations and other requirements.

Critical Accounting Estimates

In preparing our condensed consolidated financial statements in accordance with U.S. GAAP, we are required to make estimates, assumptions and judgments that affect the amounts reported in our financial statements and the accompanying disclosures. Estimates and judgments used in the preparation of our financial statements are, by their nature, uncertain and unpredictable, and depend upon, among other things, many factors outside of our control, including demand for our products, economic conditions and other current and future events, such as macroeconomic factors, global economic uncertainties, geopolitical tensions and global tariffs, export controls and retaliatory measures and announcements regarding same. Actual results could differ from these estimates and assumptions, and any such differences may be material to our condensed consolidated financial statements.

There have been no material changes during the nine months ended September 30, 2025 to our critical accounting estimates from the information provided in the "Critical Accounting Estimates" section of Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the year ended December 31, 2024.

Results of Operations

The table below sets forth the data on the Condensed Consolidated Statements of Operations as a percentage of revenue:

		Three Months Ended September 30,																Nine Months Ended September 30,
		2025								2024								2025								2024
		(In thousands, except percentages)
Revenue		$	737,176				100.0	%		$	620,119				100.0	%		$	2,039,304				100.0	%		$	1,585,435				100.0	%
Cost of revenue			330,948				44.9				276,676				44.6				913,830				44.8				708,973				44.7
Gross profit			406,228				55.1				343,443				55.4				1,125,474				55.2				876,462				55.3
Operating expenses:
Research and development			98,173				13.3				85,051				13.7				286,666				14.1				238,986				15.1
Selling, general and administrative			112,872				15.3				94,364				15.2				310,108				15.2				261,425				16.5
Total operating expenses			211,045				28.6				179,415				28.9				596,774				29.3				500,411				31.6
Operating income			195,183				26.5				164,028				26.5				528,700				25.9				376,051				23.7
Other income, net			10,392				1.4				10,278				1.6				27,743				1.4				27,330				1.7
Income before income taxes			205,575				27.9				174,306				28.1				556,443				27.3				403,381				25.4
Income tax expense			27,301				3.7				29,876				4.8				110,652				5.4				66,044				4.1
Net income		$	178,274				24.2	%		$	144,430				23.3	%		$	445,791				21.9	%		$	337,337				21.3	%

Revenue

The following table summarizes our revenue by end market:

		Three Months Ended September 30,																Nine Months Ended September 30,
End Market		2025				% of Revenue				2024				% of Revenue				2025				% of Revenue				2024				% of Revenue
		(In thousands, except percentages)
Storage and Computing		$	186,572				25.3	%		$	143,993				23.2	%		$	570,403				28.0	%		$	365,069				23.0	%
Enterprise Data			191,482				26.0				184,459				29.7				468,370				23.0				521,397				32.9
Automotive			151,540				20.6				111,344				18.0				441,576				21.7				285,629				18.0
Communications			79,868				10.8				71,884				11.6				225,322				11.1				162,095				10.2
Consumer			72,399				9.8				64,401				10.4				189,009				9.2				144,704				9.1
Industrial			55,315				7.5				44,038				7.1				144,624				7.0				106,541				6.8
Total		$	737,176				100.0	%		$	620,119				100.0	%		$	2,039,304				100.0	%		$	1,585,435				100.0	%

Revenue for the three months ended September 30, 2025 was $737.2 million, an increase of $117.1 million, or 18.9%, from $620.1 million for the three months ended September 30, 2024. The increase in revenue was primarily due to higher shipment volume.

For the three months ended September 30, 2025, revenue from the storage and computing market increased $42.6 million, or 29.6%, from the same period in 2024. This increase was primarily due to higher sales of power solutions for storage applications. Revenue from the enterprise data market increased $7.0 million, or 3.8%, from the same period in 2024. Revenue from the automotive market increased $40.2 million, or 36.1%, from the same period in 2024. This increase was primarily due to higher sales of applications supporting advanced driver assistance systems, infotainment, and motion control. Revenue from the communications market increased $8.0 million, or 11.1%, from the same period in 2024. Revenue from the consumer market increased $8.0 million, or 12.4%, from the same period in 2024. Revenue from the industrial market increased $11.3 million, or 25.6%, from the same period in 2024.

