We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Should Investors Buy MPWR as AI Growth Meets a Premium Valuation?
Read MoreHide Full Article
Key Takeaways
MPWR's Q2 revenues rose 47.6% and non-GAAP EPS climbed 54.4% as AI and server demand accelerated.
Enterprise Data revenue surged 164.3% to $380.6 million, prompting MPWR to raise its 2026 growth floor.
MPWR trades at 44.1X forward earnings, while near-term gross-margin expansion remains limited.
Monolithic Power Systems, Inc. (MPWR - Free Report) is entering a higher earnings base as artificial intelligence (AI) and server demand lifts its data-center power business. Second-quarter 2026 revenues rose 47.6% year over year, while non-GAAP earnings increased 54.4% to $6.50 per share.
The question for investors is whether rapid growth, rising estimates and a broader product opportunity can offset a valuation that remains well above major benchmarks.
MPWR’s AI Growth Is Rewriting the Earnings Base
Enterprise Data revenue jumped 164.3% year over year to $380.6 million and represented 38.8% of second-quarter revenues. Existing and new customer ramps, greater module content, platform refreshes and central processing unit server demand supported the increase.
Management raised its 2026 Enterprise Data growth floor to 130% from 85%. Communications revenue also advanced 78.3%, reflecting higher sales of power solutions for optical modules and switches.
The Zacks Consensus Estimate calls for 2026 revenues of $4.084 billion and earnings of $27.11 per share. For 2027, the consensus stands at $5.156 billion in revenues and $34.73 per share in earnings.
The current-year earnings estimate has moved 16% higher over the past four weeks. Consensus earnings for 2026 also stand well above the $17.77 per share reported for 2025, with another increase projected for 2027.
Image Source: Zacks Investment Research
Image Source: Zacks Investment Research
MPWR’s Premium Multiple Raises the Bar
MPWR trades at 44.1X forward 12-month earnings, compared with 26.9X for its sub-industry, 21.3X for the broader technology sector and 20.7X for the S&P 500.
The current multiple is below MPWR’s five-year median of 55.8X but remains well above outside benchmarks. That premium places more emphasis on continued earnings expansion as investors assess the stock.
Image Source: Zacks Investment Research
Monolithic Faces Margin and Data Center Risks
Non-GAAP gross margin was 55.6% in the second quarter and remains near the low end of management’s model. Third-quarter guidance of 55.4%-56% points to limited near-term margin expansion, while order visibility does not extend through 2027.
Enterprise Data’s 38.8% revenue share also increases exposure to AI and server spending cycles. Analog Devices, Inc. (ADI - Free Report) is also targeting AI data-center power delivery with analog and mixed-signal solutions. Microchip Technology Incorporated (MCHP - Free Report) competes across analog, power management, timing and memory products used in data-center applications.
MPWR’s Balance Sheet Supports the Expansion
Cash, cash equivalents and short-term investments totaled $1.41 billion at June 30, 2026, while second-quarter operating cash flow was $227.9 million. That liquidity supports product development and capacity expansion.
MPWR has extended its capacity goal significantly beyond $6 billion. The company is expanding wafer supply and more complex module and system assembly while diversifying its global supply chain.
MPWR’s Bullish Signal Meets Weak Style Scores
MPWR’s earnings trajectory remains favorable, but the valuation makes the investment case less forgiving. The stock currently carries a Zacks Rank #1 (Strong Buy), reflecting favorable short-term earnings-estimate trends.
The Style Scores are less supportive. MPWR has a Value Score of F, Growth Score of D, Momentum Score of D and VGM Score of F. The combination is mixed rather than decisive because the Zacks Rank favors near-term estimate revisions, while the weak Style Scores do not provide the A or B confirmation that can strengthen a top-ranked stock selection.
View the Zacks #1 Rank List
Image: Bigstock
Should Investors Buy MPWR as AI Growth Meets a Premium Valuation?
Key Takeaways
Monolithic Power Systems, Inc. (MPWR - Free Report) is entering a higher earnings base as artificial intelligence (AI) and server demand lifts its data-center power business. Second-quarter 2026 revenues rose 47.6% year over year, while non-GAAP earnings increased 54.4% to $6.50 per share.
The question for investors is whether rapid growth, rising estimates and a broader product opportunity can offset a valuation that remains well above major benchmarks.
MPWR’s AI Growth Is Rewriting the Earnings Base
Enterprise Data revenue jumped 164.3% year over year to $380.6 million and represented 38.8% of second-quarter revenues. Existing and new customer ramps, greater module content, platform refreshes and central processing unit server demand supported the increase.
Management raised its 2026 Enterprise Data growth floor to 130% from 85%. Communications revenue also advanced 78.3%, reflecting higher sales of power solutions for optical modules and switches.
Image Source: Zacks Investment Research
Monolithic’s Estimate Revisions Keep Moving Higher
The Zacks Consensus Estimate calls for 2026 revenues of $4.084 billion and earnings of $27.11 per share. For 2027, the consensus stands at $5.156 billion in revenues and $34.73 per share in earnings.
The current-year earnings estimate has moved 16% higher over the past four weeks. Consensus earnings for 2026 also stand well above the $17.77 per share reported for 2025, with another increase projected for 2027.
Image Source: Zacks Investment Research
Image Source: Zacks Investment Research
MPWR’s Premium Multiple Raises the Bar
MPWR trades at 44.1X forward 12-month earnings, compared with 26.9X for its sub-industry, 21.3X for the broader technology sector and 20.7X for the S&P 500.
The current multiple is below MPWR’s five-year median of 55.8X but remains well above outside benchmarks. That premium places more emphasis on continued earnings expansion as investors assess the stock.
Image Source: Zacks Investment Research
Monolithic Faces Margin and Data Center Risks
Non-GAAP gross margin was 55.6% in the second quarter and remains near the low end of management’s model. Third-quarter guidance of 55.4%-56% points to limited near-term margin expansion, while order visibility does not extend through 2027.
Enterprise Data’s 38.8% revenue share also increases exposure to AI and server spending cycles. Analog Devices, Inc. (ADI - Free Report) is also targeting AI data-center power delivery with analog and mixed-signal solutions. Microchip Technology Incorporated (MCHP - Free Report) competes across analog, power management, timing and memory products used in data-center applications.
MPWR’s Balance Sheet Supports the Expansion
Cash, cash equivalents and short-term investments totaled $1.41 billion at June 30, 2026, while second-quarter operating cash flow was $227.9 million. That liquidity supports product development and capacity expansion.
MPWR has extended its capacity goal significantly beyond $6 billion. The company is expanding wafer supply and more complex module and system assembly while diversifying its global supply chain.
MPWR’s Bullish Signal Meets Weak Style Scores
MPWR’s earnings trajectory remains favorable, but the valuation makes the investment case less forgiving. The stock currently carries a Zacks Rank #1 (Strong Buy), reflecting favorable short-term earnings-estimate trends.
The Style Scores are less supportive. MPWR has a Value Score of F, Growth Score of D, Momentum Score of D and VGM Score of F. The combination is mixed rather than decisive because the Zacks Rank favors near-term estimate revisions, while the weak Style Scores do not provide the A or B confirmation that can strengthen a top-ranked stock selection.
You can see the complete list of today’s Zacks #1 Rank stocks here.