Monolithic Power Systems, Inc Q4 2025 Earnings Call Transcript

Monolithic Power Systems, Inc (NASDAQ: MPWR) Q4 2025 Earnings Call dated Feb. 05, 2026

Presentation

Arthur Lee — Finance Manager

Welcome everyone to the NPS fourth quarter 2025 earnings webinar. My name is Arthur Lee and I’ll be the moderator for this webinar. Joining me today are Michael Singh, CEO and Founder of nps, Bernie Blagon, EVP and CFO Rob Dean, Corporate Controller and Tony Ballo, Vice President of Finance. Earlier today, along with our earnings announcement, NPS released a written commentary on the results of our operations. Both documents can be found on our website. Before we begin, I’d like to remind everyone that in the course of today’s presentation we may make forward looking statements and projections within the meaning of the Private Securities Litigation Reform act of 1995 that involved risk and uncertainties.

The risk, uncertainties and other factors that could cause actual results to differ from these forward looking statements are identified in the Safe harbor statements contained in the Q4 2025 earnings release, our Q4 2025 earnings commentary and in our SEC filings, including our Form 10K and Forms 10Q, which can be found on our website. Our statements are made as of today and we assume no obligation to update this information. Now I’d like to turn the call over to Tony.

Tony Balow — Vice President of Finance

Thanks Arthur. Good afternoon and welcome to our Q4 2025 earnings call. Today we made an announcement that after 15 years at NPS and 10 as the CFO, Bernie will be retiring. Before we begin our prepared remarks, I’d like to turn the webinar over to him for his thoughts on his time at NPS and the transition ahead. Bernie?

Bernie Blegen — Executive Vice President and Chief Financial Officer

Thanks Tony. As I was preparing for today, I realized that this is my 40th earnings call as MPS’s CFO. That’s a nice round number to finish up with. It’s been my pleasure and honor to work closely with Michael for so long and to have been a part of MPS’s leadership team. I want to thank our investors and analysts for the trust you placed in me. It is natural for all businesses to go through cycles. Your support has been consistent regardless of the circumstances and I have greatly appreciated it. As I look ahead, MPS’s prospects remain bright.

With our unique culture, our dedicated employees and a fantastic portfolio of products, MPS is well positioned to sustain the broad based growth you come to expect from us during the last 10 years. I have a lot of confidence in the team. I am transitioning my responsibilities too, starting with Rob Dean, who will be our interim cfo. While many of you may not know Rob, we have been partners in this enterprise for the last nine years and like my predecessor and for myself, Rob continues the NPS tradition of transitioning from MPS’s controllership to CFO. This ensures a lot of continuity in the role.

Likewise, I will remain with the company to support a successful transition. Rob, would you like to say a few words?

Rob Dean — Corporate Controller

Yes, thanks Bernie, and I’m grateful to you and Michael for this opportunity to continue the tradition and to have been part of the NPS finance team while. You have been cfo. I know I speak for the entire. Finance team and I thank you Bernie for everything you’ve done over the last 15 years. He’s not only helped guide the business. To consistent growth and execution, but he’s grown a great team around him. I’ve worked closely with Michael and the executive team for close to a decade. We’ve developed a strong relationship which I expect to continue as we grow the company and take on the opportunities ahead. I appreciate the confidence they have placed in me in this new role. I look forward to meeting all of you in the coming days and weeks. With that, I’ll pass it over to Tony.

Tony Balow — Vice President of Finance

Thanks Rob. I’ll now move to our prepared remarks before going to Q and a in 2025, NPS posted its 14th consecutive year of growth with a full year revenue of $2.8 billion of 26.4% from 2024. For Q4 2025, we had a record quarterly revenue of $751.2 million, 1.9% above Q3 2025 and 20.8% higher than the fourth quarter of 2024. This performance reflected our consistent execution, continued innovation and relentless customer focus. Let me call out a few highlights from 2025. Our non enterprise data end markets grew by over 40% year over year, showcasing the strength of our diversified business model.

We achieved our milestone of securing more than 4 billion of geographically balanced capacity and continue to add additional supply chain partners to support future growth. We had record module revenue and positioned ourselves for a further shift to solutions by sampling our 800 volt power solution for data center in automotive. We launched solutions for 48 volt and zonal architectures including the first fully integrated 48 volt E fuse and a kilowatt level zonal controller that will support growth in 2026 and beyond. We expanded our customer base and data center for power solutions across AI, server, memory, optical modules and switch applications with leading edge current density, power efficiency and packaging.

