In the semiconductor space, NVE Corporation (NVEC) and Alpha and Omega Semiconductor (AOSL) represent two very different ends of the small-cap chip spectrum. Over the past year, NVEC shares have gained 6.2%, clearly outperforming AOSL’s decline of roughly 17%. Image Source: Zacks Investment Research But does NVEC’s relative outperformance automatically make it the better investment? A closer look at fundamentals, business models, balance-sheet strength and valuation suggests the answer is more nuanced.Price ...

Financial Performance - NVEC Corporation reported total revenues of $6.22 million for Q3 fiscal 2026, a 23% increase from $5.06 million in the same quarter last year, driven by a 16% increase in product sales and a 335% increase in contract research and development revenue [1] - Net income rose 11% year over year to $3.38 million, or 70 cents per diluted share, compared to $3.05 million, or 63 cents per share, in the prior-year period [2] - Gross margin declined to 79% from 84% a year earlier, attributed to a less profitable product mix and a higher proportion of distributor sales [2] Profitability Metrics - Operating margin reached 60%, pretax margin was 68%, and net margin stood at 54%, indicating strong profitability despite margin pressure [3] Operating Expenses and Cash Flow - Operating expenses declined 12% year over year, with a 9% reduction in research and development spending and a 19% decrease in selling, general, and administrative expenses [4] - Cash flow from operations totaled $12.2 million for the first nine months of the fiscal year, with inventories declining modestly, suggesting improved demand and inventory management [4] Management Insights - Management characterized the quarter as one of broad-based growth, highlighting strength in both defense and nondefense markets, as well as growth across distributor and direct sales channels [5] - Rising distributor sales, while dilutive to gross margin, are viewed positively as a sign of improving end-user demand [5] Factors Influencing Results - The decline in gross margin was primarily due to product mix and increased distributor sales, which typically carry lower margins [6] - The effective tax rate increased to 20% from 15% a year earlier, largely due to noncash impacts of tax law changes [6] Future Outlook - Newly installed manufacturing equipment is expected to be operational by March 31, which should expand capacity and support new product introductions [7] - Management expressed optimism around defense demand normalizing and opportunities in medical devices, industrial automation, and applications related to the Internet of Things and artificial intelligence [7] Other Developments - NVEC announced a quarterly cash dividend of $1 per share, payable on February 27, 2026, to shareholders of record as of February 2, 2026 [8] - The company extended a supplier partnering agreement with Abbott Laboratories for two years through December 31, 2027, including price increases for 2026 and 2027 [8]

Group 1 - The common wisdom suggests that analog semiconductor companies are poised to benefit from the increasing demand for robotics in various sectors, including factories and consumer robotics [1] - ABI Research projects that the robotics market will grow at an annual rate of 14%, reaching $110 billion by 2030-2035 [1]

Core Insights - NVE Corporation's stock surged 14.7% after reporting fiscal Q3 2026 earnings, indicating positive market reaction despite lack of analyst coverage [1][3] Financial Performance - NVE reported $5.8 million in sales for the quarter, reflecting a 23% year-over-year increase [3] - Earnings per share grew 11% to $0.70, reversing a trend of declining sales and earnings in the first half of the fiscal year [3] - The company announced a quarterly dividend of $1, exceeding its earnings for the quarter [3] Valuation and Growth Potential - NVE stock is priced at 25 times earnings, which may not seem expensive if sales and profit margins were expanding, but earnings growth is only 11% for the quarter and remains negative for the fiscal year to date [6] - Free cash flow was strong, covering about 87% of reported net profit, and the company has substantial cash reserves [7] - The spintronic technology developed by NVE is noted as interesting, suggesting potential for future growth [7] Market Position - NVE Corporation remains largely unnoticed on Wall Street, despite its strong sales growth and profitability [5] - The company is considered worth monitoring due to its unique technology and lack of analyst attention [7]

Group 1 - The article does not provide any relevant content regarding company or industry insights [1]

