Semiconductor designer Power Integrations (NASDAQ: POWI) missed Wall Street’s revenue expectations in Q1 CY2025, but sales rose 15.1% year on year to $105.5 million. Its non-GAAP EPS of $0.31 per share was 8.9% above analysts’ consensus estimates.

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StockStory’s Take

Power Integrations’ first quarter results were shaped by growth across each of its end markets, with management highlighting particular strength in the Consumer and Computer categories. CEO Balu Balakrishnan pointed to robust appliance sales and air conditioning demand, along with notable design wins in TVs and game consoles, as contributors to the Consumer segment’s performance. In the Computer segment, he emphasized the adoption of GaN (gallium nitride) products for high-density server applications supporting artificial intelligence workloads. The company also attributed some of the quarter’s outperformance in Consumer to appliance shipments being pulled forward ahead of anticipated tariffs, referencing commentary from a major appliance customer.

Looking ahead, Power Integrations expects second quarter revenue growth to be driven by continued strength in Industrial, Computer, and Communications categories, while anticipating a normalization in Consumer after the tariff-related pull-forward. Management cautioned that the outlook for the rest of the year will depend heavily on evolving trade policy, with Balakrishnan stating, “the outlook for the second half of the year is highly dependent on the course of trade policy, and we would not expect to be immune from any reduction in end demand related to tariffs.” The company remains focused on leveraging long-term trends like energy efficiency and electrification, while noting that a favorable outcome on tariffs could prompt inventory replenishment and additional upside.

Key Insights from Management’s Remarks

Management attributed quarterly growth to a mix of end-market strength, new design wins, and external factors like tariff-related demand shifts, while emphasizing the durability of ongoing efficiency and electrification trends.

• Appliance demand and tariff pull-forward: The Consumer segment benefited from higher appliance and air conditioning sales, with some demand pulled forward as U.S. customers accelerated shipments ahead of tariffs. Management estimated this effect accounted for several million dollars in additional revenue.

• AI-driven server growth: The Computer category saw increased adoption of Power Integrations’ GaN components for servers, particularly those designed for artificial intelligence applications that require higher power density and efficiency.

• Industrial market momentum: Growth in the Industrial segment was underpinned by high-voltage design wins in DC transmission, renewables, and electric locomotives, especially in India. The company added new locomotive and metering projects, positioning itself for sustained expansion in these areas.

• Automotive design wins expanding: Power Integrations reported its first high-voltage GaN design win in automotive for a U.S. electric vehicle customer, as well as new production shipments to Japanese and European automakers. These initiatives are expected to diversify future revenue streams.

• Inventory and channel health: Channel inventories remained at normal levels, with Consumer inventories below average. Management said this should help cushion any negative effects from demand fluctuations or trade policy changes in upcoming quarters.

Drivers of Future Performance

Management anticipates that growth in Industrial, Computer, and Communications segments, combined with ongoing design wins and evolving trade policy, will drive near-term performance and shape the outlook for the rest of the year.

• Industrial and automotive ramp: The company expects Industrial to be its fastest-growing segment in 2025, supported by new high-voltage projects in transmission, renewables, and further automotive design wins in the U.S., Japan, and Europe.

• Consumer normalization post-tariff: After a first quarter boost from tariff-related shipment timing in appliances, management predicts a sequential decline in Consumer revenues but sees a return to typical seasonal patterns by the second half of the year, assuming stable trade conditions.

• Trade policy uncertainty: Management highlighted that changes in global trade policy remain a significant risk factor for revenue and demand in the second half of 2025. However, low channel inventory levels could soften the impact of any adverse policy developments.

Catalysts in Upcoming Quarters

Over the coming quarters, the StockStory team will be watching (1) progress in ramping high-voltage industrial and automotive design wins, (2) the impact of trade policy developments on demand and inventory management, and (3) ongoing adoption of GaN products in AI-related server applications. Execution in these areas will be critical to sustaining growth and navigating external risks.

Power Integrations currently trades at a forward P/E ratio of 29.6×. In the wake of earnings, is it a buy or sell? See for yourself in our full research report (it’s free).

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