I am also pleased to announce that our quarterly dividend will increase 28% to $2 per share for the three years ending with December 2025. NPS has returned over 72% of free cash flow to stockholders through share repurchases and dividends. Our proven long term growth strategy remains intact as NPS focuses on innovation and solving our customers most challenging problems. We continue to invest in new technology, expand into new markets and to diversify both our end market applications and global supply chain. This will allow us to capture future growth opportunities, maintain supply chain stability and quickly adapt to market changes as they occur.

I will now open the webinar for questions.

Question & Answers

Operator

Thank you Tony Analysts. I would now like to begin our Q and A session. As a reminder, if you would like to ask a question, please click on the participants icon on the menu bar and then click the resend button. Our first question is from Chris Castle of Hoof Research. Chris, your line is now open.

Christopher Caso

Thank you. And Bernie, I’m lucky to be the first to congratulate you on your retirement and wish you all the best. It’s been a pleasure all these years.

Bernie Blegen — Executive Vice President and Chief Financial Officer

Thank you very much, Chris.

Christopher Caso

So for my first question, I guess. As we look into the March quarter, could you give some color on what you’re seeing, you know, with, with, with respect to the different segments, you know, what, what, what what, what do you see within the the various market segments?

Bernie Blegen — Executive Vice President and Chief Financial Officer

Sure. Let me start to color this by talking a little bit about Q4 25. We saw a good step up in the ordering patterns in the quarter. Our book to bill ratio was well in excess of one and that that’s really reflected in our backlog which is starting to extend out into Q2 and Q3 of 26. We also finished with fairly routine rather our channel inventories stayed at the low end of our range. So we feel that we’re servicing real demand and that we’re seeing a lot of strong ordering trend. So as we look at the fourth quarter you can see that we saw some, you know, pretty good strength particularly as it relates to enterprise data and also to the communications.

We expect that those trends along with automotive should continue to extend into Q1 and into the remainder of the year.

Christopher Caso

Thank you. As a follow up and you mentioned enterprise Data and obviously you know that’s been a focus attention not just for you but, but, but the whole market. You know I you had made some comments in enterprise data for 26 on the last earnings call and you know if I just annualize the Q4 numbers, you pretty much get to where that that guidance was. So you know, what are your thoughts. On that in the year and perhaps is there a seasonal element to enterprise data as we go through the year?

Bernie Blegen — Executive Vice President and Chief Financial Officer

Sure. I’LL start off on this one. As I said in Q4 we saw some fairly pronounced changes in ordering patterns which has given us a fair amount more of confidence as far as what the outlook for enterprise data could be in 26. Now I think for those that you’ve worked with me for the last 10 years, you know that I like to stay pretty conservatively profiled when I make an estimate. So I’d probably say that whereas last quarter I talked about a range of between 30 and 40%, maybe I can increase that to a floor of 50% growth for 2025.

Michael R. Hsing — Chairman of the Board, President and Chief Executive Officer

Well, 50%, I thought we can do a lot more than that conservatively. Well, I see. This is what I see here. We won the many design wings and across the board not from one company, one large company. We have multiple customers, they are very big. They call what magnetic fixing seven or eight or whatever. It’s an okay, we want all the designs again and we are proven we are one of the valuable AI power supplied and also I see the other end, we have all the capacities we can deliver this year to our customers needs and I don’t see why not.

So not only 50% which going be a lot more than that.

Tony Balow — Vice President of Finance

Okay, maybe just one last thing to add, Chris. You heard us talk about the drivers for growth which was really around growing existing customers, adding new customers, seeing new platforms coming to market and then of course just server tailwinds. I think we always knew those were in place and now we’re just seeing some of the backlog to go to go along with it. The only other thing I’d add right is we focus a lot in enterprise data. But I think we’ve seen strong data center demand which is really also pulled through storage growth, optical modules, switches and other areas we’ve talked about.

So I think overall we’ve seen strong data center demand through the end of the year.

Christopher Caso

Got it. Okay, thank you. All the best, Bernie.

Operator

Our next question is from Joe Quatorchi of Wells Fargo. Joe, your line is now open.

Joseph Quatrochi

Yeah, thanks for taking the questions and. My congrats to Bernie as well. Thanks for all the help. Maybe just to follow up on that. In the enterprise data and the increase in outlook, how much of that is. Related to like traditional server CPU demand. That it seems like is accelerating as well?

