Monolithic Power Systems (NASDAQ:MPWR) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.
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View the webcast at https://edge.media-server.com/mmc/p/4h5w4d9z/
Summary
Monolithic Power Systems reported a milestone achievement with $1.2 billion in Q3 2026 revenue, a 22% increase quarter-over-quarter and 63% year-over-year.
The company is expanding its capacity from $6 billion to $8 billion by the second half of 2027, targeting $10 billion to support growth.
Strong demand was noted in enterprise data, automotive, and robotic solutions, with significant expansion in AI design tools and 48-volt automotive power solutions.
Monolithic Power Systems repurchased over $450 million of its stock during Q3.
Management highlighted the strategic use of AI in expanding customer bases and improving product offerings, with a focus on maintaining efficiency in R&D investments.
The company is cautious about new technology adoption, such as GaN solutions, ensuring reliability before large-scale deployments.
The outlook for 2027 is positive, with no signs of growth slowing, driven by diversified growth strategies across markets like enterprise data and communications.
Operational leverage is expected to improve due to efficient R&D spending and capacity expansion, despite rising costs.
Full Transcript
OPERATOR
Good day and thank you for standing by. Welcome to the Monolithic Power Systems third quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker’s presentation there will be a question and answer session. To ask a question during the session you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again.
Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Arthur Lee. Please go ahead.
Arthur Lee (Investor Relations)
Earlier today MPS released a written commentary on the results of its operations for the third quarter ended September 30, 2026. This document can be found on our website. Before we begin, I would 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 involve risks and uncertainties. The risks, 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 Q3 2026 earnings commentary and in our SEC filings, including our Form 10-K and Form 10-Q, 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 would like to turn the call over to Tony.
Michael Hsing (Chief Executive Officer)
Thanks, Arthur. Good afternoon, and for us, good morning from Shanghai, and welcome to our Q3 2026 earnings call. In Q3, MPS achieved another significant milestone, exceeding $1 billion in quarterly revenue. For Q3, revenue of $1.2 billion was 22% higher than the second quarter of 2026 and 63% higher than the third quarter of 2025. During the quarter, our capacity surpassed $6 billion in annual revenue support. We expect to have $8 billion of capacity in place by 2H27, on our way to $10 billion in support of our rapidly expanding business.
In our enterprise data end market, we saw strong demand across existing customers which we expect to continue into 2027. In addition, using our in-house developed AI design tools, we significantly expanded our customer base in traditional areas as well as landing new wins in applications such as desktop AI designs. Beyond our strong enterprise data growth, in Automotive, we received first orders for our 48-volt power solutions and expect design wins for 48-volt and zonal architectures to be a driver of growth in 2027.
We started ramping robotic solutions with sensor and motor control products across multiple geographies. We continue to increase our SAM with the ramp of our high-speed memory products. We landed our first large data converter design win, which we expect to ramp next year. And we continued to build out our high-voltage portfolio and began sampling GaN-based solutions for use in 800-volt data center architectures, complementing our existing silicon carbide-based designs.
And finally, in Q3, we repurchased over $450 million of our own stock. Overall, we see accelerated growth. Our diversified growth strategy is paying off. Operator, you may now open the webinar for questions.
OPERATOR
As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press again. In the interest of time, we ask that you please limit yourself to one question and one follow-up. Please stand by while we compile the Q&A roster. Our first question comes from Tori Sponberg with Stifel. Your line is now open.
Tori Sponberg (Analyst at Stifel)
Yes, thank you. Michael and Tony, congratulations on that billion-dollar milestone. And to you, Tony, congratulations on your CFO appointment. I guess for my first question, you talked about accelerated growth. Was hoping you can maybe elaborate a little bit on that. I mean I’m sure you’re not going to give us kind of 2027 guidance, but you are on track to growing 50, 60% this year and especially in light of your $8 billion capacity. And then, you know, when should we potentially see $10 billion capacity in place?
Thank you.
