POWI Q2 Deep Dive: Leadership Transition, GaN Growth, and Tariff Headwinds Shape Outlook

Semiconductor designer Power Integrations (NASDAQ:POWI) reported Q2 CY2025 results topping the market’s revenue expectations, with sales up 9.1% year on year to $115.9 million. On the other hand, next quarter’s revenue guidance of $118 million was less impressive, coming in 7.7% below analysts’ estimates. Its non-GAAP profit of $0.35 per share was in line with analysts’ consensus estimates.

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StockStory’s Take

Power Integrations’ second quarter was defined by both leadership change and shifting demand patterns. The market reacted negatively to results as management called out a marked slowdown in bookings during July, driven by customer caution around tariffs and inventory adjustments—particularly in the appliance segment. Newly appointed CEO Jennifer Lloyd highlighted continued growth in high-voltage GaN products and metering design wins, but also noted that the consumer appliance business is facing short-term pressure from tariffs and a sluggish housing market. CFO Sandeep Nayyar described the booking environment as “nearly 20% below the normal run rate,” prompting a more cautious revenue outlook.

Looking forward, Power Integrations’ guidance is shaped by ongoing uncertainty around tariffs, evolving demand in core consumer electronics, and the company’s ambition to expand in high-growth verticals such as data centers and automotive. Lloyd stressed her intention to “invigorate growth to achieve the double-digit growth model,” focusing on R&D efficiency and aligning product development to emerging opportunities in high-power systems. Management remains optimistic about the long-term potential of proprietary GaN technology, especially as new data center architectures and automotive applications gain traction, despite near-term headwinds.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to growth in industrial and GaN-based products, offset by appliance segment volatility tied to tariffs and front-loaded demand.

• Leadership transition: Jennifer Lloyd, previously at Analog Devices, took over as CEO with a mandate to enhance R&D efficiency and drive growth in new verticals. Balu Balakrishnan transitioned to Executive Chairman, focusing on innovation and IP support until early 2026.
• Industrial and high-power strength: The industrial segment, including metering and high-power applications like solar and battery storage, drove much of the sequential revenue growth. Lloyd highlighted major design wins, such as traction inverters for heavy equipment and electric buses, alongside international metering expansion.
• GaN product momentum: Proprietary gallium nitride (GaN) technology underpinned growth across notebooks, TVs, and gaming, with GaN revenues up over 50% in the first half. Lloyd emphasized that Power Integrations is the only firm currently shipping 1250-volt GaN and has already launched 1700-volt variants for emerging data center and automotive needs.
• Tariff-driven appliance volatility: Appliance sales, a significant portion of the consumer segment, experienced front-loading as U.S. customers rushed to import goods ahead of tariff hikes. Management expects a multi-quarter adjustment as inventories rebalance and tariff impacts play out.
• Competitive landscape and supply chain: TSMC’s exit from the GaN foundry business highlighted the value of Power Integrations’ in-house process control. Management sees this as a strategic differentiator, allowing flexibility and reliability as competitors scramble to find new foundry partners.

Drivers of Future Performance

Power Integrations expects near-term growth to be tempered by tariff-related uncertainties, offset by continued investment in advanced GaN and high-power applications.

• Tariff and macro headwinds: Management cited ongoing adjustments in the appliance segment due to tariffs and macroeconomic factors, including a stagnant housing market, which are expected to suppress consumer-driven revenues for at least the next two quarters.
• GaN and high-power expansion: The company is increasing R&D efforts to accelerate the launch of next-generation GaN products for data centers and automotive, targeting higher-value, high-voltage applications. Lloyd indicated these advancements are essential for achieving long-term growth goals.
• Automotive and metering ramp: Design wins in automotive (across China, India, Europe, and the U.S.) and international metering are projected to drive material revenue contributions by 2026, supporting management’s ambitions for double-digit growth.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be closely monitoring (1) whether Power Integrations can sustain momentum in GaN and high-power design wins, (2) the pace and profitability of automotive and metering revenue ramp-ups, and (3) signs of normalization in the appliance segment as tariff impacts and inventory adjustments settle. Execution of R&D initiatives and leadership’s ability to align product development with emerging high-voltage applications will also be critical for tracking progress.

Power Integrations currently trades at $43.84, down from $47.46 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free).

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