Navitas Semiconductor Corp Q4 FY2025 Earnings Call

Good afternoon, and welcome to Navitas Semiconductor's Fourth Quarter 2025 Financial Results Conference Call. As a reminder, this conference call is being recorded today, Tuesday, February 24, 2026. I would now like to turn the conference over to Brett Perry of Shelton Group Investor Relations. Brett, please go ahead.

Thank you, operator. Good afternoon, and welcome to Navitas Semiconductor's Fourth Quarter 2025 Financial Results Conference Call. Joining us on today's call are Navitas President and CEO, Chris Allexandre; CFO, Todd Glickman. I'd like to remind our listeners that the results announced today are preliminary, as they are subject to the company finalizing its closing procedures and customary quarterly review by the company's independent registered public accounting firm. As such, these results are unaudited and subject to revision until the company files its Form 10-K for its year ended December 31, 2025. In addition, management's prepared remarks contain forward-looking statements, which are subject to risks and uncertainties, and management may make additional forward-looking statements in response to your questions. Therefore, the company claims the protection of the safe harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from those discussed today, and therefore, we refer you to a more detailed discussion of the risks and uncertainties in the company's filings with the Securities and Exchange Commission, including Form 10-K and Form 10-Q. In addition, any projections as to the company's future performance represent management's estimates as of today, February 24, 2026. Navitas assumes no obligation to update these projections in the future as market conditions may or may not change, except to the extent required by applicable law. Additionally, in the company's press release and management's statements during this conference call will include discussions of certain measures and financial information in both GAAP and non-GAAP terms. Included in the company's press release are definitions and reconciliations of GAAP to non-GAAP items, which provide additional details. For those of you unable to listen to the entire call at this time, a recording will be available via webcast for 90 days in the Investor Relations section of Navitas' website at www.navitassemi.com. And now, it's my pleasure to turn the call over to Navitas' President and CEO. Chris, please go ahead.

