MONOLITHIC POWER SYSTEMS INC (MPWR) · Quarterly Report (10-Q) SEC Filing

PART I. FINANCIAL INFORMATION Item 1. Financial Statements MONOLITHIC POWER SYSTEMS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except par value) (Unaudited) June 30, 2026December 31, 2025 ASSETS Current assets: Cash and cash equivalents$1,005,587 $1,099,302 Short-term investments408,174 157,243 Accounts receivable, net343,620 255,626 Inventories675,849 564,649 Other current assets44,156 106,982 Total current assets2,477,386 2,183,802 Property and equipment, net774,549 627,689 Acquisition-related intangible assets, net8,216 8,790 Goodwill25,944 25,944 Deferred tax assets, net1,182,833 1,182,883 Other long-term assets217,279 165,091 Total assets$4,686,207 $4,194,199 LIABILITIES AND STOCKHOLDERS EQUITY Current liabilities: Accounts payable$182,224 $138,272 Accrued compensation and related benefits93,635 85,963 Other accrued liabilities222,075 145,130 Total current liabilities497,934 369,365 Income tax liabilities75,022 75,022 Deferred tax liabilities90,316 90,480 Other long-term liabilities127,511 127,835 Total liabilities790,783 662,702 Commitments and contingencies (Note 7) Stockholders equity: Common stock and additional paid-in capital: $0.001 par value; shares authorized: 150,000; shares issued and outstanding: 49,142 and 48,709, respectively 1,033,062 936,998 Retained earnings2,861,853 2,609,651 Accumulated other comprehensive income (loss)509 (15,152) Total stockholders equity3,895,424 3,531,497 Total liabilities and stockholders equity$4,686,207 $4,194,199 See accompanying notes to unaudited condensed consolidated financial statements. 3 Table of Contents MONOLITHIC POWER SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per-share amounts) (Unaudited) Three Months Ended June 30,Six Months Ended June 30, 2026202520262025 Revenue$980,642 $664,574 $1,784,827 $1,302,128 Cost of revenue439,572 298,558 798,692 582,882 Gross profit541,070 366,016 986,135 719,246 Operating expenses: Research and development118,618 96,266 219,184 188,493 Selling, general and administrative118,558 104,992 221,905 197,236 Total operating expenses237,176 201,258 441,089 385,729 Operating income303,894 164,758 545,046 333,517 Other income, net17,835 12,220 23,865 17,351 Income before income taxes321,729 176,978 568,911 350,868 Income tax expense64,431 41,969 118,387 80,807 Net income$257,298 $135,009 $450,524 $270,061 Net income per share: Basic$5.24 $2.82 $9.17 $5.64 Diluted$5.22 $2.81 $9.15 $5.62 Weighted-average shares outstanding: Basic49,13847,88749,11847,869 Diluted49,26048,01949,25148,012 See accompanying notes to unaudited condensed consolidated financial statements. 4 Table of Contents MONOLITHIC POWER SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) (Unaudited) Three Months Ended June 30,Six Months Ended June 30, 2026202520262025 Net income$257,298 $135,009 $450,524 $270,061 Other comprehensive income, net of tax Foreign currency translation adjustments10,656 19,634 15,695 24,773 Net change in unrealized gains and losses on available-for-sale securities(35)(1)(34)47 Other comprehensive income, net of tax10,621 19,633 15,661 24,820 Comprehensive income$267,919 $154,642 $466,185 $294,881 See accompanying notes to unaudited condensed consolidated financial statements. 5 Table of Contents MONOLITHIC POWER SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (In thousands, except per-share amounts) (Unaudited) Common Stock and Additional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Total Stockholders Equity Three Months Ended June 30, 2026SharesAmount Balance as of April 1, 202649,129$983,926 $2,703,596 $(10,112)$3,677,410 Net income-- 257,298 - 257,298 Other comprehensive income-- - 10,621 10,621 Dividends and dividend equivalents declared ($2.00 per share) -- (99,041)- (99,041) Common stock issued 16- - - - Repurchases of common stock(3)(4,048)- - (4,048) Stock-based compensation expense-53,184 - - 53,184 Balance as of June 30, 202649,142$1,033,062 $2,861,853 $509 $3,895,424 Common Stock and Additional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossTotal Stockholders Equity Three Months Ended June 30, 2025SharesAmount Balance as of April 1, 202547,877$764,959 $2,351,994 $(43,324)$3,073,629 Net income-- 135,009 - 135,009 Other comprehensive income-- - 19,633 19,633 Dividends and dividend equivalents declared ($1.56 per share) -- (75,924)- (75,924) Common stock issued19- - - - Repurchases of common stock(4)(2,484)- - (2,484) Stock-based compensation expense-60,107 - - 60,107 Balance as of June 30, 202547,892$822,582 $2,411,079 $(23,691)$3,209,970 Common Stock and Additional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Total Stockholders Equity Six Months Ended June 30, 2026SharesAmount Balance as of January 1, 202648,709$936,998 $2,609,651 $(15,152)$3,531,497 Net income-- 450,524 - 450,524 Other comprehensive income-- - 15,661 15,661 Dividends and dividend equivalents declared ($4.00 per share) -- (198,322)- (198,322) Common stock issued 4365,830 - - 5,830 Repurchases of common stock(3)(4,048)- - (4,048) Stock-based compensation expense-94,282 - - 94,282 Balance as of June 30, 202649,142$1,033,062 $2,861,853 $509 $3,895,424 Common Stock and Additional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossTotal Stockholders Equity Six Months Ended June 30, 2025SharesAmount Balance as of January 1, 202547,823$706,817 $2,292,819 $(48,511)$2,951,125 Net income-- 270,061 - 270,061 Other comprehensive income-- - 24,820 24,820 Dividends and dividend equivalents declared ($3.12 per share) -- (151,801)- (151,801) Common stock issued735,335 - - 5,335 Repurchases of common stock(4)(2,484)- - (2,484) Stock-based compensation expense-112,914 - - 112,914 Balance as of June 30, 202547,892$822,582 $2,411,079 $(23,691)$3,209,970 See accompanying notes to unaudited condensed consolidated financial statements. 6 Table of Contents MONOLITHIC POWER SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Six Months Ended June 30, 20262025 Cash flows from operating activities: Net income$450,524 $270,061 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization32,173 24,569 Amortization of discount on available-for-sale securities(484)(2,885) Gain on deferred compensation plan investments(7,343)(4,230) Deferred taxes, net(125)14,496 Stock-based compensation expense94,282 112,904 Other(1,102)29 Changes in operating assets and liabilities: Accounts receivable(88,002)(22,264) Inventories(111,194)(71,018) Other assets17,320 83,395 Accounts payable33,276 36,627 Accrued compensation and related benefits6,983 15,584 Income tax liabilities32,640 33,798 Other accrued liabilities19,211 2,958 Net cash provided by operating activities478,159 494,024 Cash flows from investing activities: Purchases of property and equipment(153,272)(88,485) Purchases of investments(263,797)(393,010) Maturities and sales of investments14,591 211,227 Other5,621 (3,015) Net cash used in investing activities(396,857)(273,283) Cash flows from financing activities: Property and equipment purchased on extended payment terms(897)(1,902) Proceeds from common stock issued5,830 5,335 Repurchases of common stock(4,048)(3,687) Dividends and dividend equivalents paid(179,496)(135,073) Net cash used in financing activities(178,611)(135,327) Effect of change in exchange rates3,591 10,169 Net increase (decrease) in cash, cash equivalents and restricted cash(93,718)95,583 Cash, cash equivalents and restricted cash, beginning of period1,099,521 691,941 Cash, cash equivalents and restricted cash, end of period$1,005,803 $787,524 Reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated balance sheets: Cash and cash equivalents$1,005,587 $787,382 Restricted cash included in other long-term assets216 142 Total cash, cash equivalents, and restricted cash$1,005,803 $787,524 Supplemental disclosures for cash flow information: Cash paid for income taxes, net$88,705 $17,007 Non-cash investing and financing activities: Liability accrued for property and equipment purchases$26,997 $6,108 Liability accrued for dividends and dividend equivalents$100,326 $77,193 See accompanying notes to unaudited condensed consolidated financial statements. 7 Table of Contents MONOLITHIC POWER SYSTEMS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements of Monolithic Power Systems, Inc., a Delaware corporation, and its wholly owned subsidiaries (the Company or MPS ) have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the SEC ). Certain information and disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles ( U.S. GAAP ) have been condensed or omitted in accordance with these accounting principles, rules and regulations. All intercompany accounts and transactions have been eliminated. The information in this report should be read in conjunction with the Company s audited consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on February 27, 2026. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the Company s financial position, results of operations and cash flows for the interim periods presented. The financial statements contained in this Quarterly Report on Form 10-Q are not necessarily indicative of the results that may be expected for the year ending December 31, 2026 or for any other future periods. Summary of Significant Accounting Policies There have been no changes to the Company s significant accounting policies during the three and six months ended June 30, 2026 from those described in the Company s audited consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2025. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenue and expenses during the reporting period. Significant estimates and assumptions used in these condensed consolidated financial statements primarily include those related to income tax valuation allowances and stock-based compensation. Actual results could differ from these estimates and assumptions, and any such differences may be material to the Company s condensed consolidated financial statements. New Accounting Pronouncements Not Yet Adopted as of June 30, 2026 In November 2024, the Financial Accounting Standards Board ( FASB ) issued Accounting Standards Update ( ASU ) 2024-03, Income Statement Reporting Comprehensive Income Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which aims to provide more detailed information about the types of expenses in commonly presented expense captions. The Company will adopt this standard in its Form 10-K for the fiscal year ending December 31, 2027. The Company is evaluating the impact of adoption on its Consolidated Financial Statements. 8 Table of Contents 2. REVENUE RECOGNITION Revenue from Product Sales The Company generates revenue primarily from product sales, which include assembled and tested integrated circuits ( ICs ), power modules as well as dies in wafer form. The remaining revenue, which primarily consists of royalty revenue from licensing arrangements with value-added resellers and revenue from wafer testing services performed for third parties, was not significant in any of the periods presented. The following is a summary of revenue by geographic region based on the direct customers ship-to locations for the periods presented (in thousands): Three Months Ended June 30,Six Months Ended June 30, Country or Region2026202520262025 China$501,973 $397,951 $913,126 $761,671 Taiwan260,487 104,970 442,103 221,311 South Korea87,887 63,501 169,693 127,865 Southeast Asia48,960 34,867 89,709 67,573 Europe34,832 26,497 70,631 51,489 U.S.26,212 18,127 55,986 33,376 Japan20,171 18,536 43,355 38,637 Other120 125 224 206 Total$980,642 $664,574 $1,784,827 $1,302,128 The Company s direct customers are primarily third-party distributors and value-added resellers. For each of the three and six months ended June 30, 2026, 88% of the Company s total sales were made through distribution arrangements. For each of the three and six months ended June 30, 2025, 83% of the Company s total sales were made through distribution arrangements. These distribution arrangements contain enforceable rights and obligations specific to those distributors and value-added resellers and not the end customers. The following table summarizes the direct customers with sales equal to 10% or more of the Company s total revenue for the periods presented: Three Months Ended June 30,Six Months Ended June 30, Customer2026202520262025 Distributor A28%25%27%25% Distributor B15%17%15%18% Distributor C*11%*11% Distributor D10%*** ____________________________ *Represents less than 10%. The Company s agreements with these third-party distributors were made in the ordinary course of business and may be terminated with or without cause by these distributors with advance notice. Although the Company may experience a short-term disruption in the distribution of its products and a short-term decline in revenue if its agreement with any of the distributors were terminated, the Company believes that such termination would not have a material adverse effect on its financial statements because it would be able to engage alternative distributors, resellers and other distribution channels to deliver its products to end customers within a relatively short period following any termination of the agreement with a distributor. Purchase orders, which are generally governed by sales agreements or the Company s standard terms of sale, set the final terms for unit price, quantity, shipping and payment agreed upon between the Company and the customer. The Company considers purchase orders to be contracts with the customers. The unit price as stated on the purchase orders is considered the observable, stand-alone selling price for the contracts. 9 Table of Contents The Company recognizes revenue when it satisfies a performance obligation by transferring control of the promised goods or services to its customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company excludes taxes assessed by government authorities, such as sales taxes, from revenue. Product sales consist of a single performance obligation that the Company satisfies at a point in time. The Company recognizes product revenue from distributors and direct end customers when the following events have occurred: (a) the Company has transferred physical possession of the products, (b) the Company has a present right to payment, (c) the customer has legal title to the products, and (d) the customer bears significant risks and rewards of ownership of the products. In accordance with the shipping terms specified in the contracts, these criteria are generally met when the products are shipped from the Company s facilities (such as the Ex Works shipping term) or delivered to the customers locations (such as the Delivered Duty Paid shipping term). Under certain consignment agreements, the Company recognizes revenue when customers consume products from the consigned inventory locations, at which time control transfers to the customers and the Company issues invoices. Variable Consideration The Company accounts for price adjustments and stock rotation rights as variable consideration that reduces the transaction price and recognizes that reduction in the same period the associated revenue is recognized. Certain distributors have limited stock rotation rights that permit the return of a small percentage of the previous six months purchases in accordance with the contract terms. The Company estimates the stock rotation returns using the expected value method based on an analysis of historical returns, and the current level of inventory in the distribution channel. The Company records a liability for the stock rotation reserve, with a corresponding reduction to revenue. In addition, the Company recognizes an asset for product returns which represents the right to recover products from the customers related to stock rotations, with a corresponding reduction to cost of revenue. Contract Balances Accounts Receivable: The Company records a receivable when it has an unconditional right to receive consideration after the performance obligations are satisfied. The Company s accounts receivable are short-term, with standard payment terms generally ranging from 30 to 90 days. The Company does not require its customers to provide collateral to support accounts receivable. The Company assesses collectability by reviewing accounts receivable on a customer-by-customer basis. To manage credit risk, management performs ongoing credit evaluations of the customers financial condition, monitors payment performance, and assesses current economic conditions, as well as reasonable and supportable forecasts of future economic conditions, that may affect collectability of the outstanding receivables. For certain customers, the Company requires standby letters of credit or advance payments prior to shipments of goods. The Company did not recognize any write-offs of accounts receivable or record any allowance for credit losses for the periods presented. The following table summarizes the customers with accounts receivable equal to 10% or more of the Company s total accounts receivable: CustomerJune 30, 2026December 31, 2025 Distributor A33%35% Value-added reseller A20%* Distributor B15%14% ____________________________ *Represents less than 10%. 10 Table of Contents Practical Expedients The Company has elected the practical expedient to expense sales commissions as incurred because the amortization period would have been one year or less. The Company s standard payment terms generally require customers to pay 30 to 90 days after the Company satisfies the performance obligations. For this reason, the Company has elected not to determine whether contracts with customers contain significant financing components. The Company s unsatisfied performance obligations primarily include products held in consignment arrangements and customer purchase orders for products that the Company has not yet shipped. Because the Company expects to fulfill these performance obligations within one year, the Company has elected not to disclose the amount of these remaining performance obligations. 