Michael Hsing (Chief Executive Officer)
Yeah, thanks, Tori. As Tony mentioned, only a few items we see beyond that. And I see this explosive growth period in the next few years. And even this year you see the first nine months, and we don’t see any sign [to] slow down.
Tony (Chief Financial Officer)
Yeah. The other thing I’d add is I think as we’ve come into the second half, you started to see growth across multiple end markets, including Auto, which the ramp started here in Q3. And we’ve talked about continuing here through the second half. And then as we start to see applications like robotics begin to ramp, we’d expect that then to continue into the future. So I think it’s not just the existing businesses. It’s adding on the additional growth areas over time, which is really giving us confidence going forward.
Tori Sponberg (Analyst at Stifel)
Very good. And that’s my follow-up. You mentioned the 800-volt GaN product sampling. Now that you are sampling GaN, could you maybe elaborate a little bit more, help us understand a bit more the positioning there? Is this a vertical GaN? Is it horizontal GaN? Is it your own process? Any more color you could help us there? And when do you expect to start to see some internal GaN revenue? Thank you.
Michael Hsing (Chief Executive Officer)
Yeah. It is based on MPS’s own development, which is later than we developed silicon carbide devices. And we started sampling this type of solutions. We let our customer choose, either using GaN. GaN is a new technology for everyone, and for everyone adopting in the data centers and the industrial automotive type of applications. This is the first time, and we are always cautious about the reliability. We want to achieve below 1 ppm failures, and for these modules we let our customer choose: GaN or silicon carbide.
Silicon carbide is known. We know the data, and so that’s a very high-reliability product. And GaN, we have to ship somewhere 50 million units before we can say this is new GaN. But we let our customers choose.
Tony (Chief Financial Officer)
Yeah, I’ll just add on a few things there. Just the experience we’ve already gained in data center I think puts us in a really good position to do what Michael’s talking about in terms of making sure we can meet all the standards the customer requires. You asked a question on the timing of it. I think right now we’ve always kind of been late in ’27 for any kind of the 800-volt kind of architecture ramps, with probably more in ’28. I don’t think our thinking on that has changed.
We’re just obviously getting ahead of that design work now even for our customers.
Michael Hsing (Chief Executive Officer)
They use both. They don’t want to have a failure either. They use both solutions.
Tori Sponberg (Analyst at Stifel)
Makes a lot of sense. Congrats again. Thank you.
OPERATOR
Thank you. Our next question comes from Rick Schaefer with Oppenheimer & Company. Your line is open.
Rick Schaefer (Analyst at Oppenheimer)
Thanks, and congratulations, you guys. And congratulations, Tony, on the appointment. If I could ask a question on storage and compute for my first one, I was hoping maybe you could level-set us on some of the moving parts in there. I mean, how does that segment split now if you look at SSD, HDD, DDR5 PMIC, you know, versus the PC, you know, the Vcore power piece? Because I know, you know, we all see PC units tracking down about 20% here in the second half.
So I’m just curious, you know, is that kind of what you guys are seeing on the PC side of that segment, and then, you know, how much is the storage piece growing and what’s it contributing? Thanks.
Tony (Chief Financial Officer)
Yeah. Rick, let me start and then I’ll let Michael come in. I think just kind of mechanically if you look at it, the big driver of growth in that segment has been the DDR5, primarily on the PMIC solution. As we said, we’re just starting the high-speed journey on the DDR5. We have seen pretty healthy growth over the past year or so on the hard disk drive and SSD part of that storage business as well. But clearly DDR5 is the biggest portion of that.
A notebook, sort of tactically, yeah, I think we’ve been talking about this and that’s what we’re seeing as well. We’re seeing not the same strength on notebook due to what’s happening downstream with some of the memory constraints. But I think if you look forward, I think we’re still pretty bullish on notebook in the long term because we have really good technology and good share. And then I think there’s applications around AI that will continue to build out over time at the edge, of which notebook will play a part.
