- Monolithic Power Systems posted top and bottom-line beats in its Q4 2024 results, closing 2024 with record revenues and issuing upside Q1 2025 guidance.
- The Enterprise Data segment grew 121.7% in 2024, driven by AI servers, data centers and application power solutions. The Company expects a slow start to 2025, accelerating in the second half of 2025 as hyperscalers ramp up and Monolithic Power is “… engaged across all the hyperscalers.”
- Communications and Automotive segments will drive the growth in 1H 2025, as Enterprise Data gains traction again towards the year’s end.
Monolithic Power Systems designs, develops and produces power management integrated circuits (ICs), creating highly integrated power solutions that combine multiple functions into a single chip. It is widely believed that they supply power management solutions ICs and modules to the majority of NVIDIA GPUs, including Blackwell, and also supply them for AMD GPUs and Google’s TPUs. The company expects a slow start to 2025, supported by growth in its automotive segment and then acceleration into the second half of the year as Enterprise Data revenues rise with hyperscaler ramp-ups. The conference call felt like management was trying to downplay the ramp and brace analysts for a flattish year as Enterprise Data is expected to accelerate closer to years end.
Solid Q4 2024 Results Driven by EVs and AI
Monolithic Power reported Q4 2024 EPS of $4.09 versus $3.98 consensus estimates, beating by $0.11. Q4 2024 generated record revenues up 36.9% YoY and 0.2% QoQ to $621.7 million versus $608.09 million estimates, a $13.61 million beat. The company guided Q1 2025 revenues above consensus from $610 million to $630 million, mid-point of $620 million compared to $584.38 million consensus.
Revenue: Record Q4 2024 Revenues
Monolithic Power reported record Q4 revenues of $621.7 million, up 0.2% QoQ and 36.9% YoY. Strength was attributed to the Automotive and Enterprise Data segments. The company guided Q1 revenue of $610 million to $630 million, mid-point at $620 million, representing 35.4% YoY growth, beating estimates by 6.1%. Notably, this is flat growth QoQ even though Nvidia’s Blackwell is expected to be ramping – this would indicate either MPS is not a key supplier for the B200s and rack-level systems or Blackwell is delayed, impacting the supply chain.
The company’s quarterly growth of 37% is higher than the 21% growth reported for the fiscal year, which is typically a good sign. However, despite the Q1 guide beating expectations, analysts are estimating a sharp deceleration to 9% growth for the September quarter.
Monolithic Power generates revenues through six segments:
Enterprise Data focuses on providing power solutions to data centers, servers and networking equipment used in enterprise computing ecosystems. AI is a major driver in this segment. However, thriving data center revenue is lumped in with the legacy enterprise segment, which can provide lumpiness. Q4 revenue was up 51.2% YoY to $194.9 million. This is the strongest segment, generating full-year 2024 revenues of $716.2 million, up 121.7% YoY, driven by power management solutions for AI and server applications. It represents 32.5% of total 2024 revenue, up from 17.7% of total revenue in 2023.
CFO Bernie Blegan specifically pointed out in the Q&A call, “On industrial consumer, we have a lot of new product ramps, but those are likely to start to contribute at the end of 2025 and the enterprise data will be down.”
Blegan also added that Enterprise Data would accelerate, “Yes. Just to add a little bit of color to how we see the year rolling out, we believe that, we will be off to a slower start in the first half of the year. But as the year develops, the customer base is expected to broaden as hyperscalers launch their new products. We have multiple product ramps with both existing customers as well as with these new hyperscalers. So as Michael just said, we believe, it's likely to be a flattish year, but we believe that from a quality and supply availability perspective, we're in very good shape.”
Communications provides power management solutions for infrastructure and communications systems including power integrated circuits (ICs) for optical modules, fiber optic communications, wireless communication base stations, routers and switches. Soft networking solutions partially offset the strong sales of optical modules and routers. Q4 revenues were down (11.2%) YoY to $63.8 million. Full year 2024 revenue rose 10.2% YoY to $225.9 million, representing 10.2% of total revenue, down from 11.3% in 2023.
Automotive focuses on automotive applications like advanced driver assistance systems (ADAS), ICs for battery management systems, infotainment systems, motor controls and various automotive applications.
This is one of the strongest segments generating strong sales of its highly integrated applications supporting ADAS. Monolithic Power’s silicon carbide inverters have higher efficiency, higher power density and can operate at higher temperatures than regular silicon. They were introduced for high-powered clean energy applications like electric vehicles (EVs), helping to reduce power losses in the motor drive system. EVs were around 75% of its Automotive revenues.
