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DI

DIODES INC /DEL/ (DIOD)·Q3 2025 Earnings Summary

Executive Summary

  • Revenue rose to $392.2M (+12.0% YoY, +7.1% QoQ), driven by AI-related server/data center demand; GAAP gross margin compressed to 30.7% on unfavorable mix (computing/consumer) despite sequential gross profit increase .
  • Q4 2025 guidance: revenue ~$380M ±3% (+12% YoY), GAAP GM ~31% ±1%, non-GAAP OpEx ~27% of revenue; management expects fifth consecutive YoY growth quarter and improving margins as automotive/industrial recover .
  • Relative to Wall Street consensus, Q3 revenue essentially matched, while non-GAAP EPS was modestly below; gross margin and EBITDA trailed consensus, reflecting mix and underloading costs. Values retrieved from S&P Global.*
  • Cash generation strong: CFO $79.1M, FCF $62.8M (FCF/share $1.35), cash/investments ~$392M, total debt ~$58M; inventory days fell (162 total, 62 finished goods), indicating healthier channel/internal levels and setting up margin “entitlement” as loadings normalize .

What Went Well and What Went Wrong

What Went Well

  • Revenue growth broad-based: computing up ~17% QoQ with AI servers/data center/edge; automotive and industrial grew sequentially and YoY; Asia POS strongest, followed by North America .
  • Strong cash generation and liquidity: CFO $79.1M, FCF $62.8M, cash/investments ~$392M vs. total debt ~$58M; working capital ~$890M .
  • Management confidence in FY growth and margin path: “Future margin expansion will be driven by ongoing improvements in product mix… higher-margin automotive and industrial… and improved loading” (Gary Yu) .

What Went Wrong

  • GAAP gross margin down to 30.7% (vs. 31.5% in Q2 and 33.7% YoY) on product mix and underloading; EBITDA fell to $46.6M (11.9% of revenue) from $84.5M in Q2 .
  • GAAP net income declined sharply QoQ to $14.3M ($0.31 diluted EPS) versus $46.1M ($0.99) in Q2; mix and underloading offset revenue strength .
  • Automotive/industrial recovery “slower than expected,” keeping combined margin mix from fully benefiting results this quarter; management flagged tariffs/geopolitics but noted limited direct impact given footprint flexibility .

Financial Results

MetricQ3 2024Q2 2025Q3 2025
Revenue ($USD Millions)$350.1 $366.2 $392.2
GAAP Gross Profit ($USD Millions)$118.0 $115.3 $120.5
GAAP Gross Margin %33.7% 31.5% 30.7%
GAAP Diluted EPS ($)$0.30 $0.99 $0.31
Non-GAAP Diluted EPS ($)$0.43 $0.32 $0.37
EBITDA ($USD Millions)$46.9 $84.5 $46.6

Segment/end-market mix (Q3 2025):

End Market Mix (% of Product Revenue)Q3 2025
Industrial22%
Automotive19%
Computing28%
Consumer18%
Communications13%

KPIs and operating metrics:

KPIQ2 2025Q3 2025
Cash Flow from Operations ($M)$41.5 $79.1
Free Cash Flow ($M)$21.1 $62.8
CapEx ($M)$20.4 $16.3
Free Cash Flow per Share ($)N/A$1.35
Cash & Equivalents + Restricted + ST Investments ($M)~$333 ~$392
Total Debt ($M)~$54 ~$58
Working Capital ($M)~871 ~890
Inventory Days (Total)173 162
Finished Goods Inventory Days71 62

Estimate comparison (consensus vs actual):

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Revenue Consensus Mean ($M)346.3*323.3*352.1*392.2*
Revenue Actual ($M)350.1 332.1 366.2 392.2
Primary EPS Consensus Mean ($)0.423*0.148*0.247*0.383*
Non-GAAP EPS Actual ($)0.43 0.19 0.32 0.37
EBITDA Consensus Mean ($M)57.0*43.0*51.0*59.0*
EBITDA Actual ($M)46.9 26.2 84.5 46.6
Gross Margin Consensus Mean (%)34.0%*32.675%*32.125%*31.6%*
Gross Margin Actual (%)33.7% 31.5% 31.5% 30.7%