Good afternoon, and we appreciate you joining us today. I'm pleased to be hosting my second quarterly conference call as Navitas CEO. We closed out the year with a productive fourth quarter, as we continue to accelerate our pivot to Navitas 2.0 and align the entire organization to focus on addressing high-power markets. In fact, it has been an energizing five months since I joined the company, and my conviction in our industry-leading GaN and high-voltage SiC solution has only grown stronger, and that our strategic pivot is on the right path to successfully scale the company to the next level. Before providing comments and updates specific to the quarter, I want to briefly reiterate several key elements on our previously communicated strategic transformation and our vision to what we call Navitas 2.0. First, we're accelerating our pivot away from the company's historical mobile and low-end consumer business to focus on high-power markets, where our GaN and high-voltage SiC products can deliver real differentiation and value through higher density, efficiency, and reliability. We are laser-focused on four high-growth, high-value market segments: AI data centers, energy and grid infrastructure, performance computing, and industrial electrification. Collectively, this segment represents a serviceable addressable market of $3.5 billion by 2030, split roughly 50-50 between GaN and high-voltage SiC with a combined CAGR of more than 60%. Although the largest portion of this $3.5 billion SAM is within AI data centers and grid and energy infrastructure, I want to emphasize that AI is a shared underlying catalyst across our four target markets, driving a rapid acceleration in terms of re-architecture infrastructure, customer expectation, and the adoption of the new high-voltage technology. We're leveraging our proven 10-year track record as a pioneer of GaN at scale, having shipped over 300 million unit GaN devices, coupled with deep expertise in system and application as well as our leadership in high-voltage SiC through our GeneSiC technology. The end goal of Navitas 2.0 strategic transformation is straightforward: to rapidly penetrate, secure expanded customer engagement, and achieve scale, resulting in more sustainable, consistent, and future profitable growth for Navitas. Turning to a brief recap of our fourth quarter results. As initial progress of our pivot to Navitas 2.0, we've completed a realignment of the entire organization, both in terms of skills and geography to focus on addressing high-power markets. This includes fully redeploying organizational resources, road map, and focus accordingly. Revenue in the fourth quarter came at the high end of our guidance range at $7.3 million, coupled with the fourth quarter being the first time that high-power market represented the majority of our total revenue. We remain confident that the fourth quarter was the bottom. Notably, our Mobile business declined sequentially from a majority of revenue in Q3 to less than 25% of total revenue in Q4. We expect Mobile to continue going down as a percentage of quarterly revenue and become insignificant by the end of '26. Also, consistent with our comment last quarter, we're guiding to quarter-over-quarter growth for Q1 and anticipate continued sequential growth throughout '26, driven by increasing sales traction in the high-power market. Over the last several months, as part of my expanded meetings with customers and partners, I've seen numerous proof points that the new technology adoption is accelerating. AI is a catalyst, changing the game across markets. Existing technologies and architecture are no longer sufficient. The industry is moving faster than it ever has in terms of technology adoption with customers clearly moving in to take advantage of GaN and high-voltage SiC technology. As previously mentioned, AI is a primary catalyst that's driving momentum and broadening the adoption of high-power solutions across all four of our target high-power markets. Every interaction with customers has confirmed the market is undergoing secular change and that AI is sparking a revolution we're focused on. This impelling inflection point in architecture, design, and technology adoption is highly favorable to GaN and high-voltage SiC, putting Navitas 2.0 at the center of this revolution. As outlined in our last call, the Navitas 2.0 transformation to a high-power company is being backed by decisive actions and grounded in four pillars that include market focus, technology leadership, operational efficiency, and financial discipline. Let me now review the major progress that we've made in each of these areas since our last earnings call. Starting with market focus. As I mentioned earlier, we're sharply focused on the high-power market of AI data centers, energy and grid infrastructure, performance computing, and industrial electrification. In AI data center specifically, Navitas is uniquely positioned as one of the leaders in GaN and high-voltage SiC, supporting all major AI data center architectures. The density of compute power will require higher efficiency and power density. It's driving the acceleration of GaN in next-generation data centers. During the quarter, we've accelerated sampling of product and solution delivery with our 100-volt GaN and 650-volt GaN targeted at AI data centers, 800-volt HVDC, and 48-volt IBC HV buck architecture. Samples are currently available in different package sites and are being evaluated by more than a dozen customers. More recently, on February 9, we announced our breakthrough 10-kilowatt DC-DC design platform. This is an all GaN 10-kilowatt 800-volt to 50-volt DC-DC platform, which employs advanced 650-volt and 100-volt GaNFast FETs in a 3-level half-bridge architecture with synchronous electrification. This platform has delivered a 98.5% peak efficiency, which we believe is the best in the industry so far. This full-brick package design platform achieved leading power density and supports plus or minus 400-volt VDC standard for AI data centers. This is a great example of how Navitas is able to leverage our 10 years of GaN and system expertise. We're setting the benchmark for scalable, high-performance AI infrastructure. Our product portfolio enabled unprecedented power density to support rapid large-scale expansion of AI data centers while also allowing hyperscalers and OEMs the ability to maximize compute density and reduce energy loss in support of deploying next-generation AI workload. On the SiC front, we are very active supporting customers in their AC-DC PSU designs for current AI data center architecture with our latest 1.2 kV SiC devices, leveraging our latest fifth-generation GeneSiC technology announced earlier this month. This product brings improved figures of merit and best-in-class thermal behavior, the topside cooling Q-DPAK