Revenue for the nine months ended September 30, 2025 was $2,039.3 million, an increase of $453.9 million, or 28.6%, from $1,585.4 million for the nine months ended September 30, 2024. The increase in revenue was primarily due to higher shipment volume.

For the nine months ended September 30, 2025, revenue from the storage and computing market increased $205.3 million, or 56.2%, from the same period in 2024. This increase was primarily due to higher sales of power solutions for storage applications, notebooks and graphics cards. Revenue from the automotive market increased $155.9 million, or 54.6%, from the same period in 2024. This increase was primarily due to higher sales of applications supporting advanced driver assistance systems and infotainment. Revenue from the enterprise data market decreased $53.0 million, or 10.2%, from the same period in 2024. Revenue from the communications market increased $63.2 million, or 39.0%, from the same period in 2024. This increase was primarily driven by higher sales of power solutions for optical modules and routers. Revenue from the consumer market increased $44.3 million, or 30.6%, from the same period in 2024. This increase was primarily driven by higher sales of products for home appliances and gaming solutions. Revenue from the industrial market increased $38.1 million, or 35.7%, from the same period in 2024.

Cost of Revenue and Gross Margin

Cost of revenue primarily consists of costs incurred to manufacture, assemble and test our products, as well as warranty costs, inventory-related and other overhead costs, and stock-based compensation expense.

		Three Months Ended September 30,								Nine Months Ended September 30,
		2025				2024				2025				2024
		(In thousands, except percentages)
Cost of revenue		$	330,948			$	276,676			$	913,830			$	708,973
As a percentage of revenue			44.9	%			44.6	%			44.8	%			44.7	%
Gross profit		$	406,228			$	343,443			$	1,125,474			$	876,462
Gross margin			55.1	%			55.4	%			55.2	%			55.3	%

Cost of revenue was $330.9 million, or 44.9% of revenue, for the three months ended September 30, 2025, and $276.7 million, or 44.6% of revenue, for the three months ended September 30, 2024. The $54.3 million increase in cost of revenue was primarily driven by higher shipment volume.

Gross margin was 55.1% for the three months ended September 30, 2025, compared with 55.4% for the three months ended September 30, 2024. The decrease in gross margin was mainly driven by product mix.

Cost of revenue was $913.8 million, or 44.8% of revenue, for the nine months ended September 30, 2025, and $709.0 million, or 44.7% of revenue, for the nine months ended September 30, 2024. The $204.9 million increase in cost of revenue was primarily driven by higher shipment volume.

Gross margin was 55.2% for the nine months ended September 30, 2025, compared with 55.3% for the nine months ended September 30, 2024. The decrease in gross margin was mainly driven by product mix, partially offset by a decrease in inventory write-downs as a percentage of revenue.

Research and Development

R&D expenses primarily consist of cash compensation and benefits, stock-based compensation and deferred compensation for design and product engineers, expenses related to new product development and supplies, and facility costs.

		Three Months Ended September 30,								Nine Months Ended September 30,
		2025				2024				2025				2024
		(In thousands, except percentages)
R&D expenses		$	98,173			$	85,051			$	286,666			$	238,986
As a percentage of revenue			13.3	%			13.7	%			14.1	%			15.1	%

R&D expenses were $98.2 million, or 13.3% of revenue, for the three months ended September 30, 2025, and $85.1 million, or 13.7% of revenue, for the three months ended September 30, 2024. The $13.1 million increase in R&D expenses was primarily due to an $8.9 million increase in cash compensation and benefits, a $1.2 million increase in stock-based compensation and related expenses, and a $1.1 million increase in laboratory and other supplies.

R&D expenses were $286.7 million, or 14.1% of revenue, for the nine months ended September 30, 2025, and $239.0 million, or 15.1% of revenue, for the nine months ended September 30, 2024. The $47.7 million increase in R&D expenses was primarily due to a $29.0 million increase in cash compensation and benefits, a $6.3 million increase in new product development expenses, and a $4.1 million increase in laboratory and other supplies.

Selling, General and Administrative

SG&A expenses primarily include cash compensation and benefits, stock-based compensation and deferred compensation for sales, marketing and administrative personnel, travel expenses, facilities costs, third party service fees and legal expenses.

