MONOLITHIC POWER SYSTEMS, INC.

Previous wording

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, export controls 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.

Current wording

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 announcements regarding same, export controls 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.

Previous wording

We work with third parties to manufacture, assemble and test 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.

Current wording

We work with third parties to manufacture, assemble and test our ICs and power solutions. This has enabled us to limit our capital expenditures and fixed costs, while focusing our engineering and design resources on our core strengths.

Previous wording

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.

Current wording

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, in most situations, can cancel or reschedule orders without incurring a significant penalty, make the forecasting of our orders, revenue and expenses difficult.

Previous wording

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 direct customers in Asia was 94% and 93% of our total revenue for the three months ended June 30, 2026 and 2025, respectively. Our revenue from sales to direct customers in Asia was 93% of our total revenue for each of the six months ended June 30, 2026 and 2025. 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.

Current wording

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 direct customers in Asia was 93% and 91% of our total revenue for the three months ended September 30, 2026 and 2025, respectively. Our revenue from sales to direct customers in Asia was 93% of our total revenue for each of the nine months ended September 30, 2026 and 2025. 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.

Previous wording

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 the same, increased interest rates, and fluctuations in currency rates. We remain cautious in light of continued challenging global 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.

Current wording

The semiconductor industry is impacted by various macroeconomic challenges including fluctuations in consumer spending, fluctuations in demand for semiconductors, availability of goods in the supply chain, rising inflation, global tariffs and retaliatory measures and announcements regarding the same, increased interest rates, and fluctuations in currency rates. We remain cautious in light of continued challenging global macroeconomic conditions and will continue to monitor the potential impact on our operations while implementing business strategies to mitigate these challenges. 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.

Previous wording

There have been no material changes during the six months ended June 30, 2026 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, 2025.

Current wording

There have been no material changes during the nine months ended September 30, 2026 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, 2025.

Previous wording

Revenue for the three months ended June 30, 2026 was $980.6 million, an increase of $316.1 million, or 47.6%, from $664.6 million for the three months ended June 30, 2025. The increase in revenue was primarily due to increased demand for products serving our enterprise data and communications end markets. In addition, a higher product mix of power solutions, which generally carry higher average selling prices than discrete ICs, also contributed to the increase in year over year revenue.

Current wording

Revenue for the three months ended September 30, 2026 was $1,202.4 million, an increase of $465.2 million, or 63.1%, from $737.2 million for the three months ended September 30, 2025. The increase in revenue was primarily due to increased demand for products serving our enterprise data, communications and automotive end markets. In addition, a higher product mix of power solutions, which carry higher average selling prices than discrete ICs, also contributed to the increase in year over year revenue.

Previous wording

For the six months ended June 30, 2026, revenue for enterprise data end market increased $366.5 million, or 132.4%, from the same period in 2025. This increase was primarily due to higher sales of power management solutions for artificial intelligence (“AI”) and server applications. Revenue from the storage and computing end market of $374.2 million decreased $9.6 million, or 2.5%, from the same period in 2025. For the six months ended June 30, 2026, automotive revenue of $309.4 million increased $19.4 million, or 6.7%, from the same period in 2025 due to higher sales of applications supporting infotainment and lighting systems. Communications end market revenue of $243.0 million increased $97.6 million, or 67.1%, from the same period in 2025 due to higher sales of power solutions for optical modules and switches. For the six months ended June 30, 2026, consumer end market revenue decreased $5.3 million, or 4.5%, from the same period in 2025. Revenue of $103.4 million from the industrial end market increased $14.1 million, or 15.8%, from the same period in 2025. This increase was primarily due to higher sales for power sources.

Current wording

For the three months ended September 30, 2026, revenue for the enterprise data end market increased $315.3 million, or 164.6%, from the same period in 2025. This increase was primarily due to higher sales of power management solutions for artificial intelligence (“AI”) and server applications. For the three months ended September 30, 2026, automotive end market revenue of $180.7 million increased $29.2 million, or 19.2%, from the same period in 2025 due to higher sales of applications supporting advanced driver assistance systems. For the three months ended September 30, 2026, communications end market revenue of $187.4 million increased $107.6 million, or 134.7%, from the same period in 2025 primarily due to higher sales of power solutions for optical modules and switches.