CFO Blegan pointed out, “Initial revenue is expected to ramp in late 2025. Other silicon carbide-based applications are expected to be introduced in multiple geographies during both 2025 and 2026.” Q4 revenues grew 43% YoY to $128.4 million. The full-year 2024 revenues rose 4.9% YoY to $14 million, representing 18.8% of total 2024 revenues, down from 21.7% in 2023.
Storage and Computing provides power management for computing and storage devices like power ICs for solid-state drives (SSDs), hard disk drives (HDDs), and notebook and desktop computers. Q4 revenue was up 16.4% YoY to $136.5 million. The full-year 2024 revenues rose 2.1% YoY to $501.6 million, driven by increased sales of products for notebooks. This segment represents 22.7% of total revenue, down from 27% in 2023.
Consumer focuses on power management for consumer electronic devices, including power management ICs for smartphones, tablets, laptops and wearables. This segment has been weak due to the broad market weakness and lower sales of smart TVs, home appliances and gaming solutions. Q4 revenues rose 31% YoY to $57.3 million. Full-year 2024 revenue fell (13.9%) YoY to $202 million, representing 9.1% of total revenues, down from 12.9% in 2023.
Industrial focuses on industrial applications like ICs for robotics, motor control, industrial automation, machinery and equipment. This division is weak due to market weakness across all industrial segments. Q4 revenue rose 22.3% YoY to $40.8 million. The full-year 2024 revenues fell 14.6% YoY and represent 6.7% of total 2024 revenues, down from 9.4% in 2023.
EPS: A Slow Start in 1H 2025 That Gains Traction in 2H 2025
Monolithic Power posted Q4 2024 non-GAAP EPS of $4.09, beating $3.98 consensus estimates by $0.11 or 2.9%. Management guided Q1 2025 non-GAAP EPS of $3.94, up 40.29% YoY. Margins are gradually improving.
Margins have been steady with gradual improvement. In Q4:
- Non-GAAP gross margin was 55.80%, up from 55.7% in the year-ago period.
- The non-GAAP operating margin was 35.5%, up from 34.4% in the year-ago period.
- Non-GAAP net margin was 31.9%, up from 31% in the year ago period.
- Cash was $862.9 million, down from $1.1 billion in the year-ago period.
- The Company completed repurchases in Q4 under a 2023 $640 million authorization.
- The Company has returned 86% of its free cash to shareholders through share repurchases and dividends paid for the past three years ending December 2024.
- The Company had no debt in 2023 and 2024.
Risks/Concerns: Three Customers Comprise Over 20% of Sales and Blackwell
Customer concentration is a concern as Q1, Q2 and Q3 and full-year had two direct customers, which were distributors, with more than 10% of sales and one indirect customer with more than 10% of sales. This means that three customers comprise over 20% of 2024 revenues.
Edgewater Research Says NVDA Cancelling 50% of Monolithic’s Backlog in November
There was speculation from Edgewater Research on November 11, 2024, that the company may have lost some market share in NVIDIA's Blackwell GPU line to Renesas and Infineon Technologies, as there may be performance problems with its voltage regulator modules and power management integrated circuits.
Edgewater analysts said, "We hear NVDA will go through their confirmed orders to MPWR for the next few quarters, but we hear NVDA has canceled half of MPWR’s backlog, cutting all of their unconfirmed orders," the analysts explained. "It appears that Renesas may see its Hopper allocation grow to 50% in 1Q or 2Q25, vs ~15% in 4Q24. We are not aware of plans for IFX to be qualified for Hopper. It sounds like NVDA Engineering has lost confidence in MPWR, and they have decided to focus on Renesas and IFX as their two primary suppliers." The analysts also noted that Monolithic's solution to the hopper issue was seen as a "stopgap measure" by several supply chain partners, as opposed to a true resolution to the root cause.
Monolithic Indicates No Changes from Nvidia
Monolithic Power filed an 8-K stating, “In calls with analysts on November 11, 2024, representatives of Monolithic Power Systems, Inc. (the “Company”) confirmed the Company has no performance issues and remains in NVIDIA Corporation’s bill of materials for its next generation systems. The Company’s Q4-2024 guidance remains unchanged.” It’s worth noting that they made a special effort to avoid mentioning any specific names during their Q4 2024 conference call, in accordance with their clients' requests. Customers have made it very clear they don’t want to be disclosed. Keybanc’s note indicates that MPWR has lost market share on the B200/GB200s but will “regain share on Blackwell Ultra in the second half of 2025 as well as the ramp of other AI platforms, including the Google TPU.”
