Vicor Reports Q3 Revenue of $197.1 Million, Up 78.5% Year Over Year

Vicor (NASDAQ: VICR ) reported third-quarter financial results on Tuesday. The transcript from the company's third-quarter earnings call has been provided below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

View the webcast at Summary Vicor Corporation reported Q3 2026 revenues of $197.1 million, a 37.5% increase from Q2 2026 and a 78.5% increase from Q3 2025, with a significant boost from royalty revenue. Gross margin improved to 68.3%, largely due to increased royalty revenue and better product margins from volume efficiencies. The company expects a 10% increase in Q4 product revenue and at least $43 million in royalty revenue, with potential for further growth depending on new license agreements. Vicor is expanding its capacity with two new chip fabs to meet growing demand, particularly in AI applications, and expects initial equipment deployment in Fab 2 by Q2 2027.

Strong demand is anticipated across business segments, particularly in AI and high-growth applications, with a 7% increase in backlog to $406 million by the end of Q3. Management highlighted the strategic focus on licensing and capacity expansion, indicating robust growth potential and a move towards recurring royalty revenue. Full Transcript OPERATOR Ladies and gentlemen, thank you for standing by. Welcome to the third quarter 2026 Vicor earnings conference call.

At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session, and to ask a question during this session, you would need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again.

Please be advised that today's conference is being recorded. I would now like to turn the conference over to Jim Schmidt, Chief Financial Officer. Please go ahead. Jim Schmidt (Chief Financial Officer) Thank you.

Good morning and welcome to Vicor Corporation's earnings call for the third quarter ended September 30, 2026. I'm Jim Schmidt, Chief Financial Officer, and I'm in Andover with Patrizio Vinciarelli, Chief Executive Officer, and Phil Davies, Corporate Vice President, Global Sales and Marketing. Earlier this morning we issued a press release summarizing our financial results for the three and nine months ended September 30, 2026. This press release has been posted on the investor relations page of our website, We also filed a Form 8-K today related to the issuance of this press release.

I remind listeners this conference call is being recorded and is the copyrighted property of Vicor Corporation. I also remind you various remarks we make during this call may constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995.

Except for historical information contained in this call, the matters discussed on this call, including any statements regarding current and planned products, current and potential customers, potential market opportunities, expected events and announcements, and our capacity expansion, as well as management's expectations for sales growth, spending and profitability are forward-looking statements involving risks and uncertainties. In light of these risks and uncertainties, we can offer no assurance that any forward-looking statement will in fact prove to be correct.

Actual results may differ materially from those explicitly set forth in or implied by any of our remarks today. The risks and uncertainties we face are discussed in Item 1A of our 2025 Form 10-K, which we filed with the SEC on March 2, 2026. This document is available via the EDGAR system on the SEC's website. Please note, the information provided during this conference call is accurate only as of today, Tuesday, October 20, 2026.

Vicor undertakes no obligation to update any statements, including forward-looking statements made during this call, and you should not rely upon such statements after the conclusion of this call. A webcast replay of today's call will be available shortly on the Investor Relations page of our website. I'll now turn to a review of our Q3 financial performance, after which Phil will review recent market developments and Patrizio, Phil and I will take your questions. In my remarks I will focus mostly on the sequential quarterly changes for P&L and balance sheet items and refer you to our press release or our upcoming Form 10-Q for additional information.

As stated in today's press release, Vicor recorded product and royalty revenue for the third quarter of $197.1 million, up 37.5% sequentially from the second quarter of 2026 total of $143.4 million and up 78.5% in the third quarter of 2025 total of $1.4 million. Advanced products revenue, which includes royalty revenue, increased 47.5% sequentially to $138.9 million and brick products revenue increased 18.4% sequentially to $58.3 million. Royalty revenue increased 119.1% sequentially to $66.6 million. A fraction of this increase due to initial royalty payments from the new licensee was nonrecurring.

As we add more licensees, growth in royalty revenues will be less lumpy. Shipments to stocking distributors increased 24.8% sequentially and increased 16.2% year over year. Exports for the second quarter decreased sequentially as a percentage of total revenue to approximately 36.1% from the prior quarter's 46%. For Q3, advanced products' share of total revenue increased to 70.4% compared to 65.7% for the second quarter of 2026, with brick products' share correspondingly decreasing to 29.6% of total revenue.

Turning to Q3 gross margin, we recorded a consolidated gross profit margin of 68.3%, a 1,030 basis point increase from the prior quarter. Q3 gross margin increased 1,080 basis points from the same quarter last year. Gross margin improved both as a result of increased royalty revenue as well as better product gross margins as we achieved gains in volume, efficiency and mix. I'll now turn to Q3 operating expenses.