3. STOCK-BASED COMPENSATION 2014 Equity Incentive Plan In April 2013, the Board of Directors adopted the Company s 2014 Equity Incentive Plan (the 2014 Plan ), which the Company s stockholders approved in June 2013. In October 2014, the Board of Directors approved certain amendments to the 2014 Plan. The amended 2014 Plan became effective on November 13, 2014 and provided for the issuance of up to 5.5 million shares. In April 2020, the Board of Directors further amended and restated the amended 2014 Plan (the Amended and Restated 2014 Plan ), which the Company s stockholders approved in June 2020. The Amended and Restated 2014 Plan became effective on June 11, 2020 and provides for the issuance of up to 10.5 million shares. The Amended and Restated 2014 Plan will cease being available for new awards on June 11, 2030. As of June 30, 2026, 3.4 million shares remained available for future issuance under the Amended and Restated 2014 Plan. Stock-Based Compensation Expense The Company recognized stock-based compensation expense as follows for the periods presented (in thousands): Three Months Ended June 30,Six Months Ended June 30, 2026202520262025 Cost of revenue$1,764 $1,913 $3,238 $3,586 Research and development ( R&D )12,483 12,469 23,758 24,147 Selling, general and administrative ( SG&A )38,937 45,716 67,286 85,171 Total stock-based compensation expense$53,184 $60,098 $94,282 $112,904 Tax benefit related to stock-based compensation (1) $606 $703 $1,364 $1,163 ____________________________ (1)Amount reflects the tax benefit related to stock-based compensation recorded for equity awards that are expected to generate tax deductions when they vest in future periods. Equity awards granted to the Company s executive officers are subject to the tax deduction limitations set by Section 162(m) of the Internal Revenue Code. Restricted Stock Units ( RSUs ) The Company s RSUs include time-based RSUs, RSUs with performance conditions ( PSUs ), RSUs with market conditions ( MSUs ), and RSUs with performance and market conditions ( MPSUs ). Vesting of awards with performance conditions or market conditions is subject to the achievement of pre-determined performance or market goals and the approval of such achievement by the Compensation Committee of the Board of Directors (the Compensation Committee ). All such awards include service conditions which require continued employment with or service to the Company. 11 Table of Contents A summary of RSU activity is presented in the table below (in thousands, except per-share amounts): Total Time-based RSUs, PSUs and MSUs Number of SharesWeighted-Average Grant Date Fair Value Per Share Outstanding at January 1, 2026771$535.78 Granted251(1) $1,005.72 Vested(80)$430.30 Forfeited(50)$571.38 Outstanding at June 30, 2026892$687.48 ____________________________ (1)Amount reflects the number of awards that may ultimately be earned based on management s probability assessment of the achievement of performance conditions at each reporting period. The fair value related to vested RSUs, as of their respective vesting dates, was $25.2 million and $11.5 million for the three months ended June 30, 2026 and 2025, respectively. The fair value related to vested RSUs, as of their respective vesting dates, was $100.3 million and $42.6 million for the six months ended June 30, 2026 and 2025, respectively. As of June 30, 2026, unamortized compensation expense related to all outstanding RSUs was $350.0 million with a weighted-average remaining recognition period of approximately two years. RSUs generally vest over four years for non-executive employees, three years for executives, and one year for directors serving on the Board of Directors, all subject to continued service to the Company. 2026 Executive PSUs: In February 2026, the Compensation Committee granted 42,000 PSUs to the executive officers, which represent the target number of shares that can be earned based on the degree of achievement of two sets of independent performance goals (the 2026 Executive PSUs ). For the first goal, the executive officers can earn up to 300% of the target number of the 2026 Executive PSUs based on the achievement of the Company s three-year (2026 through 2028) average revenue growth rate in excess of the analog industry s three-year average revenue growth rate as published by the Semiconductor Industry Association (the SIA ). For the second goal, the executive officers can earn up to 200% of the target number of the 2026 Executive PSUs if the Company secures manufacturing capacity that can support a specified level of annual revenue at the end of the three-year performance period. For both goals, a percentage of the 2026 Executive PSUs will fully vest on December 31, 2028, depending on the degree to which the pre-determined goals are met during the performance period. Assuming the achievement of the highest level of the performance goals, the total stock-based compensation cost for the 2026 Executive PSUs will be $208.2 million. The 2026 Executive PSUs contain a purchase price feature, which requires the executives to pay the Company up to $300 per share upon vesting of the shares. The $300 purchase price requirement for executives is deemed satisfied and fully waived if the Company s stock price on the last trading day of the applicable performance period is $300 or more higher than the grant date stock price of $1,164.83. The Company determined the grant date fair value of the 2026 Executive PSUs using a Monte Carlo simulation model with the following assumptions: stock price of $1,164.83, simulation term of three years, expected volatility of 53.39%, risk-free interest rate of 3.60%, and expected dividend yield of 0.69%. There is no illiquidity discount because the awards do not contain any post-vesting sales restrictions. 12 Table of Contents 4. BALANCE SHEET COMPONENTS Inventories Inventories consisted of the following (in thousands): June 30, 2026December 31, 2025 Raw materials$86,874 $107,801 Work in process306,554 220,410 Finished goods282,421 236,438 Total$675,849 $564,649 Other Current Assets Other current assets consisted of the following (in thousands): June 30, 2026December 31, 2025 Prepaids and other$44,156 $46,982 Other receivables (1) - 60,000 Total$44,156 $106,982 ____________________________ (1)Other receivables related to an annually refundable deposit made to a supplier under a long-term wafer supply agreement. The deposit was received in the quarter ended March 31, 2026. Other Long-Term Assets Other long-term assets consisted of the following (in thousands): June 30, 2026December 31, 2025 Deferred compensation plan assets$115,366 $107,096 Refundable deposit (1) 40,000 - Operating lease right-of-use ( ROU ) assets23,867 24,886 Other38,046 33,109 Total$217,279 $165,091 ____________________________ (1)The refundable deposit as of June 30, 2026 was for a long-term assembly service agreement. Other Accrued Liabilities Other accrued liabilities consisted of the following (in thousands): June 30, 2026December 31, 2025 Dividends and dividend equivalents$101,683 $81,510 Stock rotation and sales returns19,197 17,150 Income tax payable35,606 2,920 Other65,589 43,550 Total$222,075 $145,130 13 Table of Contents Other Long-Term Liabilities Other long-term liabilities consisted of the following (in thousands): June 30, 2026December 31, 2025 Deferred compensation plan liabilities$106,014 $103,954 Operating lease liabilities18,934 19,972 Dividend equivalents2,563 3,909 Total$127,511 $127,835 5. NET INCOME PER SHARE Basic net income per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding for the period. Diluted net income per share reflects the potential dilution from contingently issuable shares and is calculated using the treasury stock method. Contingently issuable shares, including all types of equity awards, are considered outstanding shares of common stock and included in basic net income per share as of the date that all necessary conditions to earn the awards have been satisfied. Prior to the end of the contingency period, the number of contingently issuable shares included in diluted net income per share is based on the number of shares, if any, that would be issuable under the terms of the arrangement at the end of the reporting period as if the end of the reporting period were the end of the contingency period. The following table sets forth the computation of basic and diluted net income per share for the periods presented (in thousands, except per-share amounts): Three Months Ended June 30,Six Months Ended June 30, 2026202520262025 Numerator: Net income$257,298 $135,009 $450,524 $270,061 Denominator: Weighted-average outstanding shares basic49,13847,88749,11847,869 Effect of dilutive securities122132133143 Weighted-average outstanding shares diluted49,26048,01949,25148,012 Net income per share: Basic$5.24 $2.82 $9.17 $5.64 Diluted$5.22 $2.81 $9.15 $5.62 Anti-dilutive common stock equivalents were not material for the periods presented. 6. SEGMENT AND GEOGRAPHIC INFORMATION The Company operates in one reportable segment that includes the design, development, marketing and sale of high-performance, semiconductor-based power electronics solutions for the storage and computing, enterprise data, automotive, industrial, communications, and consumer end markets. The Company s chief operating decision maker ( CODM ) is its Chief Executive Officer, who reviews financial information presented on a consolidated basis for the purposes of allocating resources and evaluating financial performance. Specifically, the CODM uses net income that is reported on the Condensed Consolidated Statements of Operations, and cash provided by operating activities reported in the Condensed Consolidated Statements of Cash Flows, to decide whether and how much to reinvest profits into core business operations or to return to stockholders in the form of stock repurchases and dividends. All significant segment expenses have been captured on the face of the Condensed Consolidated Statements of Operations. 