Conference Call Q&A: H1 will be Flat Ahead of Hyperscalers Ramping in H2
The theme of the conference call was about the ramp-up occurring in the second half of 2025. Management really downplayed Enterprise Data in the first half of 2025.
They pointed out the slower start at the beginning of the year was expected as their hyperscaler clients start to ramp with their new offerings later in the year. While the exact timing of the ramp is hard to call they are engaged across all the hyperscalers. Management can't tell which ones will ramp or how much their ramp will be. They have to be ready to receive orders and have the supply chain intact.
Here's what CFO Blegan said in the call.
“Yes. Just to add a little bit of color to how we see the year rolling out, we believe that, we will be off to a slower start in the first half of the year. But as the year develops, the customer base is expected to broaden as hyperscalers launch their new products. We have multiple product ramps with both existing customers as well as with these new hyperscalers. So as Michael just said, we believe, it's likely to be a flattish year, but we believe that from a quality and supply availability perspective, we're in very good shape.”
Monolithic Power will be ramping up inventory for the second half of 2025. CEO Hsing admitted their inventory and the channel inventory is low, “Our inventory is low, and the channel inventory is low. We're going to be ramping up. And the rest of our stuff, okay, Bernie.”
Enterprise data is expected to be flattish for the year for the whole segment not just AI. Hyperscalers are expected to ramp up in 2H of 2025. Ramps for Silicon Carbide (SOC) and Tensor processors are going to launch in the 2nd half. Existing customers have multiple new product launches in the 2nd half of the year. The trickle-down effect in memory, optical and networking is expected to ramp up in the second half.
CFO Blegen said this during the Q&A.
“As we look at the ramps for both the SOCs and some of the sensor processor products that are expected to come out, we've been prototyping those, but the revenue ramps are really weighted to the second half. In addition, some of our existing customers in the AI business in particular have multiple new products that they're ramping, and those will have different demand profiles as well.”
Management can't tell if it will move revenue needles in Q4 of 2025 or next year. Staying away from quarter-by-quarter but half-by-half for ramps and timing. No telling when the ramps will happen. While large customers are pushing out, others are pulling. Cautiously optimistic that the momentum is moving in the right direction.
CEO Hsing said this during the Q&A when asked about lumpiness of opportunities and trajectory.
“It's very difficult to say. Surely, you go by year-by-year, we don't go by year-by-year, but although we have to report a year-by-year. And I'll give you examples. Our large customers start to push out some product, pulling a lot of other ones. So we can't really tell. And other customers, other hyperscalers start to ramp. They start telling us we're going to keep a ramp, whether the ramp have effective move our revenue needles in Q4 over this year or Q1 over next year, we can't tell.”
Automotive Will Drive Growth Until Enterprise Data Ramps Up in H2
Automotive and Communications are long design cycles; automotive is 2-3 years and 4-5 years ahead of time for design wins, which makes it the easiest to predict. However, the timing of the ramps is hard to tell. They can predict within 6 to 9 mos. EVs in China are growing, supplemented by a European OEM in second half of 2025.
CFO Blegen said this when asked about a broader view into demand for 2025.
“When you look at the end markets, most of the ones that we have are long design cycles. And automotive probably lends itself to being the most predictive because we secure design win two to three years for an EV in advance of when it gets launched, or as many as four to five years for a traditional internal combustion. Now having said that, the timing of those ramps, when we get the design win comes to market, still remains a question mark. But within the context of six to nine months, we can be reasonably predictive. So in automotive, we see a continuation of what's been driving our last two quarters of growth as far as EVs in China. And those will be supplemented in the second half of the year more likely by a European OEM that is going to be bringing up an autonomous driving ADAS solution, as well as additional content opportunities in North American EV Company.”
The Communications segment finally started to grow last year and is in the very early stages of being able to ramp opportunities, particularly with fiber optics, and expects to grow from originally starting with two customers. Areas of strength are in optical, data center opportunity, versus legacy business.
“If you look at comps going forward, their area of strength that we've really been calling out is in optical, and we'd expect that to continue as part of the overall data center opportunity that you heard Michael talk about. So I think that's probably the biggest inflection point that you've seen over the past couple of quarters versus the legacy business.”
CFO Blegen also added.
“And then, when you look at the communications side, I think that is, we're very early stages of being able to ramp the revenue opportunities, particularly in fiber optics. We started out with two primary customers, but we expect that customer base to diversify over the year.”