Michael R. Hsing — Chairman of the Board, President and Chief Executive Officer

Well as I said, we have a lot of new design wings on the. Game. Particularly last year and a half and we see continuously changing adapt our modules and even from us changing from a silicon to modules and we see the trend and with our power densities and again, we’re winning the market. Yeah. I think to go back to part of your question, which had to do with the traditional maybe CPU data center, the lines between AI GPUs and CPU are getting pretty blurry because they’re so integral to one another these days. They’re using the same kind of a power supply now.

Bernie Blegen — Executive Vice President and Chief Financial Officer

Okay, exactly. But I would say that we’ve been trending very well in both categories. So I can talk to a trend line, but I can’t really give you an absolute figure.

Joseph Quatrochi

Okay, that’s helpful. And then as a follow up, as. I think about just kind of like. Storage and compute and maybe the exposure to like PCs, are you seeing anything related to just kind of, you know. Memory prices increasing, you know, and just kind of maybe some pressure on, some. Demand destruction around that part of the market?

Michael R. Hsing — Chairman of the Board, President and Chief Executive Officer

Oh, you’re talking about PC. The PC is a, is a, is a different animal than the data centers. Okay.

Bernie Blegen — Executive Vice President and Chief Financial Officer

New question. He’s asking about memory and the constraints. There, whether we’re seeing that affect us.

Michael R. Hsing — Chairman of the Board, President and Chief Executive Officer

Or memory constraints. And. Okay, as I said earlier, we don’t have a constraints on the capacity side.

Bernie Blegen — Executive Vice President and Chief Financial Officer

Yeah. I think where you’re going, Joe, as well is also, is there any demand destruction in PCs? I think as you looked at Q4 and into Q1, remember, we’re coming off a very strong first half of 2025, so we expected that to be down a bit as well as we are participating more selectively in the margin parts of that business. I don’t think we know how it’s going to play out through the rest of this year at this point. So I don’t think it’s possible to say how that market might trend. We. We hear a lot of the same, but I think it’s too early for us to tell.

Joseph Quatrochi

Thank you.

Michael R. Hsing — Chairman of the Board, President and Chief Executive Officer

Memory constraint on the PC on the.

Bernie Blegen — Executive Vice President and Chief Financial Officer

Yes.

Michael R. Hsing — Chairman of the Board, President and Chief Executive Officer

Oh, oh, okay. I don’t know. We don’t know those in market. Okay. We don’t know our. What our customer do. Yeah, we deliver what our customers. Our customers ask. I care less. Yeah.

Bernie Blegen — Executive Vice President and Chief Financial Officer

Okay.

Operator

Our next question is from Josh Bualter of Cohen. Josh, your line is now open.

Joshua Buchalter

Guys, thank you for taking my question and definitely want to echo the congrats and best wishes to Bernie after, you know, an incredible run and a long, sometimes strange trip. Very much appreciate the support over the year and congrats and best of luck to Rob. Maybe just to start, you know, the incremental confidence in enterprise data is great to see and it seems like you guys are suggesting you feel Better about visibility there than you have in the past. Is that a fair read? And if so, is part of this. It’s just the market is maturing and scaling and also just the capacity needs are so great.

I’m just hoping you could maybe speak to how visibility compared to maybe a year ago or something that. Thank you.

Bernie Blegen — Executive Vice President and Chief Financial Officer

Yeah. I think in prior quarters I’ve said that we’ve been experiencing a turnaround, much of which has been around the enterprise data or more broadly AI markets. But that the anomaly had been that we’d been seeing very short lead times and that they were not putting a lot of backlog in our books. And I’d say that the, the fundamental change that also making us more confident right now is that we are seeing longer ordering patterns because some of our customers are concerned about capacity constraints. Not necessarily with us, but just in general.

Joshua Buchalter

Okay, that’s helpful caller. Thank you, Bernie. And then the 40% non enterprise data growth number for 2025 is obviously a big, huge and above your historical algorithm of I think it was 10 to 15% above the analog industry. Is that still the right way? We should be thinking about, you know, the non compute exposed verticals into 2026 as well. Thank you and congrats again.

Michael R. Hsing — Chairman of the Board, President and Chief Executive Officer

Yeah, I will try to manage your, your, your expectation. We’re not going to, we’re not say 26 or whatever. 40% growth. Okay. And these growths. Okay. We are, we are still small. Small. Players in the overall markets compared to other market size. Okay. And some growth. Some years we see the opportunities, we can grow better than the other years. But the long term trend or even short term Trend and even 26, we will grow.