14 Table of Contents The following is a summary of long-lived assets by geographic region (in thousands): CountryJune 30, 2026December 31, 2025 China$432,821 $332,506 U.S.204,655 165,107 Taiwan68,477 65,081 Other68,596 64,995 Total$774,549 $627,689 7. COMMITMENTS AND CONTINGENCIES Product Warranties and Rework The Company generally provides either a one- or two-year warranty against defects in materials and workmanship and will repair the products, provide replacements at no charge to customers or issue a refund. As they are considered assurance-type warranties, the Company does not account for them as separate performance obligations. The Company accrues for warranty and rework costs upon evaluation of customer specific claims. Historically, the Company s warranty obligations and rework costs associated with product-related claims have not been material. The estimated amount of product warranty and rework liabilities was $14.0 million and $10.1 million as of June 30, 2026 and December 31, 2025, respectively. Purchase Commitments The Company has outstanding purchase obligations with its suppliers and other parties that require the purchases of goods or services. The purchase obligations primarily consist of wafer and other inventory purchases, assembly and other manufacturing services, construction of manufacturing and R&D facilities, purchases of production and other equipment, and license arrangements. Total estimated future unconditional purchase commitments to all suppliers and other parties as of June 30, 2026 were as follows (in thousands): 2026 (remaining six months)$256,444 2027313,075 20281,031 2029486 Total$571,036 Litigation The Company is a party to actions and proceedings in the ordinary course of business, including challenges to the enforceability or validity of its intellectual property, claims that the Company s products infringe on the intellectual property rights of others, and employment matters. The Company is also subject to litigation initiated by its stockholders. These proceedings often involve complex questions of fact and law and may require the expenditure of significant funds and the diversion of other resources to prosecute and defend. The Company defends itself vigorously against any such claims. Based on current information, the Company does not believe that a material loss from known matters is probable as of June 30, 2026. 15 Table of Contents 8. CASH, CASH EQUIVALENTS AND INVESTMENTS The following is a summary of the Company s cash, cash equivalents and debt investments (in thousands): June 30, 2026December 31, 2025 Cash$771,683 $969,628 Money market funds233,904 129,674 Certificates of deposit309,162 157,243 U.S. treasuries and government agency bonds99,012 - Auction-rate securities backed by student-loan notes25 49 Total$1,413,786 $1,256,594 June 30, 2026December 31, 2025 Reported as: Cash and cash equivalents$1,005,587 $1,099,302 Short-term investments408,174 157,243 Investment within other long-term assets25 49 Total$1,413,786 $1,256,594 The following table summarizes the contractual maturities of the short-term and long-term available-for-sale investments as of June 30, 2026 (in thousands): Amortized CostFair Value Due in less than 1 year$305,167 $305,120 Due in 1 - 5 years103,054 103,054 Due in greater than 5 years25 25 Total$408,246 $408,199 Gross realized gains and losses recognized on the sales of available-for-sale investments were not material for the periods presented. 9. FAIR VALUE MEASUREMENTS Fair Value Hierarchy The Company has estimated the fair value of its financial assets by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement: Level 1 includes instruments with quoted prices in active markets for identical assets. Level 2 includes instruments for which the valuations are based upon quoted market prices in active markets involving similar assets or inputs other than quoted prices that are observable for the assets. The market inputs used to value these instruments generally consist of market yields, recently executed transactions, broker/dealer quotes or alternative pricing sources with reasonable levels of price transparency. Pricing sources may include industry standard data providers, security master files from large financial institutions, and other third-party sources used to determine a daily market value. Level 3 includes instruments for which the valuations are based on inputs that are unobservable and significant to the overall fair value measurement. 16 Table of Contents Financial Assets Measured at Fair Value on a Recurring Basis The following tables detail the fair value of the Company s financial assets measured on a recurring basis (in thousands): June 30, 2026 TotalLevel 1Level 2Level 3 Money market funds$233,904 $233,904 $- $- Certificates of deposit309,162 - 309,162 - U.S. treasuries and government agency bonds99,012 - 99,012 - Auction-rate securities backed by student-loan notes25 - - 25 Mutual funds and money market funds under deferred compensation plan80,083 80,083 - - Total$722,186 $313,987 $408,174 $25 December 31, 2025 TotalLevel 1Level 2Level 3 Money market funds$129,674 $129,674 $- $- Certificates of deposit157,243 - 157,243 - Auction-rate securities backed by student-loan notes49 - - 49 Mutual funds and money market funds under deferred compensation plan75,484 75,484 - - Total$362,450 $205,158 $157,243 $49 10. DEFERRED COMPENSATION PLAN The following table summarizes the deferred compensation plan balances on the Condensed Consolidated Balance Sheets (in thousands): June 30, 2026December 31, 2025 Deferred compensation plan asset components: Cash surrender value of corporate-owned life insurance policies$35,283 $31,612 Fair value of mutual funds and money market funds80,083 75,484 Total$115,366 $107,096 Deferred compensation plan assets reported in: Other long-term assets$115,366 $107,096 Deferred compensation plan liabilities reported in: Accrued compensation and related benefits$6,795 $3,707 Other long-term liabilities106,014 103,954 Total$112,809 $107,661 17 Table of Contents 11. OTHER INCOME, NET The components of other income, net, were as follows for the periods presented (in thousands): Three Months Ended June 30,Six Months Ended June 30, 2026202520262025 Interest income$8,322 $6,043 $16,263 $11,740 Gain on deferred compensation plan investments8,931 5,580 7,343 4,230 Amortization of discount on available-for-sale securities484 2,117 484 2,885 Charitable commitments- (900)(900)(900) Other98 (620)675 (604) Total$17,835 $12,220 $23,865 $17,351 12. INCOME TAXES The income tax expense for the three and six months ended June 30, 2026 was $64.4 million and $118.4 million, respectively, or an effective tax rate of 20.0% and 20.8%, respectively. The income tax expense for the three and six months ended June 30, 2025 was $42.0 million and $80.8 million, respectively, or an effective tax rate of 23.7% and 23.0%, respectively. The reduction in rates from the comparable periods was primarily due to the impact of higher non-deductible stock-based compensation reported in the periods in 2025 than in 2026. 13. STOCKHOLDERS EQUITY Cash Dividend Program The Company has a dividend program approved by its Board of Directors, pursuant to which the Company intends to pay quarterly cash dividends on its common stock. The Board of Directors declared the following cash dividends for the periods presented (in thousands, except per-share amounts): Three Months Ended June 30,Six Months Ended June 30, 2026202520262025 Dividend declared per share$2.00 $1.56 $4.00 $3.12 Total amount$98,285 $74,711 $196,543 $149,399 As of June 30, 2026 and December 31, 2025, accrued dividends totaled $98.3 million and $76.0 million, respectively. The declaration of any future cash dividends is at the discretion of the Board of Directors and will depend on, among other things, the Company s financial condition, results of operations, capital requirements, business conditions, and other factors that the Board of Directors may deem relevant, as well as a determination that cash dividends are in the best interests of the Company s stockholders. The Company anticipates that cash used for future dividend payments will come from its domestic cash, cash generated from ongoing U.S. operations, and cash repatriated from certain foreign subsidiaries. The Company also anticipates that earnings from other foreign subsidiaries will continue to be indefinitely reinvested. Cash Dividend Equivalent Rights The Company s RSUs contain rights to receive cash dividend equivalents, which entitle employees who hold RSUs to the same dividend value per share as holders of common stock. The dividend equivalents are accumulated and paid to the employees after the underlying RSUs vest. Dividend equivalents accumulated on the underlying RSUs are forfeited if the underlying RSUs do not vest. As of June 30, 2026 and December 31, 2025, accrued dividend equivalents totaled $6.0 million and $9.4 million, respectively. Stock Repurchase Program In February 2025, the Board of Directors approved a stock repurchase program authorizing the Company to repurchase up to $500.0 million of its common stock through February 2028. Shares are retired upon repurchase. The Company repurchased 3,000 shares of its 18 Table of Contents common stock for an aggregate purchase price of $4.0 million during the three and six months ended June 30, 2026. The Company repurchased 4,000 shares of its common stock for an aggregate purchase price of $2.6 million during the three and six months ended June 30, 2025. Stock repurchased under the program may be made through open market repurchases, privately negotiated transactions, or other structures, in accordance with applicable state and federal securities laws, at times and in amounts as management deems appropriate. The timing and the number of shares of any repurchased common stock will be determined by the Company s management based on its evaluation of market conditions, legal requirements, share price, and other factors. The repurchase program does not obligate the Company to purchase any particular number of shares, and may be suspended, modified, or discontinued at any time without prior notice. 