Previous wording

Revenue for the six months ended June 30, 2026 was $1,784.8 million, an increase of $482.7 million, or 37.1%, from $1,302.1 million for the six months ended June 30, 2025. The increase in revenue was primarily due to increased demand for products serving our enterprise data and communications end markets. In addition, a higher product mix of power solutions, which generally carry higher average selling prices than discrete ICs, also contributed to the increase in year over year revenue.

Current wording

Revenue for the nine months ended September 30, 2026 was $2,987.2 million, an increase of $947.9 million, or 46.5%, from $2,039.3 million for the nine months ended September 30, 2025. The increase in revenue was primarily due to increased demand for products serving our enterprise data, communications and automotive end markets. In addition, a higher product mix of power solutions, which carry higher average selling prices than discrete ICs, also contributed to the increase in year over year revenue.

Previous wording

By end market, second quarter 2026 revenue for the enterprise data end market increased $236.6 million, or 164.3%, from the same period in 2025. This increase was primarily due to higher sales of power management solutions for artificial intelligence (“AI”) and server applications. Revenue from the storage and computing end market of $199.8 million increased $4.5 million, or 2.3%, from the same period in 2025. Second quarter 2026 automotive end market revenue of $157.1 million increased $11.9 million, or 8.2%, from the same period in 2025 due to higher sales of applications supporting infotainment and lighting systems. Communications end market revenue of $131.6 million increased $57.8 million, or 78.3%, from the same period in 2025 due to higher sales of power solutions for optical modules and switches. Second quarter 2026 consumer end market revenue decreased $2.9 million, or 4.8%, from the same period in 2025. Revenue of $54.8 million from the industrial end market increased $8.1 million, or 17.3%, from the same period in 2025.

Current wording

For the nine months ended September 30, 2026, revenue for enterprise data end market increased $681.8 million, or 145.6%, from the same period in 2025. This increase was primarily due to higher sales of power management solutions for AI and server applications. For the nine months ended September 30, 2026, automotive end market revenue of $490.1 million increased $48.5 million, or 11.0%, from the same period in 2025 primarily due to higher sales of applications supporting advanced driver assistance systems, infotainment and lighting systems. For the nine months ended September 30, 2026, communications end market revenue of $430.5 million increased $205.1 million, or 91.0%, from the same period in 2025 primarily due to higher sales of power solutions for optical modules and switches.

Previous wording

Cost of revenue was $439.6 million, or 44.8% of revenue, for the three months ended June 30, 2026, and $298.6 million, or 44.9% of revenue, for the three months ended June 30, 2025. The $141.0 million increase in cost of revenue was primarily driven by higher shipment volume and product mix.

Current wording

Cost of revenue was $536.9 million, or 44.6% of revenue, for the three months ended September 30, 2026, and $330.9 million, or 44.9% of revenue, for the three months ended September 30, 2025. The $206.0 million increase in cost of revenue was primarily driven by higher shipment volume and increased product mix of power solutions, which carry higher average costs than discrete ICs.

Previous wording

Gross margin was 55.2% for the three months ended June 30, 2026, compared with 55.1% for the three months ended June 30, 2025.

Current wording

Gross margin was 55.4% for the three months ended September 30, 2026, compared with 55.1% for the three months ended September 30, 2025. The increase in gross margin was mainly driven by product mix.

Previous wording

Cost of revenue was $798.7 million, or 44.7% of revenue, for the six months ended June 30, 2026, and $582.9 million, or 44.8% of revenue, for the six months ended June 30, 2025. The $215.8 million increase in cost of revenue was primarily driven by higher shipment volume and product mix.

Current wording

Cost of revenue was $1,335.6 million, or 44.7% of revenue, for the nine months ended September 30, 2026, and $913.8 million, or 44.8% of revenue, for the nine months ended September 30, 2025. The $421.8 million increase in cost of revenue was primarily driven by higher shipment volume and increased product mix of power solutions, which carry higher average costs than discrete ICs.

Previous wording

Gross margin was 55.3% for the six months ended June 30, 2026, compared with 55.2% for the six months ended June 30, 2025.

Current wording

Gross margin was 55.3% for the nine months ended September 30, 2026, compared with 55.2% for the nine months ended September 30, 2025.

Previous wording

R&D expenses were $118.6 million, or 12.1% of revenue, for the three months ended June 30, 2026, and $96.3 million, or 14.5% of revenue, for the three months ended June 30, 2025. The $22.3 million increase in R&D expenses was primarily due to an $11.2 million increase in cash-based compensation and benefits, a $6.6 million increase in new product development expenses, and a $1.3 million increase in facilities costs.