Joshua Buchalter

Okay, thank you.

Operator

Next question is from Quinn Bolton of Needham Quinn, your line is now open.

Quinn Bolton

Thanks for taking my question. And Bernie, it’s been a great run, a great decade, so thank you for all your help along the way. Welcome. Rob, wanted to ask some of your competitors in the AI power space are talking about their business is doubling in 2026 and I know your business and their businesses don’t overlap 100%. There’s different compositions. My question is do you guys think that you’re gaining share as you look into 2026 broadly in the AI power segment?

Michael R. Hsing — Chairman of the Board, President and Chief Executive Officer

Yeah, I refuse to get into a prison contest and the whole who who wear less on the on the stage. Okay. We let the number speak speak self as always as our CSI POS 21 years history. We never do that. Okay.

Bernie Blegen — Executive Vice President and Chief Financial Officer

I do think that we clearly have great products, broad engagement across the Customers, we have design wins in a, you know, a broad swath. So how the market then plays out, you know, remains to be seen, I think. But I think we’re very confident in our product portfolio and the engagements we have right now.

Michael R. Hsing — Chairman of the Board, President and Chief Executive Officer

Got it. And then Michael, some of the. That’s a much better small stock. That’s a much.

Quinn Bolton

Well, as you said, we’ll see where the numbers shake out at the end of the year. Michael, I wanted to ask too. You talked about sampling your 800 volt.

Michael R. Hsing — Chairman of the Board, President and Chief Executive Officer

You’ll probably see much earlier. Okay. Oh good. We’ll stay tuned.

Quinn Bolton

I wanted to ask you about the. 800 volt solutions for 800 volt racks. Some of the participants in the market are suggesting Nvidia and others are looking for GAN based solutions. I think you guys are offering a silicon carbide based solution. And so just wondering if you can talk about what you’re seeing in the market. Is there a preference for GAN or silicon carbide? Do you think there’ll be a mix. Of compound semiconductor solutions for that 800 volt to 12 or 6 volt stage in those 800 volt racks?

Michael R. Hsing — Chairman of the Board, President and Chief Executive Officer

Yeah. Yeah. Okay, again, okay. This is not a good venue to talk about technical terms. And okay, actually I’m happy, I’m happy to be a person who really knows a semiconductor device. And we are developed silicon carbide, okay. And 10 years ago I was wrong about the gangs and okay. But in the last few years we developed our own gain devices. Okay. And 800 volts since Tony is mentioning about it and we’re entering a pissing contest. And okay, that revenue is not for this year, not for even for next year. So maybe end of the next year, however, we’re the first company to sample it. Now that’s a part of a pissing contest. Okay.

Bernie Blegen — Executive Vice President and Chief Financial Officer

And again, we, we’ve done a good job and shown ourselves to be very adaptive changes to the market. So whether it turns out to be, you know, GAN or Silicon Carbide, that is what’s demanded. I’m sure that we’ll be well positioned to take advantage of it.

Quinn Bolton

Got it. Thank you.

Operator

Next question is from Rick Schaefer of Oppenheimer. Rick, your line is now open.

Rick Schafer

Thanks. And I just, I’ll just say, Bernie, it’s been a genuine pleasure. You’re going to be missed. And Michael, I just want to confirm for everybody that you’re never retiring. Right.

Michael R. Hsing — Chairman of the Board, President and Chief Executive Officer

Well, it happened to be. Today is my 86th earnings call. I’m looking for double. Okay, well be serious, okay? And I enjoy this NPS immensely. We actually created this platform. Everybody can maximize their their capability and we. And the more more interesting things to me is we company evolve and we form a semic. We sell semiconductor power management. Now in the semiconductor we get into a mcu we’re getting to a data converters we get up to even high speed. Okay these are a few gigahertz of stuff and you will see the revenue zones and on the overall marketing marketing market segment address we migrate from silicon to systems to a module to systems and you will see a lot more.

I enjoy this process a lot and I’m a part of it and I have own product lines.

Rick Schafer

Thanks Michael. It’s reassuring. Hey, I also I just had a. Quick clarification and then I’ve got a couple follow ups. But the clarification Michael, you said earlier that the CPU and GPU and server are using the same power supplies now. So does that mean that server CPU is already migrating to 48 volt?

