Navitas Semiconductor's Q3 2025: Contradictions Emerge on Mobile vs. High-Power Focus, Data Center Growth, and Strategic Shifts

Date of Call: None provided

Financials Results

• Revenue: $10.1M in Q3 2025 (midpoint of guidance); Q4 guidance $7.0M ± $0.25M, expected to be the bottom as company deprioritizes lower‑margin mobile and reduces channel inventory.
• Gross Margin: 38.7% in Q3 2025, up sequentially from 38.5% in Q2 2025; Q4 guidance 38.5% ±50 bps (relatively flat).

Guidance:

• Q4 revenue expected $7.0M ± $0.25M; company expects Q4 to be the bottom.
• Q4 gross margin ~38.5% ±50 bps (flat vs Q3); management expects progressive gross margin improvement over time.
• Q4 operating expenses targeted at $15M (≈24% YoY reduction); weighted average shares ~214M.
• Strategic actions: deprioritize low‑margin China mobile, reduce channel inventory, streamline distribution, reallocate resources to high‑power markets; expect gradual revenue growth in 2026 and material AI data‑center contribution in 2027.

Business Commentary:

* Transition to High-Power Markets: - Navitas Semiconductor is pivoting from lower-margin mobile markets to high-power segments like AI data centers, performance computing, energy and grid infrastructure, and industrial electrification. - This transition is driven by a strategy to focus on high-growth markets where Navitas' experience in GaN and high-voltage SiC technologies position the company for long-term success.

• Market Environment and Revenue Impact:
• Revenue for Q3 2025 was $10.1 million, which reflects adverse impacts from China tariff risk for their SiC business and pricing pressure in the mobile sector.

• The expected revenue for Q4 is $7 million, marking the bottom as the company deprioritizes lower-profit segments and realigns resources towards high-power markets.

• Operational Efficiency and Cost Reduction:

• Navitas has reduced operating expenses sequentially from $16.1 million in Q2 to $15.4 million in Q3, aligning with their cost reduction target.

• The company is streamlining its distribution network and adjusting inventory levels to better align with their new high-power focus, aiming for improved operating efficiency.

• Technological Leadership in GaN and SiC:

• Navitas is expanding its manufacturing footprint and considering additional foundry partnerships to better serve high-power customers.
• The company's leadership in GaN device shift and high-voltage SiC technology is expected to drive growth and margin expansion in high-power markets.

Sentiment Analysis:

Overall Tone: Positive

• Management frames a decisive pivot to 'Navitas 2.0' focused on high‑power markets, stating 'Q4 will represent the bottom' and expressing confidence: 'we are confident these strategic moves position the company for its next wave of more profitable growth' and that AI data centers will deliver 'material P&L contribution starting 2027.'

Q&A:

• Question from Kevin Cassidy (Rosenblatt Securities): How long is the mobile tail and when do you expect high‑voltage/high‑power to be more than 50% of the business?
  Response: Mobile was the majority in Q3 but will be under 50% in Q4; the company will walk away from low‑margin mobile and drive growth from AI data centers, performance computing and grid, shifting mix to high‑power.

• Question from Ross Seymore (Deutsche Bank): With many collaborators on NVIDIA's list, what is Navitas' true competitive differentiation — GaN or SiC?
  Response: Differentiation is owning both GaN and high‑voltage SiC plus proven track record, speed and execution capability — customers value speed/support for transition.

• Question from Ross Seymore (Deutsche Bank): You said Q4 is the bottom — conceptually what gives you confidence and what will drive sequential growth in 2026?
  Response: Confidence comes from proactively walking away from lower‑margin mobile and reallocating resources; sequential 2026 growth will be driven by high‑power markets (AI, performance computing, grid) rather than mobile.

• Question from Quinn Moulton (Needham & Company): Has anything materially changed in the last 90 days regarding the China mobile impact and the pivot?
  Response: Yes — leadership accelerated the pivot after customer engagements; decision to more rapidly redeploy resources from mobile to high‑power driven by customer urgency.

• Question from Quinn Moulton (Needham & Company): Is the solar microinverter (GaN BDS) ramp still on track?
  Response: Yes — the GaN BDS microinverter program remains on track to ramp in 2026 with the lead customer.

• Question from Jack Egan (Charter Equity Research): What cultural/operational characteristics will you install at Navitas from your prior experience?
  Response: Focus on clarity, speed and execution — sharpened strategic focus and faster decision making to execute the pivot.

• Question from Jack Egan (Charter Equity Research): Could pricing pressure eventually move into higher‑wattage mobile like low‑end chargers did?
  Response: Management believes high‑power markets are fundamentally different (complexity, innovation, system value) and are far from commoditization, supporting better durable margins.

