Semiconductor designer Power Integrations (NASDAQ: POWI) reported Q1 CY2026 results beating Wall Street’s revenue expectations, with sales up 2.6% year on year to $108.3 million. Guidance for next quarter’s revenue was optimistic at $117.5 million at the midpoint, 2.2% above analysts’ estimates. Its non-GAAP profit of $0.25 per share was 11% above analysts’ consensus estimates.
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Power Integrations (POWI) Q1 CY2026 Highlights:
- Revenue: $108.3 million vs analyst estimates of $106.6 million (2.6% year-on-year growth, 1.6% beat)
- Adjusted EPS: $0.25 vs analyst estimates of $0.23 (11% beat)
- Adjusted Operating Income: $12.65 million vs analyst estimates of $11 million (11.7% margin, 15% beat)
- Revenue Guidance for Q2 CY2026 is $117.5 million at the midpoint, above analyst estimates of $115 million
- Operating Margin: 1.3%, down from 6.4% in the same quarter last year
- Free Cash Flow Margin: 16.7%, down from 19.6% in the same quarter last year
- Inventory Days Outstanding: 289, down from 313 in the previous quarter
- Market Capitalization: $4.36 billion
Company Overview
A leading supplier of parts for electronics such as home appliances, Power Integrations (NASDAQ: POWI) is a semiconductor designer and developer specializing in products used for high-voltage power conversion.
Revenue Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Power Integrations’s demand was weak and its revenue declined by 4.2% per year. This was below our standards and is a sign of poor business quality. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions.
Long-term growth is the most important, but short-term results matter for semiconductors because the rapid pace of technological innovation (Moore's Law) could make yesterday's hit product obsolete today. Power Integrations’s annualized revenue growth of 1.9% over the last two years is above its five-year trend, which is encouraging. 
This quarter, Power Integrations reported modest year-on-year revenue growth of 2.6% but beat Wall Street’s estimates by 1.6%. Adding to the positive news, Power Integrations’s growth inflected positively this quarter, news that will likely give some shareholders hope. Company management is currently guiding for a 1.4% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 9.5% over the next 12 months. Although this projection implies its newer products and services will fuel better top-line performance, it is still below average for the sector.
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Product Demand & Outstanding Inventory
Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business’ capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.
This quarter, Power Integrations’s DIO came in at 289, which is 52 days above its five-year average. These numbers suggest that despite the recent decrease, the company’s inventory levels are higher than what we’ve seen in the past.
Key Takeaways from Power Integrations’s Q1 Results
It was good to see Power Integrations beat analysts’ EPS expectations this quarter. We were also excited its adjusted operating income outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this was a solid print. The stock traded up 4.3% to $74.99 immediately after reporting.
Power Integrations had an encouraging quarter, but one earnings result doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here (it’s free).
