Power Integrations Unveils 2,200-Volt GaN Milestone as Margins Snap Back and Data Center Pipeline Builds
Q2 2026 earnings call, August 5, 2026
Power Integrations used its second-quarter print to showcase two storylines investors will want to track closely: a sharp margin recovery in its legacy appliance and industrial business, and a technology reveal that pushes its high-voltage gallium nitride roadmap into territory previously dominated by silicon carbide. Revenue came in at $118.9 million, up 10% sequentially and 3% year-over-year, with non-GAAP operating margin jumping 540 basis points to 17.1%. CEO Jennifer Lloyd called it "a strong quarter," and the numbers back that up, but the more consequential news for long-term holders was the company's demonstration of 2,200-volt PowiGaN technology, a milestone that extends its gallium nitride platform well beyond where competitors' GaN-on-silicon offerings can practically go.
2,200-Volt GaN: A Roadmap Play, Not a Near-Term Revenue Driver
The headline technical disclosure was the 2,200-volt PowiGaN demonstration, which Lloyd described as reinforcing the company's position in "application spaces traditionally served by silicon carbide." Unlike conventional GaN-on-silicon, which hits a practical voltage ceiling, PowiGaN is built as a platform technology that scales across voltage nodes, from 750 volts up through 1,250, 1,700, and now 2,200 volts, while preserving the reliability profile customers have seen over eight years in the field. That reliability argument is central to the pitch: "PowiGaN offers a long-term pathway for data center customers, giving them confidence that they can incorporate GaN today without fear of being boxed in and forced to change technologies on next-gen designs," Lloyd said.
Investors should not mistake this for a near-term catalyst, however. Pressed by Needham's David Williams on timing, Lloyd was blunt: "Right now, it's really just a technology demonstration. It's not a product... You're talking about several years before we would have products." The 1,500-volt data center roadmap that this technology feeds into remains multiple years out. The strategic value is more about de-risking customer adoption decisions today. As Lloyd put it, having a credible path to higher voltages "is giving us the opportunity to really partner with our customers with our road map to solve those challenges, not just today at 800 volts, but as things evolve."
Data Center SAM Splits Into Two Tracks, With Aux Power Further Along
Management continues to size its data center serviceable addressable market at $1 billion by 2030, split between the main power path to the GPU and auxiliary power around the rack. The aux power track is clearly the nearer-term opportunity: in June, Power Integrations published two reference designs targeting NVIDIA 800-volt racks using its 1,700-volt InnoMux products, claiming roughly 30% space savings versus discrete silicon carbide designs. Stifel's Tore Svanberg pushed for specifics on timing, and Lloyd indicated aux power revenue "could be" realized in 2028, tied to when 800-volt systems actually deploy. The main power path business, which relies on the company's 1,250-volt GaN as an alternative to stacked 650-volt architectures, is earlier stage and still requires significant co-development work with customers. That bifurcation matters for modeling purposes: the data center opportunity is real but should be treated as a 2028-and-beyond revenue event, not a 2026-2027 one.
Supply Chain Positioning Emerges as an Underappreciated Edge
One of the more notable exchanges came from Susquehanna's Christopher Rolland, who asked whether competitors' supply constraints might be opening share-gain opportunities for Power Integrations, echoing dynamics from the last upcycle. CFO Nancy Erba's response suggested this is already playing out in customer conversations: "We have had feedback recently actually from certain of our customers, one hyperscaler in particular that we met with this week, that actually framed a very similar comment that you just put forward." She added that the company's "unique supply chain structure" and competitive lead times, combined with the technology roadmap, could translate into share gains going forward. This is a data point worth monitoring, since supply reliability has historically been a swing factor in semiconductor customer qualification decisions, particularly at hyperscalers now treating power delivery as a critical bottleneck.
Automotive Ramping Faster, With a Real GaN Design Win
Automotive revenue, embedded within the industrial category, is on track to double this year, and management reiterated a longer-term target of $100 million in automotive revenue by the 2029-2030 timeframe. The more important disclosure was a Q2 design win at a major Tier 1 supplier for a GaN-based micro DC-to-DC converter slated for production next year. Lloyd framed this as evidence that Power Integrations is breaking through where rivals have not: "This win represents another important endorsement of PowiGaN in the auto market, where other high-voltage GaN offerings have struggled to break through, but customers are increasingly impressed by the documented reliability performance of our GaN." The shift toward distributed high-voltage power conversion in EVs, away from low-voltage subsystem batteries, represents a genuine bill-of-materials expansion opportunity beyond the company's existing emergency power supply position.
Margin Recovery Looks More Structural Than Cyclical
Gross margin reached 55.1%, up 160 basis points sequentially and above the high end of guidance, helped by industrial mix rising to 43% of sales and a favorable yen impact that management flagged will reverse into a headwind in the third quarter before turning favorable again in the fourth. More telling was the operating expense trajectory: Erba noted that after guiding to low single-digit OpEx growth for 2026 last quarter, the company now expects a low single-digit decrease for the year, even while continuing to fund data center, automotive, energy, and rail investments. Non-GAAP operating expenses came in at $45.2 million, below the $47 million guided midpoint. Third-quarter operating margin guidance of 17% to 19% suggests the improvement is not a one-off.
Channel Inventory Normalized, Setting Up Cleaner Sell-In
Channel inventory fell to 7.3 weeks from a start-of-year level above 9 weeks, landing within management's targeted 7-to-8-week range. Internal days-on-hand dropped 27 days sequentially to 265 days. Lloyd characterized current channel health as solid across partners, product types, and regions, and indicated the first half's demand strength should continue into the third quarter with growth expected across the communications, computer, and industrial categories, while consumer normalizes seasonally lower. Third-quarter revenue guidance of $122 million to $130 million implies roughly 6% sequential growth at the midpoint, with gross margin guided to 54% to 55%.