So I think what you’re seeing in the short term around notebook tracks with what you’re seeing, Rick. But I think long term, I think we’re still pretty high on what notebook could be for the company. Michael,
Michael Hsing (Chief Executive Officer)
For that segment we have a new product like clock drivers and RCD. These all lined up, and other than in addition to our product, these are what we are lined up for revenue 2027 or 2028. And we see even 2028 these products really ramping up. So that part of the TAM is much bigger than power management in the notebooks. As Tony mentioned, we will see this is a very fast-growing market segment because after the manufacturing capacity opens up, that’s the segment along with the desktops.
Tony (Chief Financial Officer)
If you sum that up a little bit, what we’ve kind of said for the segment overall with the puts and takes, it could be kind of flattish, up a couple of points year over year, is kind of how we positioned it. But it’s really a tale of two cities, as we’ve talked about, with really strong storage and then the TAM just being limited on the notebook side.
Rick Schaefer (Analyst at Oppenheimer)
Got it. And if I could, this is your first call with the CFO moniker and I’m curious how you look at OPEX growth going forward. I mean any meaningful changes to the prior targets that you guys have laid out? I mean, type of top-line growth rates that Tori called out, 50, 60% by top line, how fast can you actually scale R&D, et cetera? You know, it seems like you guys are set for some pretty material operating leverage to be flowing through the model.
Is that the right way to be thinking about it? Any rules of thumb in there?
Michael Hsing (Chief Executive Officer)
Let me answer that part. I never believed the big dollars are equivalent to a bigger, bigger, bigger result. For our business, it’s inversely proportional to that. We just need some good ideas, good people that make everything happen.
Tony (Chief Financial Officer)
So I think, Rick, you’re not going to see us necessarily change our model. What we’ve seen pragmatically, though, as we start to get to higher levels of growth, is that we start to fall below our model range in terms of just can’t spend money that fast. But I completely agree with Michael on that. It’s about the efficiency of the R&D and the people that you get versus just spending more. But in general, I’d say at the growth rates that we’ve seen, for example this year, you’re going to fall below the model from an OPEX perspective.
Rick Schaefer (Analyst at Oppenheimer)
Got it. Thanks again and congrats to you guys.
OPERATOR
Thank you. Our next question comes from Quinn Bolton with Needham & Company. Your line is open.
Quinn Bolton (Analyst at Needham & Company)
Hey guys, I’ll echo my congratulations, and Tony, congratulations on the new role. I guess I want to start with Enterprise Data. Last quarter you gave us a floor of 130 with September results, and December guidance kind of looks like you’re tracking to maybe 150% growth, but wondering if, Tony, you might be able to level-set us what a new floor growth for Enterprise Data might be. And then I know it’s early, but any sort of thoughts on that segment as you look into 2027, what kind of growth rate you might be looking at in a forward case?
And then I’ve got a follow-on in the comms business.
Tony (Chief Financial Officer)
Sure. Let me start with your question. I think at this point, given what we’ve seen in Q3 and Q4, we’re comfortable raising the floor. We were at 130% year over year, but to your point, I think we’re comfortable with a floor of 150% year over year. Now going forward on 2027, I think it’s a little early for us to put a percentage out, but I’ll start. Michael, I’m sure, will follow up, in that structurally the growth drivers that we’re seeing this year are all intact, whether you see the diversification of customers, the growth in modules, the content gains as new platforms roll out. And I think over time, as you start to see even stronger growth in CPU, potentially driven by the agentic AI workloads, that’s going to be an even further tailwind out in time.
So while it’s a little early to call next year, I feel really good about the growth drivers.
Michael Hsing (Chief Executive Officer)
Well, I see even in the next years and beyond next years, and I’m very excited to see that we build our own datasets, and as Tony mentioned earlier, the result is tremendous. So I can improvement. And so this is not in the data centers, okay. And Monolithic Power Systems is all servers and all these servers. We believe, I believe, it will change and change again to the type of servers like that. The hardware will change, and they will trickle down to desktops and even the mobile, as I said earlier.
And this type of growth, it will trickle down in the next year and the year after. We see those trends, these design activities really happening. And so this is not only this year, not only the data centers; it will trickle down to all other areas.
