Operator: Good day, and thank you for standing by. Welcome to the Monolithic Power Systems Q3 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Arthur Lee. Please go ahead.
Arthur Lee: Earlier today, MPS released a written commentary on the results of its operations for the Q3 ended September 30th, 2026. This document can be found on our website. Before we begin, I would like to remind everyone that in the course of today's presentation, we may make forward-looking statements and projections within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risk and uncertainties. The risk, uncertainties, and other factors that could cause actual results to differ from these forward-looking statements are identified in the safe harbor statements contained in the Q3 2026 earnings commentary and in our SEC filings, including our Form 10-K and Forms 10-Q, which can be found on our website. Our statements are made as of today, and we assume no obligation to update this information. Now, I would like to turn the call over to Tony.
Tony Balow: Thanks, Arthur. Good afternoon, and for us, good morning from Shanghai, and welcome to our Q3 2026 earnings call. In Q3, MPS achieved another significant milestone, exceeding $1 billion in quarterly revenue for the first time. Q3 revenue of $1.2 billion was 22% higher than the Q2 2026 and 63% higher than the Q3 2025. During the quarter, our capacity surpassed $6 billion in annual revenue support. We expect to have $8 billion of capacity in place by the H2 2027 on our way to $10 billion in support of our rapidly expanding business. In our enterprise data end market, we saw strong demand across existing customers, which we expect to continue into 2027.
Tony Balow: In addition, using our in-house developed AI design tools, we significantly expanded our customer base in traditional areas, as well as landing new wins in applications such as desktop AI designs. Beyond our strong enterprise data growth, in automotive, we received first orders for our 48-volt power solutions and expect design wins for 48-volt and zonal architectures to be a driver of growth in 2027. We started ramping robotic solutions with sensor and motor control products across multiple geographies. We continue to increase our SAM with the ramp of our high-speed memory products. We landed our first large data converter design win, which we expect to ramp next year. And we continued to build out our high voltage portfolio and began sampling GaN-based solutions for use in 800-volt data center architectures, complementing our existing silicon carbide-based designs.
Tony Balow: Finally, in Q3, we repurchased over $450 million of our own stock. Overall, we see accelerated growth. Our diversified growth strategy is paying off. Operator, you may now open the webinar for questions.
Operator: As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. In the interest of time, we ask that you please limit yourselves to one question and one follow-up. Please stand by while we compile the Q&A roster. Our first question comes from Tore Svanberg with Stifel. Your line is now open.
Tore Svanberg: Yes. Thank you, Michael and Tony. Congratulations on that billion-dollar milestone. To you, Tony, congratulations on your CFO appointment. I guess for my first question, you talked about accelerated growth. I was hoping you can maybe elaborate a little bit of that. I am sure you are not going to give us 2027 guidance, but you are on track to growing 50% to 60% this year. Especially in light of your $8 billion capacity and then $10 billion, when do we potentially see $10 billion capacity in place? Thank you.
Michael Hsing: Yeah. Thanks, Tore. As Tony mentioned, there is only a few items that we see beyond that, and I see this explosive growth period in the next few years. Even this year, you see the first nine months. We do not see any signs of a slowdown.
Tony Balow: Yeah. The only thing I would add is, I think as we have come into the H2, you have started to see growth across multiple of our end markets, including like auto, which the ramp started here in Q3, and we have talked about continuing here through the H2. Then as we start to see applications like robotics begin to ramp, we would expect that then to continue into the future. So I think it is not just the existing businesses, it is adding on the additional growth areas over time, which is really giving us confidence going forward.
Tore Svanberg: Very good. That is my follow-up. You mentioned the 800-volt GaN product sampling. Now that you are sampling GaN, could you maybe elaborate a little bit more, help us understand a little bit more the positioning there? Is it vertical GaN? Is it horizontal GaN? Is it your own process? Any more color you could help us there, and when do you expect to start to see some 800-volt GaN revenue? Thank you.