Values retrieved from S&P Global.*

Observations: Q3 revenue matched consensus; non-GAAP EPS modest miss; GM and EBITDA below consensus due to mix/underloading headwinds. Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious Guidance (as of Aug 7, 2025)Current Guidance (as of Nov 6, 2025)Change
Revenue ($M)Q3 2025 vs Q4 2025~$392 ±3% ~$380 ±3% Lower (seasonality)
GAAP Gross Margin %Q3 2025 vs Q4 202531.6% ±1% 31.0% ±1% Lower
Non-GAAP OpEx (% of revenue)Q3 2025 vs Q4 202526.0% ±1% 27.0% ±1% Higher
Net Interest Income ($M)Q3 2025 vs Q4 2025~$1.0 ~$1.0 Maintained
Income Tax Rate (%)Q3 2025 vs Q4 202518.0% ±3% 18.5% ±3% Slightly higher
Diluted Shares (M)Q3 2025 vs Q4 2025~46.5 ~46.4 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2025 and Q2 2025)Current Period (Q3 2025)Trend
AI/Technology initiativesQ1: Better than seasonal computing in Asia tied to AI; guiding sequential and YoY growth . Q2: Consumer strongest; computing solid; AI-related demand cited .Strongest growth in computing; AI servers, PCIe 5/6 clocks, USB4, level shifters seeing traction and share gains .Accelerating AI-driven demand
Supply chain/inventoryQ1: Channel/internal inventory dollars/days decreasing; inventory limits factory loading temporarily . Q2: Channel/internal inventory continued to decrease; underloading headwind .Inventory dollars/days down again; total days fell to 162; management expects more balanced ship-in/ship-out and margin entitlement as loadings normalize .Normalizing; positive for margins
Tariffs/geopoliticsQ1: Company positioned with hybrid manufacturing across regions; noted global tariffs . Q2: Not specifically highlighted beyond flexibility.Impact relatively small given flexible manufacturing and NAFTA routes (Mexico/Canada); focus on supporting customers amidst geopolitics .Manageable
Product performanceQ1/Q2: Mixed; consumer strong in Q2; auto/industrial flat as % revenue .Auto/industrial up QoQ and YoY but slower pace; computing/consumer strength weighed on GM; new product introductions continue .Mix improving over time
Regional trendsQ1: Improving Europe/North America; Asia strength . Q2: POS up across regions with double-digit growth in Asia .Asia 78% of revenue; POS strongest in Asia, then North America .Asia-led demand
R&D execution/insourcingQ2: Underloading noted; focus on margin improvement .Insourcing to SP fab; qualification progressing; expected GM catalyst in 2026 (reduce external premiums) .Positive margin lever
Competitive dynamicsNot explicit in Q1/Q2.Disruptions at peers (e.g., discrete supply) seen as opportunity to capture share selectively (e.g., Nexperia/Xperi references) .Share gains potential

Management Commentary

  • “Revenue in the quarter increased 7% sequentially and 12% year-over-year driven by strong demand across the general computing market, including for AI-related server applications as well as data center and edge computing.” – Gary Yu, President & CEO .
  • “Product mix unfavorably weighed on gross margin during the quarter. Future margin expansion will be driven by ongoing improvements in product mix… higher-margin automotive and industrial end markets… and improved loading across our manufacturing facilities.” – Gary Yu .
  • “At the midpoint of our fourth quarter guidance, we expect to achieve approximately 12% growth for the full year.” – Gary Yu .
  • “Excluding non-cash share-based compensation… both GAAP net income and non-GAAP adjusted net income would have increased by $0.12 per share.” – Brett Whitmire, CFO .
  • “We are gaining strong traction… with particular strength in PCI Express 5.0 and 6.0 clock solutions… widely adopted in key applications such as AI servers and solid-state drives.” – Emily Yang, SVP Sales & Marketing .

Q&A Highlights

  • Gross margin trajectory and loadings: Management expects margin improvement via better mix (auto/industrial), insourcing/efficiencies, and normalized inventory/entitlement; 2026 targeted as growth/margin year .
  • Tariffs: Limited impact due to flexible footprint and routing via Mexico/Canada; small North America percentage mitigates exposure .
  • Automotive outlook: Automotive at 19% of product revenue (Q3); management expects automotive percentage to improve in 2026 on market share/content gains and new program ramps .
  • Operating margin target: Path back to ~20% through GM recovery toward 40%+ and OpEx ~20% at higher revenue, with heavier R&D investment and SG&A control .
  • Competitive displacement: Supply disruptions at peers in discretes seen as selective share-capture opportunities aligned with long-term strategy .

Estimates Context

  • Q3 revenue essentially matched consensus (~$392.2M vs $392.2M); non-GAAP EPS modest miss ($0.37 vs ~$0.383); GM and EBITDA below consensus, consistent with mix/underloading commentary. Values retrieved from S&P Global.*
  • Prior quarters show Q2 beats on revenue/EPS vs consensus, aided by non-operational items (mark-to-market gains and subsidiary disposal boosted GAAP; note EPS comparisons here use non-GAAP for operations). Values retrieved from S&P Global.*
  • Implication: Near-term estimate revisions likely modest—slight EPS/EBITDA trims on margin trajectory, while revenue trajectory supported by AI/server demand and sequential Q4 seasonality-above guidance. Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Narrative: AI/server/data center demand is the principal growth engine, with sequential and YoY revenue expansion amid continued normalization of inventories; margins lag due to mix/underloading but have identified levers to improve (insourcing, auto/industrial recovery) .
  • Short-term: Expect Q4 above typical seasonality with GM ~31%; watch mix (computing vs auto/industrial) and inventory/loadings for margin “entitlement” progression .
  • Medium-term: 2026 targeted as growth/margin year—GM recovery toward 40%+, OpEx discipline, R&D investment, and insourcing at SP fab supporting margin expansion; automotive content share expected to rise .
  • Cash discipline: Robust FCF and cash provide flexibility to invest, insource, and support capital allocation (buyback authorization earlier in 2025) .
  • Risk checks: Recovery in automotive/industrial slower than expected; geopolitics/tariffs manageable but dynamic; monitor peer supply changes and potential share shifts .
  • Actionables: Track Q4 mix vs guidance, inventory days, and qualification/insourcing milestones; consider that EPS/EBITDA may lag revenue near-term until mix/loadings normalize .
  • Note: Investor materials show a discrepancy on auto/industrial mix (slide annotated ~59% vs. management’s 41%); rely on management’s end-market percentages from the call for Q3 while awaiting clarification in the 10-Q .

Additional Relevant Press Releases (Q3 timeframe)

  • Automotive-compliant retimer launched for USB/DP in vehicles, reinforcing automotive content strategy (PI2DPT1021Q) .
  • Recognized by Resilinc as a Top 30 resilient supplier, highlighting supply chain risk management capabilities .
  • Q3 earnings call scheduling press release (housekeeping) .