package that is being well received by customers. In the grid and energy infrastructure market, the energy grid is in the process of a major transformation and modernization to support the AI catalyst but also overall growth in energy demand. This is not a short cycle, but rather a multi-decade secular and sustainable trend that will transform grid and energy infrastructure. As a result, we are seeing an acceleration in the design cycles here as well. We are leading this effort with our new ultra-high voltage 2.3 kV and 3.3 kV SiC modules and road map to even higher voltage. We are now in evaluation with over 15 OEMs globally, mostly in the U.S. and Europe with notable acceleration in the U.S. In performance computing, we continue to see increased GaN adoption in high-power chargers and power units for high-end computing and AI notebooks replacing silicon. We have more than 15 projects in production and approximately twice that number in designing across 170 watts, 200 watts, 250 watts, 240 watts and up to 360 watts with leading global computing companies. We expect to continue gaining momentum in the performance computing market throughout '26. And lastly, in industrial electrification, we're starting to see GaN and high-voltage SiC action in high-performance applications spanning industrial pumps and heavy equipment electrification like DC-DC converters and megawatt chargers. Turning to our second pillar, technology leadership. We continue to prioritize innovation across GaN and high-voltage SiC technology, including both product and solutions, supported by expanding customer engagement and co-development projects. One example of this innovation and system expertise was our breakthrough 10-kilowatt DC-DC platform that I just discussed previously. Another highlight was our announcement during the last quarter of our 2,300-volt and 3,300-volt ultra-high-voltage SiC module portfolio, which we have accelerated sampling to more customers. These modules feature proprietary Trench-Assisted Planar technology for AI scalability, advanced robustness and performance in mission-critical applications across grid-tied infrastructure, energy storage and megawatt scale fast charging. These products are available in SiCPAK G-plus power modules, discrete packages and known good die format with extended AEC-plus reliability testing. As mentioned earlier, we announced last week our Gen 5 technology and upcoming new 1.2 kV SiC Q-DPAK product targeting PSU AC-DC for AI data centers. Our new Gen 5 SiC technology continues to improve the figure of merits of our leading GeneSiC technology. It leveraged our Trench-Assisted Planar TAAP architecture, best-in-class thermal behaviors and topside cooling in Q-DPAK. We're now sampling our first new 1.2 kV Gen 5 SiC product to multiple OEM and ODMs designing high-power PSUs and AC-DC for AI data centers. On our third pillar, operational efficiency, we have taken actionable steps to create a more streamlined and rebalanced geographically deployed organization. We have been receiving strong employee buy-in and seeing tangible benefits from these efforts. Also, on November 20, we were pleased to announce a long-term strategic technology and manufacturing partnership with GlobalFoundries to accelerate GaN technology design and manufacturing in the United States. This partnership enables a secure, scalable solution for our target high-power market and ensures that Navitas can deliver the performance, efficiency and scale our customers demand. It also provides Navitas the opportunity to manufacture our solution in critical national security applications in the U.S. Development began a few weeks ago, and both companies are deeply collaborating with production expected to begin later in the year and accelerate in 2027. Over time, we expect to transition to 8-inch in order to lower product costs and increase scale. Also, during the quarter, we executed actions to restructure and optimize our go-to-market strategy. This included significant consolidation of distribution channel partners from approximately 40 to less than 10 distributors. We have the ability to scale and are well suited for serving high-power markets while removing previously mobile-centric distributors. And our fourth pillar, financial discipline, centers on resource realignment in support of our focus on high-power market. This includes a very targeted 19% reduction in headcount in the fourth quarter, offset by realignment action to support the Navitas 2.0 shift, including hiring new employees well equipped for high-power markets, in particular within the United States. As evidenced by our fourth quarter revenue mix, we have made tremendous progress. We also brought in new additional leaders with skills in sales and marketing, R&D and operations with a focus on enabling stronger execution. These collective actions focus the entire company on the high-power market and provide a foundation for efficient and effective execution going forward. Even with a larger market opportunity, our resource realignment allows us to efficiently focus our quarterly spend on the high-power market. As a result, we're targeting to maintain operating expenses flat throughout the coming year. We also expect to drive gradual margin expansion throughout '26 through improving scale and mix of high-power business. Lastly, to further strengthen our balance sheet and fund future operations, we completed a private placement of common stock in November with net proceeds of approximately $96 million, contributing to a quarterly end cash balance of $237 million. These proceeds further support our Navitas 2.0 strategy, accelerating our transformation and funding working capital for scalable growth and long-term value creation. In closing, I am very pleased with the overall progress we achieved in a relatively short period of time. Speed is a financial element of our company's culture, and it's clearly working. We are positioning Navitas 2.0 as a high-power company, sharpening our focus on execution to enable scalable growth. Looking ahead, we anticipate a return to top line sequential growth starting in the first quarter, fueled by increased revenue from high-power markets. When combined with the benefit of our optimized cost structure, streamlined go-to-market approach and accelerated product roadmap, we're also positioned to achieve gradual improvement in gross margin and bottom line results over the coming year. I'm incredibly proud of the team's dedication, hard work and agility in pivoting to Navitas 2.0 vision. I also want to thank our customers for their support for our new strategic direction as well as ongoing contributions to mutually beneficial collaboration and partnership. With that, I'll turn the call over to Todd to review our fourth quarter and full year results as well as our first quarter guidance.

