MONOLITHIC POWER SYSTEMS, INC. 10-Q

Item 1. Financial Statements MONOLITHIC POWER SYSTEMS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except par value) (Unaudited) June 30, December 31, 2025 2024 ASSETS Current assets: Cash and cash equivalents $ 787,382 $ 691,816 Short-term investments 358,695 171,130 Accounts receivable, net 194,821 172,518 Inventories 490,642 419,611 Other current assets 87,217 109,978 Total current assets 1,918,757 1,565,053 Property and equipment, net 563,885 494,945 Acquisition-related intangible assets, net 9,364 9,938 Goodwill 25,944 25,944 Deferred tax assets, net 1,309,981 1,326,840 Other long-term assets 144,279 194,377 Total assets $ 3,972,210 $ 3,617,097 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 129,919 $ 102,526 Accrued compensation and related benefits 81,296 63,918 Other accrued liabilities 172,293 128,123 Total current liabilities 383,508 294,567 Income tax liabilities 73,185 65,193 Other long-term liabilities 113,449 111,570 Total liabilities 570,142 471,330 Commitments and contingencies (Note 8) Stockholders’ equity: Common stock and additional paid-in capital: $ 0.001 par value; shares authorized: 150,000 ; shares issued and outstanding: 47,892 and 47,823 , respectively 822,582 706,817 Retained earnings 2,603,177 2,487,461 Accumulated other comprehensive loss ( 23,691 ) ( 48,511 ) Total stockholders’ equity 3,402,068 3,145,767 Total liabilities and stockholders’ equity $ 3,972,210 $ 3,617,097 See accompanying notes to unaudited condensed consolidated financial statements. 4 Table of Contents MONOLITHIC POWER SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per-share amounts) (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Revenue $ 664,574 $ 507,431 $ 1,302,128 $ 965,316 Cost of revenue 298,558 226,853 582,882 432,297 Gross profit 366,016 280,578 719,246 533,019 Operating expenses: Research and development 96,266 77,945 188,493 153,935 Selling, general and administrative 104,992 86,097 197,236 167,061 Total operating expenses 201,258 164,042 385,729 320,996 Operating income 164,758 116,536 333,517 212,023 Other income, net 12,220 7,512 17,351 17,052 Income before income taxes 176,978 124,048 350,868 229,075 Income tax expense 43,252 23,682 83,351 36,168 Net income $ 133,726 $ 100,366 $ 267,517 $ 192,907 Net income per share: Basic $ 2.79 $ 2.06 $ 5.59 $ 3.96 Diluted $ 2.78 $ 2.05 $ 5.57 $ 3.94 Weighted-average shares outstanding: Basic 47,887 48,687 47,869 48,660 Diluted 48,019 48,945 48,012 48,935 See accompanying notes to unaudited condensed consolidated financial statements. 5 Table of Contents MONOLITHIC POWER SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Net income $ 133,726 $ 100,366 $ 267,517 $ 192,907 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments 19,634 ( 4,313 ) 24,773 ( 18,135 ) Change in unrealized gains and losses on available-for-sale securities, net of tax of $ 0 , $ 50 , $ 0 and $( 198 ), respectively ( 1 ) 368 47 703 Other comprehensive income (loss), net of tax 19,633 ( 3,945 ) 24,820 ( 17,432 ) Comprehensive income $ 153,359 $ 96,421 $ 292,337 $ 175,475 See accompanying notes to unaudited condensed consolidated financial statements. 6 Table of Contents MONOLITHIC POWER SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS ’ EQUITY (In thousands, except per-share amounts) (Unaudited) Accumulated Common Stock and Other Total Additional Paid-in Capital Retained Comprehensive Stockholders’ Three Months Ended June 30, 2025 Shares Amount Earnings Loss Equity Balance as of April 1, 2025 47,877 $ 764,959 $ 2,545,375 $ ( 43,324 ) $ 3,267,010 Net income - - 133,726 - 133,726 Other comprehensive income - - - 19,633 19,633 Dividends and dividend equivalents declared ($ 1.56 per share) - - ( 75,924 ) - ( 75,924 ) Common stock issued 19 - - - - Repurchases of common stock (4 ) ( 2,484 ) - - ( 2,484 ) Stock-based compensation expense - 60,107 - - 60,107 Balance as of June 30, 2025 47,892 $ 822,582 $ 2,603,177 $ ( 23,691 ) $ 3,402,068 Accumulated Common Stock and Other Total Additional Paid-in Capital Retained Comprehensive Stockholders’ Three Months Ended June 30, 2024 Shares Amount Earnings Loss Equity Balance as of April 1, 2024 48,667 $ 1,176,382 $ 977,724 $ ( 40,549 ) $ 2,113,557 Net income - - 100,366 - 100,366 Other comprehensive loss - - - ( 3,945 ) ( 3,945 ) Dividends and dividend equivalents declared ($ 1.25 per share) - - ( 61,882 ) - ( 61,882 ) Common stock issued 37 - - - - Repurchases of common stock ( 6 ) ( 4,550 ) - - ( 4,550 ) Stock-based compensation expense - 52,312 - - 52,312 Balance as of June 30, 2024 48,698 $ 1,224,144 $ 1,016,208 $ ( 44,494 ) $ 2,195,858 Accumulated Common Stock and Other Total Additional Paid-in Capital Retained Comprehensive Stockholders’ Six Months Ended June 30, 2025 Shares Amount Earnings Loss Equity Balance as of January 1, 2025 47,823 $ 706,817 $ 2,487,461 $ ( 48,511 ) $ 3,145,767 Net income - - 267,517 - 267,517 Other comprehensive income - - - 24,820 24,820 Dividends and dividend equivalents declared ($ 3.12 per share) - - ( 151,801 ) - ( 151,801 ) Common stock issued 73 5,335 - - 5,335 Repurchases of common stock (4 ) ( 2,484 ) - - ( 2,484 ) Stock-based compensation expense - 112,914 - - 112,914 Balance as of June 30, 2025 47,892 $ 822,582 $ 2,603,177 $ ( 23,691 ) $ 3,402,068 Accumulated Common Stock and Other Total Additional Paid-in Capital Retained Comprehensive Stockholders’ Six Months Ended June 30, 2024 Shares Amount Earnings Loss Equity Balance as of January 1, 2024 48,028 $ 1,129,937 $ 947,064 $ ( 27,062 ) $ 2,049,939 Net income - - 192,907 - 192,907 Other comprehensive loss - - - ( 17,432 ) ( 17,432 ) Dividends and dividend equivalents declared ($ 2.50 per share) - - ( 123,763 ) - ( 123,763 ) Common stock issued 682 4,606 - - 4,606 Repurchases of common stock ( 12 ) ( 8,626 ) - - ( 8,626 ) Stock-based compensation expense - 98,227 - - 98,227 Balance as of June 30, 2024 48,698 $ 1,224,144 $ 1,016,208 $ ( 44,494 ) $ 2,195,858 See accompanying notes to unaudited condensed consolidated financial statements. 7 Table of Contents MONOLITHIC POWER SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Six Months Ended June 30, 2025 2024 Cash flows from operating activities: Net income $ 267,517 $ 192,907 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 24,569 16,942 Amortization of discount on available-for-sale securities ( 2,885 ) ( 10,040 ) Gain on deferred compensation plan investments ( 4,230 ) ( 5,285 ) Deferred taxes, net 17,040 ( 5,821 ) Stock-based compensation expense 112,904 98,232 Other 29 77 Changes in operating assets and liabilities: Accounts receivable ( 22,264 ) 21,951 Inventories ( 71,018 ) ( 42,350 ) Other assets 83,395 60,590 Accounts payable 36,627 30,725 Accrued compensation and related benefits 15,584 8,353 Income tax liabilities 33,798 7,459 Other accrued liabilities 2,958 15,286 Net cash provided by operating activities 494,024 389,026 Cash flows from investing activities: Purchases of property and equipment ( 88,485 ) ( 47,498 ) Purchases of intangible assets ( 2,000 ) ( 18,175 ) Purchases of investments ( 393,010 ) ( 589,615 ) Maturities and sales of investments 211,227 420,514 Cash paid for acquisition, net of cash acquired - ( 33,283 ) Contributions to deferred compensation plan ( 1,015 ) ( 1,309 ) Net cash used in investing activities ( 273,283 ) ( 269,366 ) Cash flows from financing activities: Property and equipment purchased on extended payment terms ( 1,902 ) ( 2,010 ) Proceeds from common stock issued under the employee stock purchase plan 5,335 4,606 Repurchases of common stock ( 3,687 ) ( 8,626 ) Dividends and dividend equivalents paid ( 135,073 ) ( 117,608 ) Net cash used in financing activities ( 135,327 ) ( 123,638 ) Effect of change in exchange rates 10,169 ( 6,603 ) Net increase (decrease) in cash, cash equivalents and restricted cash 95,583 ( 10,581 ) Cash, cash equivalents and restricted cash, beginning of period 691,941 561,181 Cash, cash equivalents and restricted cash, end of period $ 787,524 $ 550,600 Supplemental disclosures for cash flow information: Cash paid for income taxes, net $ 17,007 $ 34,064 Non-cash investing and financing activities: Liability accrued for property and equipment purchases $ 6,108 $ 7,488 Liability accrued for dividends and dividend equivalents $ 77,193 $ 62,949 See accompanying notes to unaudited condensed consolidated financial statements. 8 Table of Contents MONOLITHIC POWER SYSTEMS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements of Monolithic Power Systems, Inc., a Delaware corporation, and its wholly owned subsidiaries (the “Company” or “MPS”) have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted in accordance with these accounting principles, rules and regulations. All intercompany accounts and transactions have been eliminated. The information in this report should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Annual Report on Form 10 -K for the year ended December 31, 2024 , filed with the SEC on March 3, 2025. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the interim periods presented. The financial statements contained in this Quarterly Report on Form 10 -Q are not necessarily indicative of the results that may be expected for the year ending December 31, 2025 or for any other future periods. Summary of Significant Accounting Policies There have been no changes to the Company’s significant accounting policies during the three and six months ended June 30, 2025 from those described in the Company’s audited consolidated financial statements included in the Annual Report on Form 10 -K for the year ended December 31, 2024 . Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenue and expenses during the reporting period. Significant estimates and assumptions used in these condensed consolidated financial statements primarily include those related to income tax valuation allowances, inventory valuation and stock-based compensation. Actual results could differ from these estimates and assumptions, and any such differences may be material to the Company’s condensed consolidated financial statements. New Accounting Pronouncements Not Yet Adopted as of June 30, 2025 In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023 - 09, Income Taxes (Topic 740 ): Improvements to Income Tax Disclosures , which aims to improve an entity’s income tax disclosures around its effective rate reconciliation, income taxes paid, disaggregation of income before income taxes and income tax expense. The guidance is effective for annual periods beginning January 1, 2025. The standard should be applied prospectively but retrospective application is permitted. Adoption of this new guidance will result in expanded disclosures in the Notes to Consolidated Financial Statements. In November 2024, the FASB issued ASU 2024 - 03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220 - 40 ): Disaggregation of Income Statement Expenses , which aims to provide more detailed information about the types of expenses in commonly presented expense captions. The guidance will be effective for annual periods beginning January 1, 2027 and interim periods beginning January 1, 2028. The standard can be applied prospectively or retrospectively to any or all prior periods presented in the financial statements. The Company is evaluating the impact of adoption on its Consolidated Financial Statements. 9 Table of Contents 2. REVENUE RECOGNITION Revenue from Product Sales The Company generates revenue primarily from product sales, which include assembled and tested integrated circuits (“ICs”), power modules as well as dies in wafer form. The remaining revenue, which primarily consists of royalty revenue from licensing arrangements and revenue from wafer testing services performed for third parties, was not significant in any of the periods presented. See Note 7 for the disaggregation of the Company’s revenue by geographic region. The Company sells its products to end customers primarily through third -party distributors and value-added resellers. For each of the three and six months ended June 30, 2025 , 83 % of the Company’s total sales were made through distribution arrangements. For each of the three and six months ended June 30, 2024 , 89 % of the Company’s total sales were made through distribution arrangements. These distribution arrangements contain enforceable rights and obligations specific to those distributors and not the end customers. Purchase orders, which are generally governed by sales agreements or the Company’s standard terms of sale, set the final terms for unit price, quantity, shipping and payment agreed between the Company and the customer. The Company considers purchase orders to be the contracts with customers. The unit price stated on purchase orders is considered to be the observable, stand-alone selling price for customer sales arrangements. The Company recognizes revenue when it satisfies a performance obligation by transferring control of the promised goods or services to its customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company excludes taxes assessed by government authorities, such as sales taxes, from revenue. Product sales consist of a single performance obligation that the Company satisfies at a point in time. The Company recognizes product revenue from distributors and direct end customers when the following events have occurred: (a) the Company has transferred physical possession of the products, (b) the Company has a present right to payment, (c) the customer has legal title to the products, and (d) the customer bears significant risks and rewards of ownership of the products. In accordance with the shipping terms specified in the contracts, these criteria are generally met when the products are shipped from the Company’s facilities (such as the “Ex Works” shipping term) or delivered to the customers’ locations (such as the “Delivered Duty Paid” shipping term). Under certain consignment agreements, the Company recognizes revenue when customers consume products from the consigned inventory locations, at which time control transfers to the customers and the Company issues invoices. Variable Consideration The Company accounts for price adjustments and stock rotation rights as variable consideration that reduces the transaction price and recognizes that reduction in the same period the associated revenue is recognized. Certain U.S.-based distributors have price adjustment rights when they sell the Company’s products to their customers at a price that is lower than the distribution price invoiced by the Company. When the Company receives claims from the distributors that products have been sold to the end customers at the lower prices, the Company issues the distributors credit memos for the price adjustments. The Company estimates the price adjustments using the expected value method based on an analysis of historical claims, at both the distributor and product level, as well as an assessment of any known trends of product sales mix. Other U.S. distributors and non-U.S. distributors do not have price adjustment rights. The Company records a credit against accounts receivable for the estimated price adjustments with a corresponding reduction to revenue. Certain distributors have limited stock rotation rights that permit the return of a small percentage of the previous six months’ purchases in accordance with the contract terms. The Company estimates the stock rotation returns using the expected value method based on an analysis of historical returns, and the current level of inventory in the distribution channel. The Company records a liability for the stock rotation reserve, with a corresponding reduction to revenue. In addition, the Company recognizes an asset for product returns which represents the right to recover products from the customers related to stock rotations, with a corresponding reduction to cost of revenue. 10 Table of Contents Contract Balances Accounts Receivable: The Company records a receivable when it has an unconditional right to receive consideration after the performance obligations are satisfied. The Company’s accounts receivable are short-term, with standard payment terms generally ranging from 30 to 90 days. The Company does not require its customers to provide collateral to support accounts receivable. The Company assesses collectability by reviewing accounts receivable on a customer-by-customer basis. To manage credit risk, management performs ongoing credit evaluations of the customers’ financial condition, monitors payment performance, and assesses current economic conditions, as well as reasonable and supportable forecasts of future economic conditions, that may affect collectability of the outstanding receivables. For certain customers, the Company requires standby letters of credit or advance payments prior to shipments of goods. The Company did not recognize any write-offs of accounts receivable or record any allowance for credit losses for the periods presented. Contract Liabilities: For customers without credit terms, the Company requires cash payments two weeks before the products are scheduled to be shipped to the customers. The Company records these payments received in advance of performance as customer prepayments within other accrued liabilities. As of June 30, 2025 and December 31, 2024 , customer prepayments totaled $ 7.2 million and $ 6.9 million, respectively. All of the customer prepayment balance as of December 31, 2024 has been fulfilled by the Company during the six months ended June 30, 2025 . Practical Expedients The Company has elected the practical expedient to expense sales commissions as incurred because the amortization period would have been one year or less. The Company’s standard payment terms generally require customers to pay 30 to 90 days after the Company satisfies the performance obligations. For those customers who are required to pay in advance, the Company satisfies the performance obligations generally within a quarter. For these reasons, the Company has elected not to determine whether contracts with customers contain significant financing components. The Company’s unsatisfied performance obligations primarily include products held in consignment arrangements and customer purchase orders for products that the Company has not yet shipped. Because the Company expects to fulfill these performance obligations within one year, the Company has elected not to disclose the amount of these remaining performance obligations. 11 Table of Contents 3. STOCK-BASED COMPENSATION 2014 Equity Incentive Plan In April 2013, the Board of Directors adopted the Company’s 2014 Equity Incentive Plan (the “2014 Plan”), which the Company’s stockholders approved in June 2013. In October 2014, the Board of Directors approved certain amendments to the 2014 Plan. The amended 2014 Plan became effective on November 13, 2014 and provided for the issuance of up to 5.5 million shares. In April 2020, the Board of Directors further amended and restated the amended 2014 Plan (the “Amended and Restated 2014 Plan”), which the Company’s stockholders approved in June 2020. The Amended and Restated 2014 Plan became effective on June 11, 2020 and provides for the issuance of up to 10.5 million shares. The Amended and Restated 2014 Plan will cease being available for new awards on June 11, 2030. As of June 30, 2025 , 3.6 million shares remained available for future issuance under the Amended and Restated 2014 Plan. Stock-Based Compensation Expense The Company recognized stock-based compensation expense as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Cost of revenue $ 1,913 $ 1,611 $ 3,586 $ 3,009 Research and development (“R&D”) 12,469 11,682 24,147 22,129 Selling, general and administrative (“SG&A”) 45,716 39,013 85,171 73,094 Total stock-based compensation expense $ 60,098 $ 52,306 $ 112,904 $ 98,232 Tax benefit related to stock-based compensation (1) $ 703 $ 798 $ 1,163 $ 1,506 ( 1 ) Amount reflects the tax benefit related to stock-based compensation recorded for equity awards that are expected to generate tax deductions when they vest in future periods. Equity awards granted to the Company’s executive officers are subject to the tax deduction limitations set by Section 162 (m) of