Power Integrations Q3 Revenue Rises 6% on GaN, Industrial Growth

Power Integrations, Inc. (NASDAQ: POWI) reported higher third-quarter 2026 revenue and a wider non-GAAP operating margin, supported by continued industrial-market growth and increased sales of gallium nitride, or GaN, products. Revenue rose 6% year over year and 5% sequentially to $125.5 million, while non-GAAP operating margin expanded 430 basis points from the prior quarter to 21.4%.

Non-GAAP gross margin was 55.2%, up 10 basis points sequentially. Non-GAAP operating expenses declined 10% from a year earlier to $42.4 million, below the company’s prior outlook of $45 million to $46 million. Non-GAAP net income reached $26.1 million, or $0.46 per diluted share, compared with $20.9 million, or $0.37 per share, in the preceding quarter.

On a GAAP basis, gross margin was 55.6%, operating expenses were $50.6 million and operating margin was 15.2%. GAAP net income totaled $18.3 million, or $0.32 per diluted share.

Industrial and GaN Products Drive Growth

Industrial and automotive applications accounted for 43% of third-quarter revenue. Sales in the category increased 8% year over year and 6% sequentially, bringing year-to-date growth to 13%. Power Integrations described the industrial gains as broad-based, although metering remained soft.

Computer revenue advanced 13% year over year and 29% sequentially, driven by GaN design wins in notebooks and seasonal tablet demand. Communications revenue rose 11% from a year earlier and 22% from the second quarter, reflecting seasonal strength and growth in GaN-based chargers.

Consumer revenue declined 1% year over year and 7% sequentially amid seasonally lower air-conditioning demand and continued weakness in consumer appliances. Consumer products represented 32% of quarterly revenue, while communications and computer applications contributed 13% and 12%, respectively.

The company also disclosed a collaboration with Ideal Power on solid-state circuit breakers intended to provide intelligent and efficient protection for 800-volt direct-current data centers.

Cash Flow and Inventory

Power Integrations generated $42.6 million of operating cash flow during the quarter. Year-to-date free cash flow totaled $72.2 million, while trailing-12-month free cash flow was $91.4 million, calculated as $110.8 million of operating cash flow less $19.4 million of capital expenditures.

Cash and investments increased by $25.5 million during the quarter to $288.1 million. Internal inventory declined by 19 days sequentially to 246 days on hand. Distributor inventory, however, increased by 4.5 weeks to 11.8 weeks, which the company attributed to higher buffer-stock requirements and the timing of end demand.

Power Integrations said it expects to increase its quarterly dividend to $0.22 per share beginning in the first quarter of 2027. The presentation also referenced an anticipated dividend of $0.215 per share payable on December 31, 2026.

Fourth-Quarter Outlook

For the fourth quarter of 2026, management expects revenue of $118 million to $126 million. GAAP gross margin is projected at 54.0% to 55.0%, while non-GAAP gross margin is expected to range from 54.5% to 55.5%.

GAAP operating expenses are forecast at $53 million to $54 million, including approximately $10.5 million of stock-based compensation. Non-GAAP operating expenses are expected to be between $42.5 million and $43.5 million. The company projects a GAAP operating margin of 10% to 12% and a non-GAAP operating margin of 19% to 21%.

The outlook remains subject to uncertainty around the durability of GaN and industrial-market growth, customer demand, tariffs and trade restrictions, global economic and geopolitical conditions, product supply, competition, component and operating costs, and the timing and market acceptance of new products. Power Integrations also cautioned that product-development delays or defects could cause actual results to differ from its expectations.