Power Integrations (POWI) Q2 2025: GaN Revenue Up 50% as Data Center and Industrial Drive Strategic Shift
Power Integrations’ Q2 marked a strategic inflection, with GaN-based product revenue up more than 50% year-to-date and industrial now the largest segment at 40% of sales. The company faces near-term appliance softness tied to tariffs and inventory pull-ins, but is leveraging proprietary high-voltage GaN and gate driver technology to win in high-growth verticals like data center, automotive, and clean energy. New CEO Jen Lloyd signaled a sharpened focus on R&D efficiency and system-level solutions, positioning POWI for long-term double-digit growth despite cyclical and macro headwinds.
Summary
- GaN Acceleration: Proprietary high-voltage GaN product revenue surged, underpinning expansion into data center and automotive.
- Industrial Lead: Industrial segment became the largest contributor, offsetting appliance-driven consumer weakness.
- Leadership Reset: New CEO prioritizes R&D efficiency and system-level innovation to drive next-phase growth.
Performance Analysis
Power Integrations delivered a 9% year-over-year revenue increase to $116 million, with sequential growth of 10% led by the industrial segment. Industrial now represents 40% of total sales, up from historical levels, as metering, automation, and high-power applications drove strength. Notably, metering revenues are on track for 20%+ annual growth, with wins in Japan and Europe leveraging higher ASP, or average selling price, GaN-based products. High-power revenues grew over 40% in the first half, fueled by clean energy and EV traction inverter wins.
Consumer sales, 37% of revenue, declined sequentially after a tariff-fueled Q1 pull-in, with major appliances facing a sharp slowdown as customers front-loaded inventory ahead of tariff implementation. Communication and computer segments saw seasonal upticks, but the overall mix shifted away from lower-margin legacy consumer toward higher-value industrial and automotive. Gross margin held steady at 55.8% despite higher input costs, while operating expenses rose due to executive transition, R&D, and litigation. Cash from operations was $29 million, supporting over $44 million in capital return via buybacks and dividends. Channel and balance sheet inventory remain healthy, positioning POWI for reacceleration post-correction.
- Industrial Outperformance: Segment grew nearly 30% sequentially, now at a record 40% of sales, with metering and high-power as key drivers.
- GaN Revenue Surge: GaN-based product revenue rose over 50% in H1, outpacing core business and enabling entry into data center and automotive.
- Consumer Pullback: Appliance sales fell after Q1 front-running of tariffs, with major appliances down despite offsetting design wins in gaming.
POWI’s business mix is shifting structurally toward higher-margin, higher-growth end markets, even as near-term volatility from tariffs and inventory cycles weighs on the consumer segment.
Executive Commentary
"The core of our business, almost 90% of sales, is power conversion ICs for appliances, consumer electronics, and a wide array of industrial applications. We have a market-leading portfolio of products for these markets with more in the pipeline ... Notwithstanding the near-term uncertainty, our core business is back on a growth trajectory after the long post-pandemic down cycle."
Jen Lloyd, President and CEO
"Sales were up 10% sequentially. As expected, industrial was the primary driver of the increase, rising nearly 30% from the prior quarter on strength in metering, home and building automation, broad-based industrial, and high power, where we saw growth in solar energy and high-voltage DC transmission."
Sandeep Nair, Chief Financial Officer
Strategic Positioning
1. Proprietary High-Voltage GaN: Technology Moat and Market Expansion
Power Integrations’ proprietary GaN (gallium nitride, a wide-bandgap semiconductor known for high efficiency at high voltages) is a core differentiator, with the company being first to market at 1250V and now sampling 1700V devices. This voltage leadership enables unique system-level solutions for 800V data center architectures and next-generation EVs, where competitors relying on TSMC face process risk after TSMC’s announced exit from the GaN foundry business. POWI’s IDM (integrated device manufacturer, a company that both designs and fabricates its chips) model provides control over process and device integration, supporting cost, yield, and performance advantages.
2. Segment Mix Shift: From Consumer to Industrial and High-Power
The company’s revenue mix is shifting decisively toward industrial and high-power applications, including metering, automation, clean energy, and EV traction. This evolution reduces dependence on cyclical consumer appliances, which are currently pressured by tariffs and housing softness, and positions POWI for secular growth as global electrification and efficiency standards rise.