14. SUBSEQUENT EVENTS MPSU Awards In July 2026, the Compensation Committee approved MPSU grants to the Company s executive officers and over 2,000 non-executive employees. The employees and executive officers can earn up to approximately 697,000 shares based on achievement of certain performance and market conditions as measured through July 2029. The MPSUs granted to executive officers include a holding period in the event the vesting conditions are met prior to July 2029. The MPSUs granted to non-executive employees include a time-based vesting condition of up to three years after July 2029. The fair value of the MPSUs will be estimated using the Monte Carlo valuation simulation model that incorporates various assumptions, including expected volatility, risk-free interest rate, expected dividend yield, illiquidity discount rate, and probability assessment results of the performance conditions. The Company will perform the probability assessment on a quarterly basis beginning with the quarter ending September 30, 2026. Share Repurchase Program In July 2026, the Board of Directors approved an additional $500.0 million to the stock repurchase program initially approved in 2025. 19 Table of Contents Item 2. Management s Discussion and Analysis of Financial Condition and Results of Operations This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that have been made pursuant to and in reliance on the provisions of the Private Securities Litigation Reform Act of 1995. These statements include, among others, statements concerning: the above-average industry growth of product and market areas that we have targeted; our plans to increase revenue and our manufacturing capacity in a diversified way across regions and through the introduction of new products within our existing product families as well as in new product categories and families; our mission statement to reduce energy and material consumption to improve all aspects of quality of life and create a sustainable future; the effects of macroeconomic factors, global economic uncertainties, current and potential global conflicts and global tariffs, export controls and retaliatory measures on the semiconductor industry and our business; the effect of changes in laws or economic policies in China or the U.S.; the effect that liquidity of our investments has on our capital resources; the continuing application of our products in the storage and computing, enterprise data, automotive, industrial, communications and consumer end markets; estimates of our future liquidity requirements and the sufficiency of our cash, cash equivalents and short-term investments to operate our business; the cyclical nature of the semiconductor industry; our belief that we may incur significant legal expenses that vary with the level of activity in each of our current or future legal proceedings; expectations regarding protection of our proprietary technology; our business outlook for the remainder of 2026 and beyond; the factors that we believe will impact our business, operations and financial condition, as well as our ability to achieve revenue growth; the expected percentage of our total revenue from various end markets; our ability to identify, acquire and integrate companies, businesses and products, and achieve the anticipated benefits from such acquisitions and integrations; the expected impact of various U.S. and international tax laws and regulations on our income tax provision, financial position and cash flows; our plan to repatriate cash from our foreign subsidiaries; our ability to fulfill our customers evolving needs, enter new market segments and obtain design wins; our ability to forecast demand accurately and align inventory levels accordingly; our ability to develop and leverage process technologies as key strategic components of our future growth; our expectation to capitalize on the length of product life cycles to reduce manufacturing intensity and related emissions; our ability to recruit and retain application and design engineering personnel; 20 Table of Contents our expectation to continue devoting significant resources to research and development including related increased expenses; our ability to engage additional supply chain partners to support future growth and to leverage a diversified and resilient supply chain to reduce exposure to trade- and tariff-related risks; our intention and ability to execute our stock repurchase program and pay cash dividends and dividend equivalents; the factors that differentiate us from our competitors; and our ability to timely and adequately remediate our material weakness. These forward-looking statements generally are identified by the words would, could, may, should, predict, potential, targets, continue, anticipate, expect, intend, plan, believe, seek, estimate, project, forecast, will, and similar expressions. All forward-looking statements are based on our current outlook, expectations, estimates, projections, beliefs and plans or objectives about our business, our industry and the global economy, including our expectations regarding the potential impacts of macroeconomic factors, global economic uncertainties, including tariffs, export controls and retaliatory measures, and geopolitical tensions on the semiconductor industry and our business. These statements are not guarantees of future performance and are subject to significant risks and uncertainties. Actual events or results could differ materially and adversely from those expressed in any such forward-looking statements. Risks and uncertainties that could cause actual results to differ materially include those set forth throughout this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K including, in particular, in the sections entitled Risk Factors. Except as required by law, we disclaim any duty, and undertake no obligation, to update any forward-looking statements, whether as a result of new information relating to existing conditions, future events or otherwise or to release publicly the results of any future revisions we may make to forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Readers are cautioned not to place undue reliance on such statements, which speak only as of the date of this Quarterly Report on Form 10-Q and entail significant risks. Readers should carefully review future reports and documents that we file from time to time with the SEC, such as our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K. Unless stated otherwise or the context otherwise requires, references to the terms Monolithic Power Systems, MPS, Registrant, the Company, we, our, and us as used herein are references to Monolithic Power Systems, Inc. and its consolidated subsidiaries. Overview We are a fabless global company that provides high-performance, semiconductor-based power electronics solutions. Our mission is to reduce energy and material consumption to improve all aspects of quality of life and create a sustainable future. Founded in 1997 by our CEO Michael Hsing, we have three core strengths: deep system-level knowledge, strong semiconductor design expertise, and innovative proprietary technologies in the areas of semiconductor processes, system integration, and packaging. These combined advantages enable us to deliver reliable, compact, and monolithic solutions that are highly energy-efficient, cost-effective, and environmentally responsible while providing a consistent return on investment to our stockholders. We operate in the cyclical semiconductor industry. We are subject to industry downturns, but we have targeted product and market areas that we believe allow us to operate at above average industry performance levels over the long term. We work with third parties to manufacture, assemble and test our ICs. This has enabled us to limit our capital expenditures and fixed costs, while focusing our engineering and design resources on our core strengths. Following the introduction of a product, our sales cycle generally takes a number of quarters after we receive an initial customer order for a new product to ramp up. Typical supply chain lead times for orders are generally 16 to 26 weeks. These factors, combined with the fact that our customers can cancel or reschedule orders without incurring a significant penalty, make the forecasting of our orders, revenue and expenses difficult. We derive most of our revenue from sales through distribution arrangements and direct sales to customers in Asia, where our products are incorporated into end-user products. Our revenue from sales to direct customers in Asia was 94% and 93% of our total revenue for the three months ended June 30, 2026 and 2025, respectively. Our revenue from sales to direct customers in Asia was 93% of our total revenue for each of the six months ended June 30, 2026 and 2025. We believe our ability to achieve revenue growth will depend, in part, on our ability to develop new products, enter new markets, gain market share, manage litigation risk, diversify our customer base and continue to secure manufacturing capacity. 