the Internal Revenue Code. Restricted Stock Units ( “ RSUs ” ) The Company’s RSUs include time-based RSUs, RSUs with performance conditions (“PSUs”), RSUs with market conditions (“MSUs”), and RSUs with both market and performance conditions (“MPSUs”). Vesting of awards with performance conditions or market conditions is subject to the achievement of pre-determined performance or market goals and the approval of such achievement by the Compensation Committee of the Board of Directors (the “Compensation Committee”). All awards include service conditions which require continued employment with or service to the Company. A summary of RSU activity is presented in the table below (in thousands, except per-share amounts): Time-Based RSUs PSUs and MPSUs MSUs Total Weighted- Weighted- Weighted- Weighted- Average Average Average Average Grant Date Grant Date Grant Date Grant Date Number of Fair Value Number of Fair Value Number of Fair Value Number of Fair Value Shares Per Share Shares Per Share Shares Per Share Shares Per Share Outstanding at January 1, 2025 85 $ 516.12 681 $ 524.08 938 $ 203.32 1,704 $ 347.01 Granted 32 $ 635.87 269 (1) $ 565.99 - $ - 301 $ 573.03 Vested ( 27 ) $ 471.70 ( 37 ) $ 399.91 - $ - ( 64 ) $ 430.10 Forfeited ( 4 ) $ 555.89 ( 4 ) $ 524.36 ( 10 ) $ 297.97 ( 18 ) $ 399.27 Outstanding at June 30, 2025 86 $ 573.19 909 $ 540.24 928 $ 202.27 1,923 $ 378.58 ( 1 ) Amount reflects the number of awards that may ultimately be earned based on management’s probability assessment of the achievement of performance conditions at each reporting period. 12 Table of Contents The intrinsic value related to vested RSUs was $ 11.5 million and $ 25.5 million for the three months ended June 30, 2025 and 2024 , respectively. The intrinsic value related to vested RSUs was $ 42.6 million and $ 428.6 million for the six months ended June 30, 2025 and 2024 , respectively. As of June 30, 2025 , the total intrinsic value of all outstanding RSUs was $ 1.4 billion, based on the closing stock price of $ 731.38 . As of June 30, 2025 , unamortized compensation expense related to all outstanding RSUs was $ 314.3 million with a weighted-average remaining recognition period of approximately two years. Time-Based RSUs: For the six months ended June 30, 2025 , the Compensation Committee granted 32,000 RSUs with service conditions to non-executive employees and non-employee directors. The RSUs generally vest over four years for employees and one year for directors, subject to continued service with the Company. 2025 PSUs: In February 2025, the Compensation Committee granted 50,000 PSUs to the executive officers, which represent the target number of shares that can be earned based on the degree of achievement of two sets of independent performance goals ( “2025 Executive PSUs”). For the first goal, the executive officers can earn up to 300 % of the target number of the 2025 Executive PSUs based on the achievement of the Company’s three -year ( 2025 through 2027 ) average revenue growth rate in excess of the analog industry’s three -year average revenue growth rate as published by the Semiconductor Industry Association (the “SIA”). For the second goal, the executive officers can earn up to 200 % of the target number of the 2025 Executive PSUs based on the achievement of the Company’s three -year ( 2025 through 2027 ) total stockholder return percentile ranking relative to the constituent entities in the Philadelphia Semiconductor Sector Index (the “PHLX Index”). For both goals, a percentage of the 2025 Executive PSUs will fully vest on December 31, 2027, depending on the degree to which the pre-determined goals are met during the performance period. Assuming the achievement of the highest level of the performance goals, the total stock-based compensation cost for the 2025 Executive PSUs will be $ 138.5 million. In February 2025, the Compensation Committee granted 11,000 PSUs to certain non-executive employees, which represent the target number of shares that can be earned based on the degree of achievement of the Company’s 2026 revenue goals for certain regions or product line divisions, or based on the degree of achievement of the Company’s two -year ( 2025 and 2026 ) average revenue growth rate compared against the analog industry’s two -year average revenue growth rate as published by the SIA ( “2025 Non-Executive PSUs”). The maximum number of shares that an employee can earn is either 200 % or 300 % of the target number of the 2025 Non-Executive PSUs, depending on the job classification of the employee. 50 % of the 2025 Non-Executive PSUs will vest in the first quarter of 2027 depending on the degree to which the pre-determined goals are met during the performance period. The remaining 2025 Non-Executive PSUs will vest over the following two years on a quarterly or annual basis. Assuming the achievement of the highest level of performance goals, the total stock-based compensation cost for the 2025 Non-Executive PSUs will be $ 16.6 million. The 2025 Executive PSUs and the 2025 Non-Executive PSUs contain a purchase price feature, which requires the employees to pay the Company $ 30 per share upon vesting of the shares. The $30 purchase price requirement is deemed satisfied and waived if the Company’s stock price on the last trading day of the performance period is $30 higher than the grant date stock price of $ 656.29 . The Company determined the grant date fair value of the 2025 Executive PSUs and the 2025 Non-Executive PSUs using a Monte Carlo simulation model with the following assumptions: stock price of $ 656.29 , simulation term of three years, expected volatility of 54.42 %, risk-free interest rate of 4.20 %, and expected dividend yield of 0.95 %. The Monte Carlo simulation model for the 2025 Executive PSUs further utilized correlation coefficients of peer companies of 0.46 to 0.76 . The correlation coefficients were based on peer companies in the PHLX Index as an aggregate benchmark for determining the market-based total stockholder return component. There is no illiquidity discount because the awards do not contain any post-vesting sales restrictions. 13 Table of Contents 4. BALANCE SHEET COMPONENTS Inventories Inventories consist of the following (in thousands): June 30, December 31, 2025 2024 Raw materials $ 79,438 $ 91,851 Work in process 198,649 169,982 Finished goods 212,555 157,778 Total $ 490,642 $ 419,611 Other Current Assets Other current assets consist of the following (in thousands): June 30, December 31, 2025 2024 Prepaid wafer expenses (1) $ 60,000 $ - Prepaid expenses 16,915 36,083 Other receivables (1) - 60,000 Other 10,302 13,895 Total $ 87,217 $ 109,978 ( 1 ) Prepaid wafer expenses and other receivables relate to a deposit made to a supplier under a long-term wafer supply agreement. See Note 8 for details about the supply agreement. Other Long-Term Assets Other long-term assets consist of the following (in thousands): June 30, December 31, 2025 2024 Deferred compensation plan assets $ 97,831 $ 92,586 Operating lease right-of-use (“ROU”) and related assets (1) 37,705 34,198 Prepaid wafer purchases (2) - 60,000 Other 8,743 7,593 Total $ 144,279 $ 194,377 ( 1 ) The operating lease ROU and related assets include a fair value measurement related to favorable market terms on a facility lease. ( 2 ) Prepaid wafer purchases relate to a deposit made to a supplier under a long-term wafer supply agreement. See Note 8 for details about the supply agreement. Other Accrued Liabilities Other accrued liabilities consist of the following (in thousands): June 30, December 31, 2025 2024 Dividends and dividend equivalents $ 79,387 $ 60,622 Income tax payable 36,739 10,534 Stock rotation and sales returns 20,929 20,799 Other 35,238 36,168 Total $ 172,293 $ 128,123 Other Long-Term Liabilities Other long-term liabilities consist of the following (in thousands): June 30, December 31, 2025 2024 Deferred compensation plan liabilities $ 94,606 $ 93,653 Operating lease liabilities 15,938 12,974 Dividend equivalents 2,905 4,943 Total $ 113,449 $ 111,570 14 Table of Contents 5. LEASES The Company has operating leases primarily for administrative, sales and marketing offices, manufacturing operations and R&D facilities, and employee housing units. These leases have remaining lease terms from less than one year to 19 years. Some of these leases include options to renew the lease term for up to five years or on a month-to-month basis. The Company does not have finance lease arrangements. The following table summarizes the balances of operating lease ROU assets and liabilities (in thousands): June 30, December 31, Financial Statement Line Item 2025 2024 Operating lease ROU assets Other long-term assets $ 20,863 $ 16,915 Operating lease liabilities Other accrued liabilities $ 3,974 $ 2,819 Other long-term liabilities $ 15,938 $ 12,974 The following tables summarize certain information related to the leases (in thousands, except percentages and years): Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Lease costs: Operating lease costs $ 1,284 $ 1,014 $ 2,392 $ 1,911 Other 825 648 1,594 1,198 Total lease costs $ 2,109 $ 1,662 $ 3,986 $ 3,109 Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows for operating leases $ 1,161 $ 1,027 $ 2,161 $ 1,700 ROU assets obtained in exchange for new operating lease liabilities $ 2,562 $ 7,809 $ 5,206 $ 9,271 June 30, December 31, 2025 2024 Weighted-average remaining lease term (in years) 9.5 11.5 Weighted-average discount rate 5.5 % 5.5 % As of June 30, 2025 , the maturities of the lease liabilities were as follows (in thousands): 2025 (remaining six months) $ 2,576 2026 4,457 2027 3,949 2028 2,752 2029 1,964 Thereafter 11,468 Total remaining lease payments 27,166 Less: imputed interest ( 7,254 ) Total lease liabilities $ 19,912 As of June 30, 2025 , the Company had no operating leases that had not yet commenced. 