• Question from Jon Tanwanteng (CJS Securities): What are the 2026 data‑center prospects before the 800‑volt products ramp?
  Response: Company already ships into AI data centers but revenues are not material in 2026; material content and exponential growth expected in 2027 when 800‑volt architectures scale.

• Question from Jon Tanwanteng (CJS Securities): Can you summarize cash position and burn to support the ramp to 2027?
  Response: Cash $151M, no debt, burn roughly $10–11M per quarter — management views this as sufficient for current operations and transition.

• Question from Tristan Gerra (Baird): How much SiC epitaxy output is insourced versus outsourced and what is the target?
  Response: The in‑house epitaxy project was never initiated; today all SiC substrates and EPI are outsourced.

• Question from Richard Shannon (Craig‑Hallum): Is Infineon still a second‑source strategy and when will you have visible wins in data centers?
  Response: Company continues dialogue with Infineon (cross‑licensing) but cannot disclose specifics; system‑level interactions with hyperscalers are at an all‑time high and 2026 is for enabling transitions.

• Question from Richard Shannon (Craig‑Hallum): How should we think about calendar 2026 sales mix — low‑voltage GaN vs SiC and overall growth?
  Response: Management frames results by segment not material by GaN vs SiC: mobile down, high‑power (compute, grid) up; mid/low‑voltage GaN products will be revenue‑bearing primarily in 2027.

• Question from Jon Tanwanteng (CJS Securities): Will margins in high‑voltage data center and grid be different than current high‑voltage business and how will you accelerate development and capacity?
  Response: High‑power markets are expected to deliver higher, more sustainable margins; acceleration requires shifting R&D, application and system engineering to these markets; capacity roadmap uses TSMC today, ramping PSMC and pursuing additional foundry partners for 2027 scale.

Contradiction Point 1

Focus on Mobile vs. High-Power Markets

It reflects a shift in strategic focus and market prioritization, which could impact business growth and resource allocation.

How long will the mobile market tail last, and when will over 50% of the business be in high-power markets? - Kevin Cassidy(Rosenblatt Securities)

2025Q3: Mobile represented the majority in Q3 but will be less than 50% in Q4. By 2026, high-power markets like AI data centers and grid infrastructure will drive quarterly growth. - Todd Glickman(CFO)

How is customer sentiment toward smartphone unit growth in 2025 and potential tariff impacts? - Nick Doyle(Needham & Company)

2025Q1: Mobile continues to be an important and stable part of our business. Xiaomi and Oppo have increased GaN adoption, and we expect further dynamic growth as power levels rise. - Gene Sheridan(CEO)

Contradiction Point 2

Data Center Growth Trajectory

It highlights differing expectations for data center growth, which could influence investor expectations and resource allocation.

What data center growth is expected in 2026 prior to the 800-volt product ramp? - Jon Tanwanteng(CJS Securities)

2025Q3: Revenue will grow in data centers but not materially until 2027. The adoption of GaN and high-voltage SiC will drive exponential growth when the 800-volt architecture becomes prime time. - Chris Alexandra(President and CEO)

Can you provide details on traction in data centers, particularly with the 12kW platform? - Jon Tanwanteng(CJS Securities)

2025Q1: We have over 75 customer projects using GaN or silicon carbide, with opportunities for more growth. - Gene Sheridan(CEO)

Contradiction Point 3

Data Center Revenue Expectations

It involves differing expectations for data center revenue growth, which is a critical area for the company's future growth.

What data center growth can we expect in 2026 before the 800V product ramp? - Jon Tanwanteng(CJS Securities)

2025Q3: Revenue will grow in data centers but not materially until 2027. - Chris Alexandra(President and CEO)

Are the $10-20 million data center expectations still valid for 2025? - Quinn Bolton(Needham & Company)

2024Q4: We see a strong trajectory with design wins increasing, particularly in Q4. Expect sequential growth throughout 2025. - Todd Glickman(CFO)

Contradiction Point 4

Resource Allocation and Strategic Focus

It highlights changes in the company's resource allocation and strategic focus, which impact business operations and competitive positioning.

What has changed in the mobile market and high-power market focus over the last 90 days? - Quinn Moulton(Needham & Company)

2025Q3: Pivoting resources towards application engineering, customer support, system engineering, R&D, and roadmaps for high-power markets. - Chris Alexandra(President and CEO)

Are the $10-20 million data center expectations still valid for 2025? - Quinn Bolton(Needham & Company)

2024Q4: We increased focus on strategic applications, leveraging GaN and silicon carbide in EV space, especially as demand improves. - Gene Sheridan(CEO)