Power Integrations, Inc.

What they do

Power Integrations makes analog and mixed-signal integrated circuits and other components used in power converters that transform high-voltage electricity into the voltage and current a downstream device requires. Most of its products are AC-DC power-supply ICs used in industrial controls, smart utility meters, appliances, air conditioners, battery-powered tools, building-automation and IoT devices, and mobile devices. It also sells high-voltage LED drivers, BLDC motor-driver ICs, and gate drivers for IGBTs and SiC MOSFETs used in high-power applications such as industrial motors, solar and wind systems, electric locomotives, EVs and high-voltage DC transmission.

Revenue drivers

• AC-DC power-supply ICs — The core product family, converting wall-outlet AC to the low-voltage DC used by electronics; the 10-K describes this as a large percentage of products, spanning power outputs up to roughly 500 watts.
• Gate drivers for high-power conversion — Standalone ICs or circuit boards that operate high-voltage switches such as IGBTs and SiC MOSFETs in applications from about 100 kilowatts up to gigawatts, including industrial motors, renewable energy, EVs and HVDC.
• LED drivers and motor-driver ICs — High-voltage LED drivers for lighting and BLDC motor drivers for appliances, HVAC systems, ceiling fans and industrial uses, extending the product line beyond power supplies.
• Industrial end market — Industrial was 43% of net revenue in Q2 2026, up from 40% a year earlier, and the company attributed recent revenue increases to higher industrial sales; consumer was 36%, computer 11% and communications 10%.

Recent performance

Second-quarter 2026 revenue was $118.9 million, up 10% sequentially and up 3% from $115.9 million in Q2 2025, with the increase attributed to higher industrial end-market sales. GAAP net income was $9.8 million, or $0.17 per diluted share, versus $0.02 in the prior-year quarter; non-GAAP net income was $20.9 million, or $0.37 per diluted share. Gross margin declined to 54.3% from 55.2%, which the company tied to less favorable customer and product mix and a less favorable dollar/yen exchange rate on wafer costs. Cash flow from operations was $22.0 million, and the company paid a $0.215 per share dividend on June 30, 2026.

Strategy

The 10-K states growth depends largely on increasing penetration of existing markets, creating customer value and expanding the addressable market, since the overall market grows only modestly as unit growth is offset by falling average selling prices. The company funds R&D to introduce more highly integrated, higher-performance products, with R&D expense at 22.8% of revenue in Q2 2026, and it also expands technical documentation and design-support tools. The August 2026 earnings release highlighted a new 2200 V PowiGaN technology to extend high-voltage GaN capabilities and support customer roadmaps in renewable energy, grid infrastructure and AI data centers. Management also cited distribution-channel and balance-sheet inventory reduction as a second-quarter priority outcome.

Risks

• End-market demand concentration — Industrial and consumer together were 79% of Q2 2026 revenue, so a downturn in either market would materially affect results.
• Trade policy and tariffs — The 10-K states changes in global trade policy such as tariffs could reduce demand for end products incorporating Power Integrations products, hurting revenue and operating results.
• Distributor dependence and limited visibility — Sales to distributors were about 72% of net revenue in the June 2026 quarter, which the company says limits direct customer interaction and reduces its ability to forecast sales.
• Third-party wafer supply — The company depends on contracted foundries for wafers, and the 10-K warns that failure to obtain sufficient wafer quantities could harm the business.

Outlook

For third-quarter 2026, management guided revenue to $122–$130 million, GAAP gross margin of 53.3%–54.4% and non-GAAP gross margin of 54%–55%. GAAP operating expenses are expected at $55–$56 million versus non-GAAP operating expenses of $45–$46 million, yielding GAAP operating margin of 8.3%–10.9% and non-GAAP operating margin of 17%–19%. The company also declared a $0.215 per share dividend payable September 30, 2026 to holders of record August 31, 2026.