Monolithic Power Systems (MPS) is entering 2026 with solid AI-driven momentum in its Enterprise Data segment, recording growth of 97.7% YoY and 12.6% QoQ, a third consecutive quarter of double-digit sequential growth albeit decelerating each time.
While management last quarter had laid out a ‘conservative’ floor for 50% YoY growth for Enterprise Data, this quarter saw management increase the floor to 85% YoY for the segment. This would represent a nearly $250 million raise in just one quarter, underpinned by strong ordering patterns continuing and increasing visibility in Q1. Additionally, the rollout of next-gen systems such as Nvidia’s Rubin and AMD’s MI450X serve as additional 2H catalyst.
Monolithic also had an unexpected catalyst this quarter, seeing strong optical-driven growth emerge in its Communications segment, driving growth of 33.1% QoQ, the segment’s strongest sequential growth since Q3 2024. This growth was driven primarily by 800G optical modules, which are expected to see shipments rise as much as 2.6X this year. Additional levers for optics-driven growth include increasing optical attach rates with Rubin as well as the ramp of 1.6T.
On the capacity front, Monolithic is increasing its near-term capacity goal to $6 billion, having reached its $4 billion target last quarter. This capacity expansion is imperative in preventing the company from becoming supply constrained given that FY26’s revenue estimates are already within 10% of that $4 billion mark.
Brief Recap on Products, Vertical Power Delivery
For a brief recap, Monolithic supplies a range of power management ICs, a broad suite of DC-DC converters, power modules, and multi-phase regulator modules.
Power management ICs help regulate, distribute and optimize power within chips, and also help regulate heat dissipation to prevent overheating, an especially critical function as AI GPUs continue to push the thermal boundary higher.
DC-DC converters help enable precise voltage regulation from 400V DC power entering the rack to lower voltage rails required by AI accelerators. DC-DC converters can also handle higher power densities, reducing power consumption and optimizing performance of increasingly-power hungry GPUs.
Power modules combine DC-DC converters with built-in, integrated power MOSFETs, inductors, and other necessary components into a single module to lower BOM, reduce amount of external components required, and simplify AI chip design.
Multi-phase voltage regulator modules (VRMs) are increasing in content as GPUs push into higher power requirements. GPUs operate at very low voltage at roughly 1V — but draw extremely high current, which means power must be converted from 12V at the board level down to the GPU core. Rather than relying on one oversized regulator, engineers distribute the load across multiple phases to improve efficiency and thermal management.
However, as AI GPUs heat up to 2,000W and beyond (where Rubin and AMD’s MI450 generation are headed), the traditional placement of VRMs and lateral power delivery carried a major drawback that must be addressed.
Lateral routing increases power loss and drives heat generation higher, causing overheating (when next-gen GPUs are already getting hotter) and reduced performance. This is essentially forcing a shift to vertical power delivery (VPD), which places voltage regulators directly under the PCB and shortening delivery lengths. VPD helps enable higher power density, lets modules more efficiently power GPU, CPU and memory rails, while also freeing up space on the PCB for additional HBM stacks or other components.
With these key advantages and push to more powerful GPUs with each generation, MPS expects VPD to essentially become a non-negotiable in 2026: “This is just 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-voltage — high-current.”
Enterprise Data FY26 Growth Raised from 50% to 85%
While Q1 showed more evidence of Monolithic’s growing AI-driven revenue opportunities outside of its Enterprise Data segment, management’s updated growth guidance for the segment in FY26 arguably stole the show. This growth in Enterprise is likely being driven by VPD and higher content per socket, as VPD is becoming increasingly necessary with more powerful chips such as Rubin and the MI450.
After guiding for a floor of 50% YoY growth last quarter, management raised this forecast to 85% YoY growth, a substantial 35 point raise in just one quarter (and with three more to go in the year):
“We tend to be fairly conservative in how we look at these things, waiting for the backlog to be in place. So late last year, we talked about 30% to 40% growth year-over-year. In the last call, we kind of rose that to a 50% floor. And the strong ordering patterns that we saw start last year has kind of continued through Q1. So at this point in time, I think we're comfortable raising that floor up to around 85% year-over-year growth.”
