VICOR CORP VICR

Vicor reported Q2 FY26 product and royalty revenue of $143.4 million, a 26.9% sequential increase and 1.6% year-over-year growth (excluding a prior-year patent settlement). Advanced Products revenue grew 45% sequentially to $94.2 million, now representing 65.7% of total revenue. Consolidated gross profit margin improved by 280 basis points sequentially to 58%, while operating expenses increased 6.1% sequentially to $48.2 million, primarily due to contingent legal expenses. Net income for the quarter was $49.8 million, resulting in GAAP diluted EPS of $1.04.

The company's IP licensing practice is gaining focus, with a new license agreement contributing $15 million to Q2 revenue. Due to accounting treatment, this agreement is expected to contribute $5 million in Q3 and $10 million per quarter for the subsequent four quarters. Management emphasized that this initial license does not include a sourcing relationship for the first couple of years but anticipates it will become part of future relationships, especially with second-gen VPD capabilities. The long-term strategy involves a comprehensive approach to IP enforcement, expecting a 'crossing of the cars' in the industry as hyperscalers and OEMs recognize the need to license Vicor's technology.

Development for the second-generation VPD has completed for a baseline of 3 amps per square millimeter current density with the initial chipset for a lead customer. Demo systems are being prepared for broader customer engagement, with a target to raise current density to 5 amps per square millimeter by late this year or early next year. Management highlighted that competitive solutions are limited to barely over 1 amp per square millimeter, positioning Vicor's VPD as a critical solution for the increasing compute density requirements in AI data centers and HPC systems.

Vicor is actively expanding its first chip fab's capacity, which involved a one-time^📎 expense for equipment relocation that impacted Q2 product gross margins. The company is nearing full capacity utilization at its first fab and is in the process of selecting a site for a second chip fab, with a decision expected in the next few weeks. The second fab is planned to initially double capacity, with flexibility to expand to 2-3 times the first fab's output, which is crucial for achieving the long-term revenue target of $2.5 billion.

The power module business is focused on 100 customers across four markets: HPC (High-Performance Compute), industrial, automotive, and aerospace and defense. Major new product introductions are underway in the industrial and aerospace and defense sectors, expanding beyond the initial top 100 customer opportunities. The automatic test equipment (ATE) market was specifically highlighted as a strong growth area, driven by the need for low noise performance and thin package technology, where Vicor holds a competitive advantage.