Power Integrations faced a challenging third quarter as the market reacted negatively to its results, despite meeting revenue expectations and posting non-GAAP earnings above consensus. Management cited strong demand for its gallium nitride (GaN) products, particularly in industrial and computing segments, as key drivers of sequential growth. However, softness in consumer end-markets, especially appliances, and a buildup of channel inventory weighed on sentiment. CFO Nancy Erba explained that inventory increases were tied to softer demand in appliances, delays in metering projects in India, and higher buffer stock requirements due to customer supply concerns.
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Power Integrations (POWI) Q3 2026 highlights:
- Revenue $125.5 million vs S&P analysts’ estimates of $126 million (5.5% year-on-year growth, in line)
- Adjusted EPS $0.46 vs S&P analysts’ estimates of $0.42 (10.8% beat)
- Adjusted operating income $26.88 million vs analyst estimates of $23.17 million (21.4% margin, 16% beat)
- Revenue guidance $122 million at the midpoint for Q4 2026, below analyst estimates of $124.4 million
- Operating margin 15.2%, up from -3.3% in the same quarter last year
- Inventory days outstanding 245, down from 264 in the previous quarter
- Market capitalization $2.17 billion
While we enjoy listening to the management’s commentary, our favorite part of earnings calls is the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our top 5 analyst questions from Power Integrations’s Q3 earnings call
- David Williams (Needham & Co.) asked how OCP Summit feedback is changing management’s view on the 800V data center opportunity. CEO Jen Lloyd explained enthusiasm is growing and design-ins are increasing, especially for auxiliary power.
- David Williams (Needham & Co.) followed up on inventory dynamics, asking if the buildup signaled broader demand softening. CFO Nancy Erba clarified the inventory increase was due to consumer softness, India project delays, and buffer stock requirements, not a broad demand decline.
- Tore Svanberg (Stifel) asked if elevated channel inventory would remain above normal levels into next year. Erba said it may sit at nine to ten weeks due to buffer stock, but the company is monitoring closely.
- Tore Svanberg (Stifel) questioned design win timelines for 1250V and 1700V GaN products. Lloyd and Erba confirmed revenue from 1700V is expected in 2027, with main path products coming later.
- Christopher Rolland (Susquehanna) inquired about supply chain advantages and whether unique foundry partnerships affected inventory. Erba responded that differentiated supply has benefited the company but some high-power products now face their own constraints due to strong demand.
Catalysts in upcoming quarters
In future quarters, the StockStory team will focus on (1) the pace of inventory normalization across consumer and metering channels, (2) tangible revenue contributions from new GaN design wins and high-power gate driver demand, and (3) the progress of key partnerships, such as the Ideal Power collaboration for data center circuit protection. Additionally, updates on supply chain constraints and the integration of new technical leadership will be important markers of execution.
Power Integrations currently trades at $38.78, down from $46.80 just before the earnings. Is there an opportunity in the stock? See for yourself in our full research report (it’s free).
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