Detailed narrative
Strategic Pivot to High-Voltage Markets
Power Integrations is reorienting its long-term focus and investments towards high-growth markets such as energy infrastructure, rail, data center, and automotive. These markets are characterized by rising voltage and power levels, along with high uptime requirements, creating a strong demand for advanced high-voltage solutions. The company aims to leverage its technology and system expertise to maximize efficiency, power density, reliability, and safety in these applications.
PowiGaN Technology Leadership and Roadmap
The company demonstrated its 2,200-volt PowiGaN technology, a significant milestone that extends GaN into application spaces traditionally dominated by silicon carbide. This technology maintains GaN's efficiency and power density advantages while offering proven reliability across existing voltage nodes (750V, 900V, 1,250V, 1,700V). The 2,200-volt demonstration reinforces Power Integrations' leadership in high-voltage GaN and provides a long-term pathway for customers, with 1,500-volt architectures already in view.
Expanding Data Center Opportunities
Power Integrations is actively engaged with hyperscalers for 800-volt data centers, targeting a projected $1 billion SAM by 2030. This includes developing solutions for the main power path to the GPU using unique 1,250-volt GaN, offering a high-density alternative to stacked 650-volt designs. Additionally, the company sees expanding opportunities in auxiliary power within the data center rack, with a healthy roster of design-ins for 1,700-volt products, including two reference designs for NVIDIA 800-volt racks offering 30% space savings.
Automotive Market Expansion and GaN Penetration
Automotive revenue is on track to double in FY26, with a long-term target of $100 million by 2029-2030. The company is expanding its bill of materials (BOM) content in EVs, moving beyond emergency power supplies to micro DC-to-DC converters using GaN. A recent design win with a major Tier 1 supplier for a GaN-based micro DC-to-DC converter, scheduled for production next year, highlights the increasing adoption of PowiGaN due to its documented reliability performance.
Performance in Appliance and Industrial Markets
Appliance and low-power industrial markets continue to be main drivers of revenue and cash flow. Recent product releases like TOPSwitch GaN and TinySwitch-5 are generating a healthy pipeline of designs, particularly in appliances, with TinySwitch-5 expected to contribute meaningful revenue in the second half of 2026. Industrial revenue grew 16% year-to-date, driven by broad-based growth across high and low power applications, including renewable energy, home and building automation, tools, and metering.
Financial Discipline and Operating Margin Expansion
The company achieved a non-GAAP gross margin of 55.1% in Q2, up 160 basis points sequentially, driven by better mix, higher volume, and favorable yen-dollar exchange rates. Non-GAAP operating expenses were $45.2 million, below the outlook range, reflecting a Q1 restructuring and broader efficiency initiatives. These factors combined led to a significant 540 basis point expansion in non-GAAP operating margin to 17.1% and non-GAAP diluted EPS of $0.37, up from $0.25 in the prior quarter.