		Three Months Ended September 30,								Nine Months Ended September 30,
		2025				2024				2025				2024
		(In thousands, except percentages)
SG&A expenses		$	112,872			$	94,364			$	310,108			$	261,425
As a percentage of revenue			15.3	%			15.2	%			15.2	%			16.5	%

SG&A expenses were $112.9 million, or 15.3% of revenue, for the three months ended September 30, 2025, and $94.4 million, or 15.2% of revenue, for the three months ended September 30, 2024. The $18.5 million increase in SG&A expenses was primarily driven by an $8.3 million increase in cash compensation and benefits, and a $7.0 million increase in stock-based compensation and related expenses.

SG&A expenses were $310.1 million, or 15.2% of revenue, for the nine months ended September 30, 2025, and $261.4 million, or 16.5% of revenue, for the nine months ended September 30, 2024. The $48.7 million increase in SG&A expenses was primarily driven by a $24.1 million increase in cash compensation and benefits, and a $15.8 million increase in stock-based compensation and related expenses.

Other Income, Net

Other income, net, was $10.4 million for the three months ended September 30, 2025, compared with $10.3 million for the three months ended September 30, 2024. Other income, net, was $27.7 million for the nine months ended September 30, 2025, compared with $27.3 million for the nine months ended September 30, 2024.

Income Tax Expense

The income tax provision for interim periods is generally determined using an estimate of our annual effective tax rate and adjusted for discrete items, if any, in the relevant period. Each quarter the estimate of the annual effective tax rate is updated, and if our estimated tax rate changes, a cumulative adjustment is made.

The budget reconciliation bill H.R.1 ("H.R.1 Act") signed into law on July 4, 2025 makes permanent certain expiring provisions of the 2017 Tax Cuts and Jobs Act and makes modifications to the existing tax framework. The modifications that primarily impact us for the current year are the immediate expensing of domestic R&D and 100% bonus depreciation. Our tax provision for the three and nine months ended September 30, 2025 includes the estimated impact of the H.R.1 Act.

The income tax expense for the three months ended September 30, 2025 was $27.3 million, or 13.3% of pre-tax income. The income tax expense for the nine months ended September 30, 2025 was $110.7 million, or 19.9% of pre-tax income. The effective tax rates were lower than the federal statutory rate of 21% primarily due to the effect of U.S. federal tax law changes enacted during the quarter, income generated by our subsidiaries in lower tax jurisdictions, foreign tax credits, and U.S. R&D credits. The lower effective tax rates relative to the federal statutory rate were partially offset by the U.S. impact of foreign earnings and non-deductible stock-based compensation.

The income tax expense for the three months ended September 30, 2024 was $29.9 million, or 17.1% of pre-tax income. The income tax expense for the nine months ended September 30, 2024 was $66.0 million, or 16.4% of pre-tax income. The effective tax rates were lower than the federal statutory rate of 21% primarily due to lower statutory tax rates at certain of our foreign subsidiaries, and excess tax benefits from stock-based compensation. The lower effective tax rates relative to the federal statutory rate were partially offset by the U.S. impact of foreign earnings.

In January 2025, the OECD released new Administrative Guidance on the application of the GLoBE Model Rules. We will continue to evaluate the impact of this release and of other future guidance on our future global tax provision.

In December 2023, the Bermuda CIT Act was enacted and signed into law. See Note 13 to our unaudited condensed consolidated financial statements for further details.

Liquidity and Capital Resources

		September 30,				December 31,
		2025				2024
		(In thousands, except percentages)
Cash and cash equivalents		$	1,081,251			$	691,816
Short-term investments			188,233				171,130
Total cash, cash equivalents and short-term investments		$	1,269,484			$	862,946
Percentage of total assets			30.2	%			23.9	%
Total current assets		$	2,112,745			$	1,565,053
Total current liabilities			(442,804	)			(294,567	)
Working capital		$	1,669,941			$	1,270,486

As of September 30, 2025, we had cash and cash equivalents of $1,081.3 million and short-term investments of $188.2 million, compared with cash and cash equivalents of $691.8 million and short-term investments of $171.1 million as of December 31, 2024. As of September 30, 2025, $871.0 million of cash and cash equivalents and $154.5 million of short-term investments were held by our foreign subsidiaries. For the nine months ended September 30, 2025, we repatriated $275 million of cash from certain of our foreign subsidiaries to the U.S. with minimal tax impact. We may repatriate additional cash from certain of our foreign subsidiaries in future periods. We anticipate that earnings from other foreign subsidiaries will continue to be indefinitely reinvested.

