Monolithic Power Systems, Inc. (MPWR) Q3 2026 Earnings Call Transcript

Good day, and thank you for standing by. Welcome to the Monolithic Power Systems 3rd 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 this 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.

Earlier today, MBS released a written commentary on the results of its operations for the third quarter ended September 30th, 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 risk and uncertainties. The risk, 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 Forms 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 call over to Tony.

Thanks, Arthur. Good afternoon, and for us, good morning from Shanghai, and welcome to our Q3 2026 earnings call. In Q3, NPS achieved another significant milestone, exceeding $1 billion in quarterly revenue for the first time. 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 In addition, using our in-house developed AI design tools, we significantly expanded our We started ramping robotic solutions with sensor and motor control products across multiple geographies. We continued 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.

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 star 11 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 Svonberg with CFL. Your line is now open.

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. I was hoping you can maybe leverage a little bit of that. I mean, I'm sure you're not going to give us Canada 27 guidance, but, you know, You are on track to growing 50-60% this year. And especially in light of your $8 billion capacity and then $10 billion, when do we potentially see $10 billion capacity in place? Thank you.

Yeah. Thanks, Tori. See, as Tony mentioned, it's only a few items.

So 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, okay, and we don't see anything, any fines slow down.

Yeah, the other thing I'd add is I think as we've come into the second half, you've started to see growth across multiple brand markets, including like 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, you know, 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.

Very good. And as my follow-up, you mentioned the 800-volt GAN product sampling. You know, now that you are sampling GAN, could you maybe elaborate a little bit more, help us understand a little bit more the positioning there? Is this a vertical GAN? Is it horizontal GAN? Is it your own process? Any more quality you can help us there, and when do you expect to start to see some in-on-the-volt GAN revenue? Thank you.

Yeah, we let a – it is based on NPS home development, which is later than we developed silicon carbide devices. And we start to

– we start to sampling this type of solutions.

We let our customers choose, and either using GAN, the GAN is the new technologies for everyone, and for everyone adapted in the data centers and the industrial automotive type of applications. This is the first time. And we are always very cautious about the reliability. We want to achieve below 1 ppm failures for these modules. And we let our customers choose, GAN or silicon carbide. Silicon carbide is known. We know the data. And so that's a very high reliability product in the games. We have to shift somewhere to 50 million units before we can say this is a new game. But we let our customers choose.

Yeah, I'll just add on. I think all of the experience—I'm just going to add a few things there. The experience you'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're still – we've always kind of been late in 27 for, I think, kind of the 800-volt kind of architecture ramps with probably more in 28. I don't think our thinking in that has changed. We're just obviously getting ahead of that design work now.

Yeah, even for our customers, they use pulse. They don't want to have a failure, either.

They use both solutions. Makes a lot of sense. Congrats again. Thank you.

Thank you. Our next question comes from Rick Schaefer with Oppenheimer & Co. Your line is open.

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, you know, 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, PNIC, you know, versus the PC, you know, the V-Core 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.

Yeah, Rick, let me start and then I'll let Michael come in. And 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've 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, right? 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 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.

For that segment, we have

a new product, like a Croc, the drivers, and RCD. These all lined up, and other

than in addition to our power management. These will be lined up for revenue

27 or 28, and we see even 28, these products were really ramping up. Okay, so that part of 10 is much bigger than power management.

And the notebook, as Tony mentioned, we will see this as a very

fast-growing market segment, because after the manufacturing capacity opens up,

that's the segment along with the desktop.

If you sum that up for a little bit, what we've kind of said for kind of segment overall is with the puts and takes, you know, 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.

And if I could, you know, this is your first call with, you know, with the CFO moniker, and I'm curious, you know, how you look at OpEx growth going forward. I mean, you know, any meaningful changes to the prior targets that you guys have laid out? I mean, you know, at each type of top line growth rates that Tori called out, you know, 50%, 60% type top line, you know, how fast can you, you know, actually scale R&D, et cetera? You know, it seems like we're – 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?

Let me answer that part again. I never believed the big dollars are in each program to a bigger result. For our business, it's inversely proportional to that. We just need some good ideas, good people that are going to make everything happen. Okay.

So, yeah, I think, Rick, you're not going to see us necessarily change our model. What we've seen pragmatically, though, is we start to get to higher levels of growth, that we start to fall below our model range in terms of you just can't spend money that fast. But I completely can 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 bottom from an OpEx perspective.

Got it. Thanks again. Congrats to you, guys.

Thank you. Our next question comes from Quinn Bolton with Needham & Company. Your line is open.