Thank you, Chris. In my comments today, I will take you through our fourth quarter and full year 2025 financial results. And then, I'll walk you through some of the important Q4 achievements and market dynamics as well as our outlook for the first quarter 2026. I will then return to Chris for final remarks before we take questions. Revenue in the fourth quarter of 2025 exceeded the high end of guidance at $7.3 million compared to $10.1 million in the third quarter of 2025. As expected, revenue for the quarter reflects our strategic decision to deprioritize our low-power, lower-profit China mobile and consumer business as well as our efforts to streamline our distribution network to align our focus on high-power markets. As Chris mentioned, our high-power markets represented a majority of our quarterly revenue for the first time in the company's history, with mobile declining to less than 25%. This is a very important milestone and representative of our strategic shift. As mentioned before, we believe that Q4 represented the bottom for revenue, as our strategic actions support driving increased contribution from our high-power business going forward. Before addressing gross profit and expenses, I'd like to refer you to the GAAP to non-GAAP reconciliations in our press release. In the rest of my commentary, I will refer to non-GAAP measures. I would also like to point out that our GAAP results for the fourth quarter included a $16.6 million restructuring and impairment charge that consisted of approximately $10 million of distribution contract terminations, $4 million of fixed asset impairments and $2 million of workforce reduction expenses associated with realigning the entire organization and distribution channel to focus on addressing high-power markets. Of the $16.6 million restructuring and impairment charge in the quarter, $3.8 million was noncash related items. Gross margin in the fourth quarter was $38.7 million, which was flat sequentially with the prior quarter, reflecting the ability to maintain our margin profile despite the lower quarterly revenue. At these revenue levels, we do not yet have the leverage to overcome our fixed costs, but we expect this to improve as we further grow revenue from high-power markets. As mentioned in our last earnings call, we expect to deliver expanded margins, as we pursue a mix change towards higher power markets and away from mobile and low-end consumer. During the fourth quarter, we executed on a 19% workforce reduction, mostly deployed to mobile and consumer and an organizational realignment towards U.S. high-power customers and markets, thereby reducing operating expenses sequentially from $15.4 million to $14.9 million. This is part of our strategic plan to realign the company's resources to the Navitas 2.0 focus. Operating expenses were comprised of SG&A expenses of $6.8 million and R&D expenses of $8.1 million. These expense levels align with our cost reduction targets. The fourth quarter of 2025 loss from operations was $12.1 million compared to $11.5 million in the third quarter of 2025, as the reduction in operating expenses did not fully offset the decrease in revenue. Our weighted average share count for the fourth quarter was approximately 222 million shares. For the full year 2025, revenue was $45.9 million compared to $83.3 million in 2024. Gross margin for the full year was 38.4% compared to 40.4% last year. 2025 operating expenses were $63.6 million compared to $83.4 million in 2024. The full year loss from operation was $46 million versus $49.7 million last year. As Chris mentioned, the fourth quarter represented the bottom in quarterly revenue, and we expect to return to top line sequential growth throughout 2026, as we continue our transition to high-power markets. Turning to the balance sheet. Accounts receivable was down to $3.6 million from $9.8 million in the third quarter, reducing our DSOs to 45 days. Inventory decreased to $13.3 million from $14.7 million last quarter. Cash and cash equivalents at quarter end were approximately $237 million, reflecting net proceeds of approximately $96 million from our completed private placement of common stock in November 2025. The company continues to carry no debt. Our balance sheet remains very strong as we exit the year with a high level of liquidity and improved working capital position. Moving to guidance for the first quarter of 2026. We expect revenue to increase sequentially to between $8 million and $8.5 million. This represents the first quarter-over-quarter growth since the company's pivot. As I just mentioned, we expect sequential growth to continue throughout the year, driven by increasing revenue contribution from high-power markets. Gross margin for the first quarter is expected to be 38.7%, plus or minus 25 basis points. We continue to anticipate the technological innovations to bring to high-power, high-growth markets will result in progressive expansion of future gross margins. Turning to operating expenses. We anticipate operating expenses to remain approximately $15 million for the first quarter. We expect to continue to allocate resources and expenses, as we redeploy company resources towards higher power customer end markets, particularly within the U.S. This redeployment of resources is expected to offset the strategic downsizing of our facilities to result in flat operating expenses. For the first quarter, we expect our weighted average share count to be approximately 230 million shares. In closing, we are pleased with our initial progress and accelerated pivot to Navitas 2.0, as evidenced by high-power products representing the majority of our quarterly revenue for the first time. We expect to increasingly benefit from the broadening adoption of our GaN and high-voltage SiC products in targeted high-power markets. Together, with our recent actions to reallocate resources, optimize operational efficiencies and restructure distribution channels, we believe that Navitas is on a path to deliver improving margins and bottom line results. I'd now like to turn the call back to Chris for some final comments before opening the call to questions.

