Power conversion and control solutions provider Vicor Corporation (NASDAQ: VICR) reported Q3 CY2025 results beating Wall Street’s revenue expectations, with sales up 18.5% year on year to $110.4 million. Its GAAP profit of $0.63 per share was significantly above analysts’ consensus estimates.

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StockStory’s Take

Vicor’s third quarter was marked by strong operational execution and significant upside in IP licensing, driving results above Wall Street’s expectations and delivering a positive market reaction. Management attributed the quarter’s performance to accelerated adoption of its advanced power modules and a sharp increase in licensing revenues, particularly after reaching new agreements with existing licensees. CEO Patrizio Vinciarelli emphasized, “Our licensing income is going up substantially, and we have line of sight to doubling our licensing business within a couple of years.”

Looking forward, Vicor’s outlook centers on the scaling of its second-generation Vertical Power Delivery (VPD) solutions and further expansion in IP licensing, especially as AI data center requirements increase. Management remains focused on bringing its Gen 5 current multiplier technology to full-scale production for its lead customer in early 2026, while also engaging with additional hyperscalers and OEMs. CFO Jim Schmidt noted, “Fab utilization remains low, but we expect that performance levels achieved by fifth-generation chip, second-generation VPD will soon bring about substantial capacity utilization.”

Key Insights from Management’s Remarks

Management attributed Q3’s outperformance to strong IP licensing activity, new product traction, and operational improvements in manufacturing, despite ongoing under-absorption at its Andover fab.

• IP licensing acceleration: The quarter saw a sharp rise in licensing revenue due to new and expanded deals, including a significant agreement with an existing licensee that included both catch-up and recurring payments. Management called this a turning point, with expectations to double licensing income within two years.

• Advanced Product momentum: Vicor’s advanced power modules, especially those aimed at AI and data center customers, gained traction as key requirements for high-current, high-density applications outpace traditional solutions. Management highlighted early customer wins and ongoing design-in activity.

• Fab operational progress: The Andover chip fabrication facility, which had previously faced ramp-up challenges, is now running at world-class yields and cycle times. However, under-absorption continues to weigh on product margins, an issue management expects to resolve as VPD adoption increases.

• Segment mix shift: Brick Products rebounded this quarter, increasing their share of sales as distributor shipments rose and inventory levels were managed more efficiently. Management noted that this mix shift is tactical, with the longer-term focus on advanced modules and VPD.

• Legal and market protection: Vicor’s strategy of asserting its intellectual property through litigation and exclusion orders has led to licensing agreements with major hyperscalers, improving recurring revenue visibility and deterring unlicensed competition in core markets.

Drivers of Future Performance

Looking ahead, Vicor’s growth prospects rely on scaling new VPD products, expanded licensing, and improved fab utilization, all amid intensifying AI-driven demand.

• AI and data center demand: Management sees rising power density requirements from AI-centric data centers as a secular growth driver. Vicor’s Gen 5 VPD solutions are being adopted by lead customers, with further engagements underway at major hyperscalers and OEMs. Broader rollout is expected to accelerate as these partners move to production in late 2026.

• Licensing business expansion: The company expects its IP licensing run rate to grow by 50% annually, fueled by new agreements and the enforcement of exclusion orders. Management believes every major OEM and hyperscaler in the AI sector will eventually require a Vicor license, given the market’s technical constraints.

• Manufacturing leverage: As fab utilization improves through higher VPD volumes, management expects product gross margins to rise. The company is also exploring multi-sourcing and international fab expansion to address customer concerns about supply chain risk.

Catalysts in Upcoming Quarters

In the months ahead, the StockStory team will be watching (1) the rate at which Vicor’s Gen 5 VPD solutions move from design-in to volume production for leading AI customers, (2) the pace of new IP licensing agreements and enforcement actions, and (3) progress in improving fab utilization and gross margins as advanced product sales ramp. We’ll also track how Vicor addresses customer preferences for multi-sourcing and supply chain flexibility, as these factors could shape long-term growth.

Vicor currently trades at $80.61, up from $65.89 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members).

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