Michael Hsing: Yeah. It is based on MPS' own development, which is later than we developed a silicon carbide device. We start to sampling this type of a solution. We let our customer choose, either using GaN is a new technology for everyone, okay? For everyone adapted in the data centers and the industrial automotive type of applications, okay? This is the first time. We are always very cautious about the reliability. We want to achieve below 1 PPM failures for these modules. We let our customer choose, okay? GaN or silicon carbide. Silicon carbide is known, okay? We know the data. So that is a very high reliability product. GaNs, we have to ship somewhere, 50 million units before we can say this is good, this is new, okay? But we let our customer choose.
Tony Balow: Yeah. I will just add on, I think all of the experience that we have. I am just going to add a few things there. It is just the experience we have already gained in data center, I think puts us in a really good position to do what Michael is talking about in terms of making sure we can meet all the standards the customer requires. You asked a question on the timing of it. I think right now we are still, we have always kind of been late in 2027 for any kind of the 800-volt kind of architecture ramps, with probably more in 2028. I do not think our thinking on that has changed. We are just obviously getting ahead of that design work now.
Michael Hsing: Yeah. Even for our customers, they use both. They do not want to have a failure either. They use both solutions.
Tore Svanberg: Makes a lot of sense. With that, again, thank you.
Operator: Thank you. Our next question comes from Rick Schafer with Oppenheimer and Co. Your line is open.
Rick Schafer: Thanks, and congratulations you guys, and congratulations, Tony, on the appointment. If I could ask a question on storage and compute, for my first one. I was hoping maybe you could level set us on some of the moving parts in there. How does that segment split now, if you look at SSD, HDD, DDR5 PMIC, versus the PC, the vCore power piece. Because I know we all see PC units tracking down about 20% here in H2. So I am just curious, is that what you guys are seeing on the PC side of that segment? And then, how much is the storage piece growing and what is it contributing? Thanks.
Tony Balow: Yeah, Rick, let me start and then I will let Michael come in. I think just mechanically, if you look at it, the big driver of growth in that segment has been the DDR5, primarily on the PMIC solution. As we have said, we are just starting the high-speed journey on the DDR5. We have seen pretty healthy growth over the past year or so on the HDD and SSD part of that storage business as well. But clearly DDR5 is the biggest portion of that. On Notebook, tactically, I think we have been talking about this, and that is what we are seeing as well. We are seeing not the same strength on Notebook due to what is happening downstream with some of the memory constraints. But I think if you look forward, I think we are still pretty bullish on Notebook in the long term because we have really good technology and good share.
Tony Balow: I think there are applications around AI that will continue to build out over time at the edge, of which Notebook will play a part. So I think what you are seeing in the short term around Notebook tracks with what you are seeing, Rick, but I think long term, I think we are still pretty high on what Notebook could be for the company. Michael?
Michael Hsing: Yeah. For that segment, we have a new product, like across the drivers and our CDR. These all lined up. In addition to our power management product, these are what we are lined up for revenue 2027 or 2028. We see even 2028, these products will really ramping up. Okay. So that part of TAM is much bigger than power management. The Notebook, as Tony mentioned, we will see this is a very fast-growing market segments because after the manufacturing capacity opens up, that is the segment will grow even along with the desktops.
Tony Balow: If you sum that up for us a little bit, what we have said for the segment overall is with the puts and takes. It could be flattish up a couple of points year over year is how we positioned it, but it is really a tale of two cities, as we have talked about, with really strong storage and then the TAM just being limited on the Notebook side.
Rick Schafer: Got it. If I could, this is your first call with the CFO moniker, and I am curious how you look at OpEx growth going forward. Any meaningful changes to the prior targets that you guys have laid out? At these type of top-line growth rates that Tony called out, 50% to 60% by top line, how fast can you actually scale R&D, et cetera? It seems like you guys are set for some pretty material operating leverage to be flowing through the model. Is that the right way to be thinking about it? Any rules of thumb in there?
Michael Hsing: Let me answer that part again. Michael, I never believe the big dollars R&D equivalent to a bigger result. For our business, it is inversely proportional to that. We just need some good ideas, good people that is going to make everything happen. Tony, you can add to that as well.