Total operating expense increased 29.6% sequentially from the second quarter of 2026 to $62.5 million. Within operating expense, legal expense, a substantial portion of which is contingent on royalty revenue, increased by approximately $11.1 million from the second quarter to $16.1 million. On a run-rate basis, we expect legal expense to average approximately 20% of royalty revenue in the near term. The amounts of total equity-based compensation expense for Q3 included in cost of goods, SG&A and R&D was 1,203,000, 2,655,000 and 1,483,000 respectively, totaling approximately $5.3 million.

Turning to income taxes, we recorded a tax provision for Q3 of approximately $15.4 million representing an effective tax rate for the quarter of 19.6%. Net income for Q3 totaled $63.3 million. GAAP diluted income per share was $1.33 based on a fully diluted share count of 47,609,000 shares. Turning to our cash flow and balance sheet, cash and cash equivalents totaled $513.1 million at Q3, an increase of $59.6 million sequentially.

Accounts receivable, net of reserves, totaled $102.5 million at quarter end with DSOs for trade receivables at 34 days. Inventories, net of reserves, increased 6.2% sequentially to $110.9 million. Annualized inventory turns were 2.3. Cash flow provided by operating activities totaled $69.7 million for the quarter.

Capital expenditures for Q3 totaled $16.1 million. We ended the quarter with a construction-in-progress balance, primarily for manufacturing equipment, of approximately $26.4 million and with approximately $48.6 million remaining to be spent. I'll now address bookings and backlog. Q3 book-to-bill came in above 1 and 1-year backlog increased 7% from the prior quarter, closing at $406 million.

2026 is the year in which Vicor's innovative products and technology licensing practice came into focus within the industry. With incremental capacity, we expect a 10% increase in Q4 product revenue and at least $43 million in royalty revenue, assuming no new license agreements are closed this quarter. To achieve the product revenue growth objective, we are expecting another double-digit sequential increase in product revenue in our advanced products portfolio. In Q3 we achieved operating ratios for both profitability and expense approaching our long-term financial model.

Further revenue growth will result in further margin expansion. Phil Davies (Corporate Vice President, Global Sales and Marketing) Demand across our main business segments and in our IP licensing practice is strong with $100 million in bookings in the first two weeks of Q4, which included a large order for second-generation VPD modules from our lead customer. The purchase of two sites for Chip Fab 2 and Chip Fab 3 reflects the need to expand capacity in support of increased demand. Substantial capacity expansion will be necessary based on AI industry trends and customer enthusiasm for our second generation VPD.

Meetings held with major hyperscalers and OEMs at last week's Open Compute confirmed that first-generation VPD systems using VRs, which infringe Vicor patents, are struggling to keep up with the requirements of next-generation AI systems. Our targeted audience was impressed by Vicor's second-generation VPD with its distinct manufacturability and performance advantages. Open Compute this year focused on 800-volt DC rack distribution through inefficient intermediate bus voltages from 12 volts to 6 volts or possibly 1.8 volts to a point of load approaching 0.5 volts, underscoring the inherent limitations of VRs and IVRs.

Lack of adequate current density and current gain at the point of load sets the stage for broader adoption of Vicor's second-generation VPD, providing high current density and much higher current gain with its transient performance eliminating voltage undershoots. Vicor proprietary ALL FPA enables a 10 to 15% reduction in AI processor power loss with over 40 times the current gain of IVRs and 3 times the current density of VRs. Demo systems for second-generation VPD and ALL FPA have been set up in our Silicon Valley Applications Laboratory and are available for selected OEM and hyperscaler engagements.

On the licensing front, we granted our first VPD license to a leading AI OEM based on Stage 2 unit royalty rates and responded to inquiries from two hyperscalers seeking all-inclusive licenses quoted at Stage 2 and Stage 3 prior to the recent ITC decision to investigate VPD infringement. Even though leading OEMs have already obtained a license to our VPD patents, others may not have yet realized that they are importing or planning to import infringing products.

Catching their attention, Vicor has requested the ITC to issue a limited exclusion order barring importation of unlicensed computing systems that infringe Vicor's VPD, like the ITC did before in an earlier investigation involving our NBM patents. As hyperscalers and other OEMs come to realize the impact of an importation ban, they will take licenses based on escalating royalty rates established in our licensing practice which favors early adopters.

The decision to focus on a set of top 100 customers and top channel accounts, or TCAs, with our global distribution partners across our four markets and four regions globally is clearly paying off with both bookings and opportunity pipeline growth. Our customers are on the cutting edge of high-growth applications with the toughest power delivery challenges and specifications. Our leading ATE customers for ASIC and memory test systems, which now represents over $100 million in annual revenues, shows no signs of slowing down and we are actively discussing capacity reservations to ensure supply in coming years.