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, it kind of looks like you're tracking to maybe 150% growth, but I'm wondering, Tony, if you might be able to level set us what a new floor growth for enterprise data might be. And then, you know, I know it's early, but any sort of thoughts on that segment as you look into 2027, what, you know, kind of growth rate you might be looking at in a floor case? And then I've got a follow-on in the comms business.

Sure. Let me start just kind of with the answer to your question, Fred. I think at this point, given what we've seen in Q3 and Q4, we're comfortable raising the floor from – 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. In 2027, I think it's a little early for us to go put a percentage out at this time. But I'll start, and Michael, I'm sure, will follow up in that. Structurally, the growth drivers that we're seeing this year are all intact, right? 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 even a further tailwind out in time. So while we're early to call next year, I feel really good about the growth drivers.

Well, I see even in the next years and beyond next years, and I'm very excited to see that we've built our own data. And as Tony mentioned earlier, the result is a tremendous improvement. And so this is not in the data centers, okay? And NPS is all servers. And all these servers, we believe, I believe it will change. It changes to a type of servers, okay? The hardware will change, and they will trigger down to the desktops,

and even the notebook I said earlier. And this type of growth, it will trigger down

in the next year and the year after. We really see those trends, these design activities. It's already happening. And so this is not only this year, not only the data centers, okay, it will

trigger down to all other areas.

You had a follow-up on comms?

Yeah, it's obviously a congrats on the nice growth. I think it was 43% sequentially. It really looks like it was a breakout quarter in September. Wondering if that was primarily driven by optical modules, or are you seeing, you know, a broader set of contributors to that growth? And just any thoughts into the December quarter? Does that sort of pace of growth continue into December?

It's a great question. And, you know, to take us back here, obviously coming into the year, we obviously 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 are you 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. And 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. It won't be 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. 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.

So, we are in the macro economy and market segment predictions. I only care what is the design activity and what our customers are excited about, what we're excited about. Okay, all these new technology, new product introductions. And I said earlier, okay, all these segments, we introduce the new product and all the design activities,

that gave us an indication, clearly, the growth for even beyond next year. Thank you, Michael.

Thank you. Our next question comes from Joshua Buchholter with TD Cowan. Your line is open.

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, you know, GPUs versus ASICs or even any comments you can help us on how much is coming from from modules versus discreet at this point and expectations into 27. Thank you. Sure.

Yeah, the modules was the chip design chip power I see all of it. Even for the server side, we see many activities and going through it using modules because of the high-power demand.

That's my comment. Okay. And it's all segments. The real growth percentage are left only to that day.

Okay. Yeah, I think it's an important point around this customer diversity, that starting in 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 benefit is from a revenue diversity perspective is those carry the higher ASP associated with that. I think, furthermore, what Michael was talking about in terms of how we've been using AI to create scale to allow 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, and ultimately in the long term, might grow into a sizable customer.

Yeah, and all we clearly see is that we have the

huge beneficial from these artificial environment, these artificial intelligence, based on these large language models, of course the NPSR is internal. And it benefited us, it benefited for everybody.

And that's a world I'm very often mistaken about this and that our growth trend will continue.

Thank you both for the color there. Maybe in the same theme of starting with small sockets that become big opportunities, any context 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.

Yeah, this is, we can't tell, okay, because we have a, we just accounted, okay, these are over, conservatively, well over 6,000 products, okay, and we'll continue to develop newer product.

So what we do is we do every segment in our best. Far better than, or to meet the new market demand, and we are much faster than any of our competitors, and as long as we do, these segments do the best, and the revenue will come, and

we just don't know which segment. Seven, eight, nine, probably eight years ago, we look at our product lines, look at the optical market segments. One of the perfect examples, we didn't know today, is we're that high demand. And we got it in there, we serve our customers regardless of large or small.

And that's what What happened today? I cannot predict next 10 years, next five years, what will be bigger, and we serve our small customers well.

Yeah, I think, and again, you know, 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 ram goes.

Understood. Thank you, Bill.

Thank you. Our next question comes from Will Stein with True Securities. Your line is now open.

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.

Certainly, okay, I don't want to speak for our customers, in particular one customer. But I said earlier, and you know what we did in the 2000, we predicted in the 2016, and for the server market, NPS solution is so small, and we have to use the adapter to meet the common footprint. And so when, for the server market segment, we predicted it. And if you go about 600, 700 watts, and you run out of peripheral, and you have to use a smaller footprint, but the server CPU never get that, okay, never get to the 600, 700 watts, but the GPU did it, okay? And as GPU power increases, I don't have a GMI members. 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.