21 Table of Contents Macroeconomic Conditions and Regulations The semiconductor industry is impacted by various macroeconomic challenges including fluctuations in consumer spending, fluctuations in demand for semiconductors, rising inflation, global tariffs and retaliatory measures and announcements regarding the same, increased interest rates, and fluctuations in currency rates. We remain cautious in light of continued challenging global macroeconomic conditions and will continue to monitor the potential impact on our operations. The extent and duration of the direct and indirect impact of macroeconomic events on our business, results of operations and overall financial position remain uncertain and depend on future developments. We closely monitor changes to export control laws, tariffs, trade regulations and other trade requirements. For the three months ended June 30, 2026 and through the date we filed this Quarterly Report on Form 10-Q, no restrictions or requirements have had a material impact on our revenue and operations. We believe that our diverse, agile and resilient supply chain is structured in a way to minimize the impact of tariffs; however, such restrictions or requirements can be enacted quickly and unexpectedly and could impact our business in the future. To the extent tariffs, trade regulations or retaliatory measures or announcements regarding the same that affect us are implemented, we will seek to take mitigating actions in the near- and medium-term, as necessary, but there can be no assurance we will be successful. We are committed to complying with all applicable trade laws, regulations and other requirements. Critical Accounting Estimates In preparing our condensed consolidated financial statements in accordance with U.S. GAAP, we are required to make estimates, assumptions and judgments that affect the amounts reported in our financial statements and the accompanying disclosures. Estimates and judgments used in the preparation of our financial statements are, by their nature, uncertain and unpredictable, and depend upon, among other things, many factors outside of our control. These factors include demand for our products, economic conditions and other current and future events, such as macroeconomic factors, global economic uncertainties, current and potential global conflicts and global tariffs, export controls and retaliatory measures and announcements regarding the same. Actual results could differ from these estimates and assumptions, and any such differences may be material to our condensed consolidated financial statements. There have been no material changes during the six months ended June 30, 2026 to our critical accounting estimates from the information provided in the Critical Accounting Estimates section of Part II, Item 7, Management s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2025. Results of Operations The table below sets forth the data on the Condensed Consolidated Statements of Operations as a percentage of revenue for the periods presented: Three Months Ended June 30,Six Months Ended June 30, 2026202520262025 (In thousands, except percentages) Revenue$980,642 100.0%$664,574 100.0%$1,784,827 100.0%$1,302,128 100.0% Cost of revenue439,572 44.8 298,558 44.9 798,692 44.7 582,882 44.8 Gross profit541,070 55.2 366,016 55.1 986,135 55.3 719,246 55.2 Operating expenses: Research and development118,618 12.1 96,266 14.5 219,184 12.4 188,493 14.5 Selling, general and administrative118,558 12.1 104,992 15.8 221,905 12.4 197,236 15.1 Total operating expenses237,176 24.2 201,258 30.3 441,089 24.8 385,729 29.6 Operating income303,894 31.0 164,758 24.8 545,046 30.5 333,517 25.6 Other income, net17,835 1.8 12,220 1.8 23,865 1.4 17,351 1.3 Income before income taxes321,729 32.8 176,978 26.6 568,911 31.9 350,868 26.9 Income tax expense64,431 6.6 41,969 6.3 118,387 6.7 80,807 6.2 Net income$257,298 26.2%$135,009 20.3%$450,524 25.2%$270,061 20.7% 22 Table of Contents Revenue The following table summarizes our revenue by end market for the periods presented: Three Months Ended June 30,Six Months Ended June 30, End Market2026% of Revenue2025% of Revenue2026% of Revenue2025% of Revenue (In thousands, except percentages) Enterprise Data$380,561 38.8%$143,964 21.7%$643,384 36.0%$276,888 21.3% Storage and Computing199,830 20.4195,320 29.4 374,224 21.0383,831 29.5 Automotive157,068 16.0145,132 21.8 309,414 17.3290,036 22.3 Communications131,571 13.473,783 11.1 243,028 13.6145,454 11.2 Consumer56,805 5.859,663 9.0 111,345 6.2116,610 8.9 Industrial54,807 5.646,712 7.0 103,432 5.889,309 6.8 Total$980,642 100.0%$664,574 100.0%$1,784,827 100.0%$1,302,128 100.0% Revenue for the three months ended June 30, 2026 was $980.6 million, an increase of $316.1 million, or 47.6%, from $664.6 million for the three months ended June 30, 2025. The increase in revenue was primarily due to increased demand for products serving our enterprise data and communications end markets. In addition, a higher product mix of power solutions, which generally carry higher average selling prices than discrete ICs, also contributed to the increase in year over year revenue. By end market, second quarter 2026 revenue for the enterprise data end market increased $236.6 million, or 164.3%, from the same period in 2025. This increase was primarily due to higher sales of power management solutions for artificial intelligence ( AI ) and server applications. Revenue from the storage and computing end market of $199.8 million increased $4.5 million, or 2.3%, from the same period in 2025. Second quarter 2026 automotive end market revenue of $157.1 million increased $11.9 million, or 8.2%, from the same period in 2025 due to higher sales of applications supporting infotainment and lighting systems. Communications end market revenue of $131.6 million increased $57.8 million, or 78.3%, from the same period in 2025 due to higher sales of power solutions for optical modules and switches. Second quarter 2026 consumer end market revenue decreased $2.9 million, or 4.8%, from the same period in 2025. Revenue of $54.8 million from the industrial end market increased $8.1 million, or 17.3%, from the same period in 2025. Revenue for the six months ended June 30, 2026 was $1,784.8 million, an increase of $482.7 million, or 37.1%, from $1,302.1 million for the six months ended June 30, 2025. The increase in revenue was primarily due to increased demand for products serving our enterprise data and communications end markets. In addition, a higher product mix of power solutions, which generally carry higher average selling prices than discrete ICs, also contributed to the increase in year over year revenue. For the six months ended June 30, 2026, revenue for enterprise data end market increased $366.5 million, or 132.4%, from the same period in 2025. This increase was primarily due to higher sales of power management solutions for artificial intelligence ( AI ) and server applications. Revenue from the storage and computing end market of $374.2 million decreased $9.6 million, or 2.5%, from the same period in 2025. For the six months ended June 30, 2026, automotive revenue of $309.4 million increased $19.4 million, or 6.7%, from the same period in 2025 due to higher sales of applications supporting infotainment and lighting systems. Communications end market revenue of $243.0 million increased $97.6 million, or 67.1%, from the same period in 2025 due to higher sales of power solutions for optical modules and switches. For the six months ended June 30, 2026, consumer end market revenue decreased $5.3 million, or 4.5%, from the same period in 2025. Revenue of $103.4 million from the industrial end market increased $14.1 million, or 15.8%, from the same period in 2025. This increase was primarily due to higher sales for power sources. 23 Table of Contents Cost of Revenue and Gross Margin Cost of revenue primarily consists of costs incurred to manufacture, assemble and test our products, as well as warranty costs, inventory-related and other overhead costs, and stock-based compensation expenses. Three Months Ended June 30,Six Months Ended June 30, 2026202520262025 (In thousands, except percentages) Cost of revenue$439,572 $298,558 $798,692 $582,882 As a percentage of revenue44.8%44.9%44.7%44.8% Gross profit$541,070 $366,016 $986,135 $719,246 Gross margin55.2%55.1%55.3%55.2% Cost of revenue was $439.6 million, or 44.8% of revenue, for the three months ended June 30, 2026, and $298.6 million, or 44.9% of revenue, for the three months ended June 30, 2025. The $141.0 million increase in cost of revenue was primarily driven by higher shipment volume and product mix. Gross margin was 55.2% for the three months ended June 30, 2026, compared with 55.1% for the three months ended June 30, 2025. Cost of revenue was $798.7 million, or 44.7% of revenue, for the six months ended June 30, 2026, and $582.9 million, or 44.8% of revenue, for the six months ended June 30, 2025. The $215.8 million increase in cost of revenue was primarily driven by higher shipment volume and product mix. Gross margin was 55.3% for the six months ended June 30, 2026, compared with 55.2% for the six months ended June 30, 2025. Research and Development R&D expenses primarily consist of cash-based compensation and benefits, stock-based compensation and deferred compensation for design and product engineers, expenses related to new product development and supplies, and facilities costs. Three Months Ended June 30,Six Months Ended June 30, 2026202520262025 (In thousands, except percentages) R&D expenses$118,618 $96,266 $219,184 $188,493 As a percentage of revenue12.1%14.5%12.4%14.5% R&D expenses were $118.6 million, or 12.1% of revenue, for the three months ended June 30, 2026, and $96.3 million, or 14.5% of revenue, for the three months ended June 30, 2025. The $22.3 million increase in R&D expenses was primarily due to an $11.2 million increase in cash-based compensation and benefits, a $6.6 million increase in new product development expenses, and a $1.3 million increase in facilities costs. R&D expenses were $219.2 million, or 12.4% of revenue, for the six months ended June 30, 2026, and $188.5 million, or 14.5% of revenue, for the six months ended June 30, 2025. The $30.7 million increase in R&D expenses was primarily due to a $15.5 million increase in cash-based compensation and benefits, a $5.7 million increase in new product development expenses, a $2.6 million increase in facilities costs, and a $2.2 million increase in laboratory and other supplies. 