As we close today's call, I want to address one additional matter. After an extraordinary 10 years of dedicated service, Todd has decided to step down as CFO to pursue other opportunities. He has been an invaluable partner to everyone in the company, bringing financial discipline, strategic insight and weathering integrity that helped steer us through periods of both growth and challenges. Todd has also been a great partner over the last six months, helping to pivot and transition the company to Navitas 2.0. On behalf of the entire Board and executive team, I want to extend our gratitude for all of his contributions over the past decade. We have a strong financial organization in place, and Todd is fully committed to assisting in a seamless transition until his successor has been made. We expect to communicate in the coming weeks regarding Todd's replacement and Navitas' new CFO. We enter this new chapter with confidence in our strategy, our momentum and our ability to continue delivering long-term value for our shareholders. Thank you again for joining us today. Operator, we might now open the call to questions.

And our first question comes from the line of Kevin Garrigan with Jefferies.

Chris and Todd, congrats on the results. And Todd, best of luck on your next path forward. Can you guys just walk us through how each of the high-power end markets performed in Q4? And how we should think about the trajectory for each of those markets in Q1?

Yes. Well, obviously, our quarter-on-quarter growth in revenue was due to the high-power markets. So they are performing well. We're not going to sort of break out the high-power markets at this time, but we do expect all of them to be performing on a go-forward basis as mobile becomes immaterial, as we move through the year.

Okay. Got it. And then as a follow-up, can you just update us on the progress of the 800-volt architecture opportunity? And can you give us a sense of a timeline on customer decisions?

Kevin, this is Chris. As we talked last time, there's a lot of work going on between us and the hyperscalers, not only one, but multiple of them on the adoption of the 800-volt HVDC. We sampled, as we mentioned in the press release and in the script, some of the new products that will be used in this type of architecture. We also announced a leading-edge 800-volt to 50-volt DC-DC brick that demonstrates the performance we can get with those products. So there's a continuation of collaboration. It's a bit too early to kind of tell you when this will be confirmed, but I think we are getting closer and closer with our customers.

Okay. Great. Congrats again on the results.

The one thing I would add, Kevin, is everybody refers to the 800-volt HVDC as a step function for power content in the AI data center, and this is true, especially with the adoption of GaN replacing silicon as you move to the 800-volt HVDC, right? But I would outline that in AI DC, and you heard it from multiple vendors, is that there is an acceleration of demand also in using the classic architecture, which is AC-DC, right, using SiC. And we see a growth throughout the year ahead of the step function with GaN in HVDC.

Our next question comes from the line of Kevin Cassidy with Rosenblatt.

Congratulations on the progress. As you mentioned, you are collaborating with the hyperscalers. Are you working directly with them? Will they be developing their own power supplies, or will they rely on current power suppliers to meet their needs?

Kevin, it's actually all of the above, okay? So the hyperscalers are driving the new architecture, both in terms of what they expect in terms of density and power level in the AC-DC PSUs as well as the 800-volt either 50-volt or even lower voltage HVDC architecture, right? Now, we don't work only with the hyperscalers. If you think about PSU, which is clearly designed in OEMs and ODMs that are serving those hyperscalers, and if you look at the HVDC, a lot of these that are classic merchant power companies serving the hyperscalers are also doing designs on this new architecture. So we work with everybody. I would tell you that the driver of the change of the architecture comes from the U.S. and the hyperscalers, but a lot of the OEM and ODM in Taiwan, in China, but also in the U.S. are driving that. And as you know, we just announced this board, right, which I mentioned, which was basically a co-development with the customer. And that's basically to showcase the level of efficiency you can get by using GaN on the primary side and GaN on the secondary side in 800-volt to 50-volt DC-DC brick. And you're going to see more of those reference implementations in the future as well.

Okay. Great. And have any of your customers or the hyperscalers given you an idea of when that inflection point would be of when they start doing the installations?

I mean, the thing I would say is, as I said just earlier on Kevin's question, there are two streams, if you prefer, of the AI data center growth. Number one is more data centers, more power, and that drives more PSUs, higher-power PSUs and that drives the growth in SiC, which we are seeing throughout '26. When it comes to the 800-volt HVDC, which I think is your question, when there is a discontinuity and you cannot use silicon anymore on the primary side because you're 800-volt and you have to move to high-voltage GaN. This is really driven by not the GPU change, but the rack architecture change. As you compact more GPUs into a single rack and you get to megawatt rack, you cannot get the power density and the efficiency with silicon. And that's this discontinuity. I would say, as we said before, this is really about '27. Will GaN be used slightly earlier? It could. There is a case where you can use GaN in the 48-volt IBC replacing silicon, as I mentioned in the script, where GaN brings higher efficiency. You can do it with silicon, but you get higher efficiency. And this might be the first time you see GaN in data centers. But the real step function is really coming from the 800-volt DC, which is really kind of linked to the Kyber rack, which is the higher integration of GPUs in '27.

And also I'll give my best wishes to Todd, pleasure working with you.

Thanks, Kevin.

Next question comes from the line of Quinn Bolton with Needham.

