Vicor (NASDAQ:VICR) reported sharply higher third-quarter revenue and profitability, supported by growth in advanced products and royalty income, while management outlined further capacity expansion plans to address demand tied to artificial-intelligence infrastructure and other markets.
For the quarter ended Sept. 30, 2026, product and royalty revenue totaled $197.1 million, up 37.5% sequentially and 78.5% from a year earlier, Chief Financial Officer Jim Schmidt said. Advanced products revenue, including royalties, rose 47.5% from the prior quarter to $138.9 million, while Brick Products revenue increased 18.4% to $58.3 million.
Margins and earnings improve
Vicor’s consolidated gross margin reached 68.3% in the third quarter, improving 1,030 basis points sequentially and 1,080 basis points year over year. Schmidt attributed the expansion to higher royalty revenue as well as improved product margins driven by volume, manufacturing efficiency and product mix.
Operating expenses increased 29.6% sequentially to $62.5 million. Legal expense rose by approximately $11.1 million from the second quarter to $16.1 million, substantially reflecting costs contingent on royalty revenue. Schmidt said Vicor expects legal expenses to average about 20% of royalty revenue in the near term.
Net income totaled $63.3 million, or $1.33 per diluted share, based on 47.6 million diluted shares. The company recorded a tax provision of approximately $15.4 million, representing an effective tax rate of 19.6%.
Cash and cash equivalents ended the quarter at $513.1 million, up $59.6 million sequentially. Operating cash flow was $69.7 million, while capital expenditures were $16.1 million. Inventory increased 6.2% from the prior quarter to $110.9 million.
Fourth-quarter outlook and bookings
Vicor said its third-quarter book-to-bill ratio was above one and one-year backlog rose 7% sequentially to $406 million. Management expects product revenue to increase 10% in the fourth quarter, aided by incremental capacity, with another double-digit sequential increase expected in the advanced-products portfolio.
Schmidt said the company anticipates at least $43 million in fourth-quarter royalty revenue assuming no new license agreements are completed during the quarter. He also noted that existing licensing arrangements could generate royalty revenue above that baseline.
“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,” Schmidt said during the question-and-answer session.
Chief Executive Officer Patrizio Vinciarelli said royalty revenue could remain uneven as Vicor pursues additional agreements with hyperscalers and original equipment manufacturers, but he expects the licensing business to grow. “With some lumpiness, this is going to be a significant growth business,” he said.
Phil Davies, Vicor’s corporate vice president of global sales and marketing, said demand across the company’s business segments and licensing operations remained strong. He said Vicor recorded $100 million in bookings during the first two weeks of the fourth quarter, including a large order for second-generation VPD modules from its lead customer.
Capacity expansion plans
Vicor has acquired sites for ChiP Fab-2 and ChiP Fab-3 as it prepares for a larger manufacturing footprint. Vinciarelli said the company expects initial equipment deployment at Fab-2 in the second quarter of 2027, beginning with production lines tied to process steps that are currently capacity constrained at Fab-1.
The rollout at Fab-2 will be incremental rather than a full replication of Fab-1 from the outset, according to Vinciarelli. He said the company expects to be nearing full utilization of Fab-1 next year, though constraints are tied to specific manufacturing platforms and process steps.
Fab-3, meanwhile, is a longer-term option. Vicor has purchased the land but does not currently plan to begin construction. Vinciarelli said the new sites could support more than a fivefold expansion in capacity relative to Fab-1, describing that estimate as conservative because the locations provide more room for expansion.
Management did not provide capital-spending figures for Fab-2 or Fab-3, but Vinciarelli said Vicor expects to fund Fab-2, and eventually Fab-3, without raising external capital.
AI power-delivery opportunity and licensing
Davies said meetings with hyperscalers and OEMs at the Open Compute event reinforced management’s view that conventional voltage regulators and intermediate-voltage regulators face limitations in supplying power to next-generation AI systems. Vicor is promoting its second-generation VPD technology and ALL-FPA architecture, which the company said offers current-density, current-gain and transient-performance advantages.
The company has established demonstration systems for its second-generation VPD and ALL-FPA technologies at its Silicon Valley applications laboratory for selected customer engagements.
On licensing, Davies said Vicor granted its first VPD license to a leading AI OEM based on stage-two royalty rates. The company also said it has asked the U.S. International Trade Commission for a limited exclusion order barring imports of unlicensed computing systems that infringe Vicor’s VPD patents.
Vinciarelli explained that Vicor’s royalty rates increase as patent enforcement advances through defined stages. He said stage three begins when the ITC institutes an investigation, with rates escalating as the process advances. The company said its licensing structure is intended to encourage earlier licensing agreements and maintain consistency among licensees.
Beyond AI, Davies said Vicor’s automated test equipment customers now represent more than $100 million in annual revenue and “show no signs of slowing down.” He also cited new product introductions and market expansion in industrial, aerospace and defense applications.
About Vicor (NASDAQ:VICR)
Vicor Corporation (NASDAQ: VICR) designs, develops, manufactures and markets modular power components and systems. The company’s products convert, regulate and distribute electrical power for electronic equipment, with an emphasis on high-performance, compact and efficient power solutions.
Its portfolio includes AC-to-DC and DC-to-DC converters, regulators, power modules, power distribution components and complete power systems. Vicor’s technologies include its Factorized Power Architecture and high-density ChiP packaging, which are designed to help engineers manage power more efficiently while reducing the size and complexity of electronic systems.
Vicor serves customers in industries such as data centers and computing, telecommunications, automotive, aerospace and defense, industrial equipment, and consumer electronics.
