NVE Corp. Distributor Sales Jump 67% as Robotics Design Wins Take Shape, but a Medical Inventory Reset and a 95% Defense Collapse Cut Quarterly Revenue 8%
Fiscal Q2 2027 earnings call, October 21, 2026: first quarter under new CEO Pete Eames
NVE Corporation reported fiscal second-quarter revenue that fell 8% year over year, with the weakness masking a sharp acceleration in the part of the business that management treats as the best read on underlying demand. Distributor sales rose 67% in the quarter, up from roughly 40% growth in the first half, which CEO Pete Eames described as "our broadest estimate of the sales of the company." Net income was $3.17 million, or $0.65 per diluted share, against $3.31 million, or $0.68, a year earlier. Net margin was 54%, helped by a lower effective tax rate of 14% versus 20%. For the first six months, revenue was $16.9 million, up 36%, and net income was $9.57 million, or $1.97 per share.
Distributor Acceleration Is the Real Signal, but It Carries a Mix Cost
The 67% distributor growth is the most important datapoint in the quarter. Eames said the distribution channel covers the broadest product portfolio and a global customer base, so growth there reflects "continued attraction of NVE's products in general gaining in the market." Management attributed the strength to improving industry conditions and demand for both new and legacy commercial products. Distributor sales typically run between one-third and two-thirds of total revenue, and the share rose this quarter partly because direct sales were weak.
An analyst asked whether the higher distributor mix means revenue can flex higher at lower margin. Eames called that "a safe assumption." Gross margin was still 78% and operating margin 55%, so the dilution is not yet visible, but investors should expect the mix to matter if distributor share keeps climbing. Management also said revenue strengthened through the quarter, with September stronger than August.
The Revenue Decline: Medical Timing and a Near-Total Defense Drop
Product sales fell 9%, which Principal Financial Officer Daniel Nelson attributed to two factors: a short-term inventory adjustment at a large medical device customer and a 95% decline in defense product sales. Contract R&D revenue rose 25% on progress with existing contracts. Eames said the medical disruption came mainly from orders pulled into the first quarter from the second, and that the company sees no further disruption. Management expects medical and defense sales to recover in the current quarter.
The defense drop deserves a sober read. Nelson noted that defense sales "can be highly variable because of government procurement cycles," and the company offered no visibility beyond the expectation of a rebound. NVE also does not track backlog, so there is no hard metric to verify the recovery claim. Eames said only that order flow is strong and inventory is ample. He also cited Abbott's guidance for roughly 10% year-over-year growth as supportive context for the medical business.
On the second half, management guided to revenue "consistent with the first half." In response to an analyst, Eames agreed that a reasonable way to model this is to normalize the first two quarters and use roughly the midpoint, implying a quarterly run rate near $8.4 million. That is a flat outlook after 36% first-half growth, and it leaves little embedded credit for the robotics and power conversion ramps management is promoting.
Robotics: Early Design Wins, Tens of Sensors per Humanoid, and Unquantified Volumes
NVE announced two products in the quarter. The first is a wafer-level chip-scale analog sensor measuring just 0.55 millimeters square, the smallest the company has made, aimed at precision motion in medical devices, industrial automation and robotics. The second is a family of seven gear-tooth sensors designed for encoders and closed-loop servo systems, which Eames said are "exactly what are being used in humanoid robotics." He said the timing is "perfect" and that early interest is strong.
The commercial evidence is still thin. Eames said the company has "some important, small design wins" for the chip-scale parts, typically beginning with sample orders, moving to low-thousand-unit purchases during system integration, and then potentially stepping up by a factor of 10 or more. He said this cycle can take a couple of quarters or less, and that NVE is "within that cycle with several products." He declined to name customers or size them, saying only that interest spans robotics and other markets and that the company serves both Western and global customers through distributors.
The one concrete framework offered was unit economics. Typical NVE sensor ASPs are $1 to $2, and Eames said a humanoid robot could use "certainly in the tens of sensors." That implies tens of dollars of content per robot at most, a modest figure that only becomes meaningful at very large unit volumes. Eames said that "tens of millions of sensors are certainly well within our capacity." He would not say when humanoid customers plan to enter production, noting that "it's hard to speak directly to what their plans are." The robotics thesis is therefore plausible but unproven in revenue terms, and the timing is outside NVE's control.
Capacity Expansion Begins to Tilt Toward Production
Last quarter management described the expanded facility as largely supporting R&D. Eames said there has now been a shift toward production, though he called it "relatively small." The added capacity is primarily being directed at the wafer-level chip-scale products where design wins exist, and it will be reallocated further as orders grow. Management has not discussed further expansion, but the option under consideration is moving administrative staff offsite to free up space in the existing building for production.
Power Conversion and the Isolation Advantage
Eames said the company is seeing strong growth in power conversion, and he linked it to rising application voltages, including the data center shift toward 800-volt architectures. His argument is that "we provide the highest isolation in the industry, and as voltages increase... that continues to favor NVE's products." He offered no customer names, revenue figures or content-per-system estimates, so the opportunity remains a directional claim. The company is also developing more power-efficient isolators and power conversion products.
Costs, Cash and Capital Return
Operating expenses rose 4% as SG&A jumped 44%, which Nelson attributed to higher stock prices at the grant date for director options. R&D fell 17% because of staffing redeployment, a figure that sits awkwardly alongside the product-development narrative. The company expects an effective tax rate of 14% to 16% through at least the rest of the fiscal year. Operating cash flow was $11.1 million for the half versus $8 million a year earlier. Cash and marketable securities rose to $44.4 million from $43.5 million after funding the $1 per share quarterly dividend. Another dividend will be paid at the end of November.
Leadership Change and Competitive Moat
Eames became CEO at the August annual meeting. Former CEO Dan Baker succeeded Terry Glarner as Chairman, and Carolyn Valentine joined the board, expanding it from 5 to 7 members. Eames characterized his strategy as continuity, focused on using the new capacity for products in fast-growing markets. On medical concentration, he said Abbott and cardiac rhythm management remain important but that neurostimulators and other implantables offer additional growth, given NVE's small size and low power. He said new customers should account for an increasing share of revenue.
On defensibility, Eames pointed to the company's spintronics patent portfolio and trade secrets as the main barriers to entry. The next earnings call, covering the third quarter, is scheduled for January.