Tony Balow: So yeah, I think, Rick, you are not going to see us necessarily change our model. What we have seen pragmatically, though, as we start to get to higher levels of growth, that we start to fall below our model range in terms we just cannot spend money that fast. But I completely can agree with Michael on that. It is about the efficiency of the R&D and the people that you get versus just spending more. But in general, I would say at the growth rates that we have seen, for example, this year, you are going to fall below the model from an OpEx perspective.
Rick Schafer: Got it. Thanks again, and congrats to you guys.
Operator: Thank you. Our next question comes from Quinn Bolton with Needham and Company. Your line is open.
Quinn Bolton: Hey, guys. I will echo my congratulations, and Tony, congratulations on the new role. I guess I want to start with enterprise data. Last quarter, you gave us a floor of 130%. With September results and December guidance, it looks like you are tracking to maybe 150% growth, but wondering if, Tony, if you might be able to level set us what a new floor growth for enterprise data might be. Then, I know it is early, but any sort of thoughts on that segment as you look into 2027, what kind of growth rate you might be looking at in a floor case, and then I have got a follow-on in the comms business.
Tony Balow: Sure. Let me start just to answer your question straight. I think at this point, given what we have seen in Q3 and Q4, we are comfortable raising the floor from, we were at 130% year over year, but to your point, I think we are comfortable with a floor of 150% year over year now going forward. On 2027, I think it is a little early for us to go put a percentage out at this time, but I will start, and Michael, I am sure, will follow up in that. Structurally, the growth drivers that we are seeing this year are all intact. Right? Whether you see the diversification of customers, the growth in modules, the content gains as new platforms roll out.
Tony Balow: I think over time, as you start to see even stronger growth in CPU, potentially driven by the agentic AI workloads, that is going to be even a further tailwind out in time. While we are early to call next year, I feel really good about the growth drivers.
Michael Hsing: Well, I see even in the next years and beyond next years. I am very excited to see that we built our own data. As Tony mentioned earlier, the result is a tremendous improvement. This is not in the data centers, okay? In MPS own servers. All these servers, I believe, it will change, and change to agentic AI type of servers. The hardware will change, and they will trickle down to the desktops and even the Notebook I said earlier. This type of growth, it will trickle down in the next year and the year after. We see those trends, these design activities. It is really happening. This is not only this year, it is not only the data centers. It will trickle down to all other areas.
Tony Balow: You had a follow-up on comms?
Quinn Bolton: Yeah. Obviously, congrats on the nice growth. I think it was 43% sequentially. It really looked like it was a breakout quarter in September. I am wondering if that was primarily driven by optical modules or are you seeing a broader set of contributors to that growth? Just any thoughts into the December quarter, does that sort of pace of growth continue into December?
Tony Balow: It is a great question. To take us back here, obviously coming into the year, we obviously had very strong growth in optical modules. What we added beginning of the year is what we have been calling the switch business. I know I have talked about this before, but to answer your question, why you are starting to see the acceleration of growth in that particular end market is because you are adding both of those growth drivers together. We saw the effect really in Q3. I think for the year, we have been positioning it is, I think comms is going to be our second fastest growing end market for sure. It will not be quite as fast as enterprise data, but certainly will not be far behind. Just like enterprise data, I think if you go into next year, all of those growth drivers are intact.
Tony Balow: In optical modules, you see the transition to 1.6T. That is not just a volume play, but there is a content play there as well. Then certainly as we continue to build out additional sockets in the switch business, that is going to be a driver of growth as well. I think right now we really like the comms business, not just this year, but going into next year.
Michael Hsing: We are not MPS, not plan on a macro economy, market segment predictions. I only care what is the design activity and what our customers excited about it, what we excited about it. We are all these new technology, new product introductions. I said earlier, all these segments we introduced the new product, and all the design activities, that gave us the indication clearly the growth for even beyond next year.
Quinn Bolton: Thank you, Michael.
Michael Hsing: Okay.