Summary of Cash Flows

The following table summarizes our cash flow activities:

		Nine Months Ended September 30,
		2025				2024
		(In thousands)
Net cash provided by operating activities		$	733,292			$	620,729
Net cash used in investing activities			(145,718	)			(296,128	)
Net cash used in financing activities			(208,567	)			(186,853	)
Effect of change in exchange rates			10,445				1,552
Net increase in cash, cash equivalents and restricted cash		$	389,452			$	139,300

For the nine months ended September 30, 2025, the $112.6 million increase in net cash provided by operating activities compared to the same period in 2024 was primarily due to increased accounts receivable collections, partially offset by increased inventory purchases.

For the nine months ended September 30, 2025, the $150.4 million decrease in net cash used in investing activities compared to the same period in 2024 was primarily due to a decrease of $545.9 million in purchases of investments, partially offset by a decrease of $395.2 million in sales of investments.

For the nine months ended September 30, 2025, the $21.7 million increase in net cash used in financing activities compared to the same period in 2024 was primarily due to an increase of $31.2 million in dividend and dividend equivalent payments, partially offset by a decrease in repurchases of common stock.

Cash Requirements

Although consequences of economic uncertainties and macroeconomic conditions, including tariffs and retaliatory measures and announcements regarding same, and other factors could adversely affect our liquidity and capital resources in the future, and cash requirements may fluctuate based on the timing and extent of many factors such as those discussed above, we believe that our balances of cash, cash equivalents and short-term investments of $1,269.5 million as of September 30, 2025, along with cash generated by ongoing operations, will be sufficient to satisfy our liquidity requirements for at least the next 12 months.

Our material cash requirements include the following contractual and other obligations:

Purchase Obligations

Purchase obligations represent commitments to our suppliers and other parties requiring the purchases of goods or services. Our purchase obligations primarily consist of wafer and other inventory purchases, assembly and other manufacturing services, construction of manufacturing and R&D facilities, purchases of production and other equipment, and license arrangements.

In May 2022, we entered into a long-term supply agreement in order to secure manufacturing production capacity for silicon wafers over a four-year period. As of September 30, 2025, we had remaining prepayments under this agreement of $60.0 million reported in other current assets on the Condensed Consolidated Balance Sheets.

As of September 30, 2025, total estimated future unconditional purchase commitments to all suppliers and other parties, net of the $60.0 million prepayment, were $499.3 million, of which $443.2 million was due within a year.

Operating Leases

Operating lease obligations represent the undiscounted remaining lease payments primarily for our leased facilities. As of September 30, 2025, these obligations totaled $18.9 million, of which $3.8 million was short-term.

Capital Return to Stockholders

In February 2025, our Board of Directors approved a stock repurchase program authorizing us to repurchase up to $500.0 million of our common stock through February 2028. Shares are retired upon repurchase. We repurchased 6,000 shares of our common stock for an aggregate purchase price of $4.7 million during the nine months ended September 30, 2025. As of September 30, 2025, $495.3 million remained available for future repurchases under the program.

We currently have a dividend program approved by our Board of Directors, pursuant to which we intend to pay quarterly cash dividends on our common stock. Based on our historical practice, stockholders of record as of the last business day of the quarter are entitled to receive the quarterly cash dividends when and if declared by the Board of Directors, which are payable to the stockholders in the following month. As of September 30, 2025, accrued cash dividends totaled $74.7 million. The declaration of any future cash dividends is at the discretion of our Board of Directors and will depend on, among other things, our financial condition, results of operations, capital requirements, business conditions and other factors that our Board of Directors may deem relevant, as well as a determination that cash dividends are in the best interests of our stockholders.

Other Long-Term Obligations

Other long-term obligations primarily include payments for deferred compensation plan liabilities and accrued dividend equivalents. As of September 30, 2025, these obligations totaled $102.3 million.