24 Table of Contents Selling, General and Administrative SG&A expenses primarily include cash-based compensation and benefits, stock-based compensation and deferred compensation for sales, marketing and administrative personnel, travel expenses, facilities costs, third-party service fees and legal expenses. Three Months Ended June 30,Six Months Ended June 30, 2026202520262025 (In thousands, except percentages) SG&A expenses$118,558 $104,992 $221,905 $197,236 As a percentage of revenue12.1%15.8%12.4%15.1% SG&A expenses were $118.6 million, or 12.1% of revenue, for the three months ended June 30, 2026, and $105.0 million, or 15.8% of revenue, for the three months ended June 30, 2025. The $13.6 million increase in SG&A expenses was primarily driven by an $11.5 million increase in cash-based compensation and benefits and a $5.7 million increase in legal expenses, partially offset by a $6.8 million decrease in stock-based compensation. SG&A expenses were $221.9 million, or 12.4% of revenue, for the six months ended June 30, 2026, and $197.2 million, or 15.1% of revenue, for the six months ended June 30, 2025. The $24.7 million increase in SG&A expenses was primarily driven by a $21.4 million increase in cash-based compensation and benefits, a $10.1 million increase in legal expenses, a $5.1 million increase in employer payroll taxes related to vested equity awards, and a $1.6 million increase in software licensing fees, partially offset by a $17.9 million decrease in stock-based compensation. Other Income, Net Other income, net, was $17.8 million for the three months ended June 30, 2026, compared with $12.2 million for the three months ended June 30, 2025. The increase in other income, net was primarily due to $3.4 million related to changes in the value of the deferred compensation plan investments. Other income, net, was $23.9 million for the six months ended June 30, 2026, compared with $17.4 million for the six months ended June 30, 2025. The increase in other income, net was primarily due to an increase of $4.5 million in interest income and $3.1 million related to changes in the value of the deferred compensation plan investments, partially offset by a decrease of $2.4 million in income associated with the amortization of the discount on available-for-sale securities. Income Tax Expense The income tax expense for the three and six months ended June 30, 2026 was $64.4 million and $118.4 million, respectively, or an effective tax rate of 20.0% and 20.8%, respectively. The income tax expense for the three and six months ended June 30, 2025 was $42.0 million and $80.8 million, respectively, or an effective tax rate of 23.7% and 23.0%, respectively. The reduction in rates from the comparable periods was primarily due to the impact of higher non-deductible stock-based compensation reported in the periods in 2025 than in 2026. 25 Table of Contents Liquidity and Capital Resources June 30,December 31, 20262025 (In thousands, except percentages) Cash and cash equivalents$1,005,587 $1,099,302 Short-term investments408,174 157,243 Total cash, cash equivalents and short-term investments$1,413,761 $1,256,545 Percentage of total assets30.2%30.0% Total current assets$2,477,386 $2,183,802 Total current liabilities(497,934)(369,365) Working capital$1,979,452 $1,814,437 As of June 30, 2026, we had cash and cash equivalents of $1,005.6 million and short-term investments of $408.2 million, compared with cash and cash equivalents of $1,099.3 million and short-term investments of $157.2 million as of December 31, 2025. As of June 30, 2026, $659.5 million of cash and cash equivalents and $309.2 million of short-term investments were held by our foreign subsidiaries. For the six months ended June 30, 2026, we repatriated $140 million from certain foreign subsidiaries to the U.S. with minimal tax impact. We anticipate that earnings from other foreign subsidiaries will continue to be indefinitely reinvested. Summary of Cash Flows The following table summarizes our cash flow activities for the periods presented: Six Months Ended June 30, 20262025 (In thousands) Net cash provided by operating activities$478,159 $494,024 Net cash used in investing activities(396,857)(273,283) Net cash used in financing activities(178,611)(135,327) Effect of change in exchange rates3,591 10,169 Net increase (decrease) in cash, cash equivalents and restricted cash$(93,718)$95,583 For the six months ended June 30, 2026, the $15.9 million decrease in net cash provided by operating activities, compared to the same period in 2025, was primarily due to an overall increase in working capital needs. For the six months ended June 30, 2026, the $123.6 million increase in net cash used in investing activities, compared to the same period in 2025, was primarily due to $67.4 million higher net purchases of investments and $64.8 million higher net purchases of property and equipment. For the six months ended June 30, 2026, the $43.3 million increase in net cash used in financing activities, compared to the same period in 2025, was primarily due to an increase of $44.4 million in dividend and dividend equivalent payments. Cash Requirements Although consequences of economic uncertainties and macroeconomic conditions, including tariffs and retaliatory measures and announcements regarding the same, and many other factors could adversely affect our liquidity and capital resources in the future, and cash requirements may fluctuate based on the timing and extent of many factors such as those discussed above, we believe that our balances of cash, cash equivalents and short-term investments of $1,413.8 million as of June 30, 2026, along with cash generated by ongoing operations, will be sufficient to satisfy our liquidity requirements for the next 12 months. 26 Table of Contents Our material cash requirements include the following contractual and other obligations: Purchase Obligations Purchase obligations represent commitments to our suppliers and other parties requiring the purchases of goods or services. Our purchase obligations primarily consist of wafer and other inventory purchases, assembly and other manufacturing services, construction of manufacturing and R&D facilities, purchases of production and other equipment, and license arrangements. As of June 30, 2026, total estimated future unconditional purchase commitments to all suppliers and other parties were $571.0 million, of which $542.1 million was due within a year. Capital Return to Stockholders In February 2025, our Board of Directors approved a new stock repurchase program authorizing us to repurchase up to $500.0 million of our common stock through February 2028. Shares are retired upon repurchase. We repurchased 3,000 shares of our common stock for an aggregate purchase price of $4.0 million during the three and six months ended June 30, 2026. As of June 30, 2026, $489.3 million remained available for future repurchases under the program. In July 2026, our Board of Directors increased the authorized amount of the repurchase program by an additional $500.0 million. We currently have a dividend program approved by our Board of Directors, pursuant to which we intend to pay quarterly cash dividends on our common stock. Based on our historical practice, stockholders of record as of the last business day of the quarter are entitled to receive the quarterly cash dividends when and if declared by the Board of Directors, which are payable to the stockholders in the following month. As of June 30, 2026, accrued dividends totaled $98.3 million. The declaration of any future cash dividends and stock repurchases under the stock repurchase program are at the discretion of our Board of Directors and will depend on, among other things, our financial condition, results of operations, capital requirements, business conditions and other factors that our Board of Directors may deem relevant, as well as a determination that cash dividends and stock repurchases under the stock repurchase program are in the best interests of our stockholders. Other Long-Term Obligations Other long-term obligations primarily include deferred compensation plan liabilities and accrued dividend equivalents. As of June 30, 2026, these obligations totaled $108.6 million. 