Operator: Thank you. Our next question comes from Joshua Buchalter with TD Cowen. Your line is open.
Joshua Buchalter: Hey, guys. Thank you for taking my question. Congrats on the results and echoing the congrats to Tony on the CFO gig. Best of luck. I will stick with policy and ask one on enterprise data and then one on another segment. Maybe can you comment on the diversity of enterprise data? How has that business evolved over the last year or two and looking into 2027? I would just be curious to hear how much you see coming from GPUs versus ASICs or even any comments you can help us on how much is coming from modules versus discrete at this point and expectations into 2027. Thank you.
Tony Balow: Sure.
Michael Hsing: Yeah. With modules, with the chip design, chip power supplies to the ICs and all of it, okay? Even for the server side, we see many activities and are going through it using modules because of the high current, high power demand. That is my comment. It is all segments. From the gross, the real gross percentage are left only to that.
Tony Balow: Okay. Yeah, I think it is an important point around this customer diversity that starting in the middle of 2025 until now, what we have seen is really rapid growth in a lot of ASIC customers, which again, are primarily using modules over time. That benefit is from a revenue diversity perspective, as those carry the higher ASP associated with that. I think furthermore, what Michael was talking about in terms of how we have been using AI to create scale will allow us to go address even a longer tail of small customers out over time, which may be big customers in the future. That is really what we try to do, go in every socket, not knowing who and ultimately in the long term, might grow into a sizable customer.
Michael Hsing: Yeah. All we clearly see is that we have the huge beneficial from these AI environment, these artificial intelligence, based on these large language model. Of course, MPS are always internal. It benefit us or benefit for everybody. That is the world I am very optimistic about this, and that our growth trend will continue.
Joshua Buchalter: Got it. Thank you both for the color there. Maybe in the same theme of starting with small sockets that become big opportunities. Any context you can provide on how much revenue contribution we can expect from the initial high-speed data converter design win and how big is that TAM as we think about you growing into this new market? Thank you.
Michael Hsing: Yeah. We cannot tell, okay, because we just counted it. These are conservatively well over 6,000 products. Okay. We continue to develop newer product. What we do is we do every segment in our best, far better than or to meet the new market demand. We are much faster than any of our competitors. As long as we do these segments do the best, the revenue will come. We just do not know which segment. Seven, eight, nine, probably 8 years ago, we look at our product lines, look at the optical market segment. One of the perfect example, we did not know today will that high demand. We got it in there, we serve our customers, regardless of large or small. That is what happened today.
Michael Hsing: I cannot predict next 10 years, next 5 years, what will be bigger, and we serve our small customers well.
Tony Balow: Yeah, I think, again, to Michael's point, we are not ready to call it a long term. We are just beginning that process, so I would not necessarily say it moves the needle here in 2026. I think as we get into next year, we will talk more and see how that ramp goes.
Joshua Buchalter: Understood. Thank you both.
Operator: Thank you. Our next question comes from Will Stein with Truist Securities. Your line is now open.
Will Stein: Great. Thanks for taking my question. First on data center vertical power, I think there is still one meaningful customer doing lateral, and I am wondering if you can comment as to whether you think that converts to vertical in the coming year, and whether that would necessarily require a module from you instead of some other sort of solution.
Michael Hsing: Certainly. Well, I do not want to speak for our customers, particular one customer. But I said earlier, and you know what we did in 2000, we predicted in 2016. For the server market, MPS solution is so small, and we have to use the adapter to meet the common footprint. So for the server market segment, we predicted it. If you go above 600, 700 watts, you run out of peripheral, and you have to use a smaller footprint. But the server CPU never get that. Never get to the 600, 700 watts, but the GPU did it. As GPU power increase, I do not have a ginormous numbers, it will, as the power goes up, you run out of peripheral, you have to do vertical. We said this many years earlier.
Michael Hsing: I still believe that. Very logical to me.
Tony Balow: Yeah. I am just going to echo Michael. I think that we won't speak for that. Most of the industry has already moved to modules, right? That is what we have seen in terms of content gains as well as the volume gains as we have gone through enterprise data, and I think that would be a great question for our customers to go ask next time.
