Power Integrations (NASDAQ:POWI) reported fourth-quarter results that management said were largely in line with expectations, while also detailing a restructuring and a broader effort to reorient the company toward faster execution and higher-growth end markets.
Quarterly and full-year results
CEO Jen Lloyd said fourth-quarter revenue was $103 million and non-GAAP earnings were $0.23 per share. Lloyd added that the company returned to growth in 2025, with full-year revenue up 6%, non-GAAP EPS up 8%, and cash flow from operations of $112 million, which she said was up $30 million from the prior year.
Erba said non-GAAP gross margin was slightly below the level implied by guidance, attributing the shortfall to a less favorable revenue mix than assumed. She added that non-GAAP operating expenses were $45 million, below the company’s outlook of $47 million, citing lower hiring and discretionary expense controls.
Restructuring and operating expense focus
Management said Power Integrations carried out a restructuring earlier in the week of the call, reducing its global workforce by about 7%. Lloyd described the decision as intended to better align expenses with revenue and to create flexibility to invest in products, people, and markets that can create long-term shareholder value.
Erba said limiting operating expense growth to well below revenue growth is a priority, and she characterized the quarter’s spending results and the restructuring as “important steps.” In guidance, she said first-quarter GAAP results will include a restructuring charge of $3.5 million to $4.0 million. In the Q&A, Erba indicated the company is trying to reduce the historical pattern of OpEx growth tracking revenue growth, targeting OpEx growth at about half the pace over time, and cited an expectation of roughly $3 million to $5 million of improvement for the year, while also emphasizing continued portfolio and program prioritization.
End-market trends: appliances headwinds, industrial strength
Lloyd said bookings improved significantly in the fourth quarter after slowing in the prior quarter, partly due to excess appliance inventory shipped into the U.S. last year ahead of tariffs. She noted that the largest U.S. appliance OEM recently reported that the preloaded inventory has largely dissipated. Management said it expects sequential growth in the consumer category in the first quarter, but Lloyd cautioned that appliance demand still faces headwinds, including low existing home sales in the U.S., the impact of tariffs on appliance prices, and ongoing softness in China housing.
Industrial demand was highlighted as a key driver of the recent bookings uptick. Lloyd said the company expects industrial to be its fastest-growing market again in 2026, starting with a strong first quarter. Erba said industrial revenue declined 23% sequentially in Q4 after two strong quarters, citing seasonality and variability in customer order patterns, but she also said the industrial business grew 15% for the full year.
Erba broke out quarterly end-market performance and mix as follows:
- Industrial: 37% of Q4 revenue; down 23% sequentially after strong prior quarters
- Consumer: 34% of Q4 revenue; down 13% sequentially, primarily reflecting the appliance inventory overhang tied to tariffs
- Communications: 15% of Q4 revenue; up 15% sequentially on new ramps in cell phone and India 5G broadband
- Computer: 14% of Q4 revenue; down 5% sequentially on lower tablet revenue, offset by higher notebook sales
On industrial drivers, Lloyd pointed to electrification, renewable energy, and grid modernization themes, noting a record year in the company’s high-power industrial business. She cited strength tied to electric rail, including a strong position in the India locomotive market, and high-voltage DC transmission projects. She also cited customer wins in Q4, including a European maker of inverters for utility-scale solar and battery storage, commuter trains and streetcars in Europe and Africa, and multiple power grid project wins in India.
Lloyd also said the company saw double-digit growth in metering in 2025 due to its position in smart meter deployments in markets such as India and Japan, and noted customers migrating to 900- and 1250-volt GaN products to address voltage swings on India’s grid. She added that power tools contributed to industrial growth as lawn equipment and other tools continue migrating to battery power.
Product momentum: GaN, design wins, and longer-term bets
Lloyd said design win value grew 10% in 2025, with strength in GaN and high-power products. She highlighted customer interest in new TinySwitch-5 ICs, with a pipeline of designs expected to begin production in the second half of 2026. She also said the company’s multi-output GaN-based InnoMux-2 ICs are seeing strong design traction in the TV market.
In GaN, Lloyd said revenue from PowiGaN products grew more than 40% in 2025. She cited Q4 GaN design wins that included a dual USB-C charging port integrated with AC outlets, and said the company began production in Q4 on a server auxiliary power design for a U.S. cloud services provider using a GaN-based InnoSwitch. Lloyd reiterated that auxiliary power is an important element of data center engagements, including work with NVIDIA around an 800-volt DC architecture, where she said the company’s 1700-volt GaN solutions offer an alternative to silicon carbide.
During Q&A, Lloyd described auxiliary power as an entry point and said the company is aiming to expand toward main power supplies over time, which she characterized as a larger opportunity.
In automotive, Lloyd said the company continues to penetrate the EV market with auto-qualified InnoSwitch products for inverter emergency power supplies. She cited a Q4 design win at a top Chinese Tier 1 supplier serving a leading EV maker and said production began that week on a design at what she described as the number one European EV car maker. However, in response to an analyst question about near-term revenue contribution, Lloyd said some EV market delays and pushed-out ramps mean meaningful automotive contribution may be more of a 12- to 18-month timing question.
Outlook and financial items
For the first quarter, Erba guided revenue to a range of $104 million to $109 million and non-GAAP gross margin to 53% to 54%, with mix expected to improve versus Q4 as industrial and consumer represent higher portions of revenue. She guided non-GAAP operating expenses to $46.0 million ± $0.5 million, noting the resumption of FICA payments partially offset by a partial-quarter impact of the restructuring.
Erba said the company benefited in Q4 from credits related to new solar generating capacity at its San Jose headquarters and a higher-than-expected R&D tax credit, driving the full-year non-GAAP tax rate to 2% and resulting in a -3% non-GAAP tax rate in the fourth quarter. She said non-GAAP EPS included about a $0.02 benefit from the lower-than-expected tax rate. Looking ahead, she said the effective tax rate is expected to step up in 2026, with an anticipated rate of 7% to 8% for the quarter and full year due to the non-recurring nature of solar credits and an increase in the tax rate on foreign earnings specified in the 2017 tax reform.
On cash flow and capital allocation, Erba said Q4 operating cash flow was $26 million and CapEx was $7 million. For the full year, she reported $112 million in operating cash flow and $24 million of CapEx, resulting in $87 million of free cash flow. She said the company returned $145 million to shareholders through buybacks and dividends in 2025, which she quantified as 167% of free cash flow.
Erba also noted inventories rose $2 million in the quarter and days of inventory on hand increased to 313 due to lower revenue, but said wafer inventory declined in 2025 and that the company expects wafer inventory and revenue growth to contribute to lower inventory days over the course of 2026.
About Power Integrations (NASDAQ:POWI)
Power Integrations, Inc, based in Hillsboro, Oregon, specializes in the design and development of high-performance analog and mixed-signal integrated circuits for energy-efficient power conversion. The company’s products are used to convert and regulate electrical power in a wide range of applications, from consumer electronics and industrial systems to communications equipment and electric vehicle charging. By providing compact, reliable, and highly integrated solutions, Power Integrations aims to reduce system size, improve efficiency, and simplify thermal management for its customers.
The firm’s product portfolio encompasses isolated and non-isolated switching controllers for both AC-DC and DC-DC power conversion.