27 Table of Contents Item 3. Quantitative and Qualitative Disclosures About Market Risk For a discussion of market risks, refer to Item 7A, Quantitative and Qualitative Disclosures about Market Risk in our Annual Report on Form 10-K for the year ended December 31, 2025. During the three and six months ended June 30, 2026, there were no material changes or developments that would have materially altered, or were reasonably likely to materially alter, the market risk assessment performed as of December 31, 2025. Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and Interim Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934 as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, and due to the finding of the material weakness described below, our Chief Executive Officer and Interim Chief Financial Officer concluded that, as of June 30, 2026, our disclosure controls and procedures were not effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC s rules and forms. As previously reported in our Annual Report on Form 10-K for the year ended December 31, 2025, during the year-end financial reporting process for fiscal year 2025, a material weakness was identified in internal control over financial reporting related to the accounting for deferred income taxes. We engaged third-party tax service providers in connection with the original determination of the accounting for deferred income taxes associated with a one-time tax incentive granted by a certain foreign jurisdiction. Nevertheless, the internal controls in place with respect to the review of the calculation of deferred income taxes and the related income tax expense (benefit) were not designed appropriately or operating effectively as of December 31, 2025. The material weakness in internal control over financial reporting was not remediated as of June 30, 2026. Notwithstanding the material weakness in internal control over financial reporting, management believes and has concluded that the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with U.S. GAAP. Ongoing Remediation of Previously Identified Material Weakness With respect to the material weakness described above, management, under the oversight of the Audit Committee, has implemented measures designed to ensure that control deficiencies contributing to the material weakness are remediated, such that these controls are designed, implemented, and operating effectively. However, the material weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. Management expects to remediate the material weakness by the end of fiscal year 2026 and is monitoring the effectiveness of its remediation plan and will refine the plan as appropriate. However, there is no assurance as to when such remediation will be completed. Changes in Internal Control over Financial Reporting Except for the ongoing remediation measures related to the material weakness described above, there were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2026, that would have materially affected, or were reasonably likely to materially affect, our internal control over financial reporting. Limitations on Effectiveness of Controls and Procedures In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. 28 Table of Contents PART II. OTHER INFORMATION Item 1. Legal Proceedings We are a party to actions and proceedings in the ordinary course of business, including challenges to the enforceability or validity of our intellectual property, claims that our products infringe on the intellectual property rights of others, and employment matters. We are also subject to litigation initiated by our stockholders. These proceedings often involve complex questions of fact and law and may require the expenditure of significant funds and the diversion of other resources to prosecute and defend. We defend ourselves vigorously against any such claims. Based on current information and management assessment, we do not believe that a material loss from known matters is probable as of June 30, 2026. On February 4, 2025, a class action lawsuit was filed against us and certain of our executives. The lawsuit is captioned Waterford Twp. Gen. Emps. Ret. Sys. v. Monolithic Power Systems, Inc., et al., No. 25-cv-220 (W.D. Wash.) (the Securities Action ) and alleges that we violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder, by making material misstatements or omissions relating to our business. We believe the lawsuit is meritless and currently intend to defend against it vigorously. Related to the Securities Action, shareholder derivative suits were also filed, against certain current and former directors and executives, alleging breaches of their fiduciary duties. One shareholder derivative suit has been filed under the caption Moore v. Hsing, et al., No. 26-cv-80720 (S.D. Fla.), filed on June 16, 2026, and the two other shareholder derivative suits have been consolidated under the caption Miller v. Hsing, et al., No. 25-cv-527 (W.D. Wash.), filed on March 26, 2025 (collectively, the Derivative Litigation ). The Securities Action and Derivative Litigation seek unspecified amounts of damages and/or attorneys fees and other relief. The Derivative Litigation is stayed pending developments in the Securities Action. Item 1A. Risk Factors Our business, reputation, results of operations, financial condition and stock price can be affected by a number of factors, whether currently known or unknown, including those described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025 under the heading Risk Factors. When any one or more of these risks materialize from time to time, our business, reputation, results of operations, financial condition and stock price can be materially and adversely affected. There have been no material changes to our risk factors since the filing of our Annual Report on Form 10-K for the year ended December 31, 2025. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Issuer Purchases of Equity Securities In February 2025, our Board of Directors approved a stock repurchase program authorizing us to repurchase up to $500.0 million of our common stock through February 2028. Shares are retired upon repurchase. We repurchased 3,000 shares of our common stock for an aggregate purchase price of $4.0 million during the three months ended June 30, 2026. The following table represents details of our stock repurchase transactions during the three months ended June 30, 2026: PeriodTotal Number of Shares PurchasedAverage Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced ProgramApproximate Dollar Value of Shares that May Yet Be Purchased Under the Program (In thousands, except per share amounts) May 1, 2026 - May 31, 20261$1,566.81 1$492,055 June 1, 2026 - June 30, 20262$1,445.69 2$489,318 Total3$1,482.83 3 In July 2026, the Board of Directors increased the authorized amount of the repurchase program by an additional $500.0 million. Stock repurchases under the program may be made through open market repurchases, privately negotiated transactions, or other structures, in accordance with applicable state and federal securities laws, at times and in amounts as management deems appropriate. 29 Table of Contents The timing and the number of shares of any repurchased common stock will be determined by our management based on the evaluation of market conditions, legal requirements, stock price, and other factors. The repurchase program does not obligate us to purchase any particular number of shares and may be suspended, modified, or discontinued at any time without prior notice. Item 3. Defaults Upon Senior Securities None. Item 4. Mine Safety Disclosures Not applicable. Item 5. Other Information Certain of our executive officers and directors have entered into trading plans pursuant to Rule 10b5-1(c) of the Securities Exchange Act of 1934, as amended. A trading plan is a written document that pre-establishes the amounts, prices and dates (or formula for determining the amounts, prices and dates) of future purchases or sales of our common stock, including the sale of shares acquired pursuant to the Monolithic Power Systems, Inc. 2004 Employee Stock Purchase Plan, amended and restated, and upon vesting of RSUs. The following table summarizes the adoption of trading plans intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) during the three months ended June 30, 2026: Name and TitleAdoption DatePlan DurationIntended Sale Amount (in shares) Deming Xiao, Executive Vice President, Global Operations May 19, 2026Through May 19, 2027 Up to 80,000 Michael Hsing, President, Chief Executive Officer and Director May 29, 2026Through May 29, 2027 Up to 60,000 Saria Tseng, Executive Vice President, Strategic Corporate Development, General Counsel and Corporate Secretary May 29, 2026Through May 29, 2027 Up to 75,409 The following table summarizes the termination of trading plans intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) during the three months ended June 30, 2026: Name and TitleTermination DateOriginal Plan DurationIntended Sale Amount (in shares)Sold Amount (in shares) Deming Xiao, Executive Vice President, Global Operations May 6, 2026Through February 19, 2027 Up to 120,000 - During the three months ended June 30, 2026, no trading plans intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) were modified, and no other written trading arrangements that are not intended to qualify for the Rule 10b5-1(c) affirmative defense were adopted, modified, or terminated. 30 Table of Contents