Will Stein: Great. On a different topic, someone asked about the OpEx leverage. I guess I understand that for the time being, with the rapid growth, you are going to undershoot on spending, overshoot on margins. What about gross margin? I think the company has talked for a long time about 10 to 20 bps per quarter gross margin expansion. There was a time when you weren't in that range, and it seems like you are today. Any likelihood that because of the growth you could exceed that expansion rate, or should we still think about 10 to 20 as likely or any update there would be helpful? Thank you.
Tony Balow: No, and thanks for calling it out. You saw that we obviously did increase 10 basis points here in Q3. The midpoint of our guide in Q4 is another 10 basis points. So I think we are squarely in the model that we like, right? 55% to 60% is the sweet spot for sure, and within that, being slow and methodical about expansion. I think if we were to continue on that path structurally, I feel pretty good about that. We will see what happens in the future, but remember, what we do not want to do ever is put a bunch of gross margin in one quarter, then take it away the next quarter and move it around a bunch.
Michael Hsing: Yeah. We're not doing that. During the capacity constraint, we don't gouge our customers. We want to deliver to you guys, and a very consistent stories. I don't want to answer the question when the margins drops. I want our MPS to keep it same business, same performance year over year. It's like quarter over quarter, year over year.
Tony Balow: That's right. I think the model still holds. I'm very comfortable with that. I think, you called it out, but I'll highlight it again. I think if you look at the flow through to operating margin, we've been growing operating margin, it's kind of a point a quarter almost. So we've been seeing a lot of expansion on the operating margin line recently.
Michael Hsing: We're in a making money business. That's all we care.
Tony Balow: Thank you.
Michael Hsing: Next question, operator.
Operator: Next question comes from Chris Caso with Wolfe Research. Your line is open.
Chris Caso: Yes. Good afternoon. Just following from the prior discussion, maybe you could talk about how you are dealing with rising costs. And obviously, costs are going up a lot of different places. There is a lot of talk of foundry wafer prices going higher. To what extent are you passing that along? And as you go forward, does any of that result in pricing or any kind of revenue tailwind as you have to absorb some of those costs and pass them along to customers?
Michael Hsing: We definitely absorb some of the cost increase, and we do not increase the price, okay? And some that we share the cost increase with our customers.
Tony Balow: Yeah, I think that is right, Chris. I think if what you are asking is from some of the results, how much of that is from pricing, it is really not a significant contributor to the revenue growth that we have had. We are more just making sure that we do not dilute ourselves on the gross margin line.
Michael Hsing: Yeah, our customers have a very long memory.
Tony Balow: Right.
Chris Caso: Okay. Thanks for that. As a follow-up, it is a question on the 800-volt transition. I know there is a lot of noise out there with regard to the pace of that transition. In terms of MPS, how important is that to you in 2027? I guess maybe the question is it really 800-volt a very material driver of content in the ED segment, or is the majority of that still going to wind up in the existing low power, I am sorry, low voltage designs?
Michael Hsing: Yeah, we do not want to add more voices, okay? We do not talk about it until when the revenue for sure will come, okay? I do see the revenue for sure will come. Not this quarter, not next quarter. It is probably end of 2027 and 2028. It is clearly the DC supplies for high power demand, and will be the trend, will be the data center, okay, trend. All will convert it to that. Power savings is I think the beyond, like single-digit percentage improvement versus the traditional power supply.
Tony Balow: Yeah.
Michael Hsing: I see this as even beyond the data center. Why, if the data center can improve, let's say 5%, where do you get the 5% money returns? All the commercial building, even residentials, they all can be like this, 400 watts. These are, there will be no, in Europe will be 800 volts, in US will be 400 volts. These will be a significant power savings across the board. That is what I excited about that, this opportunity now.
Tony Balow: Yeah, I will even try to just address the question the other way, which is when we talked about how we were excited about growth in enterprise data, it is not because we have a big built-in ramp on 800-volt. It is really around the existing customers, the new customers, transition to modules, all the things that we have been talking about, Chris. So if you are trying to figure out how much of that excitement was just at 800-volt, I really think the business we have today is what we are confident in.