Congratulations on the progress with the transformation to Navitas 2.0, and best wishes to you, Todd. Chris, I wanted to revisit the topic of the 800 HVDC solution, particularly regarding the primary side of the 800-volt rail. There are still many in the industry discussing the use of silicon carbide in the 800-volt conversion step. You are clearly advocating for the GaN solution. Can you share what you are observing from leading GPU and hyperscaler vendors regarding their interest in the 800-volt or the 400 plus/minus rack architectures? Are they leaning more towards GaN, or are they open to both GaN and silicon carbide solutions? How do you see the technology landscape evolving between GaN and silicon carbide?

Thank you, Quinn. It's a very good question actually because I think there is some level of confusion. First of all, I would tell you that we are not pushing anything. We have both SiC and GaN, and we welcome SiC being used on the primary side if it's needed and GaN being used on the primary side if that's needed. So we're not pushing anything. We are being pulled. We've not seen any significant use case of board implementation of customer evaluation using SiC on the primary side. SiC is being used widely at 1.2 kilovolt, as I mentioned, in the classic AC-DC, right, which is basically prior to the 800-volt DC. But when it comes to 800-volt DC, we've been pulled by customers. And I'm talking about hyperscalers to Kevin's question here that are really driving the GaN adoption because it's more efficient and driving higher density.

Okay. And then, Chris, you also talked about your 10-kilowatt all GaN brick solution. Can you give us a sense if that is more of a reference platform? Or would that be a solution that Navitas would look to source that entire brick level product? Because I imagine it includes a fair amount of additional componentry. And so just thinking about to the extent you're selling the full brick solution, I imagine that might be pretty high-dollar content. So could you just talk about whether you would really just sell the GaN solutions as part of that brick? Would you sell the entire brick? And if you did sell the entire brick, what would the margin implications be?

That's a great question, thank you, Quinn. We see this as a technology that enables our customers. First, I want to emphasize that this has been developed in collaboration with a leading customer, not in isolation. We do not compete with our customers, and at this point, we do not plan to sell the modules. The design has been shared with our customers and the hyperscalers, as well as the ODM and OEM partners, to showcase how we've achieved a high efficiency level of 98.5%. This is considered among the best in the industry, based on feedback from our competitors and customers. Historically, we've pioneered GaN in mobile by helping customers reach high efficiency, low electromagnetic interference, and high density. We are applying the same principles in AI data centers. When we refer to 2.0, we are building on the advantages and expertise gained from 1.0. Our system expertise is crucial. Ultimately, we are focused on selling GaN and silicon carbide to enable our customers. Interestingly, we are also utilizing some competitor technologies in our silicon and other products that we don’t possess. Our main goal is to support customers in accelerating the adoption of GaN in HVDC.

Next question comes from the line of Jonathan Tanwanteng with CJS Securities.

And I'll join the queue in wishing Todd well wishes on his journey. If you could start, maybe talk a little bit about the competitive landscape in supplying the 800-volt data center. What are you seeing just in terms of who you're bidding against in these sockets, if they're outpricing you or doing better in technology? And on top of that, how is your partnership with Infineon evolving in that space as well?

So thank you for your question, Jon. So I'll start with the end. We continue our partnership with Infineon. We have a cross license, as you know, and we share the same vision, which is to enable the accelerated adoption of GaN and silicon carbide in the AI DC, right, so SiC as the traditional architecture and GaN in the 800-volt DC, right? So there's a lot of dialogue between the two companies on that front, right? Number two, you all have seen that there are multiple vendors having been listed on the 800-volt AI factory kind of ecosystem. As a matter of fact, I think it's up to 13 vendors today. But we don't see all of them in each of the socket we target. So I would recommend that you look at how many of those 13 are actually in the high-voltage GaN, so how many of them have a 650-volt GaN in the right package to be able to enable 800-volt HVDC, how many of them have mid-voltage GaN to enable the 50-volt secondary side. Some of them are listed as silicon vendors. We are listed as a GaN vendor. The other thing is, as we talked about SiC being used on the AC-DC as well, there is a natural pull for more SiC as we get to higher voltage, and also outside of data center, to do the 800-volt HVDC, you need to enable a change of the grid architecture. This is a pure high-voltage, ultra-voltage SiC play. So what I will tell you is there's a lot of competition, but not everybody is competing on the same thing. And there are not many of the vendors being listed that have both high-voltage SiC or ultra-voltage SiC, either competing in the AC-DC with 1.2 kV or in the grid with 2 kV and above and having high-voltage and mid-voltage GaN. So this competition pool is actually being reduced. That's why we are very clear about what we do. We don't play in the silicon. We play in the GaN, high-voltage, mid-voltage and in the high voltage and high-voltage SiC.

Got it. And then second, could you update us on the incremental margin of either this 800-volt data center products or high-power products in general, especially as you roll out new suppliers?