Tony (Chief Financial Officer)
That’s a great question. And to take us back here, obviously coming into the year, we had very strong growth in optical modules. And what we added at the beginning of the year is what we’ve been calling the switch business. And I know I’ve talked about this before, but to answer your question why you’re starting to see the accelerated growth in that particular end market is because you are adding both of those growth drivers together. And we saw the effect really in Q3.
I think for the year, we’ve been positioning it as I think comms is going to be our second fastest-growing end market. For sure, not quite as fast as enterprise data, but certainly won’t be far behind. And just like enterprise data, I think if you go into next year, all of those growth drivers are intact, and in optical modules you see the transition to 1.6 — that’s not just a volume play, but there’s a content play there as well. And then certainly as we continue to build out additional sockets in the switch business, that’s going to be a driver of growth as well.
So I think right now we really like the comms business not just this year but going into next year.
Michael Hsing (Chief Executive Officer)
On macro economy market segment predictions, I only care what is the design activity and what our customers are excited about, what we are excited about. We all need new technology, new product introductions, and I said earlier all these segments we introduced the new product, and all the design activities gave us the indication clearly of growth for even beyond next year.
Tony (Chief Financial Officer)
Thank you, Michael.
OPERATOR
Thank you. Our next question comes from Joshua Buchalter with TD Cowen. Your line is open.
Joshua Buchalter (Analyst at TD Cowen)
Hey guys, thank you for taking my question. Congrats on the results, and echoing the congrats to Tony on the CFO gig. Best of luck. I’ll stick with policy and ask one on enterprise data and then one on another segment. Maybe can you comment on the diversity of enterprise data — like how has that business evolved over the last year or two? And looking into 2027, I would just be curious to hear how much you see coming from GPUs versus ASICs, or even any comments you can help us on how much is coming from modules versus discretes at this point and expectations into 2027.
Michael Hsing (Chief Executive Officer)
Thank you. Yeah. Modules versus the chip design, chip power supplies — all of it. I mean even for server side, we see many activities, and they’re going through using modules because of the high current, high power demand. That’s my comment, and it’s all segments. The real growth percentages are left only to that.
Tony (Chief Financial Officer)
Okay. Yeah. I think it’s an important point around this customer diversity that starting the middle of 2025 until now what we’ve seen is really rapid growth in a lot of ASIC customers, which again are primarily using modules over time. And so that benefits us from a revenue diversity perspective, as those carry the higher ASP associated with that. I think furthermore, what I think about in terms of how we’ve been using AI to create scale allows us to go address even a longer tail of small customers out over time, which may be big customers in the future.
And that’s really what we try to do — go in every socket, not knowing who ultimately in the long term might grow into a sizable customer.
Michael Hsing (Chief Executive Officer)
Yeah. We clearly see we have a huge benefit from this artificial environment — these artificial intelligence or these based on these large language models. Of course Monolithic Power Systems are all just internal, and it benefits us, or benefits everybody, and that’s the world. I’m very optimistic about this and that our growth trend will continue.
Joshua Buchalter (Analyst at TD Cowen)
Thank you both for the color there. Maybe in the same theme of starting with small sockets that become big opportunities, any comments you can provide on how much revenue contribution we can expect from the initial high-speed data converter design win, and how big is that TAM as we think about you growing into this new market? Thank you.
Michael Hsing (Chief Executive Officer)
Yeah, we can’t, okay, because we have — we just counted — these are, conservatively, well over 6,000 products, and we’ll continue to develop new. So what we do is we do every segment and rest far better than to meet the new market demand, and we are much faster than any of our competitors. And as long as we do these segments the best, then the revenue will come, and we just don’t know which segment. Seven, eight, nine, probably eight years ago, we looked at our product lines, looked at the optical market segment — what is a perfect example — we didn’t know today was that high demand, and we got in there. We serve our customers regardless of large or small, and that’s what happened today. I cannot predict the next 10 years, next 5 years, what will be bigger, and we serve our small customers well.