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, right, and that's what we've seen in terms of content gains as well as the volume gains as we've gone through enterprise data, and I think that will be a great question for our customers. Okay. Great.

And a different topic. Someone asked about the OPEX leverage, and I guess 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, you know, the companies talked for a long time about 10 to 20 bps per quarter gross margin expansion. There was a time when you weren't 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 as likely? Or any update there would be helpful. Thank you.

No, and thanks for calling out. Yeah, you saw that, you know, we obviously did increase 10 basis points here in Q3. The midpoint of our guide in Q4 has gotten another 10 basis points. And so I think we're kind of squarely in the model that we like, right? 55% to 60% is the sweet spot for sure, and within that being kind of slow, methodical by 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 a bunch.

And during the capacity

constraints, 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 the margins drops. And I want NPS to keep the same business, same performance, year over year, quarter over quarter year.

That's right. So I think the model still holds. I'm very comfortable with that. And I think, you know, 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, you know, it's kind of a point or quarter almost. We've seen a lot of expansion on the operating margin line.

Well, I think I'm making money business, and that's all I would be asking for.

Thank you.

The next question, operator?

Next question comes from Chris Casso with Wolf Research.

Your line is open.

Yes. Good afternoon. Just following from the prior discussion, maybe you could talk about how you're dealing with rising costs. And, you know, obviously, you know, costs are going up a lot of different places. There's a lot of talk of foundry wafer prices going higher. So, you know, to what extent are you passing that along? And, you know, as you go forward, does any of that result in pricing or, you know, any kind of revenue tailwind as you have to absorb some of those costs and pass them along to customers?

We definitely absorb some of the cost increase. And not that we don't increase the price, okay? And we summed up, we share the cost with, cost increase with our customers.

Yeah, 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. We're more just making sure that we don't delude ourselves in the gross margin line.

Our customers have a very long, long memory.

Okay. 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, you know, the pace of that transition. And in terms of MPS, how important is that to you in 27? And, you know, I guess maybe the question is, is it really 800 volts, 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 – I'm sorry, low-voltage designs?

Yeah, we don't want to add more voices, okay? We don't talk about it until the revenue for sure will come, okay?

I do see the revenue for sure will come.

Not this quarter, not next quarter, okay, probably end of the 27th and 28th, and it's clearly the D.C.

supplied for high-power demand, and that will be the trend.

What would be the data center? Okay, all will convert it to that. And power savings is, I think, beyond a single-digit percentage improvement versus

the traditional power supply. I see this as even beyond the data center.

And if the data center can improve, let's say, 5 percent,

where do you get them 5 percent money returns? And all the commercial buildings, even residentials, they all can be like this, 400-volt diesel.

In Europe, it would be 800 volts. In the U.S., it would be 400 volts. And the diesel would be a significant power savings across the world. So that's what I'm excited about this opportunity now.

Yeah, I mean, I'll even try to just address the question the other way, which is when we talked about how we were 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.

Yeah. NPS, now, we're using our own building, do our own experiment, okay, using these 800 volts and using these

technologies and see what the power saving is. Thank you. Thank you.

Our next question comes from Sebastian Nagy with William Blair. Your line is open.

Yeah, 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. You know, given some of the news around integrated voltage regulators and the acquisition of M-Power by analog devices, Maybe could you just 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?

Yeah, a little common in other companies' activities. And we have our own solutions.

We have our own, and we can deliver

whatever customer wanted. And this is not a BS talk, so 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, and the architecture, and in terms of power delivery. And we

don't talk about those until we have a – we clearly see where the revenue will come.

Okay. Okay, great. That's helpful. We'll 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, you know, $40 to $50 billion in size, but that the real bottleneck was the software still needed to catch up. Can you maybe just talk a little bit about the progress that's been made here as we get to the end of the year?

Well, good questions. Okay. That's my baby project.

And we just have installed in our many square feet building. That's in China. And we, as I said just a minute ago, we're experimenting our own AC2D These are for 800 volt supplied, and for across the buildings, and that project, these projects just started, but in terms of turning to a 50 billion dollar revenue will take 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. But on the hardware side, we pretty much have every single component. And our single component, our chips, our module technology is far better than, sorry to say, these are the currently existing technology.

He's a 50-year-old, and we will do some significant improvement on it.

Great. Thank you. Our next question comes from Kelsey Chia with Citi.

Your line is open.

