Power management chips maker Monolithic Power Systems (NASDAQ: MPWR) announced better-than-expected revenue in Q1 CY2026, with sales up 26.1% year on year to $804.2 million. On top of that, next quarter’s revenue guidance ($900 million at the midpoint) was surprisingly good and 10.1% above what analysts were expecting. Its non-GAAP profit of $5.10 per share was 4.1% above analysts’ consensus estimates.

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“Our results demonstrate the strength of our diversified model and our continued success in transforming from a chip-only, semiconductor supplier to a full service, silicon-based solutions provider,” said Michael Hsing, CEO and founder of MPS.

Company Overview

Founded in 1997 by its longtime CEO Michael Hsing, Monolithic Power Systems (NASDAQ: MPWR) is an analog and mixed signal chipmaker that specializes in power management chips meant to minimize total energy consumption.

Revenue Growth

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Thankfully, Monolithic Power Systems’s 25.9% annualized revenue growth over the last five years was incredible. Its growth surpassed the average semiconductor company and shows its offerings resonate with customers, a great starting point for our analysis. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions (which can sometimes offer opportune times to buy).

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. Monolithic Power Systems’s annualized revenue growth of 27.2% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.

This quarter, Monolithic Power Systems reported robust year-on-year revenue growth of 26.1%, and its $804.2 million of revenue topped Wall Street estimates by 2.8%. Beyond the beat, this marks 9 straight quarters of growth, showing that the current upcycle has had a good run - a typical upcycle usually lasts 8-10 quarters. Company management is currently guiding for a 35.4% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 18.6% over the next 12 months, a deceleration versus the last two years. Still, this projection is above average for the sector and implies the market is forecasting some success for its newer products and services.

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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, Monolithic Power Systems’s DIO came in at 157, which is 7 days below its five-year average. These numbers show that despite the recent increase, there’s no indication of an excessive inventory buildup.

Key Takeaways from Monolithic Power Systems’s Q1 Results

We were impressed by Monolithic Power Systems’s optimistic revenue guidance for next quarter, which blew past analysts’ expectations. We were also glad its adjusted operating income outperformed Wall Street’s estimates. On the other hand, its inventory levels increased. Zooming out, we think this was a good print with some key areas of upside. The stock remained flat at $1,631 immediately following the results.

Monolithic Power Systems may have had a good quarter, but does that mean you should invest right now? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here (it’s free).