Tony (Chief Financial Officer)
Yeah. I think, again, to Michael’s point, we’re not ready to call the long term. We’re just beginning that process. So I wouldn’t necessarily say it moves the needle here in 2026, and I think as we get into next year we’ll talk more and see how that ramp goes.
Joshua Buchalter (Analyst at TD Cowen)
I’m good. Thank you both.
OPERATOR
Thank you. Our next question comes from Will Stein with Truist Securities. Your line is now open.
Will Stein (Analyst at Truist Securities)
Great. Thanks for taking my question. First on data center vertical power, I think there’s still one meaningful customer doing lateral, and I’m wondering if you can comment as to whether you think that converts to vertical in the coming year and whether that would necessarily require a module from you instead of some other sort of solution.
Michael Hsing (Chief Executive Officer)
Certainly. I don’t want to speak for a particular one customer, but as I said earlier, when we did it in 2000, we predicted in 2016 that for the server market, Monolithic Power Systems’ solution is so small and we have to use the adapter to meet the common footprint. And for the server market segment, we predicted if you go above 600–700 watts and you run out of peripheral, you have to use a smaller footprint, but the server CPU never got there — never came to the 600–700 watts — but the GPU did.
And as GPU power increases — I don’t have exact numbers — the power goes up, you run out of peripheral, you have to do vertical. And we said this many years earlier. I still believe that. Very logical to me.
Tony (Chief Financial Officer)
Yeah. I mean, I’m just going to echo Michael. I think that we won’t speak for that. Most of the industry has already moved to modules, and that’s what we’ve seen in terms of gains as well as the volume gains as we’ve gone through enterprise data. And I think that will be a great question for customers — to go ask them.
Will Stein (Analyst at Truist Securities)
Great. And a different topic — asked about opex leverage. I understand that for the time being with the rapid growth, you’re going to sort of undershoot on spending, overshoot on margins. What about gross margin? I think the company has talked for a long time about 10 to 20 bps per quarter gross margin expansion in that range, and it seems like you are today. Any likelihood that because of the growth you could exceed that expansion rate, or should we still think about 10 to 20 is likely?
Any update there would be helpful. Thank you.
Tony (Chief Financial Officer)
No, and thanks for calling it out. Yeah, you saw that we obviously did increase points here in Q3. The midpoint of our guide in Q4 is kind of another 10 basis points. So I think we’re kind of squarely in the model that we like. Fifty-five to sixty percent is the sweet spot for sure, and within that being kind of slow, methodical about expansion. I think we’re going to continue on that path. Structurally, I feel pretty good about that. We’ll see what happens in the future.
But remember, what we don’t want to do ever is put a bunch of gross margin in one quarter, then take it away the next quarter and move it around.
Michael Hsing (Chief Executive Officer)
During the capacity constraint we don’t gouge our customers. And so we want to deliver to you guys very consistent stories. And I don’t want to answer the question when anything drops. And I want Monolithic Power Systems to keep the same business, same performance, year over year. It’s like quarter over quarter, year over year.
Tony (Chief Financial Officer)
That’s right. So I think the milestones — I’m very comfortable with that, and I think you called it out, but I’ll highlight it again. I think if you look at the flow-through to operating margin, we’ve been growing operating margin quarter over quarter, really seeing a lot of expansion on the operating margin line.
Michael Hsing (Chief Executive Officer)
Making money business. And that’s all I believe in.
Will Stein (Analyst at Truist Securities)
Thank you.
Arthur Lee (Investor Relations)
Next question, operator.
OPERATOR
Next question comes from Chris Caso with Wolfe Research. Your line is open.
Chris Caso (Analyst at Wolfe Research)
Yes, good afternoon. Just following from the prior discussion, maybe you could talk about how you’re dealing with rising costs. Obviously costs are going up in a lot of different places; there’s a lot of talk of foundry wafer prices going higher. So to what extent are you passing that along, and as you go forward, does any of that result in pricing or any kind of revenue tailwind as you have to absorb some of those costs and pass them along to customers?