Current wording

R&D expenses were $140.6 million, or 11.7% of revenue, for the three months ended September 30, 2026, and $98.2 million, or 13.3% of revenue, for the three months ended September 30, 2025. The $42.4 million increase in R&D expenses was primarily due to a $21.7 million increase in cash-based compensation and benefits, an $11.8 million increase in stock-based compensation, and a $3.3 million increase in new product development expenses.

Previous wording

R&D expenses were $219.2 million, or 12.4% of revenue, for the six months ended June 30, 2026, and $188.5 million, or 14.5% of revenue, for the six months ended June 30, 2025. The $30.7 million increase in R&D expenses was primarily due to a $15.5 million increase in cash-based compensation and benefits, a $5.7 million increase in new product development expenses, a $2.6 million increase in facilities costs, and a $2.2 million increase in laboratory and other supplies.

Current wording

R&D expenses were $359.8 million, or 12.1% of revenue, for the nine months ended September 30, 2026, and $286.7 million, or 14.1% of revenue, for the nine months ended September 30, 2025. The $73.1 million increase in R&D expenses was primarily due to a $37.2 million increase in cash-based compensation and benefits, an $11.4 million increase in stock-based compensation, an $8.9 million increase in new product development expenses, and a $4.1 million increase in laboratory and other supplies.

Previous wording

SG&A expenses were $118.6 million, or 12.1% of revenue, for the three months ended June 30, 2026, and $105.0 million, or 15.8% of revenue, for the three months ended June 30, 2025. The $13.6 million increase in SG&A expenses was primarily driven by an $11.5 million increase in cash-based compensation and benefits and a $5.7 million increase in legal expenses, partially offset by a $6.8 million decrease in stock-based compensation.

Current wording

SG&A expenses were $167.3 million, or 13.9% of revenue, for the three months ended September 30, 2026, and $112.9 million, or 15.3% of revenue, for the three months ended September 30, 2025. The $54.4 million increase in SG&A expenses was primarily driven by a $31.7 million increase in stock-based compensation, a $10.9 million increase in cash-based compensation and benefits, and a $9.3 million increase in legal expenses.

Previous wording

SG&A expenses were $221.9 million, or 12.4% of revenue, for the six months ended June 30, 2026, and $197.2 million, or 15.1% of revenue, for the six months ended June 30, 2025. The $24.7 million increase in SG&A expenses was primarily driven by a $21.4 million increase in cash-based compensation and benefits, a $10.1 million increase in legal expenses, a $5.1 million increase in employer payroll taxes related to vested equity awards, and a $1.6 million increase in software licensing fees, partially offset by a $17.9 million decrease in stock-based compensation.

Current wording

SG&A expenses were $389.2 million, or 13.1% of revenue, for the nine months ended September 30, 2026, and $310.1 million, or 15.2% of revenue, for the nine months ended September 30, 2025. The $79.1 million increase in SG&A expenses was primarily driven by a $32.3 million increase in cash-based compensation and benefits, a $13.9 million increase in stock-based compensation, and a $19.4 million increase in legal expenses.

Previous wording

The income tax expense for the three and six months ended June 30, 2026 was $64.4 million and $118.4 million, respectively, or an effective tax rate of 20.0% and 20.8%, respectively. The income tax expense for the three and six months ended June 30, 2025 was $42.0 million and $80.8 million, respectively, or an effective tax rate of 23.7% and 23.0%, respectively. The reduction in rates from the comparable periods was primarily due to the impact of higher non-deductible stock-based compensation reported in the periods in 2025 than in 2026.

Current wording

The income tax expense for the three and nine months ended September 30, 2026 was $95.6 million and $213.9 million, respectively, or an effective tax rate of 26.1% and 22.9%, respectively. The income tax expense for the three and nine months ended September 30, 2025 was $25.8 million and $106.6 million, respectively, or an effective tax rate of 12.6% and 19.2%, respectively. The increase in rates from the comparable periods was primarily due to tax adjustments resulting from the U.S. federal tax law changes enacted in 2025 that reduced the effective tax rate for that year.

Previous wording

As of June 30, 2026, we had cash and cash equivalents of $1,005.6 million and short-term investments of $408.2 million, compared with cash and cash equivalents of $1,099.3 million and short-term investments of $157.2 million as of December 31, 2025. As of June 30, 2026, $659.5 million of cash and cash equivalents and $309.2 million of short-term investments were held by our foreign subsidiaries. For the six months ended June 30, 2026, we repatriated $140 million from certain foreign subsidiaries to the U.S. with minimal tax impact. We anticipate that earnings from other foreign subsidiaries will continue to be indefinitely reinvested.