What the Analyst Said After Q4 2024 Release
Analysts were positive on the results and conference call, with five analysts raising their price targets or ratings and one analyst lowering their price target:
- Loop Capital raised the firm's price target on Monolithic Power to $760 from $660 and keeps a Buy rating on the shares. The company's Q4 results and Q1 guidance indicate that Monolithic Power continues to take market share in the PMIC (power management integrated circuit) and general analog market, just as the company has done year in and year out for nearly a decade, the analyst tells investors in a research note, “Monolithic Power's strong growth and the better-than-seasonal Q1 guide also reflects continued strong data center-specific revenue as well as cyclical strength in broader market.”
- TD Cowen raised the firm's price target on Monolithic Power to $750 from $720 and keeps a Buy rating on the shares. The firm said its clean beat/raise was overshadowed by a weak 1H outlook and aggressive 2H ramp in MPS' key Enterprise Data segment.
- Citi raised the firm's price target on Monolithic Power to $800 from $700 and kept a Buy rating on the shares. “The company reported strong Q4 results and guided Q1 sales better than feared as strength from the Auto, Computing and Storage businesses offset share loss in the Enterprise Data business.” the analyst tells investors in a research note. The firm views the results as reinforcing its thesis that Monolithic is a "long-term diversified quality compounder" that consistently delivers 10%-15% outperformance versus peers. It sees the investor day on March 20 as the next potential catalyst for the stock.
- KeyBanc analyst John Vinh raised the firm's price target on Monolithic Power (MPWR) to $850 from $700 and keeps an Overweight rating on the shares. “Upside in the quarter was mostly driven by Auto, while guidance reflects strength in Auto, Memory, PCs, and Comms. Enterprise Data is expected to be down quarter-over-quarter in Q1 and flat for 2025 with growth expected to be the second half of the year weighted,” KeyBanc adds. The firm believes this reflects the loss of share on Nvidia's (NVDA) B200/GB200 platform and the regain of share on Blackwell Ultra in the second half of 2025, as well as the ramp of other AI platforms, including the Google (GOOGL) TPU.
- Wells Fargo analyst Joe Quatrochi raised the firm's price target on Monolithic Power to $710 from $610 and keeps an Equal Weight rating on the shares. The firm notes the company delivered a better-than-expected Q1 guide as Ent Data's weakness will be offset by accelerating other end markets. While the 2025 Ent Data reset is now confirmed, Wells thinks investors could struggle with the first half vs the second half of 2025 end market revenue dynamics.
- Deutsche Bank lowered the firm's price target on Monolithic Power to $815 from $900 and kept a Buy rating on the shares.
Valuation: Monolithic Systems Stock is Priced at a Premium
Monolithic Power stock trades at a premium. Its stock trades at a P/E of 76.84 and forward P/E of 41.32 vs the industry average of 38.82. The 5-year medium P/E is 79.92. Its price/sales ratio is 16.35, and forward P/S is 12.93. Its price to free cash flow (FCF) is 49.12 vs 62.56 industry average. May 20, 2025, is the next Investor Day.
Conclusion:
Monolithic Power had a strong 2024, with Enterprise Data achieving 51.2% YoY growth in Q4. However, growth is expected to slow in the first half of 2025 and remain flat for the year as hyperscaler clients ramp up in the second half. Management is preparing by building inventories and strengthening supply chains, positioning the company well heading into 2026, despite uncertainty about the ramp-up's timing.
In the meantime, their automotive revenues continue to accelerate having closed Q4 with 43% YoY growth. Automotive tends to be more predictable and the growth in EVs especially in China is continuing the momentum. A European OEM will be ramping up autonomous driving ADAS solutions in the second half to keep the momentum thriving. After closing Q4 with 55.9% YoY growth, its Communications business is in the very early stages of a revenue ramp powered driven by fiber optics. Automobile and Communications will carry the growth in H1 through H2, while Enterprise Data will ramp up in H2 heading into 2026.
Automotive revenues accelerated with 43% YoY growth in Q4, driven by strong EV momentum in China and expected to continue with upcoming ramp of autonomous ADAS solutions from a European OEM in H2. The Communications business also posted robust growth, rising 55.9% YoY in Q4 as it initiates a fiber optics-driven revenue ramp. Together, these segments are expected to drive growth through H1 and H2, while Enterprise Data will ramp up in H2 heading into 2026.
It may be premature to invest in Monolithic Power at this time, but its sustained growth in the Automotive and Communications segments along with the Enterprise Data ramp up in H2 suggests that it could become a strong candidate for the portfolio as we exit 2025.
Jea Yu, Equity Analyst at the I/O Fund, contributed to this article.
Please note: The I/O Fund conducts research and draws conclusions for the Fund’s positions. We then share that information with our readers. This is not a guarantee of a stock’s performance. Please consult your personal financial advisor before buying any stock in the companies mentioned in this analysis.
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