Michael Hsing (Chief Executive Officer)
We definitely absorb some of the cost increase. We don’t increase the price, and we share some of the cost increase with our customers.
Tony (Chief Financial Officer)
I think that’s right, Chris. And I think if what you’re asking is, from some of the results, how much of that is from pricing — it’s really not a significant contributor to the revenue growth that we’ve had. It’s more just making sure that we don’t delete ourselves on the gross margin line.
Michael Hsing (Chief Executive Officer)
Yeah. Our customers have a very long memory. Right.
Chris Caso (Analyst at Wolfe Research)
Okay, thanks for that. As a follow-up, it’s a question on the 800-volt transition, and I know there’s a lot of noise out there with regard to that transition. In terms of Monolithic Power Systems, how important is that to you in 2027? And you know, I guess maybe the question is, is it really 800 volts as a very material driver of content in the ED segment, or is the majority of that still going to wind up in the existing low power — low, I’m sorry — low voltage designs?
Michael Hsing (Chief Executive Officer)
Yeah. We don’t want to add a model, okay? We don’t talk about it until the revenue for sure will come. I do see the revenue for sure will come. Not this quarter, not next quarter — probably end of 2027 and 2028. And it’s clearly the DC supply for high power demand and the trend will be the data center. All will convert to that, and power savings is, I think, beyond single-digit percentage improvement versus the traditional power supply. I see this as even bigger in data center, and if the data center can improve, let’s say, 5%, then you get them 5% money returns, and all the commercial buildings, even residentials, they all can be like this — 400V. In Europe it would be 800 volts and in the U.S. would be 400 volts, and these will be a significant power savings across the board. That’s what I’m excited about with this opportunity.
Tony (Chief Financial Officer)
Yeah. I’ll even try to just address the question the other way, which is when we talked about how we are excited about growth in enterprise data, it’s not because we have a big built-in ramp on 800 volt. It’s really around the existing customers, the new customers’ transition to modules — all the things that we’ve been talking about, Chris. So if you’re kind of trying to figure out how much of that excitement was just at 800 volts, I really think the business we have today is what we’re confident in.
Michael Hsing (Chief Executive Officer)
Yeah, Monolithic Power Systems now — we’re using our own building to do a lot of experiments, using these individuals, using technology, and seeing what the power saving is.
Chris Caso (Analyst at Wolfe Research)
Thank you.
OPERATOR
Next question. Thank you. Our next question comes from Sebastian Naji with William Blair. Your line is open.
Sebastian Naji (Analyst at William Blair)
Good afternoon, or good morning for you guys. Thanks for taking the questions, and congratulations, Tony, on your appointment. I wanted to maybe just ask my first question: given some of the news around integrated voltage regulators and the acquisition of Empower by Analog Devices, could you give us your view on this technology and whether you see it as a competitive risk in the AI data center or the larger data center?
Michael Hsing (Chief Executive Officer)
Yeah, we don’t comment on other companies’ activities, and we have our own solutions. We have our — and we can deliver whatever customers want, and this is not BS talk. We do have multiple — beyond what you guys, beyond the noise levels — and we have those technologies and we can deliver. And the GPU evolves very quickly — the power levels, the architecture in terms of power delivery — and we don’t talk about those until we clearly see where the revenue will come.
Sebastian Naji (Analyst at William Blair)
Okay. Okay, great. That’s helpful. I look forward to those announcements when those products are ready. Maybe moving to something that’s a little bit closer to your heart, Michael, which is the building automation opportunity. I think last quarter you talked about $40 to $50 billion in size, but that the real bottleneck was the software still needed to catch up. Can you talk a little bit about the progress that’s been made here as we get to the end of the year?