To put this in perspective, Enterprise Data revenue in FY25 was $701.9 million, so the updated forecast essentially represents a nearly $250 million raise just one quarter into the year – FY26 revenue would project to almost $1.3 billion at 85% versus $1.05 billion at 50%.
Two pieces of additional commentary from management suggested that this growth guide is likely to move higher through the year – that the guide is underpinned by strong ordering patterns emerging through the quarter, and that Monolithic is not facing any supply chain constraints.
As we had pointed out in our write-up covering Q4’s results, Monolithic Power: Strong AI Tailwinds to Drive 50% Enterprise Data Segment Growth in FY26, the 50% growth guide was supported by increased visibility into ordering patterns, yet visibility into 2H was limited. We explained that “the key takeaway is that 2H will likely be the determining factor for where Enterprise Data growth lands.”
This quarter, the takeaway remains very similar. VP Tony Balow explained that Monolithic is comfortable increasing the growth floor to 85% because order visibility is extending with strong ordering patterns in Q1. Similar to last quarter, Monolithic did not offer any visibility into 2H, yet signals from Nvidia that Rubin will begin its initial ramp in Q3 and accelerating into Q4, alongside strong demand for server CPUs, all suggest order momentum can persist well into the year.
The second piece of commentary relates to supply constraints, with management stating: “nothing about our outlook or anything we've said about Enterprise Data floor is because we see any constraints in the supply chain.” Simply put, supply will not be a constraint to growth, and will not prevent Monolithic from reaching or exceeding its 85% target. It also suggests that if demand strength and order momentum persists into Q2 and extends through 2H, that Monolithic likely has the supply in place to meet that upside.
Combining these factors of persisting order momentum, increased visibility, and a lack of supply constraints with product-driven tailwinds in server CPUs and across AI accelerators and servers, all suggest this 85% growth guide could have more upside. If Monolithic raises growth by ~15 points in each of the next two quarters for ~115% YoY, Enterprise Data revenue would project out to $1.51 billion, or a $200 million raise from Q1’s guide (also smaller than the nearly $250 million raise this quarter).
Looking ahead, Monolithic hinted at a key advantage they have as XPUs heat up to 2,000W and beyond – monolithic solutions built on a single piece of silicon: “We are the best in the market segment because we provide a total monolithic power solutions. And we can use a single piece of silicon versus our competitor use multiple piece of silicon. And that clearly shows our advantage.” Fully integrated power modules provide higher power density, and can offer more efficient power delivery even with more compact designs. Monolithic is also planning to further increase power density on smaller modules, as it plans to move from 60nm silicon to 40nm.
This also leads into a second advantage, an ability to be flexible with integrations. Monolithic can offer fully integrated, cost effective modules to help reduce board space, accelerate chip design and increase system efficiency in increasingly complex chips, or offer a range of discrete components if its customer needs require those:
“And we do what is the most cost effective – and how we do the integrations. And we have the capabilities to integrate or disintegrate, okay? And the integrations, we can put it in one module. And that's a huge advantage. And with the multiple other chips, and if you use particularly discrete power components, discrete power FETs, and it's very difficult to do for manufacturing the modules.”
These monolithic and integration-based advantages may become increasingly important in driving growth alongside VPD as next-gen GPU platforms ramp and as chips progress past 2,000W.
Communications Unexpectedly Strong, Benefitting from AI Networking
Monolithic previously mentioned optical modules as a driver of growth for Communications (nearly a year ago at this point), yet Q1’s call was filled with discussion over 800G optical modules driving this unexpected QoQ inflection for the segment.
Communications revenue rose 33.1% QoQ to $111.5 million in Q1, a rapid acceleration from 4.8% QoQ in Q4 and marking the segment’s fastest sequential growth since Q3 2024. On a dollar basis, Communications recorded almost the same QoQ growth as Enterprise Data at $27.8 million versus $29.3 million. Management chalked up the sequential increase to strength in both optical modules and networking switches.
The reason why Monolithic is seeing strong growth ties in to what was discussed above, in its ability to offer a full module within optical modules with higher power density, better efficiency in more compact sizes: “why are we winning all these segment is because the power density, as I said earlier. And nobody want to waste the power and efficiency is — power density is directly related to power efficiency. And so they want a smaller size, and they want to have a higher efficiency.”
