Semiconductor designer Power Integrations (NASDAQ: POWI) met Wall Street’s revenue expectations in Q1 CY2025, with sales up 15.1% year on year to $105.5 million. The company expects next quarter’s revenue to be around $115 million, close to analysts’ estimates. Its non-GAAP profit of $0.31 per share was 8.9% above analysts’ consensus estimates.
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Power Integrations (POWI) Q1 CY2025 Highlights:
- Revenue: $105.5 million vs analyst estimates of $105.5 million (15.1% year-on-year growth, in line)
- Adjusted EPS: $0.31 vs analyst estimates of $0.28 (8.9% beat)
- Adjusted Operating Income: $15.55 million vs analyst estimates of $13.67 million (14.7% margin, 13.8% beat)
- Revenue Guidance for Q2 CY2025 is $115 million at the midpoint, roughly in line with what analysts were expecting
- Operating Margin: 6.4%, up from 0.5% in the same quarter last year
- Free Cash Flow Margin: 19.6%, up from 12.6% in the same quarter last year
- Inventory Days Outstanding: 325, up from 314 in the previous quarter
- Market Capitalization: $3.08 billion
Company Overview
A leading supplier of parts for electronics such as home appliances, Power Integrations (NASDAQ: POWI) is a semiconductor designer and developer specializing in products used for high-voltage power conversion.
Sales Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, Power Integrations struggled to consistently increase demand as its $432.8 million of sales for the trailing 12 months was close to its revenue five years ago. This was below our standards and is a sign of poor business quality. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions.
Long-term growth is the most important, but short-term results matter for semiconductors because the rapid pace of technological innovation (Moore's Law) could make yesterday's hit product obsolete today. Power Integrations’s recent performance shows its demand remained suppressed as its revenue has declined by 13.3% annually over the last two years. 
This quarter, Power Integrations’s year-on-year revenue growth was 15.1%, and its $105.5 million of revenue was in line with Wall Street’s estimates. Company management is currently guiding for a 8.3% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 14.8% over the next 12 months, an improvement versus the last two years. This projection is healthy and implies its newer products and services will spur better top-line performance.
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Product Demand & Outstanding Inventory
Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business’ capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.
This quarter, Power Integrations’s DIO came in at 325, which is 120 days above its five-year average, suggesting that the company’s inventory has grown to higher levels than we’ve seen in the past.
Key Takeaways from Power Integrations’s Q1 Results
We liked that Power Integrations beat analysts’ adjusted operating income and EPS expectations this quarter. On the other hand, its inventory levels increased and revenue was only in-line with expectations. Looking ahead, revenue guidance for next quarter was just in line as well. Overall, we think this was a mixed quarter. The market seemed to be hoping for more, and the stock traded down 5.1% to $56 immediately following the results.
Big picture, is Power Integrations a buy here and now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