15 Table of Contents 6. NET INCOME PER SHARE Basic net income per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding for the period. Diluted net income per share reflects the potential dilution from contingently issuable shares and calculated using the treasury stock method. Contingently issuable shares, including all types of equity awards, are considered outstanding shares of common stock and included in basic net income per share as of the date that all necessary conditions to earn the awards have been satisfied. Prior to the end of the contingency period, the number of contingently issuable shares included in diluted net income per share is based on the number of shares, if any, that would be issuable under the terms of the arrangement at the end of the reporting period. The following table sets forth the computation of basic and diluted net income per share (in thousands, except per-share amounts): Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Numerator: Net income $ 133,726 $ 100,366 $ 267,517 $ 192,907 Denominator: Weighted-average outstanding shares—basic 47,887 48,687 47,869 48,660 Effect of dilutive securities 132 258 143 275 Weighted-average outstanding shares—diluted 48,019 48,945 48,012 48,935 Net income per share: Basic $ 2.79 $ 2.06 $ 5.59 $ 3.96 Diluted $ 2.78 $ 2.05 $ 5.57 $ 3.94 Anti-dilutive common stock equivalents were not material for the periods presented. 16 Table of Contents 7. SEGMENT, SIGNIFICANT CUSTOMERS AND GEOGRAPHIC INFORMATION The Company operates in one reportable segment that includes the design, development, marketing and sale of high-performance, semiconductor-based power electronics solutions for the storage and computing, automotive, enterprise data, communications, consumer, and industrial end markets. The Company’s chief operating decision maker (“CODM”) is its Chief Executive Officer, who reviews financial information presented on a consolidated basis for the purposes of allocating resources and evaluating financial performance. Specifically, the CODM uses net income that is reported on the Condensed Consolidated Statements of Operations and cash provided by operating activities reported in the Condensed Consolidated Statements of Cash Flows to decide whether and how much to reinvest profits into core business operations or to return to stockholders in the form of stock repurchases and dividends. All significant segment expenses have been captured on the face of the Condensed Consolidated Statements of Operations. The Company sells its products to end customers primarily through third -party distributors and value-added resellers. The following table summarizes those customers with sales equal to 10% or more of the Company’s total revenue for the periods presented: Three Months Ended June 30, Six Months Ended June 30, Customer 2025 2024 2025 2024 Distributor A 25 % 38 % 25 % 40 % Distributor B 17 % 17 % 18 % 15 % Distributor C 11 % * 11 % * *Represents less than 10% The Company’s agreements with these third -party distributors were made in the ordinary course of business and may be terminated with or without cause by either party with advance notice. Although the Company may experience a short-term disruption in the distribution of its products and a short-term decline in revenue if its agreement with any of the distributors were terminated, the Company believes that such termination would not have a material adverse effect on its financial statements because it would be able to engage alternative distributors, resellers and other distribution channels to deliver its products to end customers within a short period following any termination of the agreement with a distributor. The following table summarizes those customers with accounts receivable equal to 10% or more of the Company’s total net accounts receivable: June 30, December 31, Customer 2025 2024 Distributor A 29 % 28 % Distributor B 18 % 29 % Distributor C 11 % * *Represents less than 10% The Company derives a majority of its revenue from sales to customers located outside North America, with geographic revenue based on the customers’ ship-to locations. The following is a summary of revenue by geographic region (in thousands) for the periods presented: Three Months Ended June 30, Six Months Ended June 30, Country or Region 2025 2024 2025 2024 China $ 397,951 $ 282,514 $ 761,671 $ 545,554 Taiwan 104,970 127,396 221,311 227,846 South Korea 63,501 39,513 127,865 75,050 Southeast Asia 34,867 11,352 67,573 24,591 Europe 26,497 19,105 51,489 36,847 Japan 18,536 13,552 38,637 26,500 U.S. 18,127 13,927 33,376 28,747 Other 125 72 206 181 Total $ 664,574 $ 507,431 $ 1,302,128 $ 965,316 The following is a summary of long-lived assets by geographic region (in thousands): June 30, December 31, Country 2025 2024 China $ 288,191 $ 237,649 U.S. 172,169 171,514 Taiwan 51,139 42,388 Other 52,386 43,394 Total $ 563,885 $ 494,945 17 Table of Contents 8. COMMITMENTS AND CONTINGENCIES Product Warranties and Rework The Company generally provides either a one - or two -year warranty against defects in materials and workmanship and will repair products, provide replacements at no charge to customers or issue a refund. As they are considered assurance-type warranties, the Company does not account for them as separate performance obligations. Historically, the Company’s warranty obligations have not been material. The Company may also incur rework costs associated with product-related claims. The Company accrues for warranty and rework costs upon evaluation of customer specific claims. The changes in warranty reserves were as follows (in thousands) for the periods presented: Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Balance at beginning of period $ 3,525 $ 12,873 $ 5,401 $ 16,906 Warranties issued 700 2,225 790 2,325 Repairs, replacement and refund ( 689 ) ( 116 ) ( 1,488 ) ( 4,130 ) Changes in liability for pre-existing warranties ( 491 ) ( 280 ) ( 1,658 ) ( 399 ) Balance at end of period $ 3,045 $ 14,702 $ 3,045 $ 14,702 Changes in liability for pre-existing warranties result from changes in estimates for warranties issued in prior periods. Purchase Commitments The Company has outstanding purchase obligations with its suppliers and other parties for purchases of goods or services. The purchase obligations primarily consist of wafer and other inventory purchases, assembly and other manufacturing services, construction of manufacturing and R&D facilities, purchases of production and other equipment, and license arrangements. In May 2022, the Company entered into a long-term supply agreement in order to secure manufacturing production capacity for silicon wafers over a four -year period. As of June 30, 2025 , the Company had remaining prepayments under this agreement of $ 60.0 million reported in other current assets on the Condensed Consolidated Balance Sheets. Total estimated future unconditional purchase commitments to all suppliers and other parties, net of the $60.0 million prepayment, as of June 30, 2025 were as follows (in thousands): 2025 (remaining six months) $ 237,523 2026 177,234 2027 33,319 2028 486 2029 486 Total $ 449,048 Litigation The Company is a party to actions and proceedings in the ordinary course of business, including challenges to the enforceability or validity of its intellectual property, claims that the Company’s products infringe on the intellectual property rights of others, and employment matters. The Company is also subject to litigation initiated by its stockholders. These proceedings often involve complex questions of fact and law and may require the expenditure of significant funds and the diversion of other resources to prosecute and defend. The Company defends itself vigorously against any such claims. Based on current information, the Company does not believe that a material loss from known matters is probable as of June 30, 2025 . 18 Table of Contents 9. CASH, CASH EQUIVALENTS, INVESTMENTS AND RESTRICTED CASH The following is a summary of the Company’s cash, cash equivalents and debt investments (in thousands): June 30, December 31, 2025 2024 Cash $ 414,800 $ 679,949 Money market funds 372,582 11,867 U.S. treasuries and government agency bonds 177,311 - Certificates of deposit 181,384 164,418 Corporate debt securities - 6,712 Auction-rate securities backed by student-loan notes 74 148 Total $ 1,146,151 $ 863,094 June 30, December 31, 2025 2024 Reported as: Cash and cash equivalents $ 787,382 $ 691,816 Short-term investments 358,695 171,130 Investment within other long-term assets 74 148 Total $ 1,146,151 $ 863,094 The following table summarizes the contractual maturities of the short-term and long-term available-for-sale investments as of June 30, 2025 (in thousands): Amortized Cost Fair Value Due in less than 1 year $ 261,048 $ 261,027 Due in 1 - 5 years 97,668 97,668 Due in greater than 5 years 75 74 Total $ 358,791 $ 358,769 Gross realized gains and losses recognized on the sales of available-for-sale investments were not material for the periods presented. The following tables summarize the unrealized gain and loss positions related to the available-for-sale investments (in thousands): June 30, 2025 Amortized Cost Unrealized Gains Unrealized Losses Fair Value Money market funds $ 372,582 $ - $ - $ 372,582 Certificates of deposit 181,384 - - 181,384 U.S. treasuries and government agency bonds 177,332 3 ( 24 ) 177,311 Auction-rate securities backed by student-loan notes 75 - ( 1 ) 74 Total $ 731,373 $ 3 $ ( 25 ) $ 731,351 December 31, 2024 Amortized Cost Unrealized Losses Fair Value Money market funds $ 11,867 $ - $ 11,867 Certificates of deposit 164,418 - 164,418 Corporate debt securities 6,779 ( 67 ) 6,712 Auction-rate securities backed by student-loan notes 150 ( 2 ) 148 Total $ 183,214 $ ( 69 ) $ 183,145 19 Table of Contents The following tables present information about the available-for-sale investments that had been in a continuous unrealized loss position for less than 12 months and for greater than 12 months (in thousands): June 30, 2025 Less than 12 Months Greater than 12 Months Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses U.S. treasuries and government agency bonds $ 128,607 $ ( 24 ) $ - $ - $ 128,607 $ ( 24 ) Auction-rate securities backed by student-loan notes - - 74 ( 1 ) 74 ( 1 ) Total $ 128,607 $ ( 24 ) $ 74 $ ( 1 ) $ 128,681 $ ( 25 ) December 31, 2024 Greater than 12 Months Total