Current wording

As of September 30, 2026, we had cash and cash equivalents of $560.5 million and short-term investments of $530.7 million, compared with cash and cash equivalents of $1,099.3 million and short-term investments of $157.2 million as of December 31, 2025. As of September 30, 2026, $349.2 million of cash and cash equivalents and $313.2 million of short-term investments were held by our foreign subsidiaries. For the nine months ended September 30, 2026, we repatriated $625.0 million from certain foreign subsidiaries to the U.S. with minimal tax impact. We anticipate that earnings from other foreign subsidiaries will continue to be indefinitely reinvested.

Previous wording

For the six months ended June 30, 2026, the $15.9 million decrease in net cash provided by operating activities, compared to the same period in 2025, was primarily due to an overall increase in working capital needs.

Current wording

For the nine months ended September 30, 2026, the $34.8 million increase in net cash provided by operating activities, compared to the same period in 2025, was primarily due to increased cash collections from sales, partially offset by increased inventory purchases and other changes in working capital.

Previous wording

For the six months ended June 30, 2026, the $123.6 million increase in net cash used in investing activities, compared to the same period in 2025, was primarily due to $67.4 million higher net purchases of investments and $64.8 million higher net purchases of property and equipment.

Current wording

For the nine months ended September 30, 2026, the $439.4 million increase in net cash used in investing activities, compared to the same period in 2025, was primarily due to $357.0 million higher net purchases of investments and $91.6 million higher net purchases of property and equipment.

Previous wording

For the six months ended June 30, 2026, the $43.3 million increase in net cash used in financing activities, compared to the same period in 2025, was primarily due to an increase of $44.4 million in dividend and dividend equivalent payments.

Current wording

For the nine months ended September 30, 2026, the $518.9 million increase in net cash used in financing activities, compared to the same period in 2025, was primarily due to an increase of $451.8 in repurchases of common stock and an increase of $68.0 million in dividend and dividend equivalent payments.

Previous wording

Although consequences of economic uncertainties and macroeconomic conditions, including tariffs and retaliatory measures and announcements regarding the same, and many 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 $1,413.8 million as of June 30, 2026, along with cash generated by ongoing operations, will be sufficient to satisfy our liquidity requirements for the next 12 months.

Current wording

Although consequences of economic uncertainties and macroeconomic conditions, including tariffs and retaliatory measures and announcements regarding the same, and many 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 $1,091.2 million as of September 30, 2026, along with cash generated by ongoing operations, will be sufficient to satisfy our liquidity requirements for the next 12 months.

Previous wording

As of June 30, 2026, total estimated future unconditional purchase commitments to all suppliers and other parties were $571.0 million, of which $542.1 million was due within a year.

Current wording

As of September 30, 2026, total estimated future unconditional purchase commitments to all suppliers and other parties were $767.3 million, of which $730.1 million was due within a year.

Previous wording

In February 2025, our Board of Directors approved a new 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 3,000 shares of our common stock for an aggregate purchase price of $4.0 million during the three and six months ended June 30, 2026. As of June 30, 2026, $489.3 million remained available for future repurchases under the program. In July 2026, our Board of Directors increased the authorized amount of the repurchase program by an additional $500.0 million.

Current wording

In February 2025, our Board of Directors approved a new stock repurchase program authorizing us to repurchase up to $500.0 million of our common stock through February 2028. In July 2026, our Board of Directors increased the authorized amount of the repurchase program by an additional $500.0 million. We repurchased 362,000 and 365,000 shares of our common stock for an aggregate purchase price of $453.4 million and $457.5 million during the three and nine months ended September 30, 2026. As of September 30, 2026, $535.9 million remained available for future repurchases under the program.

Previous wording

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, 2026, accrued dividends totaled $98.3 million.

Current wording

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 September 30, 2026, accrued dividends totaled $97.6 million.

Previous wording

Other long-term obligations primarily include deferred compensation plan liabilities and accrued dividend equivalents. As of June 30, 2026, these obligations totaled $108.6 million.

Current wording

Other long-term obligations primarily include deferred compensation plan liabilities and accrued dividend equivalents. As of September 30, 2026, these obligations totaled $111.5 million.