Michael R. Hsing — Chairman of the Board, President and Chief Executive Officer

It’s still. They use mostly okay if they. They have some advance okay and high price servers or special servers and okay a special need. They used to use 12 volts and but I’m aware of some models use the 48 volts. My guess is still small. I’m not very clear on that but this is. And the majority is still 12 volts and now they. It’s clear the modules the way to go and if you don’t want to improve efficiency.

Rick Schafer

Thanks for clearing that up. So my first question really is on optical transceiver because that’s basically a brand new product line. A little over a year old I believe. And by our count in our model it’s close to roughly 5% of sales exiting last year I think now which is a pretty remarkable ramp. So I guess I’m thinking we’re asking what are your expectations for that business this year and what does that imply for comm segment? What are sort of the puts and takes within the comm segment.

Michael R. Hsing — Chairman of the Board, President and Chief Executive Officer

I can comment on. I get me because we entered the module journey since 2016 or 17 and these happen to be the highest power density product on the market. Then optical modules they wanted that because they have a limited room in terms of a business. I don’t know the details and maybe Bernie Tony can answer.

Tony Balow — Vice President of Finance

Okay, yeah, I’ll just follow up. I think Rick, we have obviously seen great growth in optical modules over the past year and a half. I think the way we look at the market very typical for MPS is sort of interconnect. So it’s not just optical modules, but engagements for cpo, active copper, other things as well because the market will then figure out what interconnect technology is actually going to succeed over the long term. We obviously don’t guide by sub end market, let alone sub end market, but we would expect optical module to continue to grow as you start to see the 1.6 ramp as we go through.

And for communications, it should be an area of growth for us in 26 both on optical modules and in switches because that’s where our data center switches are as well.

Rick Schafer

Thanks for that. And then if I could sneak in one on automotive, I mean obviously great year in 25 and I’m just curious what are the. What you see is the top driver, top drivers. Excuse me of segment growth this year. I know you highlighted 48 volt zonal and I, I didn’t hear you say much about adas but I assume adas. I don’t know if you can update us on how big adas is within that segment now or and if there’s any way to quantify sort of the shift this year that you expect in, in potential content per vehicle.

Tony Balow — Vice President of Finance

Sure. I want to take a victory lap on 2025 where automotive grew 43% year over year and. But that’s only the beginning. That’s exactly the point here is that what we saw in 2025 and is going to continue is that while ADOS certainly was a strong initial ramp, particularly in 23, 24 and 25, I think we saw a lot more diversification into other content opportunities on the automotive platform. And so as we look ahead here, keep in mind we’re not necessarily driven by the SAR of the business, but we are. Our, our growth is dependent upon how fast our customers implement these new technologies. Particularly as it relates to zonal and. 48 volt

Michael R. Hsing — Chairman of the Board, President and Chief Executive Officer

or even ADAS or ADAS. The majority cars on the market is a, is a nowhere, nowhere anything close to what Tesla does. Okay. And that’s the car I drive. Okay. You have a full. I don’t drive anymore and I think a majority of people still drive. And that adoption rate in large automotive company they do things very slowly and much slower than Tesla does. And for futures we are up to this point and actually the next couple years I see our products provides the complete power supply chipsets and also we have all these firmware software.

We’re very much engaged with all the car makers and I don’t see why not that business going to continue to grow. Yeah, you actually guys. Okay. You know how Many cars shipped with ADOs. Okay, which levels? And you can count NPS in it.

Tony Balow — Vice President of Finance

And Rick, we’re a little hesitant to probably call any numbers for the full year just because there is a lot of macro uncertainty. Still, great design wins, great engagement with Tier ones and OEMs. But whether it’s tariffs, whether it’s the end of EV subsidies, or whether you even talk about what the impact on the auto market is from the memory shortage, I don’t think we know. So I think we’re a little hesitant to actually put a growth rate on it for the year.

Rick Schafer

Appreciate it. Thanks, guys.

Operator

Our next question is from Gary Mobley of Luke Capital. Gary, your line is now open.

Gary Mobley

Hey guys, thanks for taking my question. And Bernie, your retirement’s well deserved and look forward to working with you. Rob, I think everybody on the call would share the same sentiment that I have that you’re definitely one of my favorite CFOs, and for my retirement gift to you, I wanted to throw you a big softball question, but I think it’s an important topic. You know, look, looking back over the past decade when you’ve been cfo, you’ve outperformed the overall analog chip market, the overall voltage regulator market, consistently every year, seemingly for different reasons each year.