Fair Value Unrealized Losses Fair Value Unrealized Losses Corporate debt securities $ 6,712 $ ( 67 ) $ 6,712 $ ( 67 ) Auction-rate securities backed by student-loan notes 148 ( 2 ) 148 ( 2 ) Total $ 6,860 $ ( 69 ) $ 6,860 $ ( 69 ) An impairment exists when the fair value of an investment is less than its amortized cost basis. As of June 30, 2025 and December 31, 2024 , the Company did not consider the impairment of its investments to be a result of credit losses. The Company typically invests in highly rated securities, with the primary objective of minimizing the potential risk of principal loss. The Company’s investment policy generally requires securities to be investment grade and limits the amount of credit exposure to any one issuer. When evaluating a debt security for impairment, management reviews factors such as the Company’s intent to sell, or whether it will more likely than not be required to sell, the security before recovery of its amortized cost basis, the extent to which the fair value of the security is less than its cost, the financial condition of the issuer and the credit quality of the investment. Restricted Cash The following table provides a reconciliation of cash, cash equivalents and restricted cash reported on the Condensed Consolidated Balance Sheets to the amounts reported on the Condensed Consolidated Statements of Cash Flows (in thousands): June 30, December 31, 2025 2024 Cash and cash equivalents $ 787,382 $ 691,816 Restricted cash included in other long-term assets 142 125 Total cash, cash equivalents and restricted cash reported on the Condensed Consolidated Statements of Cash Flows $ 787,524 $ 691,941 20 Table of Contents 10. FAIR VALUE MEASUREMENTS Fair Value Hierarchy The Company has estimated the fair value of its financial assets by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement: ● Level 1—includes instruments with quoted prices in active markets for identical assets. ● Level 2—includes instruments for which the valuations are based upon quoted market prices in active markets involving similar assets or inputs other than quoted prices that are observable for the assets. The market inputs used to value these instruments generally consist of market yields, recently executed transactions, broker/dealer quotes or alternative pricing sources with reasonable levels of price transparency. Pricing sources may include industry standard data providers, security master files from large financial institutions, and other third -party sources used to determine a daily market value. ● Level 3—includes instruments for which the valuations are based on inputs that are unobservable and significant to the overall fair value measurement. Financial Assets Measured at Fair Value on a Recurring Basis The following tables detail the fair value of the Company’s financial assets measured on a recurring basis (in thousands): June 30, 2025 Total Level 1 Level 2 Level 3 Money market funds $ 372,582 $ 372,582 $ - $ - Certificates of deposit 181,384 - 181,384 - U.S. treasuries and government agency bonds 177,311 - 177,311 - Auction-rate securities backed by student-loan notes 74 - - 74 Mutual funds and money market funds under deferred compensation plan 68,721 68,721 - - Total $ 800,072 $ 441,303 $ 358,695 $ 74 December 31, 2024 Total Level 1 Level 2 Level 3 Money market funds $ 11,867 $ 11,867 $ - $ - Certificates of deposit 164,418 - 164,418 - Corporate debt securities 6,712 - 6,712 - Auction-rate securities backed by student-loan notes 148 - - 148 Mutual funds and money market funds under deferred compensation plan 65,337 65,337 - - Total $ 248,482 $ 77,204 $ 171,130 $ 148 Redemptions and changes in the fair value of the auction-rate securities classified as Level 3 assets were not material for the periods presented. 21 Table of Contents 11. DEFERRED COMPENSATION PLAN The following table summarizes the deferred compensation plan balances on the Condensed Consolidated Balance Sheets (in thousands): June 30, December 31, 2025 2024 Deferred compensation plan asset components: Cash surrender value of corporate-owned life insurance policies $ 29,110 $ 27,249 Fair value of mutual funds and money market funds 68,721 65,337 Total $ 97,831 $ 92,586 Deferred compensation plan assets reported in: Other long-term assets $ 97,831 $ 92,586 Deferred compensation plan liabilities reported in: Accrued compensation and related benefits $ 3,480 $ 2,323 Other long-term liabilities 94,606 93,653 Total $ 98,086 $ 95,976 12. OTHER INCOME, NET The components of other income, net, were as follows (in thousands) for the periods presented: Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Interest income $ 6,043 $ 6,630 $ 11,740 $ 13,544 Amortization of discount on available-for-sale securities 2,117 5,917 2,885 10,040 Gain on deferred compensation plan investments 5,580 1,266 4,230 5,285 Charitable commitments ( 900 ) ( 6,300 ) ( 900 ) ( 12,150 ) Other ( 620 ) ( 1 ) ( 604 ) 333 Total $ 12,220 $ 7,512 $ 17,351 $ 17,052 22 Table of Contents 13. INCOME TAXES The income tax provision or benefit for interim periods is generally determined using an estimate of the Company’s annual effective tax rate and adjusted for discrete items, if any, in the relevant period. Each quarter the estimate of the annual effective tax rate is updated, and if the Company’s estimated tax rate changes, a cumulative adjustment is made. The income tax expense for the three months ended June 30, 2025 was $ 43.3 million, or 24.4 % of pre-tax income. The income tax expense for the six months ended June 30, 2025 was $ 83.4 million, or 23.8 % of pre-tax income. The effective tax rates were higher than the federal statutory rate of 21 % primarily due to the U.S. impact of foreign earnings and non-deductible stock-based compensation. The higher effective tax rates relative to the federal statutory rate were partially offset by income generated by the Company’s subsidiaries in lower tax jurisdictions, foreign tax credits, and U.S. R&D credits. The income tax expense for the three months ended June 30, 2024 was $ 23.7 million, or 19.1 % of pre-tax income. The income tax expense for the six months ended June 30, 2024 was $ 36.2 million, or 15.8 % of pre-tax income. The effective tax rates were lower than the federal statutory rate of 21 % primarily due to lower statutory tax rates at certain foreign subsidiaries of the Company, and excess tax benefits from stock-based compensation. The lower effective tax rates relative to the federal statutory rate were partially offset by the inclusion of the global intangible low-taxed income (“GILTI”) tax. In January 2025, the Organization for Economic Co-operation and Development (“OECD”) released new Administrative Guidance on the application of the Global Anti-Base Erosion (“GLoBE”) Model Rules. The Company will continue to evaluate the impact of this release and of other future guidance on the Company’s future global tax provision. In December 2023, the Bermuda Corporate Income Tax Act of 2023 (the “Bermuda CIT Act”) was enacted and signed into law. The Bermuda CIT Act includes a 15% corporate income tax applicable to Bermuda businesses that are multinational enterprises with annual revenue of €750M or more beginning in 2025. As the Company did not realize material taxable income in Bermuda in the three and six months ended June 30, 2025, no material changes to income tax expense related to the Bermuda CIT Act have been recorded as of June 30, 2025. 14. ACCUMULATED OTHER COMPREHENSIVE LOSS The following table summarizes the changes in accumulated other comprehensive loss (in thousands): Unrealized Losses on Foreign Currency Available-for-Sale Translation Securities Adjustments Total Balance as of January 1, 2025 $ ( 790 ) $ ( 47,721 ) $ ( 48,511 ) Other comprehensive income before reclassifications 43 5,139 5,182 Amounts reclassified from accumulated other comprehensive income 5 - 5 Net current period other comprehensive income 48 5,139 5,187 Balance as of March 31, 2025 ( 742 ) ( 42,582 ) ( 43,324 ) Other comprehensive income (loss) before reclassifications ( 1 ) 19,634 19,633 Net current period other comprehensive income (loss) ( 1 ) 19,634 19,633 Balance as of June 30, 2025 $ ( 743 ) $ ( 22,948 ) $ ( 23,691 ) The amount reclassified from accumulated other comprehensive income for the period presented was recorded in other income, net, on the Condensed Consolidated Statements of Operations. 23 Table of Contents 15. STOCKHOLDERS’ EQUITY Cash Dividend Program The Company has a dividend program approved by its Board of Directors, pursuant to which the Company intends to pay quarterly cash dividends on its common stock. The Board of Directors declared the following cash dividends (in thousands, except per-share amounts) for the periods presented: Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Dividend declared per share $ 1.56 $ 1.25 $ 3.12 $ 2.50 Total amount $ 74,711 $ 60,872 $ 149,399 $ 121,706 As of June 30, 2025 and December 31, 2024 , accrued cash dividends totaled $ 74.7 million and $ 59.8 million, respectively. The declaration of any future cash dividends is at the discretion of the Board of Directors and will depend on, among other things, the Company’s financial condition, results of operations, capital requirements, business conditions, and other factors that the Board of Directors may deem relevant, as well as a determination that cash dividends are in the best interests of the Company’s stockholders. The Company anticipates that cash used for future dividend payments will come from its domestic cash, cash generated from ongoing U.S. operations, and cash repatriated from certain foreign subsidiaries. The Company also anticipates that earnings from other foreign subsidiaries will continue to be indefinitely reinvested. Cash Dividend Equivalent Rights The Company’s RSUs contain rights to receive cash dividend equivalents, which entitle employees who hold RSUs to the same dividend value per share as holders of common stock. The dividend equivalents are accumulated and paid to the employees when the underlying RSUs vest. Dividend equivalents accumulated on the underlying RSUs