3. Data Center and AI: System-Level Content in Next-Gen Architectures
POWI is targeting AI data center power delivery with its 1250V and 1700V GaN platforms, which support new 800V DC architectures championed by NVIDIA. The company is already shipping into auxiliary power supplies and plans to sample main converter products in 2026, aiming for up to $1,000 content per rack. System-level reliability and integration, rather than discrete components, are the focus, with GaN expected to displace silicon carbide and MOSFETs for performance and cost reasons.
4. R&D Efficiency and Growth Model Reset
New CEO Jen Lloyd is prioritizing R&D efficiency to accelerate product cycles and align development with high-value verticals, with the explicit goal to “invigorate the growth to achieve the model that we set out, the double digit growth model.” This includes adapting teams and processes for the requirements of automotive and data center, and leveraging system expertise to anticipate customer needs.
5. Global Design Wins and Geographic Diversification
POWI is winning designs across regions and end-markets, including new metering wins in Japan and Europe, traction inverters for US heavy equipment, and automotive programs in China, India, and the US. This diversification spreads risk and supports the company’s path to material automotive revenue by 2026, with a target of $100 million by 2029.
Key Considerations
Q2 was a transitional quarter, with strategic pivots and technology milestones offsetting near-term cyclical headwinds. Investors should focus on the company’s ability to execute on its high-voltage GaN roadmap, manage inventory and tariff-driven volatility, and deliver on its double-digit growth ambition through vertical and geographic expansion.
Key Considerations:
- GaN Process Control: TSMC’s GaN foundry exit validates POWI’s IDM strategy, but also raises industry-wide supply chain questions and competitive realignment.
- Tariff and Inventory Overhang: Appliance pull-forward and steel tariffs have created a near-term air pocket, with major appliances down after a strong first half; correction expected to last at least two quarters.
- R&D Productivity: CEO Lloyd’s focus on R&D efficiency could be a lever for faster innovation and margin leverage, but execution risk remains as the company pivots to more complex system-level products.
- Automotive and Data Center Ramp: Automotive design wins are tracking toward material revenue by 2026, while data center content expansion hinges on successful GaN main converter sampling and ecosystem adoption.
Risks
Persistent macro headwinds, including tariffs, housing softness, and global inventory adjustments, could weigh on near-term results, especially in consumer appliances. The transition to higher-power and data center markets entails execution risk, particularly as POWI must adapt R&D and go-to-market strategies for more demanding customers. Competitive dynamics in GaN, especially as rivals seek alternative foundries, and potential patent litigation, also represent material uncertainties.
Forward Outlook
For Q3, Power Integrations guided to:
- Revenue of $118 million, plus or minus $5 million
- Non-GAAP gross margin between 55% and 55.5%
For full-year 2025, management maintained its outlook for:
- Continued strength in industrial and metering, with consumer expected to remain soft due to tariffs
Management highlighted several factors that shape the outlook:
- Tariff-driven appliance correction expected to persist for at least two quarters, with channel inventory remaining healthy
- Growth in industrial, metering, high-power, and automotive expected to offset consumer softness, supporting a return to double-digit growth in 2026
Takeaways
Power Integrations is navigating a cyclical trough in consumer appliances while building a foundation for secular growth in high-value verticals.
- Technology Differentiation: Proprietary high-voltage GaN and IDM integration create a sustainable moat as the industry pivots to 800V and above architectures.
- Business Mix Evolution: Industrial and high-power segments now drive growth and margin, diversifying away from tariff-exposed consumer appliances.
- Execution Watch: Investors should monitor R&D efficiency gains, automotive and data center design win conversion, and the pace of inventory normalization for signs of sustained reacceleration.
Conclusion
Power Integrations is executing a strategic shift from legacy consumer to high-growth, high-value industrial, automotive, and data center markets, anchored by proprietary GaN technology. While near-term volatility persists due to tariffs and inventory cycles, the company’s technology roadmap and leadership reset position it for renewed growth and margin expansion as macro headwinds subside.
Industry Read-Through
TSMC’s exit from the GaN foundry business is a pivotal industry event, pressuring fabless competitors and favoring integrated device manufacturers with proprietary process control. The shift to 800V DC architectures in data centers and EVs is accelerating demand for high-voltage, high-efficiency power conversion, with GaN and silicon carbide as key battlegrounds. Appliance and consumer electronics supply chains remain exposed to tariff and inventory swings, but secular electrification and efficiency trends are creating new opportunities for differentiated players across power semiconductors, industrial automation, and automotive electrification.