Power Integrations Inc (NASDAQ:POWI) Reports Mixed Q3 Results and Weak Q4 Outlook, Shares Drop

Power Integrations Inc (NASDAQ:POWI) reported third-quarter financial results that presented a mixed picture for investors, with revenue and earnings per share figures showing modest growth but falling short of analyst expectations in key areas. The company's performance and forward-looking guidance have triggered a negative market reaction in pre-market trading.

Third Quarter Performance

The semiconductor company reported net revenues of $118.9 million for the quarter ended September 30, 2025, representing a 3% increase compared to both the previous quarter and the same period in 2024. However, this figure came in below analyst estimates of $120.8 million.

The earnings picture showed significant divergence between GAAP and non-GAAP measures:

• GAAP net loss of $1.4 million or $0.02 per diluted share
• Non-GAAP net income of $20.2 million or $0.36 per diluted share
• Non-GAAP EPS exceeded analyst estimates of $0.35 per share

The substantial difference between GAAP and non-GAAP results primarily stemmed from $21.2 million in stock-based compensation expenses and additional costs related to an employment litigation matter.

Market Reaction and Financial Metrics

The market response to the earnings release has been notably negative, with several key performance indicators showing downward pressure:

• Pre-market trading indicated a decline of approximately 5.5%
• The stock has decreased 12.8% over the past two weeks
• Weekly performance showed a slight decline of 0.09%

This reaction appears to reflect investor concerns about the revenue miss and the company's fourth-quarter outlook, despite the better-than-expected non-GAAP earnings performance.

Business Segment Performance and Strategic Initiatives

CEO Jennifer Lloyd highlighted several important developments in the company's operations. The industrial business demonstrated strong growth with a 20% year-over-year increase in the third quarter, positioning this segment for continued expansion through 2025. However, consumer appliance orders remained soft following accelerated shipments earlier in the year ahead of U.S. tariff implementations.

The company continues to focus on strategic growth areas in high-voltage applications:

• Gallium Nitride (GaN) technology development
• Grid modernization initiatives
• Electric transportation solutions
• Data center power architecture

Notably, Power Integrations detailed capabilities of its 1250- and 1700-volt PowiGaN technologies for next-generation AI data centers, including collaboration with NVIDIA on 800 VDC power architecture.

Capital Returns and Dividend Increase

The company maintained its commitment to shareholder returns through several initiatives:

• Repurchased 919 thousand shares during the quarter for $42.4 million
• Completed the company's existing repurchase authorization
• Paid a quarterly dividend of $0.21 per share
• Board approved an increase to $0.215 per share for all four quarters of 2026

Fourth Quarter Outlook and Analyst Comparisons

Power Integrations provided conservative guidance for the current quarter, projecting revenues between $100 million and $105 million. This forecast falls significantly below analyst estimates of $118.8 million for the fourth quarter. The company expects GAAP gross margin between 53% and 53.5%, with non-GAAP gross margin projected between 53.5% and 54%.

Operating expense guidance also reflects the company's cautious stance:

• GAAP operating expenses expected at approximately $56 million
• Non-GAAP operating expenses projected around $47 million
• The $9 million difference primarily attributable to stock-based compensation

Operational Highlights and Financial Position

The company generated strong operational cash flow of $29.9 million during the quarter, providing financial flexibility for ongoing investments and shareholder returns. The revenue mix showed continued strength in industrial applications, which accounted for 42% of total revenue, up from 36% in the same quarter last year.

For more detailed earnings analysis and future estimates, readers can review additional information on the company's earnings page.

Disclaimer: This article provides financial analysis for informational purposes only and should not be considered as investment advice. All investment decisions should be based on individual research and consultation with qualified financial professionals.