are forfeited if the underlying RSUs do not vest. As of June 30, 2025 and December 31, 2024 , accrued dividend equivalents totaled $ 7.6 million and $ 5.8 million, respectively. Stock Repurchase Programs In October 2023, the Board of Directors approved a stock repurchase program authorizing the Company to repurchase up to $ 640.0 million of its common stock, which was fully utilized as of December 31, 2024. In February 2025, the Board of Directors approved another stock repurchase program authorizing the Company to repurchase up to $ 500.0 million of its common stock through February 2028. Shares are retired upon repurchase. The Company repurchased 3,900 shares of its common stock for an aggregate purchase price of $ 2.6 million during the three months ended June 30, 2025 . No repurchases were made during the three months ended March 31, 2025. The Company repurchased 6,300 and 12,400 shares of its common stock for an aggregate purchase price of $ 4.5 million and $ 8.6 million during the three and six months ended June 30, 2024 , respectively. Stock repurchased under the program may be made through open market repurchases, privately negotiated transactions or other structures in accordance with applicable state and federal securities laws, at times and in amounts as management deems appropriate. The timing and the number of any repurchased common stock will be determined by the Company’s management based on its evaluation of market conditions, legal requirements, share price, and other factors. The repurchase program does not obligate the Company to purchase any particular number of shares, and may be suspended, modified, or discontinued at any time without prior notice. 16. SUBSEQUENT EVENT The budget reconciliation bill H.R.1 was enacted on July 4, 2025. It includes significant provisions, such as the permanent extension of certain expiring provisions of the 2017 Tax Cuts and Jobs Act and modifications to the existing tax framework. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The Company is currently assessing the impact on its consolidated financial statements. 24 Table of Contents Item 2. Management ’ s Discussion and Analysis of Financial Condition and Results of Operations This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that have been made pursuant to and in reliance on the provisions of the Private Securities Litigation Reform Act of 1995. These statements include, among others, statements concerning: • the above-average industry growth of product and market areas that we have targeted; • our plans to grow revenue in a diversified way across regions and increase revenue through the introduction of new products within our existing product families as well as in new product categories and families; • our mission statement to reduce energy and material consumption to improve all aspects of quality of life and create a sustainable future; • the effects of macroeconomic factors, global economic uncertainties, geopolitical tensions and global tariffs and retaliatory measures on the semiconductor industry and our business; • the effect of seasonality on our business and the factors that can impact seasonality; • the effect that liquidity of our investments has on our capital resources; • the continuing application of our products in the storage and computing, automotive, enterprise data, communications, consumer, and industrial end markets; • estimates of our future liquidity requirements and the sufficiency of our cash, cash equivalents and short-term investments to operate our business; • the cyclical nature of the semiconductor industry; • our belief that we may incur significant legal expenses that vary with the level of activity in each of our current or future legal proceedings; • expectations regarding protection of our proprietary technology; • the business outlook for the remainder of 2025 and beyond; • the factors that we believe will impact our business, operations and financial condition, as well as our ability to achieve revenue growth; • the expected percentage of our total revenue from various end markets; • our ability to identify, acquire and integrate companies, businesses and products, and achieve the anticipated benefits from such acquisitions and integrations; • the expected impact of various U.S. and international tax laws and regulations, including the recent H.R.1 Act signed into law on July 4, 2025, on our income tax provision, financial position and cash flows; • our plan to repatriate cash from our foreign subsidiaries; • our intention and ability to execute our stock repurchase program and pay cash dividends and dividend equivalents; and • the factors that differentiate us from our competitors. These forward-looking statements generally are identified by the words “would,” “could,” “may,” “should,” “predict,” “potential,” “targets,” “continue,” “anticipate,” “expect,” “intend,” “plan,” “believe,” “seek,” “estimate,” “project,” “forecast,” “will,” and similar expressions. All forward-looking statements are based on our current outlook, expectations, estimates, projections, beliefs and plans or objectives about our business, our industry and the global economy, including our expectations regarding the potential impacts of macroeconomic factors, global economic uncertainties, including tariffs and retaliatory measures, and geopolitical tensions on the semiconductor industry and our business. These statements are not guarantees of future performance and are subject to significant risks and uncertainties. Actual events or results could differ materially and adversely from those expressed in any such forward-looking statements. Risks and uncertainties that could cause actual results to differ materially include those set forth throughout this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K including, in particular, in the sections entitled “Risk Factors.” Except as required by law, we disclaim any duty, and undertake no obligation, to update any forward-looking statements, whether as a result of new information relating to existing conditions, future events or otherwise or to release publicly the results of any future revisions we may make to forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Readers are cautioned not to place undue reliance on such statements, which speak only as of the date of this Quarterly Report on Form 10-Q and entail significant risks. Readers should carefully review future reports and documents that we file from time to time with the SEC, such as our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K. Unless stated otherwise or the context otherwise requires, references to “we,” “our,” and “us” mean Monolithic Power Systems, Inc. and its consolidated subsidiaries. 25 Table of Contents Overview We are a fabless global company that provides high-performance, semiconductor-based power electronics solutions. Our mission is to reduce energy and material consumption to improve all aspects of quality of life and create a sustainable future. Founded in 1997 by our CEO Michael Hsing, we have three core strengths: deep system-level knowledge, strong semiconductor design expertise, and innovative proprietary technologies in the areas of semiconductor processes, system integration, and packaging. These combined advantages are designed to enable us to deliver reliable, compact, and monolithic solutions that are highly energy-efficient, cost-effective, and environmentally responsible while providing a consistent return on investment to our stockholders. We operate in the cyclical semiconductor industry. We are subject to industry downturns, but we have targeted product and market areas that we believe allow us to operate at above average industry performance levels over the long term. Historically, our revenue has generally been higher in the second half of the year than in the first half although various factors, such as market conditions and the timing of key product introductions, could impact this trend. We work with third parties to manufacture and assemble our ICs. This has enabled us to limit our capital expenditures and fixed costs, while focusing our engineering and design resources on our core strengths. Following the introduction of a product, our sales cycle generally takes a number of quarters after we receive an initial customer order for a new product to ramp up. Typical supply chain lead times for orders are generally 16 to 26 weeks. These factors, combined with the fact that our customers can cancel or reschedule orders without incurring a significant penalty, make the forecasting of our orders, revenue and expenses difficult. We derive most of our revenue from sales through distribution arrangements and direct sales to customers in Asia, where our products are incorporated into end-user products. Our revenue from sales to customers in Asia was 93% of our total revenue for each of the three and six months ended June 30, 2025 and 2024. We believe our ability to achieve revenue growth will depend, in part, on our ability to develop new products, enter new markets, gain market share, manage litigation risk, diversify our customer base and continue to secure manufacturing capacity. Macroeconomic Conditions and Regulations The semiconductor industry is impacted by various macroeconomic challenges including fluctuations in consumer spending, fluctuations in demand for semiconductors, rising inflation, global tariffs and retaliatory measures and announcements regarding same, increased interest rates, and fluctuations in currency rates. We remain cautious in light of continued challenging macroeconomic conditions and will continue to monitor the potential impact on our operations. The extent and duration of the direct and indirect impact of macroeconomic events on our business, results of operations and overall financial position remain uncertain and depend on future developments. We closely monitor changes to export control laws, tariffs, trade regulations and other trade requirements. To date, no restrictions or requirements have had a material impact on our revenue and operations. We believe that our