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NVEC Corporation (NVEC - Free Report) reported total revenues of $6.22 million for the third quarter of fiscal 2026, representing a 23% increase from $5.06 million in the year-ago quarter. Growth was driven by a 16% increase in product sales and a sharp 335% jump in contract research and development revenue.
Net income rose 11% year over year to $3.38 million, or 70 cents per diluted share, compared with $3.05 million, or 63 cents per share, in the prior-year period. While revenues and earnings both advanced, gross margin declined to 79% from 84% a year earlier, reflecting a less profitable product mix and a higher proportion of distributor sales. For the first nine months of fiscal 2026, revenues were essentially flat year over year at $18.7 million, up 0.4%, while net income declined 8% to $10.3 million, or $2.12 per diluted share.
Beyond headline revenues and earnings, NVE posted strong profitability metrics for the quarter. Operating margin reached 60%, pretax margin was 68%, and net margin stood at 54%, underscoring the company’s ability to convert revenues into profit despite margin pressure.
Operating expenses declined 12% year over year, reflecting a 9% reduction in research and development spending and a 19% decrease in selling, general and administrative expenses. Cash flow from operations totaled $12.2 million for the first nine months of the fiscal year, while inventories declined modestly, indicating improved demand and inventory management. The balance sheet remained conservative, with total assets of about $60.0 million and total liabilities of $1.7 million as of Dec. 31, 2025.
Management Commentary
Management characterized the quarter as one of broad-based growth across revenue lines. Chief executive officer Daniel Baker highlighted strength in both defense and nondefense markets, as well as growth across distributor and direct sales channels. Executives also emphasized that rising distributor sales, while dilutive to gross margin, are viewed positively as a sign that excess inventory in the semiconductor supply chain is being worked down and end-user demand is improving. Management expressed optimism that the company has “the wind at our backs,” supported by improving industry conditions and a strong product portfolio.
Factors Influencing the Headline Numbers
Several factors influenced quarterly results. The decline in gross margin was primarily due to product mix and increased distributor sales, which typically carry lower margins than direct sales. Interest income edged lower as proceeds from maturing bonds were used in part to fund dividends and capital expenditures. The effective tax rate increased to 20% from 15% a year earlier, largely due to the noncash impact of tax law changes, partially offset by anticipated advanced manufacturing investment tax credits later in the fiscal year. These headwinds were more than offset by revenue growth and lower operating expenses, supporting higher net income.
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The company noted that newly installed manufacturing equipment is expected to be placed into service by March 31, which should expand capacity, improve capabilities and support new product introductions. Management also indicated optimism around defense demand normalizing and nondefense opportunities, particularly in medical devices, industrial automation, and emerging applications tied to the Internet of Things and artificial intelligence of things. While specific revenue targets were not provided, management repeatedly emphasized expectations for future sales growth driven by new products and expanding customer relationships.
Other Developments
During the third quarter of fiscal 2026, NVE announced a quarterly cash dividend of $1 per share, payable Feb. 27, 2026, to shareholders of record as of Feb. 2, 2026. The company also disclosed the extension of a supplier partnering agreement with Abbott Laboratories for two years through Dec. 31, 2027, including price increases for 2026 and 2027.
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NVEC's Q3 Earnings Rise 11% Y/Y, Highlight Growth Momentum
NVEC Corporation (NVEC - Free Report) reported total revenues of $6.22 million for the third quarter of fiscal 2026, representing a 23% increase from $5.06 million in the year-ago quarter. Growth was driven by a 16% increase in product sales and a sharp 335% jump in contract research and development revenue.
Net income rose 11% year over year to $3.38 million, or 70 cents per diluted share, compared with $3.05 million, or 63 cents per share, in the prior-year period. While revenues and earnings both advanced, gross margin declined to 79% from 84% a year earlier, reflecting a less profitable product mix and a higher proportion of distributor sales. For the first nine months of fiscal 2026, revenues were essentially flat year over year at $18.7 million, up 0.4%, while net income declined 8% to $10.3 million, or $2.12 per diluted share.
NVE Corporation Price, Consensus and EPS Surprise
NVE Corporation price-consensus-eps-surprise-chart | NVE Corporation Quote
Other Key Business Metrics
Beyond headline revenues and earnings, NVE posted strong profitability metrics for the quarter. Operating margin reached 60%, pretax margin was 68%, and net margin stood at 54%, underscoring the company’s ability to convert revenues into profit despite margin pressure.
Operating expenses declined 12% year over year, reflecting a 9% reduction in research and development spending and a 19% decrease in selling, general and administrative expenses. Cash flow from operations totaled $12.2 million for the first nine months of the fiscal year, while inventories declined modestly, indicating improved demand and inventory management. The balance sheet remained conservative, with total assets of about $60.0 million and total liabilities of $1.7 million as of Dec. 31, 2025.
Management Commentary
Management characterized the quarter as one of broad-based growth across revenue lines. Chief executive officer Daniel Baker highlighted strength in both defense and nondefense markets, as well as growth across distributor and direct sales channels. Executives also emphasized that rising distributor sales, while dilutive to gross margin, are viewed positively as a sign that excess inventory in the semiconductor supply chain is being worked down and end-user demand is improving. Management expressed optimism that the company has “the wind at our backs,” supported by improving industry conditions and a strong product portfolio.
Factors Influencing the Headline Numbers
Several factors influenced quarterly results. The decline in gross margin was primarily due to product mix and increased distributor sales, which typically carry lower margins than direct sales. Interest income edged lower as proceeds from maturing bonds were used in part to fund dividends and capital expenditures. The effective tax rate increased to 20% from 15% a year earlier, largely due to the noncash impact of tax law changes, partially offset by anticipated advanced manufacturing investment tax credits later in the fiscal year. These headwinds were more than offset by revenue growth and lower operating expenses, supporting higher net income.
View
The company noted that newly installed manufacturing equipment is expected to be placed into service by March 31, which should expand capacity, improve capabilities and support new product introductions. Management also indicated optimism around defense demand normalizing and nondefense opportunities, particularly in medical devices, industrial automation, and emerging applications tied to the Internet of Things and artificial intelligence of things. While specific revenue targets were not provided, management repeatedly emphasized expectations for future sales growth driven by new products and expanding customer relationships.
Other Developments
During the third quarter of fiscal 2026, NVE announced a quarterly cash dividend of $1 per share, payable Feb. 27, 2026, to shareholders of record as of Feb. 2, 2026. The company also disclosed the extension of a supplier partnering agreement with Abbott Laboratories for two years through Dec. 31, 2027, including price increases for 2026 and 2027.