Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Monolithic Power Systems Inc (MPWR, Financial) reported a record Q2 2024 revenue of $507.4 million, exceeding the high end of their guidance.
- Strong revenue growth was driven by increased demand for AI power solutions, improving order trends in several end markets, and initial revenue ramps from past design wins.
- The company continues to expand and diversify its global supply chain to ensure supply stability and capture future growth.
- Monolithic Power Systems Inc (MPWR) is transitioning from being just a chip supplier to a full solutions provider, with solution sales now accounting for 20-25% of total revenue.
- The company has significant opportunities in the AI market, with AI-related revenues growing from 1-2% to 20% of total revenue, indicating strong future potential.
Negative Points
- The near-term outlook for the automotive segment remains uncertain, with expected uplifts not materializing as anticipated.
- Seasonality and inventory oscillations make it difficult to forecast future performance accurately.
- The company faces challenges in predicting the exact timing and impact of new design wins and market recoveries in non-enterprise data segments.
- Revenue from new ventures like silicon carbide power supplies for data centers is still small and in the early stages of development.
- There is some uncertainty regarding the need for export licenses to ship products to certain customers, such as Huawei, which could pose potential risks.
Q & A Highlights
Highlights from Monolithic Power Systems Inc (MPWR) Q2 2024 Earnings Call
Q: Bernie, could you give us some directional color by end market in your guidance for September?
A: The bookings trend into Q3 has improved significantly across various end markets. Specifically, enterprise data saw substantial growth in the last two quarters, and we expect continued growth in communications, storage, and computing.
Q: Can you provide insights into the ramp in auto and data center markets for power isolation?
A: We have started shipping higher power products for data centers, and this is just the beginning. We have design wins in all major carmakers, especially in EVs, and we expect significant growth in these markets.
Q: Michael, can you elaborate on your solution selling strategy and its impact on growth?
A: We are transforming from a semiconductor company to a silicon-based solution provider. Currently, 20-25% of our revenue comes from solutions, which offer higher value than individual chips. This strategy is driving significant growth, especially in AI power solutions.
Q: Could you discuss the opportunities within the enterprise data segment, particularly in CPU power and AI portfolio?
A: Enterprise data is expected to grow, but the rate of growth is slowing down due to significant growth in prior quarters. However, we see substantial opportunities in CPU power and AI, with VR14 expected to ramp up significantly.
Q: How should we view seasonality in your business, especially for the December quarter?
A: Seasonality is difficult to predict due to inventory oscillations and new business dynamics. While the December quarter has traditionally been down, the current business mix makes it challenging to forecast accurately.
Q: Can you elaborate on your activities in the power supply side of data centers, particularly with GaN and silicon carbide?
A: We have been developing our own silicon carbide since 2016, focusing on high-efficiency power supplies for data centers. While revenues are currently small, we expect significant growth in this segment due to our high-efficiency solutions.
Q: Are you seeing meaningful share gains in any specific areas now that we are at the bottom of the cycle?
A: We are seeing significant share gains in automotive, communications, and industrial markets. These areas offer greenfield opportunities that will materialize over the next few quarters.
Q: Do you have any exposure to Huawei, and has there been any impact from export license issues?
A: We do not have any licensing or contractual arrangements with Huawei, so there is no impact from export license issues. Any business with them is done on a PO basis.
Q: What are your expectations for vertical power delivery, especially with higher wattage processors in AI?
A: We are in a leading position in vertical power delivery, offering solutions that include modules directly under the CPU for highest efficiency. The market is huge, and we see significant opportunities in this area.
Q: Can you discuss the impact of AI trickle-down effect on your business?
A: Beyond direct AI opportunities, we see significant potential in memory, optical, and networking segments due to the AI trickle-down effect. This will drive additional growth for MPS.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