diverse, agile and resilient supply chain is structured in a way to minimize the impact of tariffs; however, such restrictions or requirements can be enacted quickly and unexpectedly and could impact our business in the future. To the extent tariffs, trade regulations or retaliatory measures or announcements regarding same that affect us are implemented, we will seek to take mitigating actions in the near- and medium-term, as necessary, and are committed to complying with all applicable trade laws, regulations and other requirements. Critical Accounting Estimates In preparing our condensed consolidated financial statements in accordance with U.S. GAAP, we are required to make estimates, assumptions and judgments that affect the amounts reported in our financial statements and the accompanying disclosures. Estimates and judgments used in the preparation of our financial statements are, by their nature, uncertain and unpredictable, and depend upon, among other things, many factors outside of our control, including demand for our products, economic conditions and other current and future events, such as macroeconomic factors, global economic uncertainties, geopolitical tensions and global tariffs and retaliatory measures and announcements regarding same. Actual results could differ from these estimates and assumptions, and any such differences may be material to our condensed consolidated financial statements. There have been no material changes during the three months ended June 30, 2025 to our critical accounting estimates from the information provided in the “Critical Accounting Estimates” section of Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2024. 26 Table of Contents Results of Operations The table below sets forth the data on the Condensed Consolidated Statements of Operations as a percentage of revenue: Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 (In thousands, except percentages) Revenue $ 664,574 100.0 % $ 507,431 100.0 % $ 1,302,128 100.0 % $ 965,316 100.0 % Cost of revenue 298,558 44.9 226,853 44.7 582,882 44.8 432,297 44.8 Gross profit 366,016 55.1 280,578 55.3 719,246 55.2 533,019 55.2 Operating expenses: Research and development 96,266 14.5 77,945 15.3 188,493 14.5 153,935 15.9 Selling, general and administrative 104,992 15.8 86,097 17.0 197,236 15.1 167,061 17.3 Total operating expenses 201,258 30.3 164,042 32.3 385,729 29.6 320,996 33.2 Operating income 164,758 24.8 116,536 23.0 333,517 25.6 212,023 22.0 Other income, net 12,220 1.8 7,512 1.4 17,351 1.3 17,052 1.7 Income before income taxes 176,978 26.6 124,048 24.4 350,868 26.9 229,075 23.7 Income tax expense 43,252 6.5 23,682 4.6 83,351 6.4 36,168 3.7 Net income $ 133,726 20.1 % $ 100,366 19.8 % $ 267,517 20.5 % $ 192,907 20.0 % Revenue The following table summarizes our revenue by end market: Three Months Ended June 30, Six Months Ended June 30, End Market 2025 % of Revenue 2024 % of Revenue 2025 % of Revenue 2024 % of Revenue (In thousands, except percentages) Storage and Computing $ 195,320 29.4 % $ 114,955 22.7 % $ 383,831 29.5 % $ 221,076 22.9 % Automotive 145,132 21.8 87,193 17.2 290,036 22.3 174,285 18.1 Enterprise Data 143,964 21.7 187,211 36.9 276,888 21.3 336,938 34.9 Communications 73,783 11.1 43,566 8.5 145,454 11.2 90,211 9.3 Consumer 59,663 9.0 42,229 8.3 116,610 8.9 80,303 8.3 Industrial 46,712 7.0 32,277 6.4 89,309 6.8 62,503 6.5 Total $ 664,574 100.0 % $ 507,431 100.0 % $ 1,302,128 100.0 % $ 965,316 100.0 % Revenue for the three months ended June 30, 2025 was $664.6 million, an increase of $157.2 million, or 31.0%, from $507.4 million for the three months ended June 30, 2024. The increase in revenue was primarily due to higher shipment volume. For the three months ended June 30, 2025, revenue from the storage and computing market increased $80.4 million, or 69.9%, from the same period in 2024. This increase was primarily due to higher sales of power solutions for storage applications and notebooks. Revenue from the automotive market increased $57.9 million, or 66.4%, from the same period in 2024. This increase was broad-based and primarily due to higher sales of applications supporting advanced driver assistance systems, infotainment and motion control. Revenue from the enterprise data market decreased $43.2 million, or 23.1%, from the same period in 2024. This decrease was primarily due to lower sales of our power management solutions for artificial intelligence (“AI”) applications, partially offset by higher sales of our power management solutions for server applications. Revenue from the communications market increased $30.2 million, or 69.4%, from the same period in 2024. This increase was primarily driven by higher sales of power solutions for optical modules and routers. Revenue from the consumer market increased $17.4 million, or 41.3%, from the same period in 2024. This increase was primarily driven by higher sales of products for home appliances, gaming solutions and monitors, partially offset by lower sales of power management solutions for digital cameras. Revenue from the industrial market increased $14.4 million, or 44.7%, from the same period in 2024. This increase was primarily due to higher sales for power sources and instrumentation applications. Revenue for the six months ended June 30, 2025 was $1,302.1 million, an increase of $336.8 million, or 34.9%, from $965.3 million for the six months ended June 30, 2024. The increase in revenue was primarily due to higher shipment volume. For the six months ended June 30, 2025, revenue from the storage and computing market increased $162.8 million, or 73.6%, from the same period in 2024. This increase was primarily due to higher sales of power solutions for storage applications, notebooks and graphics cards. Revenue from the automotive market increased $115.8 million, or 66.4%, from the same period in 2024. This increase was broad-based and primarily due to higher sales of applications supporting advanced driver assistance systems, infotainment, and body electronics. Revenue from the enterprise data market decreased $60.1 million, or 17.8%, from the same period in 2024. This decrease was primarily due to lower sales of our power management solutions for AI applications, partially offset by higher sales of our power management solutions for server applications. Revenue from the communications market increased $55.2 million, or 61.2%, from the same period in 2024. This increase was primarily driven by higher sales of power solutions for optical modules and routers. Revenue from the consumer market increased $36.3 million, or 45.2%, from the same period in 2024. This increase was primarily driven by higher sales of products for home appliances and gaming solutions. Revenue from the industrial market increased $26.8 million, or 42.9%, from the same period in 2024. This increase was primarily due to higher sales for power sources, instrumentation and industrial meter applications. 27 Table of Contents Cost of Revenue and Gross Margin Cost of revenue primarily consists of costs incurred to manufacture, assemble and test our products, as well as warranty costs, inventory-related and other overhead costs, and stock-based compensation expense. Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 (In thousands, except percentages) Cost of revenue $ 298,558 $ 226,853 $ 582,882 $ 432,297 As a percentage of revenue 44.9 % 44.7 % 44.8 % 44.8 % Gross profit $ 366,016 $ 280,578 $ 719,246 $ 533,019 Gross margin 55.1 % 55.3 % 55.2 % 55.2 % Cost of revenue was $298.6 million, or 44.9% of revenue, for the three months ended June 30, 2025, and $226.9 million, or 44.7% of revenue, for the three months ended June 30, 2024. The $71.7 million increase in cost of revenue was primarily driven by higher shipment volume. Gross margin was 55.1% for the three months ended June 30, 2025, compared with 55.3% for the three months ended June 30, 2024. The decrease in gross margin was mainly driven by product mix, partially offset by a decrease in inventory write-downs as a percentage of revenue. Cost of revenue was $582.9 million, or 44.8% of revenue, for the six months ended June 30, 2025, and $432.3 million, or 44.8% of revenue, for the six months ended June 30, 2024. The $150.6 million increase in cost of revenue was primarily driven by higher shipment volume. Gross margin was 55.2% for the six months ended June 30, 2025, flat to the six months ended June 30, 2024. Research and Development R&D expenses primarily consist of cash compensation and benefits, stock-based compensation and deferred compensation for design and product engineers, expenses related to new product development and supplies, and facility costs. Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 (In thousands, except percentages) R&D expenses $ 96,266 $ 77,945 $ 188,493 $ 153,935 As a percentage of revenue 14.5 % 15.3 % 14.5 % 15.9 % R&D expenses were $96.3 million, or 14.5% of revenue, for the three months ended June 30, 2025, and $77.9 million, or 15.3% of revenue, for the three months ended June 30, 2024. The $18.3 million increase in R&D expenses was primarily due to $9.4 million increase in cash compensation expenses and benefits, $2.1 million increase in new product development expenses, $1.9 million increase in expense related to changes in the fair value of deferred compensation plan liabilities, and $1.5 million increase in laboratory and other supplies. R&D expenses were $188.5 million, or 14.5% of revenue, for the six months ended June 30, 2025, and $153.9 million, or 15.9% of revenue, for the six months ended June 30, 2024. The $34.6 million increase in R&D expenses was primarily due to $19.8 million increase in cash compensation expenses and benefits, $6.3 million increase in new product development expenses, $3.0 million increase in laboratory and other supplies, and $0.8 million increase in stock-based compensation and related expenses. 28 Table of Contents Selling, General and Administrative SG&A expenses primarily include cash compensation and benefits, stock-based compensation and deferred compensation for sales, marketing and administrative personnel, travel expenses, facilities costs, third party service fees and legal expenses. Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 (In thousands, except percentages) SG&A expenses $ 104,992 $ 86,097 $ 197,236 $ 167,061 As a percentage of revenue 15.8 % 17.0 % 15.1 % 17.3 % SG&A expenses were $105.0 million, or 15.8% of revenue, for the three months ended June 30, 2025, and $86.1 million, or 17.0% of revenue, for the three months ended June 30, 2024. The $18.9 million increase in SG&A expenses was primarily driven by $7.3 million increase in cash compensation and benefits, $6.5 million increase in stock-based compensation and related expenses, and $2.1 million increase in expense related to changes in the fair value of deferred compensation plan liabilities. SG&A expenses were $197.2 million, or 15.1% of revenue, for the six months ended June 30, 2025, and $167.1 million, or 17.3% of revenue, for the six months ended June 30, 2024. The $30.2 million increase in SG&A expenses was primarily driven by $16.8 million increase in cash compensation and benefits, and $8.7 million increase in stock-based compensation and related expenses. Other Income, Net Other income, net, was $12.2 million for the three months ended June 30, 2025, compared with $7.5 million for the three months ended June 30, 2024. The increase in other income, net was primarily due to a decrease of $5.4 million in charitable commitments, and $4.3 million related to changes in the value of the deferred compensation plan investments, partially offset by a decrease of $3.8 million in amortization of the discount on available-for-sale securities. Other income, net, was $17.4 million for the six months ended June 30, 2025, compared with $17.1 million for the six months ended June 30, 2024. The increase in other income, net was primarily due to a decrease of $11.3 million in charitable commitments, partially offset by a decrease of $7.2 million in amortization of the discount on available-for-sale securities. Income Tax Expense The income tax provision for interim periods is generally determined using an estimate of our annual effective tax rate and adjusted for discrete items, if any, in the relevant period. Each quarter the estimate of the annual effective tax rate is updated, and if our estimated tax rate changes, a cumulative adjustment is made. The income tax expense for the three months ended June 30, 2025 was $43.3 million, or 24.4% of pre-tax income. The income tax expense for the six months ended June 30, 2025 was $83.4 million, or 23.8% of pre-tax income. The effective tax rates were higher than the federal statutory rate of 21% primarily due to the U.S. impact of foreign earnings and non-deductible stock-based compensation. The higher effective tax rates relative to the federal statutory rate were partially offset by income generated by our subsidiaries in lower tax jurisdictions, foreign tax credits, and U.S. R&D credits. The income tax expense for the three months ended June 30, 2024 was $23.7 million, or 19.1% of pre-tax income. The income tax expense for the six months ended June 30, 2024 was $36.2 million, or 15.8% of pre-tax income. The effective tax rates were lower than the federal statutory rate of 21% primarily due to lower statutory tax rates at certain of our foreign subsidiaries, and excess tax benefits from stock-based compensation. The lower effective tax rates relative to the federal statutory rate were partially offset by the inclusion of the GILTI tax. The recent H.R.1 Act that was signed into law on July 4, 2025 introduces significant provisions, including tax cut extensions and modifications to the existing tax framework. We are currently evaluating and will continue to evaluate the impact of these legislative changes on our consolidated financial statements as additional guidance becomes available. In January 2025, the OECD released new Administrative Guidance on the application of the GLoBE Model Rules. We will continue to evaluate the impact of this release and of other future guidance on our future global tax provision. In December 2023, the Bermuda CIT Act was enacted and signed into law. See Note 13 for further details. 29 Table of Contents Liquidity and Capital Resources June 30, December 31, 2025 2024 (In thousands, except percentages) Cash and cash equivalents $ 787,382 $ 691,816 Short-term investments 358,695 171,130 Total cash, cash equivalents and short-term investments $ 1,146,077 $ 862,946 Percentage of total assets 28.9 % 23.9 % Total current assets $ 1,918,757 $ 1,565,053 Total current liabilities (383,508 ) (294,567 ) Working capital $ 1,535,249 $ 1,270,486 As of June 30, 2025, we had cash and cash equivalents of $787.4 million and short-term investments of $358.7 million, compared with cash and cash equivalents of $691.8 million and short-term investments of $171.1 million as of December 31, 2024. As of June 30, 2025, $687.4 million of cash and cash equivalents and $181.4 million of short-term investments were held by our foreign subsidiaries. For the six months ended June 30, 2025, we repatriated $275 million of cash from certain of our foreign subsidiaries to the U.S. with minimal tax impact. We may repatriate additional cash from certain of our foreign subsidiaries in future periods to fund our expenditures. We anticipate that earnings from other foreign subsidiaries will continue to be indefinitely reinvested. Summary of Cash Flows The following table summarizes our cash flow activities: Six Months Ended June 30, 2025 2024 (In thousands) Net cash provided by operating activities $ 494,024 $ 389,026 Net cash used in investing activities (273,283 ) (269,366 ) Net cash used in financing activities (135,327 ) (123,638 ) Effect of change in exchange rates 10,169 (6,603 ) Net increase (decrease) in cash, cash equivalents and restricted cash $ 95,583 $ (10,581 ) For the six months ended June 30, 2025, the $105.0 million increase in net cash provided by operating activities compared to the same period in 2024 was primarily due to increased accounts receivable collections, partially offset by increased inventory purchases and changes in other working capital. The net cash used in investing activities for the six months ended June 30, 2025 was flat compared to the net cash used for the same period in 2024. For the six months ended June 30, 2025, the $11.7 million increase in net cash used in financing activities compared to the same period in 2024 was primarily due to an increase of $17.5 million in dividend and dividend equivalent payments, partially offset by a decrease in repurchases of common stock. 30 Table of Contents Cash Requirements Although consequences of economic uncertainties and macroeconomic conditions, including tariffs and retaliatory measures and announcements regarding same, and other factors could adversely affect our liquidity and capital resources in the future, and cash requirements may fluctuate based on the timing and extent of many factors such as those discussed above, we believe that our balances of cash, cash equivalents and short-term investments of $1,146.1 million as of June 30, 2025, along with cash generated by ongoing operations, will be sufficient to satisfy our liquidity requirements for the next 12 months and beyond. Our material cash requirements include the following contractual and other obligations: Purchase Obligations Purchase obligations represent commitments to our suppliers and other parties requiring the purchases of goods or services. Our purchase obligations primarily consist of wafer and other inventory purchases, assembly and other manufacturing services, construction of manufacturing and R&D facilities, purchases of production and other equipment, and license arrangements. In May 2022, we entered into a long-term supply agreement in order to secure manufacturing production capacity for silicon wafers over a four-year period. As of June 30, 2025, we had remaining prepayments under this agreement of $60.0 million reported in other current assets on the Condensed Consolidated Balance Sheets. As of June 30, 2025, total estimated future unconditional purchase commitments to all suppliers and other parties, net of the $60.0 million prepayment, were $449.0 million, of which $397.2 million was due within a year. Operating Leases Operating lease obligations represent the undiscounted remaining lease payments primarily for our leased facilities. As of June 30, 2025, these obligations totaled $19.9 million, of which $4.0 million was short-term. Capital Return to Stockholders In February 2025, our Board of Directors approved a stock repurchase program authorizing us to repurchase up to $500.0 million of our common stock through February 2028. Shares are retired upon repurchase. We repurchased 3,900 shares of our common stock for an aggregate purchase price of $2.6 million during the three months ended June 30, 2025. No repurchases were made during the three months ended March 31, 2025. As of June 30, 2025, $497.4 million remained available for future repurchases under the program. We currently have a dividend program approved by our Board of Directors, pursuant to which we intend to pay quarterly cash dividends on our common stock. Based on our historical practice, stockholders of record as of the last business day of the quarter are entitled to receive the quarterly cash dividends when and if declared by the Board of Directors, which are payable to the stockholders in the following month. As of June 30, 2025, accrued cash dividends totaled $74.7 million. The declaration of any future cash dividends is at the discretion of our Board of Directors and will depend on, among other things, our financial condition, results of operations, capital requirements, business conditions and other factors that our Board of Directors may deem relevant, as well as a determination that cash dividends are in the best interests of our stockholders. Other Long-Term Obligations Other long-term obligations primarily include payments for deferred compensation plan liabilities and accrued dividend equivalents. As of June 30, 2025, these obligations totaled $97.5 million. 31 Table of Contents