Hi. Hi, Michael and Tony. Congrats on the great results again, and Tony, congrats on your well-deserved appointment. So my question is on the switching business. So to what extent is that contributing to the strong communications growth that we saw in the quarter? And how should we think about the ramp as we head into 2027 and if that business is equated to gross margins?

Yeah, I'll start on that one. So, well, I was not going to start guiding, you know, 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 inside 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 into 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 6,000, 7,000 products. And so if you look at the distribution of that, basically what we've said 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 MPS as a total, kind of in that 55 to 60 range with sort of a slow methodical expansion when we can provide it, versus worrying about whether growth in one end market would take you out of model. Got it.

And my second question is on the industrial end market. I mean, 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, and how do you see that ramping in 27?

Robotics, okay. I tried to enter the robotics in 2016.

On the end of the day, we talked about robotics. Okay, that's the area we're focused on. Okay, we have a product for these sensors and motor controls. Okay, me and that. And I didn't know what I was talking about. Okay, the revenue didn't come.

Okay, and now it shows up. And I think it's still at the very beginning. Okay, once the vision for the recognitions and visual recognition, And I would improve and

improve the farm using the AI-based vision improvement in the technology. These robots, as you know, and

they will propagate, you know, everyday life. So, I see this is the futures, and the revenue

will be significantly higher than now.

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 come to turn into revenue in the future. So, I think that, you know, it kind of consumer and industrial, 2026, I think, really does still remain mostly about winning all the designs that support future growth.

Got it. Thank you.

Thank you. Our next question comes from Joe Quattrochi with Wells Fargo. Your line is open.

Yeah, thanks for taking the question. My congrats as well, Tony. Maybe just to the kind of the final point on the expansion of capacity to $8 billion, you know, I can appreciate that you can't grow OPEX as fast, and you don't need to grow as fast.

But how do we think about, like, maybe some of the investments you have to make on the working capital side or go-to-market side to support that?

Yeah, I think one of the nice things about being in a fabulous model, right, is we don't have to dig a hole and pour concrete into it. 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 is 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.

Okay, thanks.

And then maybe as a follow-up, you know, I think Otto's continuing to see some inflection. Can you just talk about the breadth of demand you're seeing there from a geographic or just, like, you know, perspective and how we think about, like, the design pipeline looking into 27?

It's across the geographic, okay, in the U.S. side, Europe side, okay, and also in Asia, China, okay, we see, in China particularly, we see a lot of activities. And so that's probably what the oil drive is. And we, as we said, as I said earlier, we can't predict which market segment. And that's our diversified growth strategies. And some years, okay, some years, one segment's good, other, other, even, even, even when the mature market, and some years, one market segment's good, the other one's not so good, okay? And in, in the last few years, okay, all of a sudden, the GPU markets happened, or the optical market have, and the revenue happened, okay? And so we didn't anticipate it. We just provide the best, highest-performance product. Our customers will realize it.

Yeah, and the only thing I'd add is I think the reason we've been pretty confident on the ramp in the second half is because it is so diverse amongst customers and regions and not dependent just on one. And you've seen 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, right? It's very geographically diverse and very customer diverse. We were just very excited to start seeing some of the architectural transitions that we've been talking about in sort of 48 and zonal, because those sort of form the next wave of growth for us.

We're not predictive of what the market is.

Last question.

Thank you. Our last question comes from Gary Mobley with Stonex.

Your line is open.

Good morning, gentlemen. Thanks for squeezing in my question. Congrats, Tony, again. I wanted 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. It 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?

It doesn't take much to get there. Oh, come on. It doesn't take much to move the members. There's a lot of work behind it.

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 tightness, we wanted to be very clear to you and our customers how we're growing capacity to support that business. So I think, again, it's too early to go right 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.

Thanks for that. And on inventory, I just wanted to confirm that distribution inventory is still within that normal five- to eight-week range, and then it looks like your internal inventory is down to 117 days based on a forward revenue guide basis, and that's been trickling down. Are you inventory properly to support sales, I guess, 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 gross basis, right? But obviously, as the revenues ramp, that's come down from a day's 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, It's, you know, we'll make sure that we're positioned for the business, but right now it's not limiting us on the business.

Got it. Thank you all. Again.

Thank you. This concludes the question and answer session. I would now like to turn it back to Tony Bailo for closing remarks.

All right. Thank you, Operator, and thank you all for joining us for this conference call today. I look forward to speaking with you on the next call for the fourth quarter and full year 26 revenue guidance. Thank you again, and have a great day.

This concludes today's conference call.

Thank you for participating.

You may now disconnect.