But, you know, thinking about the outperformance of the market in 2025, you know, maybe if you can give us a sense of what drove that. Was that just share gains and volts regulator die, or was it something more substantial like moving into data converters? Was it, you know, tied to the higher content associated with modules and related. Can you give us some KPIs that relates to sort of your module mix right now? Anything you can help us give us get a better understanding of that consistent market share growth.

Bernie Blegen — Executive Vice President and Chief Financial Officer

Sure, Gary. And thank, thank you for the kind words. They’re, they’re, they’re appreciated when you look at the overall performance for the company in 2025, we had what had been our largest revenue and market in enterprise Data had actually declined 2%. And yet overall, the company grew 26%. And strategically, you know, how we’re differentiated from our competition is that we are represented with the best technology, the best services across all of the end markets that we service. And this is really just a reflection of, you know, our execution against that strategy over all of these years.

It wasn’t that, pardon my saying, we pulled the rabbit out of the hat. We actually are able to adapt very quickly to have changes in the market. So that’s what this is really a reflection of in our performance of 2025.

Gary Mobley

Thanks. As my follow up, I wanted to ask about maybe some nuances in your increased visibility and comments regarding that. If I talked to you guys, you know, three months ago, I think you were thinking maybe the 2026 year was going to be a little more second half weighted just given the stronger bookings that you’ve seen, the stronger order backlog, you know, as you see here today. Would you say the shape of the year is a little more linear, less dependent on the second half?

Bernie Blegen — Executive Vice President and Chief Financial Officer

I’d say that the first half for enterprise data in particular, but for the company is more secure. I think there’s still a lot of variables that need to be shaped before we really understand what the second half trajectory is going to look like. But obviously the initial signs that we saw from the ordering pattern in Q4 and continuing to, to this June year have been exceptionally positive. So now we have more of the high level issue of trying to figure out what’s real demand and what may be, you know, some double ordering on the part of our customers as they try to secure capacity.

As I said, that’s a high level issue and we’ve shown that we can adapt to that as well as anybody by the performance we gave in late 2020 and early 2021.

Gary Mobley

Thank you.

Michael R. Hsing — Chairman of the Board, President and Chief Executive Officer

We work with customers very, especially all these large data center customers very closely and they will give us a very good lead times and forecast and so we have the capacities, readies and. Okay. And we just meet that demand.

Gary Mobley

Thanks, Michael.

Operator

Next question is from Tori Swemper of Steel. Tori, your line’s now open.

Tore Svanberg

Yes, thank you and congratulations, Bernie, you’re. You’re a class act and I’m going to miss you tremendously. My first question, Michael, I’m going to zoom in on a. In a market where there’s perhaps less contests, which is storage and especially SSD power, it seems to be an area. That could see quite a bit of upside and growth in data centers this year. So I was hoping you could talk. A little bit about the profile of that business. I mean, I think historic. Historically it’s been more tied to, you. Know, client and edge devices. But again, what’s the company’s position? SSD for data center going into 2020.

Michael R. Hsing — Chairman of the Board, President and Chief Executive Officer

Yeah, these are the power management and also the signal processes. Okay. These are all in the consortium driven by jdac maybe. Tony, you’re a lot more familiar than I do and we are part of it. And DDR4, we don’t have much business, very little. And DDR5 were in DDR4 were in on the dining table. So I’m not gonna die. Before DDR4 wasn’t. Okay. And so now this business is ramping. So okay. And memories and okay. And all shifted to DDR5. And we clearly see the volumes now this and last year and this year. And we’re not stopping there.

We’re migrated down to where we expanded our product lines to the single site. And these are all in the memory modules.

Bernie Blegen — Executive Vice President and Chief Financial Officer

I think there was a portion of your question as well about the non DDR5 part of that business sort of STD and HDD and we have seen an uptick in that part of the business as well. And I think you’re right. It’s being pulled through much more by the enterprise than consumer these days. And that’s why we generally talk about storage being data center driven inside of the storage and compute segment.

Tore Svanberg

Yeah, that’s what I was trying to get to. And as my follow up, Michael, congratulations on getting to 4 billion in capacity. But it looks like you’re going to need quite a bit more than that. So perhaps you could give us a. Little bit sense of what you’re doing on the capacity front especially the next few years because you’re clearly going to need much more than 4 billion.

