Diodes Incorporated Q3 FY2025 earnings call

Key Points

• Revenue in Q3 2025 was $392.2 million, up 12% year-over-year and 7.1% sequentially.
• Gross profit for Q3 was $120.5 million or 30.7% of revenue.
• GAAP net income for Q3 was $14.3 million or $0.31 per diluted share.
• Non-GAAP adjusted net income in Q3 was $17.2 million or $0.37 per diluted share.
• For Q4 2025, expected revenue is approximately $380 million ±3%, GAAP gross margin expected to be 31% ±1%, non-GAAP operating expenses ~27% of revenue ±1%.
• Strong demand in Asia, especially for AI computing applications. Continued new product initiative with ~180 new part numbers, 60 for automotive.
• Automotive revenue grew 8.5% sequentially and 18.5% in first 3 quarters; industrial revenue grew ~4% sequentially and 13% in first 9 months; computing revenue grew almost 17% sequentially and 22% in first 9 months.

In the third quarter, revenue breakdown by region: Asia represented 78% of the revenue, Europe 12%, and North America 10%. By end markets: Industrial was 22% of product revenue, automotive 19%, computing 28%, consumer 18%, and communications 13% of product revenue. Revenue in the quarter increased 7% sequentially and 12% year-over-year, driven by strong demand in general computing including AI-related server applications, data center, and agent computing. Channel inventory is at a healthy level, decreasing in dollars and weeks. Automotive and industrial revenue increased sequentially and year-over-year despite slower recovery than expected.

Fourth Quarter Guidance

• Revenue expected to be approximately $380 million, ±3% at midpoint.
• GAAP gross margin expected to be 31%, ±1%.
• Non-GAAP operating expenses expected to be approximately 27% of revenue, ±1%.
• Net interest income expected to be approximately $1 million.
• Income tax rate expected to be 18.5%, ±3%.
• Shares used to calculate EPS for Q4 anticipated to be ~46.4 million shares.

Full Year

• Midpoint of full year guidance expects approximately 12% growth.

Risks

• Forward-looking statements subject to risks and uncertainties as actual results may differ from discussions.
• Tariff impacts and geopolitical issues could affect operations and supply chain.
• Market conditions may change, affecting projections and actual results.

Q: Congrats on the solid results. How do you expect gross margin to improve with loadings moving forward?

A: Emily Yang mentioned product mix will continue to improve, with new products in automotive and other areas, and manufacturing efficiency improvements. Also, moving products internally to improve loading.

Q: How are you navigating tariffs?

A: Emily Yang stated that tariff impact is relatively small as they leverage flexible manufacturing sites and move things to minimize impact. Majority of North American revenue is sourced from Mexico or Canada.

Q: How should we look at the revenue growth trajectory for automotive in 2026?

A: Emily Yang said automotive percentage will continue to improve in 2026 with market share gain and content expansion.

Q: How to parse AI demand vs content expansion?

A: Emily Yang replied it's a combination of new product introductions and increased volume, with Diodes working with Tier 1 customers to develop products they need.

Q: Do you see customers replenishing inventory?

A: Emily Yang mentioned some customers in industrial market are still correcting inventory, but situation expected to improve by early next year. Brett Whitmire added that balanced ship in and ship out will help margin improvement.