Michael Hsing (Chief Executive Officer)
Well, good question. That’s my baby project, and we just have an install in our many-square-feet building that’s in China, and we, as I said just a minute ago, we’re experimenting our own AC-to-DC power — these are for ample supply and for across the building — and these projects just started. But turning into a $50 billion revenue takes some time. We don’t know how to get there yet, but the goal is very clear, and we will get there. There’s a lot of software involved in it, okay? But on the hardware side, we pretty much have every single component. And our components — our chips, our module technology — are far better than, sorry to say, the current existing technology. These are 50 years old, and we will do some significant improvement on it.
Sebastian Naji (Analyst at William Blair)
Great, thank you.
OPERATOR
Thank you. Our next question comes from Kelsey Chia with Citi. Your line is open.
Kelsey Chia (Analyst at Citi)
Hi, Michael, and congrats on the great results again. And Tony, congrats on your well-deserved appointment. So my question is on the switching. To what extent is that contributing to the strong communications growth that we saw in the third quarter? And how should we think about the ramp as we head into 2027, and if that business equates to gross margins?
Tony (Chief Financial Officer)
Yeah, I’ll start on that one. We’re obviously not going to start guiding sub end markets a little bit, but certainly from just a percentage basis it’s been growing very quickly — probably, on a percentage basis, the fastest-growing sub end market side of Communications — just because it started from a very low amount at the beginning of the year. As we go forward, again, I still think that and optical modules are going to be significant growth drivers for Communications in 2027.
On the margin side, I think if you look at all of our end markets, plus or minus, they’ll all operate around the corporate average because, to Michael’s point, we have north of 6,700 products. And so if you look at the distribution of that, basically what we’ll say is, as we grow this, we don’t think growing one end market over another will necessarily take us out of our model. And so right now I would still take Monolithic Power Systems as a total kind of in that 55 to 60 range, with sort of slow, methodical expansion when we can provide it, versus worrying about whether growth in one end market would take you out of model.
Kelsey Chia (Analyst at Citi)
Got it. And my second question is on the industrial end market. Very strong growth this quarter as well — what drove that strong growth this quarter? And if you could talk about the ramp of the robotic solutions, how do you see that ramping in 2027?
Michael Hsing (Chief Executive Officer)
The robotics — okay, this is the — we tried to enter robotics in 2016. On the analyst day, we talked about robotics. That’s the area we focus on. We have a product — all these sensors and motor controls — and I didn’t know what I was talking about. The revenue didn’t come. And now it shows up. And I think that this is still at the very beginning. Once the vision for the recognition — visual recognition — and the improvement, and that improved from using the AI-based vision improvement technology — these robots, as you know, will propagate in our everyday life.
So I see that’s the future, and the revenue would be significantly higher than—
Tony (Chief Financial Officer)
Yeah, I think the only thing I’d add kind of in the overall segment is I think this year we still look at it as just piling up design wins in robotics and other places, and really look for more of that in 2027. The growth in the quarter was fairly broad based, but I think you start to see a lot of these other design wins turn into revenue in the future. So I think that in kind of consumer and industrial, 2026 really does still remain mostly about winning all the designs that support future growth.
OPERATOR
Thank you. Our next question comes from Joe Quattrochi with Wells Fargo. Your line is open.
Joe Quattrochi (Analyst at Wells Fargo)
Yeah, thanks for taking the question. And my congrats as well, Tony. Maybe just as a kind of finer point on the expansion of capacity to $8 billion — I can appreciate that you can’t grow OPEX as fast and you don’t need to grow OPEX as fast — but how do we think about some of the investments you have to make on the working capital side or go-to-market side to support that?
Tony (Chief Financial Officer)
Yeah, I think one of the nice things about being in a fabless model is we don’t have to dig and pour concrete into it.
Michael Hsing (Chief Executive Officer)
We don’t make our brain generate.
Tony (Chief Financial Officer)
That’s right. So I don’t anticipate at this point seeing a large increase in capital intensity just to go ramp to this capacity, right? So it gives us a lot of flexibility. As a matter of fact, I am personally just amazed at the amount of capacity we’ve been able to put on just even over the last year, and I think the operations team does a tremendous job. But I don’t see it necessarily inflecting the overall OPEX at this point or any kind of change to our capital structure just to put on that extra capacity.