Michael R. Hsing — Chairman of the Board, President and Chief Executive Officer

Yes, we are very aware of that. Okay. And as speaking of course. And we’re continuously expanding our capacity and you know NPS history. The worst things are shutting customers down. Okay. And fortunately we haven’t happened in the nps. Okay. And now gets a little more complicated. Okay. We established from the beginning of the last year we established our supply management chain. And this is not only for silicon, not for semiconductors including silicon carbides and I mean and getting nitrites in the materials. And again and we develop a lot of modules or the module components. And so we established that the supply chain management.

So I think it’s. And also quality. It’s not everybody can play that game. So every supply can play that the game. These are. We go through heavy auditing and so their standards that meet our standard ultimately it reflects into our margins. And so the short answers is yes, we’re expanding very fast.

Tore Svanberg

Great. Thank you. Congrats again, Bernie.

Bernie Blegen — Executive Vice President and Chief Financial Officer

Thank you.

Operator

Our next question is from Kelsey Chia of Citi Research. Kelsey, your line is now open.

Wei Chia

Hey. Hi Bernie. Congratulations on retirement. Really appreciate the opportunity to work with you over the past year. So I think on my first question is with regards to the updated guidance for enterprise data, is there any market share gains assumption there or is it just primarily due to this industry growth and also, you know, NPS has demonstrated strong execution and historically share during serious of supply constraints. So is it fair to assume that NPS could navigate any potential supply constraints and see and to take share in this environment?

Bernie Blegen — Executive Vice President and Chief Financial Officer

Sure. And I think that I’d be doing a disservice to this conversation if I tried to break it down into a formula that says what’s share gains or what’s new business. And I’d rather sort of respond a little differently that this is a large market. We talk about the large, you know, the top six, seven customers and we’re fully engaged with them in a strategic manner where we’re developing not just the release of the next generation but the one beyond that. But this also is end market with a long tail and we’re participating in the mid market and the small size as well.

So we’re still very, very early in, you know, how this market’s going to roll out and what our positioning is going to be. And I think that we’re as well positioned as anybody to take advantage of the market opportunity. But this is a long, long and very big story.

Wei Chia

Got it.

Michael R. Hsing — Chairman of the Board, President and Chief Executive Officer

Well, the companies I’m thinking about beyond AI, beyond enterprise data centers and I’m not retiring, I’m thinking 10, 15 years ahead.

Wei Chia

That’s great. Can continue the outperformance and MPS outlined a gross margin target of 55 to 60%. Could you provide an update with regards to which end markets are currently above or below that corporate average or outline some of the specific gross margin drivers in the share range?

Michael R. Hsing — Chairman of the Board, President and Chief Executive Officer

Yeah, we’re in the range but on the low side I noticed that. Okay,

Bernie Blegen — Executive Vice President and Chief Financial Officer

let me add a little bit of color there. So Michael said this earlier. When we look at all of the opportunities we keep in mind, you know, what is the corporate model for gross margin which is between 55 and 60%. And I’ve been fairly consistent over the course of the last four to six quarters when we’ve been trending it between 55.5 and 55.8 which is Michael said is the low end of our model that in order for us to show improvement we really need to have a little longer time horizon as far as backlog be able to manage unit.

So we are starting to see a backlog developing which I don’t want to make too much out of what just 1/4 of experience but we should be able to resume at some time during the year the cadence that we’ve historically shown of incremental sequential improvements of maybe 10 to 20 basis points, quarter over quarter.

Wei Chia

Sounds good. Thank you. Thanks Bernie.

Operator

Next question is from Jack Egan of Charter Research. Jack, your line is now open.

Jack Egan

Great. Thanks for taking the questions and I’ll echo the congratulations for Bernie and Rob. I had a bit of a technical one. So during last year’s investor day, you. Mentioned a packaging innovation that would allow you to basically double the current density of your modules to about 3amps per millimeter squared. And I’m just curious, are there any updates on that? Like is that still a work in progress or you know, is there kind. Of a timeline for that milestone?

Michael R. Hsing — Chairman of the Board, President and Chief Executive Officer

We start to sampling those products and again we expect to have a shipping in this, this quarter and next quarter. This quarter, yeah, those already implemented, they already qualified and our customers went through a qualification on it.

Jack Egan

Got it. Okay, great to hear. And then kind of from a higher. Level then, you know, last quarter you talked a bit about the gross margin implications of moving from a silicon supplier to a system provider over the long term. I was very curious about the impact. On OPEX as well. I mean, is that going to require. You to kind of bring on new teams with experience in systems or is. There enough overlap between, you know, the. Chip design and system design processes that you could accomplish it organically? I guess just any, any details on, you know, the impact to R and. D dollars or SGA leverage would be nice.