As usual, Monolithic would not offer segment-level guidance for Q2, but hinted that Communcations is also seeing strong order momentum and will grow faster than corporate average this year:
Quinn Bolton, NeedhamQuinn Bolton, Needham
“I wanted to ask on the Comms segment. It was up 33% sequentially in March, it sounds like it's going to be one of the faster-growing segments in the June quarter. When I look at optical modules, I think 800-gig modules are more than doubling in '26. So — my question is, do you think the comms segment could actually grow as fast, if not faster, than Enterprise Data this year given those trends?
Tony Balow, VP FinanceTony Balow, VP Finance
“I think as ordering patterns have continued to be strong and extend, we still don't have them all the way through the year. So I think it's pretty tough for us to call all the way through the back half right now. But certainly we put that end market above the corporate average.”
Monolithic does not have visibility into 2H, yet considering the strength of demand across the optics industry for >800G speeds, it’s unlikely that ordering patterns will materially slow. For example, as we highlighted in our free newsletter on Lumentum, TrendForce has predicted that “optical transceivers shipments of 800G and higher will hit 24 million units in 2025, then jump by 2.6 times to nearly 63 million units in 2026.” This 2.6X growth, or almost a 40 million increase in unit volumes, offers a strong backdrop for Monolithic’s optics-driven growth through the rest of 2026.
Running the math on management’s commentary for Communications to grow above corporate average, coupled with calendar-Q2 guidance from other optical beneficiaries paints quite a positive picture for the segment this year.
To start, assuming Communications grows roughly 40% YoY – below Q1’s 55.5% YoY growth but roughly 8 points faster than estimated FY26 corporate growth of 32.5% — projects the segment’s FY26 revenue out to $432.7 million.
This is below Q1’s annualized run rate of ~$445 million, suggesting the segment sees no chance of sequential growth throughout the remainder of the year, an unlikely scenario considering the estimated >800G shipment growth and combined tailwinds from networking switches, where Monolithic has opportunities to provide power across switches, NIC cards, and other processors within the trays.
Assuming ~15% QoQ for the segment in Q2 (as it is not entirely optics driven but also to account for potential strength in switching) and mid-single digit QoQ in 2H, revenue would project out to $520 million, up more than 68% YoY. Perhaps a bit speculative, moving the needle higher to 20% QoQ in Q2 and 10% QoQ in the back half would project Communications revenue at $555 million, up nearly 80% YoY.
It should be noted that Monolithic’s presence in 1.6T optics is a bit unclear, as commentary this quarter primarily surrounded 800G modules; however, this may simply be due to timing as we are still quite early in the 1.6T ramp cycle and 800G could account for the bulk of growth and revenue so far. The reason optics and 1.6T (and switches) could emerge as a strong driver through 2026 is because higher power consumption at faster data rates is a critical factor to solve, especially in scale-out as optical transceiver and switch content is projected to increase sharply with Rubin. This is where Monolithic’s expertise lies in offering highly efficient power-dense modules, with CEO Michael Hsing hinting that fast execution is helping them capture the market.
Goldman Sachs estimates that current optical transceiver (800G/1.6T) to GPU attach ratio for the GB300 racks range between 1:2 to 1:3, depending on cluster architectures in either two or three-layer configurations. With Rubin, GS projects this ratio to increase to 1:4 to 1:6, while spine, leaf and top-of-rack switch counts would increase 1.8-2.2X. This sheer content growth within transceivers supports strong optics-driven growth for Monolithic extending through 2027 as Rubin ramps.
Near-Term Capacity Plan Increased to $6B
Monolithic announced last quarter that it had reached its capacity target of $4 billion, and this quarter it unveiled a new near-term capacity target of $6 billion, a 50% increase. Management emphasized that this upcoming capacity will look to be geographically diverse inside and outside of China to preserve supply chain diversity.
While comments on capacity were limited otherwise, it’s rather imperative for Monolithic to quickly expand beyond the $4 billion mark. Current revenue estimates for FY26 sit at $3.7 billion, meaning immediate capacity expansion will likely be critical in supporting future revenue upside throughout the remainder of the year, and to prevent Monolithic from capping its revenue upside.