Joe Quattrochi (Analyst at Wells Fargo)
And then maybe as a follow-up, I think Auto’s continuing to see some inflection. Can you talk about the breadth of demand you’re seeing there from a geographic perspective, and how we think about the design pipeline looking into 2027?
Michael Hsing (Chief Executive Officer)
It’s across geographies — in the U.S. side, Europe side, and also in Asia. In China particularly, we see a lot of activities. And that’s probably what drives the world. And as I said earlier, we can’t predict which market segment — that’s our diversified growth strategy. Some years one segment is good, even in the mature market, and some years one market is good, the other one’s not so good. In the last few years, all of a sudden the GPU markets happened, or the optical market, and the revenue happened.
So we didn’t anticipate it. We just provide the best, highest-performance product. Our customers will realize it.
Tony (Chief Financial Officer)
Yeah. Now, the only thing I’d add is the reason we’ve been pretty confident on the ramp in the second half is because it is so diverse amongst customer regions and not dependent just on one. You’re seeing that same level of customer diversity grow in Auto over the past several years, like we’ve been talking about in enterprise data. And the pipeline is similar — it’s very geographically diverse and very customer diverse. We are just very excited to start seeing some of the architectural transitions that we’ve been talking about in sort of 48, because those form the next wave of growth for us.
Michael Hsing (Chief Executive Officer)
We’re not predicting what the market is.
OPERATOR
Next question. Last question. Thank you. Our last question comes from Gary Mobley with Stonex. Your line is open.
Gary Mobley (Analyst at Stonex)
Good morning, gentlemen. Thanks for squeezing in my question. Congrats, Tony. Again, I want to ask about what you might be signaling in your capacity milestones. You’re currently at $6 billion in production capacity, which I assume supports your 2027 outlook — doesn’t take much to get there, just extrapolating out Q4 revenue guidance — and you’re expected to be at $8 billion in capacity exiting fiscal year ’27. So should we think about that in terms of the revenue velocity exiting fiscal year ’27?
Michael Hsing (Chief Executive Officer)
Doesn’t take much to get there? Oh, just as much as we move and move the numbers, there’s a lot of work behind it.
Tony (Chief Financial Officer)
Yeah. So right now I think what we’re trying to strongly signal is that just like we’ve been doing in the past 20 years, we’re making sure that capacity stays ahead of the business. And in a world where there’s a lot of narrative around there being — we wanted to be very clear to you and our customers how we’re growing capacity to support that business. So I think it’s too early to go write in a quarterly revenue ramp for what that means for 2027, but what we wanted to make sure was loud and clear was that we see the demand coming and we’re going to make sure capacity is there to deal with it.
Gary Mobley (Analyst at Stonex)
Thanks for that. And on inventory, I just want to confirm the distribution inventory is still within that normal five- to eight-week range. And then it looks like your internal inventory down to 117 days based on a forward revenue guide basis, and that’s been trickling down. Are you inventoried properly to support sales?
Tony (Chief Financial Officer)
I guess that is really the question. I think right now we’re still on the channel side, certainly on the lean end of our range like we’ve been for some time now. And internally I think, you know, we grew dollars on a, on a gross basis. Right. But obviously as the revenues ramp, that’s come down from a data perspective. So I think that our range certainly hasn’t changed and it’s something that as we increase our capacity and our wafer starts, you know, we’ll make sure that we’re positioned for the business.
But right now it’s not limiting us on the business.
Gary Mobley (Analyst at Stonex)
Got it. Thank you all again.
OPERATOR
Thank you. This concludes the question and answer session. I would now like to turn it back to Tony Bailow for closing remarks.
Tony (Chief Financial Officer)
All right, thank you, operator. And thank you all for joining us for this conference today. I look forward to speaking with you on your next, on the next call for the fourth quarter and full year 26 revenue guidance. Thank you again and have a great day.
OPERATOR
This concludes today’s conference call. Thank you for participating. You may now disconnect.
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