Power management chips maker Monolithic Power Systems (NASDAQ:MPWR) reported revenue ahead of Wall Street’s expectations in Q4 CY2024, with sales up 36.9% year on year to $621.7 million. On top of that, next quarter’s revenue guidance ($620 million at the midpoint) was surprisingly good and 6.5% above what analysts were expecting. Its non-GAAP profit of $4.09 per share was 2.9% above analysts’ consensus estimates.
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Monolithic Power Systems (MPWR) Q4 CY2024 Highlights:
- Revenue: $621.7 million vs analyst estimates of $608 million (36.9% year-on-year growth, 2.3% beat)
- Adjusted EPS: $4.09 vs analyst estimates of $3.98 (2.9% beat)
- Adjusted Operating Income: $220.7 million vs analyst estimates of $216.4 million (35.5% margin, 2% beat)
- Revenue Guidance for Q1 CY2025 is $620 million at the midpoint, above analyst estimates of $582.1 million
- Operating Margin: 26.3%, up from 24.1% in the same quarter last year
- Inventory Days Outstanding: 138, down from 140 in the previous quarter
- Market Capitalization: $31.9 billion
“Our proven, long-term growth strategy remains intact as we continue our transformation from being a chip-only, semiconductor supplier to a full service, silicon-based solutions provider,” said Michael Hsing, CEO and founder of MPS.
Company Overview
Founded in 1997 by its longtime CEO Michael Hsing, Monolithic Power Systems (NASDAQ:MPWR) is an analog and mixed signal chipmaker that specializes in power management chips meant to minimize total energy consumption.
Analog Semiconductors
Demand for analog chips is generally linked to the overall level of economic growth, as analog chips serve as the building blocks of most electronic goods and equipment. Unlike digital chip designers, analog chip makers tend to produce the majority of their own chips, as analog chip production does not require expensive leading edge nodes. Less dependent on major secular growth drivers, analog product cycles are much longer, often 5-7 years.
Sales Growth
Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Thankfully, Monolithic Power Systems’s 28.6% annualized revenue growth over the last five years was incredible. Its growth surpassed the average semiconductor company and shows its offerings resonate with customers, a great starting point for our analysis. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions (which can sometimes offer opportune times to buy).
We at StockStory place the most emphasis on long-term growth, but within semiconductors, a half-decade historical view may miss new demand cycles or industry trends like AI. Monolithic Power Systems’s annualized revenue growth of 10.9% over the last two years is below its five-year trend, but we still think the results were good and suggest demand was strong. 
This quarter, Monolithic Power Systems reported wonderful year-on-year revenue growth of 36.9%, and its $621.7 million of revenue exceeded Wall Street’s estimates by 2.3%. Company management is currently guiding for a 35.4% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 16.5% over the next 12 months, an improvement versus the last two years. This projection is healthy and suggests its newer products and services will spur better top-line performance.
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Product Demand & Outstanding Inventory
Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business’ capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.
This quarter, Monolithic Power Systems’s DIO came in at 138, which is 25 days below its five-year average. At the moment, these numbers show no indication of an excessive inventory buildup.
Key Takeaways from Monolithic Power Systems’s Q4 Results
It was great to see Monolithic Power Systems’s revenue guidance for next quarter exceed analysts’ expectations. We were also happy its EPS outperformed Wall Street’s estimates. Overall, we think this was a decent quarter with some key metrics above expectations. The stock traded up 17.5% to $778 immediately after reporting.
Monolithic Power Systems put up rock-solid earnings, but one quarter doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.