Historically, it can be roughly inferred that it took Monolithic around two years to expand from $2 billion of capacity (around FQ4 23) to the $4 billion mark last quarter, yet this updated plan may need to be accelerated. This could put more emphasis on higher capex, which already reached a record $70.9 million in Q1.
Quick Note on SiC and 800V
As we noted in our prior analysis, Monolithic was named as a key silicon provider and industry partner for Nvidia’s planned 800V DC architecture shift, which it believes will be needed to address rising power needs with next-gen rack architectures, from Rubin Ultra and beyond.
For a quick refresher, Monolithic has begun sampling its 800V solutions and was the first to do so, per the CEO, yet it expects revenue ramps from these solutions to land in 2027 to 2028.
800V would represent a major shift in where Monolithic Power sits as multi-phase controllers, ICs and PMICs are located on the accelerator board (or motherboard). 800V DC is about rack-level power distribution and this also shifts MPS from specializing in low voltage MOSFET-based devices to offering high voltage Sic/GaN devices in the future.
While discussions in the past have suggested Nvidia may be seeking GaN solutions, whereas MPS is offering SiC-based ones, management this quarter emphasized that their solutions will remain SiC-based.
Financials
Revenue Inflecting in Q1, Accelerating in Q2
Monolithic’s revenue began to inflect on both a YoY and QoQ basis in Q1, with Q2’s guide implying this acceleration strengthens next quarter. Q1 revenue was $804.2 million, up 26.1% YoY and 7.1% QoQ, accelerating from 20.8% YoY and 1.9% QoQ in Q4. Growth was mixed on a segment basis (discussed in more detail below), with Enterprise Data and Communications leading the sequential growth while Consumer and Industrial showed double-digit QoQ declines.
For Q2, Monolithic guided for $890 to $910 million in revenue, accelerating to 35.4% YoY and 11.9% QoQ at the midpoint. This would mark Monolithic’s fastest sequential growth since Q4 2024. Management also added that sales channels have been very lean, implying they are shipping at demand levels and suggesting that they are not facing any supply constraints or headwinds to growth.
For the full year, Monolithic has not provided guidance, though current consensus estimates point to 32.6% growth to $3.7 billion, a roughly six point acceleration from 26.4% growth in FY25.
Key Segments
Monolithic’s growth was mixed across its key segments, with Enterprise Data and Communications recording the strongest growth in Q1:
Enterprise Data revenue was $262.8 million, up 97.7% YoY and 12.6% QoQ and accounting for 32.7% of revenue. Monolithic said the QoQ increase was driven by increased sales of power management solutions for AI and server applications, though QoQ growth decelerated from 21.9% in Q4. YoY growth accelerated 78 points in the quarter.
Communications revenue was $111.5 million, up 55.5% YoY and 33.1% QoQ, accounting for 13.9% of revenue. This marked a sharp acceleration from 4.8% QoQ and 31.2% YoY in Q4, with growth driven by growth in 800G optical modules and networking switches.
Storage & Computing revenue was $174.5 million, down (7.5%) YoY but up 7.6% QoQ, accounting for 21.7% of revenue. Storage was the primary driver this quarter with HDD and SSD remaining strong, while notebook revenue remained soft. Monolithic also began sampling its first high-speed interface product for DDR5, but noted not to expect this to be a contributor in 2026.
Automotive revenue was $152.4 million, up 5.1% YoY and 0.9% QoQ, accounting for 18.9% of revenue. This decelerated from 17.6% YoY while QoQ was roughly steady after being essentially flat in Q4. Auto revenue is expected to be roughly flat in the first half before ramping later in the year.
Consumer revenue was $54.5 million, down (4.2%) YoY and (17.5%) QoQ, accounting for 6.8% of revenue.
Industrial revenue was $48.6 million, up 14.2% YoY but down (11.2%) QoQ, accounting for 6% of revenue.
Margins Improving Down the Line
Gross margins continue to remain flat with minimal expansion, with management noting headwinds arising in 2H. Operating margins are showing signs of improvement, likely tied to increasing server and optical module growth.