Michael Hsing: Yeah. MPS now, we are using our own building, do a lot of experiment. Using these 800 volts and using these technology and see what the power saving is.
Tony Balow: Got it. Thank you.
Michael Hsing: Next question.
Operator: Thank you. Our next question comes from Sebastien Naji with William Blair. Your line is open.
Sebastien Naji: Yeah. Good afternoon or good morning for you guys. Thanks for taking the questions and congratulations, Tony, on your appointment. I wanted to maybe just ask my first question. Given some of the news around integrated voltage regulators and the acquisition of Empower by Analog Devices, maybe could you just give us your view on this technology and whether you see it as a competitive risk in the AI data center or the larger data center?
Michael Hsing: Yeah. We don't comment in other companies' activities. We have our own solutions. We can deliver whatever customer wanted. This is not a BS talk. We do have multiple beyond the node levels. We have those technologies, and we can deliver it. The GPU evolves very quickly, the power levels, the architect and how does it, in terms of power delivery. We don't talk about those until we clearly see where the revenue will come.
Sebastien Naji: Okay, great. That is helpful. We will look forward to those announcements when those products are ready. Maybe, moving to something that is a little bit closer to your heart, Michael, which is the building automation opportunity. I think last quarter you talked about $40 to $50 billion in size, but that the real bottleneck was the software still needed to catch up. Can you maybe just talk a little bit about the progress that has been made here, as we get to the end of the year?
Michael Hsing: Well, good questions. Okay. That is my baby project. We just have installed in our 1 million square feet building that is in China. As I said just a minute ago, we are experimenting our own AC to DC powers. These are for 800-volt supply and for across the building. These projects just started, but in terms of turning to a $50 billion revenue will take some time. We do not know how to get there yet, but the goal is very clear. We will get there. There is a lot of software involved in it, okay. But on the hardware side, we pretty much have every single component. Our component, our chips, our module technology is far better than, sorry to say, these are the current existing technology. These are 50 year old, and we will do some significant improvement on it.
Sebastien Naji: Great. Thank you.
Operator: Thank you. Our next question comes from Kelsey Chia with Citi. Your line is open.
Kelsey Chia: Hi, Michael and Tony. Congrats on the great results again. Tony, congrats on your well-deserved appointment. My question is on the switch business. To what extent is that contributing to the strong communications growth that we saw in Q3? How should we think about the ramp as we head into 2027, and if that business is accretive to gross margins?
Tony Balow: Yeah, I'll start on that one. We're obviously not going to start guiding sub-end markets a little bit, but certainly from just a percentage basis, it's been growing very quickly, probably on a percentage basis, the fastest-growing sub-end market inside of communications, just because it started from a very low amount at the beginning of the year. As we go forward, again, I still think that optical modules are going to be significant growth drivers for communications into 2027. On the margin side, I think if you look at all of our end markets, plus or minus, they'll all operate around the corporate average because to Michael's point, we have north of 6,000, 7,000 products.
Tony Balow: If you look at the distribution of that, basically what we said is as we grow this, we don't think growing one end market over another will necessarily take us out of our model. Right now, I would still take MPS as a total, kind of in that 55% to 60% range with sort of slow methodical expansion when we can provide it, versus worrying about whether growth in one end market would take you out of model.
Michael Hsing: That's it.
Kelsey Chia: Got it. My second question is on the industrial end market. Very strong growth this quarter as well. What drove that strong growth this quarter? If you could talk about the ramp of the robotic solutions, how do you see that ramping in 2027?
Michael Hsing: The robotics, okay, I tried to enter robotics in 2016. On the analyst day, we talked about robotics. That is the area we are focused on. We have a product for these sensors and motor controls. I did not know what I was talking about. The revenue did not come. Now it shows up, and I think that it is still at the very beginning. Once the vision for the recognitions and the visual recognitions will improve from using the AI-based vision improvement technology, these robots are the
Michael Hsing: We do not make it in a way our brain generate.