Michael R. Hsing — Chairman of the Board, President and Chief Executive Officer

Well, we need to get first things. Okay, first okay. And we only gain, not lose. Okay. I never believe, okay, big dollars investments and okay. And that translates to the bigger gain. Okay. That’s a bullshit to me. And so look at nps. We creating a few thousand four to five thousand products and I lost tracking. We addressed multiple second market. Why we can put all these one plus one equals three and again not just two anymore. We can put all these products, product putting the systems and we can provide higher values to end users. Which doesn’t mean we’re building a refrigerator, we’re building a TVs and okay, we’re building some things to alleviate our customers design effort, manufacturing effort and that’s.

And give us a high aspect. And I said earlier that we’re sick and tired of selling silicon. Okay, but why we can just put all the silicon together and migrate to system levels like modules and system. You will see more and more. So at least I can say the net margins, net profit had to increase. There’ll be a company that’s going to be a lot more efficient.

Bernie Blegen — Executive Vice President and Chief Financial Officer

I want to touch on something that this transformation has been occurring now for well over 10 years if you think about we were pretty much completely an analog design house 1012 years ago. And then we’ve been able to migrate where we added both digital engineers and software engineers. And now we’ve had to take on new responsibilities and new skill sets related to packaging. And as Michael said in testing and each time we’ve done this, we’ve maintained the same level of R and D efficiency of getting the most out of the dollars spent. So just changing to develop, you know, new skill sets around the new opportunities we’ve identified does not necessarily mean that it’s going to get more expansive or it’s going to compress our operating margins.

Tony Balow — Vice President of Finance

And I’ll just have one last comment. Even we made the model during investor day Jack that was fully aware of this transition. And so we talked about growing OPEX slower than revenue and giving some leverage to the model. We knew this transition was happening when we put that guidance out there. Yeah.

Jack Egan

Okay, thank you all for all the color.

Michael R. Hsing — Chairman of the Board, President and Chief Executive Officer

Yeah.

Operator

Our last question is from Sebastian Nagy of William Blair. Sebastian, your line is now open.

Sebastien Cyrus Naji

Good afternoon and thanks for taking the questions. I’ll just echo the best wishes for you, Bernie. Retirement. My first question is really on the shift to vertical Power solutions in the data center as we move through 2026. What are your expectations for adoption of vertical power and has that changed at all from your view in previous quarters?

Tony Balow — Vice President of Finance

Vertical power. Oh that’s a long. That’s a. Everybody’s going to avoid cows and I guess okay, and those one don’t and okay sooner or later they will.

Bernie Blegen — Executive Vice President and Chief Financial Officer

This is just where the direction of the market. It’s the only energy efficient solution you can put in place if you’re going to operate in these high, high voltage current. So that’s just a natural evolution of the marketplace place.

Sebastien Cyrus Naji

Got it. So do you think that’s that that starts to. To drive revenue in 2026 then? Is that fair to say?

Tony Balow — Vice President of Finance

Oh yeah, yeah, yeah, yeah.

Sebastien Cyrus Naji

Okay. Oh yeah. Great, great. That’s helpful. And then maybe just as a follow up on your optical module business. I think you talked about this a little bit in a previous question, but as we think about this shift to co packaged optics that’s getting a lot more attention these days. How does that potentially change your revenue opportunity in optics? Is it more, more revenue per port or the asp? Significantly higher. Any thoughts on that?

Tony Balow — Vice President of Finance

Higher current, Higher density is always good for us and we’re smiling. They increase power and there’s a lot. More opportunity for us and a higher level of integration. Yeah. Higher level of integrations and widen the competition gap.

Bernie Blegen — Executive Vice President and Chief Financial Officer

Yeah, I think the only thing I’d add there is again, I think that’s. Again, for long term. I don’t think that necessarily moves the needle on 26, just to be sure, but it’s certainly something we’re engaged in over the longer term.

Sebastien Cyrus Naji

Okay, got it. Makes sense. Thank you.

Operator

This concludes our Q and A session. I would now like to turn the webinar back over to Tony.

Tony Balow — Vice President of Finance

I’d like to thank all of you for joining us today on this conference call. Our first quarter 2026 conference call will likely be held in late April. Thank you and have a great day.