Major new product introductions are also underway in our industrial and aerospace and defense businesses, with market expansion now occurring with new non-traditional companies that have entered the A&D market with new autonomous technologies. Successful execution is achieved with focus and we are very focused. Thank you and we will now take your questions. OPERATOR Thank you.

And as a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. And the first question is going to come from Quinn Bolton with Needham and Company. Your line is open.

Quinn Bolton (Analyst) Hey guys. Congratulations on the strong product and licensing outlook. I guess I wanted to start. Jim, just—you mentioned that the royalty revenue in the third quarter of $66.6 million did include some catch-up royalties.

Wondering if you could help size that in the third quarter, and then I've got a couple of follow-ups. Jim Schmidt (Chief Financial Officer) It might be best to just think about the $43 million that I mentioned, Quinn, as the baseline amount that we can count on now with no new deals as a starting point for Q4. Quinn Bolton (Analyst) Got it. Right.

Jim Schmidt (Chief Financial Officer) Yes. So, thinking, Quinn, thinking about this, what's the meaning of nonrecurring? I think that which was labeled nonrecurring has been recurring pretty periodically. So, as we pointed out, in Q3 there was a contribution.

There is nonrecurring, but then early in Q4 we get some other contribution. So I think we should all expect that our licensing income is going to be growing while we're still in a Patrizio Vinciarelli (Chief Executive Officer) Licensing arrangement with a relatively small subset of all the hyperscalers and OEMs. It is still going to be ramped. There's going to be more, quote unquote, non-recurring contributions.

It's not going to be until there's a crossing of the chasm with respect to the need to license microtechnology for freedom to operate in AI applications, given the strong component of Vicor IP that is immensely involved in these systems, but with some lumpiness. This is going to be a significant growth business that we're now estimating to reach levels next year and the year after that beyond the levels that I had forecasted a year ago. Jim Schmidt (Chief Financial Officer) And Quinn, I'll just add to what Patricio said. It's better for, I think, the audience and the analysts to think about the royalty stream as recurring now and not a non-recurring activity.

Just to put it in perspective, the nature of the agreements are recurring. Quinn Bolton (Analyst) Yeah. No, I think I understand that if you sign new licenses there may be catch-ups with those additional license agreements. But the 43 million sounds like a good go-forward base and then obviously we can add on to that as the company signs new licenses.

Wanted to turn to the second and third chip fab. I think we're all expecting you to announce a second site, so it was great to see you announce both the second and the third site. Can you give us a sense for the second site? When would you think that that facility would come online and begin contributing to product revenue?

Is that a sort of 12-month timeline? Is it 18 months? What's a good sort of timeline for investors to be thinking with that second site? And would that be able to produce sort of full set or is that just first equipment deliveries?

Patricio? Patrizio Vinciarelli (Chief Executive Officer) We're likely going to have some initial equipment deployment in Q2 of '27. Yeah. So it's going to be incremental steps with respect to those processes where we first ran into capacity limitations in Fab 1.

So in Fab 2 we're going to bring up lines that address the shorter-term limiting factors and move on from those to other ones. Quinn Bolton (Analyst) Got it. So it may not be sort of full production, a mimic of Fab 1, but you'll bring in those production steps where you're most constrained. So the impact would be to increase the company's total manufacturing beginning the second quarter.

Patrizio Vinciarelli (Chief Executive Officer) That's right, yeah. Obviously for those process steps where we still have ample capacity, there is no need, there is no rush to deploy additional equipment there. So we're going to be able to do it incrementally and more cost effectively and more predictably. Quinn Bolton (Analyst) And then the last one for me, Phil, you mentioned good meetings at Open Compute last week and just kind of wondering if you could address what kind of demand are you seeing for the factorized power or the 48-volt solutions as the VRs and IVRs do look increasingly challenged?

When do you think you might see adoption of 2nd gen VPD outside of your lead customer based on some of those conversations? Phil Davies (Corporate Vice President, Global Sales and Marketing) So conversations are still early, Quinn. In that regard, we do have line of sight to new chips that are under development that are sort of further out, if you like. But I do think that there could be opportunities in the shorter term based upon the inefficiencies of VRs and IVRs.

So we'll be taking a look at that. Patrizio Vinciarelli (Chief Executive Officer) As we move forward. So again, we're looking at all these opportunities in the frame of reference of capacity limitations over the next 12 months. It's not that we can engage with any hyperscaler OEM that has got a need; visually, all of them do, because as you know well, there's been a lot going on with respect to 800-volt bus and converting that to 6 volts, 12 volts, or back to 6 volts on the way to 1.8 volt.

The real issue with respect to enabling AI doesn't have to do with what happens, in effect, some distance away under volt bus or even the Tamir bus. The real concerns have to do with the point of load.