Tony Balow: That is right. I do not anticipate at this point seeing a large increase in capital intensity just to go ramp this capacity. It gives us a lot of flexibility. As a matter of fact, I am personally just amazed at the amount of capacity we have been able to put on just even over the last year. I think the operations team has done a tremendous job. I do not see it necessarily inflicting the overall OpEx at this point or any kind of change to our capital structure just to put on that extra capacity.
Kelsey Chia: Okay, thanks. Then maybe as a follow-up, I think auto is continuing to see some inflection. Can you just talk about the breadth of demand you're seeing there from a geographic perspective and how we think about the design pipeline looking into 2027?
Michael Hsing: It's across geographic. I mean, US side, Europe side, and also in Asia, China. In China particularly, we see a lot of activities, so that's probably worldwide. As I said earlier, we can't predict which market segment and that's our diversified growth strategies. Some years one segment is good, even with the mature market. Some years one market segment is good and the other one's not so good. In the last few years, all of a sudden the GPU market happened or the optical market and the revenue happened. We didn't anticipate it. We just provide these at the best, highest performance product. Our customers will realize it.
Tony Balow: Yeah, the only thing I'd add is I think the reason we've been pretty confident on the ramp in H2 is because it is so diverse amongst customers and regions and not dependent just on one. You've seen that same level of customer diversity grow in auto over the past several years like we've been talking about in enterprise data, and the pipeline is similar, right? It's very geographically diverse and very customer diverse. We were just very excited to start seeing some of the architectural transitions that we've been talking about in sort of 48-volt and zonal, because those sort of form the next wave of growth for us.
Michael Hsing: We're not predicting what the market is. Next question.
Michael Hsing: Last question.
Operator: Thank you. Our last question comes from Gary Mobley with StoneX. Your line is open.
Gary Mobley: Good morning, gentlemen. Thanks for squeezing in my question. Congrats, Tony, again. I wanted to ask about what you might be signaling in your capacity milestones. You are currently at $6 billion in production capacity, which I assume supports your 2027 outlook. It does not take much to get there, just extrapolating out Q4 revenue guidance, and you are expected to be at $8 billion in capacity exiting fiscal year 2027. So should we think about that in terms of the revenue velocity exiting fiscal year 2027?
Michael Hsing: It does not take much to get there? Oh, come on. This is much. It is a movement. Move the numbers. Like I said, there is a lot of work behind it.
Tony Balow: Yeah. Alan, so right now, I think what we're trying to strongly signal is that just like we've been doing for the past 20 years, we're making sure that capacity stays ahead of the business. In a world where there's a lot of narrative around there being tightness, we wanted to be very clear to you and our customers of how we're growing capacity to support that business. I think, again, it's too early to go right in a quarterly revenue ramp for what that means for 2027, but we wanted to make sure it was loud and clear was that we see the demand coming, and we're going to make sure capacity is there to deal with it.
Gary Mobley: Thanks for that. On inventory, I just wanted to confirm the distribution inventory is still within that normal five to eight week range, and then it looks like your internal inventory down to 117 days based on a forward revenue guide basis, and that's been trickling down. Are you inventoried properly to support sales, I guess is really the question?
Tony Balow: I think right now we're still on the channel side, certainly on the lean end of our range like we've been for some time now. Internally, I think we grew dollars on a gross basis, right? But obviously as the revenues ramp, that's come down from a days perspective. I think that our range certainly hasn't changed, and it's something that as we increase our capacity and our wafer starts, we'll make sure that we're positioned for the business. But right now, it's not limiting us on the business.
Gary Mobley: Got it. Thank you all again.
Michael Hsing: Sure.
Operator: Thank you. This concludes the question and answer session. I would now like to turn it back to Tony Balow for closing remarks.
Tony Balow: All right. Thank you, operator. Thank you all for joining us for this conference call today. I look forward to speaking with you on the next call for the Q4 and full year 2026 revenue guidance. Thank you again, and have a great day.
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