So first of all, as Todd said, right, we expect continuous gross margin expansion. So remember that the growth this year is coming from all high-power markets and basically mobile going down, right, being less than 25%. What I would tell you is the scale is going to help more gross margin. As we grow revenue, some of our fixed costs absorb that and that drives margin expansion. Number two is the high-power products in the high-power market are coming at a higher margin than mobile was, okay? And that mix is going to change. And the third one is we are very active in ramping new suppliers, particularly on the package side that will help us to reduce costs, right? So there's multiple aspects of how we are confident to see gross margin expansion, as we clearly outlined for the rest of '26, right? And as we scale further in '27, we expect that to continue.

Next question comes from the line of Jack Egan with Charter Equity Research.

I have a follow-up on the gross margin question. As mobile products continue to decrease in size, I'm curious about the long-term outlook. Will your gross margins primarily be influenced by the mix between data center and non-data center markets, or will it be more about the technological innovations mentioned by Todd, which seem to relate to new products with higher average selling prices? I'm trying to understand what will drive margin expansion, whether it will be market mix or improved product margins.

It's going to be a combination of both factors. The end product mix will play a significant role. As mobile demand decreases, high-power markets will provide us with higher margins due to their focus on reliability and performance. Additionally, as we scale and introduce new products into high-power markets, we anticipate further expansion through optimized processes, improved yields, and lower packaging costs. This will help reduce our product costs and, in turn, increase our margins.

The one thing I would add, Jack, is, okay, scale, cost reduction, and basically higher-margin product, right, as Todd said. But the one thing I would say is that, again, the growth this year, and I think we've been very clear that we are very confident that Q4 was the bottom, we are guiding up for Q1, and we said we're going to grow quarter-over-quarter throughout the year with margin expansion. I would reemphasize again that the growth is coming from whole high-power markets. Yes, AI data center is a big part of the future outlook. And if you look at the SAM that we shared just a few weeks ago, it's nearly half of the SAM that we see for us in 2030. But I would outline that performance computing is growing this year, okay? It will continue to grow and also help on the margin mix. Grid infrastructure is really accelerating. And I think you're going to see higher ASP products, higher-margin products coming in play there, where it's more about reliability and performance and less about cost. Of course, costs matter. And then, as we talked about in AI data center, which is a cost-sensitive market, it's all about efficiency right now, okay? And I think you're going to see all those markets contributing to the growth expansion in gross margins, right? So I just wanted to calibrate a little bit your question to make sure that we don't see the gross margin expansion only coming from AI data center.

Sure, Chris. That's really helpful. From a broader perspective, I know you're not providing as much to some automotive and industrial markets, but silicon carbide has recently experienced a significant oversupply. I'm curious about your expectations for when supply and demand might stabilize in some of the other markets, whether it's for Navitas or the industry as a whole. I understand you’re securing some large volume wins that might not be as relevant, but any insights would be appreciated.

To be honest, Jack, as someone experienced in the industry, I believe it will take some time. However, you should direct that question to the vendors supplying into electric vehicles. We don't operate in the same segment as silicon carbide. I've been clear that we focus on 1.2 kV for power supply units in AI data centers and 2 kV and above, reaching up to 5 kV and more for the grid. This is not about supply scale; it's about the reliability, efficiency, and performance of our technology. For some silicon carbide vendors operating at 450-volt, 650-volt, and 800-volt levels and focusing on electric vehicles, that's a legitimate concern. For us, the focus is on scaling with ultra-high voltage, which isn't really related to supply at this time.

Next question comes from the line of Richard Shannon with Craig-Hallum.

Apologies for the background noise; I just got off a flight and missed part of the call, so I hope I don't repeat any questions. Chris, I would like to ask about the AI data center opportunity. How much of your potential comes from your partnership and leveraging Infineon compared to other avenues? Additionally, is there any synergy between point of load and the 800-volt down in the rack that provides additional benefits?

That's a great question. We partner with Infineon and have a cross-license established a couple of years ago. We continue to work together to promote GaN adoption in both high-voltage and mid-voltage areas. However, I would say we don’t rely on Infineon to gain advantages. Regarding competition, I would say we often encounter Infineon, as we share similar visions and technologies, including high-voltage GaN, mid-voltage GaN, SiC, and ultra-high-voltage SiC for grid infrastructure. There's a lot of overlap, and while we follow each other's progress, we do not leverage Infineon. Interestingly, when we launched our package, we found that since we communicate with the same customers and have similar thought processes, we perceive the technology in a similar light. As for your question about expanding our portfolio, that's definitely something we're considering. Currently, my main focus is to pivot the company and dedicate all of our resources, including engineers, towards the four high-power markets, particularly high-voltage GaN and GaN integrated with high-voltage SiC. However, we are also looking for opportunities to broaden our portfolio. As we increase voltage levels in data centers, there will be a greater need for circuit protection, which we plan to explore in the future. For now, though, our primary focus is on successfully executing our current product offerings.