GAAP gross margin was 55.3%, roughly flat YoY and QoQ, while adjusted gross margin was 55.5%, down marginally YoY and flat QoQ. Management provided some color as to the lack of expansion and flagged headwinds arising in the second half: “For the last 4 quarters, we've been flat at 55.5%, which is at the low end of our gross margin model for growth, which ranges mid-50s to upper 50s. For Q2, as you noticed, we did have the confidence to increase incrementally our gross margins, mainly because we've gotten better visibility to our backlog. We saw this happening in the fourth quarter of last year and it's continued into the first quarter of this year. So that has, again, given us some confidence. We do, however, do see some strong headwinds potentially in the second half.” Management also hinted that yield improvements in modules are still improving, but not creating much of a headwind.
GAAP operating margin was 30%, up 3.5 points YoY and 3.4 points QoQ and coming in fairly ahead of guidance for 28.3%, suggesting more operating leverage is now appearing. Adjusted operating margin was 35.8%, up 1.1 points YoY and flat QoQ. Management noted that input component costs are rising, but they will look to offset that with price raises to maintain margins.
GAAP net margin was 24%, up 3 points YoY and 1.4 points QoQ; adjusted net margin was 31.2%, up less than a point YoY and roughly flat QoQ.
For Q2, Monolithic guided for a tiny step up in gross margins, projecting GAAP gross margin to be 55.1% to 55.7% and adjusted gross margin of 55.3% to 55.9%, both up marginally QoQ at midpoint. GAAP operating margin was guided to be 30.7%, up nearly 6 points YoY and less than a point QoQ; adjusted operating margin was guided to be 36.8%, up 2 points YoY and 1 point QoQ.
EPS
Monolithic has a strong bottom line, with adjusted EPS forecast to top $24 this year. However, considering the minimal margin expansion, EPS growth is forecast to largely track revenue growth through the year.
Q1 GAAP EPS was $3.92, up 40.5% YoY and slightly ahead of estimates for $3.86. Adjusted EPS was $5.10, up 26.2% YoY and beating estimates by 4%, marking its largest beat since Q1 2024.
For Q2, GAAP EPS is projected to be $4.72, accelerating to 69.8% YoY, while adjusted EPS is projected to be $5.86, accelerating to 39.2% YoY.
For FY26, GAAP EPS is projected to be $19.40, up 51.4% YoY, while adjusted EPS is forecast to be $24.02, up 35.2% YoY.
Cash Flows and Balance Sheet
Cash flows were solid in Q1, with operating cash flow rebounding to north of 30% after a soft Q4.
Operating cash flow was $250.3 million for a 31.1% margin, down from a 40.2% margin in the year ago quarter but up sharply from 14% in Q4.
Free cash flow was $179.4 million for a 22.3% margin, down from 33.9% in the year ago quarter but up from 8.5% in Q4.
Cash and equivalents totaled $1.37 billion, while debt remained zero.
Inventories jumped nearly 10% QoQ to $619.2 million, while accounts receivable surged more than 18% QoQ to $302.1 million.
Conclusion
Monolithic is seeing strong, multi-faceted growth emerge across its Enterprise Data and (unexpectedly) Communications segment, underpinned by a shift to VPD with increasingly powerful GPUs, and its power density and cost advantages stemming from its monolithic approach and flexibility with integrations.
Enterprise Data remained a core growth driver with revenue up 97.7% YoY and 12.6% QoQ in Q1, marking a third consecutive quarter of double-digit sequential growth. Strong order momentum and increasing visibility led management to raise the segment’s FY26 growth floor from 50% to 85%, a nearly $250 million increase, with upcoming growth levers from next-gen GPU platforms arising in 2H.
Communications emerged as an unexpected catalyst in Q1 with 800G optical modules driving 33.1% QoQ growth for the segment. Optics could emerge as a strong secondary growth story to Enterprise Data given that >800G optics are expected to increase 2.6X this year, while optical attach rates are expected to surge with Nvidia’s Rubin platform.
Working to expand capacity to $6 billion, a 50% increase from $4 billion in Q4, is necessary given Monolithic is quickly approaching that $4 billion level and has remained constraint-free on the supply side (so far). Quickly expanding capacity should allow MPS to capitalize on the multiple tailwinds above without becoming constrained.
Damien Robbins, Equity Analyst at I/O Fund contributed to this analysis.
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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