Diodes Incorporated delivered its sixth straight quarter of double-digit year-over-year revenue growth as higher semiconductor content in AI server, automotive, and industrial applications helped Q2 revenue rise more than 20%.
Second-quarter revenue reached $445.5 million, increasing from $366.2 million a year earlier and $405.5 million in Q1. That represented approximately 21.7% year-over-year growth and roughly 10% sequential growth.
Management said the growth was broad-based across geographic regions and accompanied by record global point-of-sale activity. Diodes attributed part of the momentum to expanding analog and power semiconductor content in its strategic focus markets, including automotive, industrial and AI server-related applications.
The company is also beginning to see the profitability benefits of cost and operating initiatives implemented during the semiconductor market slowdown. GAAP gross margin increased 160 basis points year-over-year to 33.1% from 31.5%. Gross profit rose to $147.6 million from $115.3 million.
Cash generation remained strong. Diodes produced $68.5 million of operating cash flow and $34.8 million of free cash flow after $33.6 million of capital expenditures. Net cash flow was positive $32.9 million even after the company deployed $10 million toward its share repurchase program.
Stronger cash flow gives Diodes more flexibility to invest in internal product development while pursuing acquisitions. Management specifically highlighted its proposed acquisition of ElevATE Semiconductor as an example of an inorganic opportunity designed to broaden the company’s technology portfolio.
Diodes expects the growth rate to accelerate further in Q3. Revenue is projected to increase approximately 30% year-over-year and 14% sequentially at the midpoint of guidance.
Gross margin is expected to improve another 190 basis points sequentially as factory utilization increases. Management also expects non-GAAP earnings to improve approximately 2.8 times year-over-year during Q3.
Those expected results would move Diodes closer to its three-year financial objectives of reaching $2 billion of annual revenue and more than $4 of non-GAAP earnings per share.
The continued expansion of semiconductor content in AI server-related applications gives Diodes another secular growth market alongside automotive and industrial electronics, while improving utilization could allow revenue growth to translate into greater margin expansion.
KEY QUOTES:
“We extended our momentum in the second quarter with revenue again increasing more than 20% year-over-year, driven by growth across all regions. Revenue also increased 10% sequentially coupled with record global POS. As the sixth consecutive quarter of double-digit year-over-year growth, this quarter serves as further confirmation of strengthening demand in the overall market combined with Diodes expanding content across our analog and power solutions in our key focus areas of automotive, industrial and AI server-related applications.”
“Additionally, the cost and operating initiatives we previously implemented during the market slowdown are producing measurable benefits to gross margin and our bottom line, with margin increasing 160 basis points year-over-year and non-GAAP earnings increasing by more than 100% again this quarter.”
Gary Yu, President and CEO of Diodes