Okay. Fair enough. And the second question probably for Todd, just on the gross margins. If I caught the end of his prepared remarks, talked about not having enough scale to really drive leverage on gross margins quite yet here. Is there a revenue level by which that happens here? And kind of what's that fall-through margin when you start to see that trajectory?

Yes. That's a great question. As our mix changes, obviously, our margins will grow. But right now, we have that scale issue. We do see margins starting to expand again in Q2 and beyond. So that's sort of the tipping point right now.

What I would tell you, Jack, is the high-power markets and the high-power product in the high-power market are coming at higher margins. The mobile is going down. We said that in Q4, it was 25%, and we said it's going to continue to go down and get insignificant by the end of '26, right? So I think we are very confident that the mix of the mix change, the higher power product in the high-power market increase as a percentage of the company and the new product and the cost reduction we have will yield to gross margin expansion. So you'll see it right and clear, okay, starting not very far from now.

Next question comes from the line of Quinn Bolton with Needham.

Chris, you spent a lot of time talking about the high -the 800-volt data center opportunity. But you also talked about needing to re-architect the grid. And I just wondered if you could spend a second talking about the opportunity for high-voltage silicon carbide and the solid-state transformers, sort of where are you in the design process for some of those solid-state transformers? And is there a way you can ballpark like what's the dollar content opportunity? I don't know if it's on a per megawatt basis or a per unit basis, but is there a way to size what the amount of high-voltage SiC that goes into a solid-state transformer, as they start to be deployed as the grid is re-architected?

Thank you for your question, Quinn. I'm pleased you raised it, as much attention has been given to AI data centers and the 800-volt HVDC architecture. This architecture signifies a shift, replacing silicon with GaN or high-voltage technology. However, such advancements depend on changes in the grid. It's not just about increasing efficiency; it's an architectural transformation. You mentioned solid-state transformers, which facilitate the transition from 35,000-volt AC lines down to 800-volt DC with high reliability. This shift is unique, and I've never observed grid infrastructure evolving so rapidly. To address your inquiry, as outlined in our script and press release, we are speeding up the sampling of our 2.3 kV and 3.2 kV technologies. These serve a variety of applications, including solid-state transformers, battery energy systems, megawatt chargers, and solar farms at the grid level. We are actively engaging with customers in these areas, emphasizing that both AI DC and the grid are critical components of our future focus. This is strictly a high-voltage SiC initiative. Regarding electric vehicles, this technology differs as it requires high reliability and robust modules. I appreciate you bringing this up—accelerated design activities are underway, though they will take time. The design cycles for these technologies are longer than for computing and AI DC. However, we anticipate noticeable revenue growth starting in 2027. During our last investor meeting, we indicated a total content range of $25,000 to $35,000 per megawatt for Navitas, based on ultra-high voltage, high-voltage SiC at 1.2 kV and above, as well as GaN technology. Approximately $10,000 to $12,000 of that content is outside the data center, comprising solid-state transformers and battery energy storage systems. Within data centers, there's a division between SiC for power supply units and GaN as we transition to 800-volt DC. It's essential to recognize the significance and potential impact of grid infrastructure. Recently, we published a detailed analysis that indicates GaN and SiC each hold a 50% share of our market potential by 2030, contributing to the $3.5 billion figure we mentioned. The grid is quickly approaching the market scale of data centers. Keep in mind that this is just the start. The transformation of the grid will span multiple decades, continuously driving higher voltages. We began at 2 kV, advancing to 3 kV, and soon we will reach 5 kV and beyond, which will facilitate ongoing transformation for many years ahead.

That concludes the question-and-answer session. I would now like to turn the call back over to the management team for closing remarks.

Thank you, everybody, for attending this call. As you could tell, we are very proud of the progress we are making. The first five months and six months since I joined was about pivoting the company and being clear about where we are going. I think we've done that. We are focusing on accelerating samples of our technology. We have four pillars of the transformation, which I mentioned: market focus, technology leadership, operational efficiency, and financial discipline. And we'll continue to update you on how we make progress. And I think we have a bright future ahead of us.

Ladies and gentlemen, that concludes today's call. Thank you all for joining in. You may now disconnect.