Core Insights - NVE Corporation reported a 23% increase in quarterly revenue and an 11% rise in net income, driven by strong product sales and a significant increase in contract R&D revenue [3][6][7] Financial Performance - Operating expenses decreased by 12% year over year, with R&D expenses down by 9% and SG&A expenses down by 19% [1] - Gross margin fell to 79% from 84% due to a less profitable product mix and a higher proportion of distributor sales [2][6] - Net income for the quarter was $3.38 million, or $0.70 per diluted share, compared to $3.05 million, or $0.63 per share, in the prior-year quarter [7] Revenue Breakdown - Revenue growth was attributed to a 16% increase in product sales and a remarkable 335% increase in contract R&D revenue [3][6] - For the first nine months of fiscal 2026, total revenue increased by 0.4% to $18.7 million, driven by a 0.8% rise in product sales, despite an 8% decline in contract R&D [12] Operational Developments - The company has nearly completed a multi-year expansion, with new equipment expected to be operational by March 31, enabling the production of smaller and more precise wafer-level chip scale sensors [5][15][17] - NVE extended its supplier agreement with Abbott through December 31, 2027, which includes price increases [4][19] Market and Product Strategy - The company is focusing on high-value MRAM opportunities through licensing rather than building large fabs [4][26] - NVE is targeting high-value markets with new wafer-level chip scale sensors measuring 0.65 millimeters square, enhancing miniaturization and spatial sensitivity [18][26] Customer and Distributor Insights - Distributor sales have been increasing, indicating that inventories built during the semiconductor slowdown have been depleted, leading to rising end-user demand [21][22] - The company participated in the Medical Design and Manufacturing Trade Show, generating positive leads for its products [20]

Financial Data and Key Metrics Changes - Revenue for the third quarter of fiscal 2026 increased by 23% year over year, driven by a 16% increase in product sales and a 335% increase in contract R&D revenue [3][4] - Net income increased by 11% to $3.38 million or $0.70 per diluted share, compared to $3.05 million or $0.63 per share in the prior year [6] - Gross margin decreased to 79% from 84% due to a less profitable product mix and increased distributor sales [4][6] - Total operating expenses decreased by 12% due to a 9% decrease in R&D expenses and a 19% decrease in SG&A [4] Business Line Data and Key Metrics Changes - Product sales increased by 16%, while contract R&D revenue saw a significant increase of 335% [4] - For the first nine months of fiscal 2026, total revenue increased by 0.4% to $18.7 million, with a 0.8% increase in product sales offset by an 8% decrease in contract R&D [7] Market Data and Key Metrics Changes - Distributor sales have been increasing, indicating a recovery from previous inventory build-up during the semiconductor slowdown [21] - The company is optimistic about returning to a more normal flow in its defense business, which had been relatively weak in past quarters [30] Company Strategy and Development Direction - The company aims to develop the world's best electronics for high-value markets, including medical devices and autonomous vehicles, focusing on miniaturization and low power consumption [11] - New equipment has been installed to enhance production capabilities, allowing for more precise manufacturing of spintronic devices [10] - The company is actively participating in trade shows to promote its products and generate leads, with plans to exhibit at more events [14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future sales growth driven by R&D investments and new product developments, particularly in the medical sector [31] - The effective tax rate is expected to be between 16%-17% for the full fiscal year, influenced by advanced manufacturing investment tax credits [6] Other Important Information - The company has completed significant investments in equipment and expects to place new equipment into service by March 31st [8][10] - The company is well-positioned to capitalize on the growing demand for rare earth-free ferrite magnets due to supply chain concerns [27] Q&A Session Summary Question: Discussion on magnetic navigation in GPS-compromised areas - Management acknowledged the potential of their magnetometer sensors for this application but noted that the technology is still evolving and not yet mature enough to pursue aggressively [15][17] Question: Status of new equipment and its impact on sales - Management confirmed that the new equipment is on schedule and is expected to enhance product sales and profitability by reducing outsourcing [18][19] Question: Inventory levels among distributors - Management indicated that distributor inventory levels are improving, suggesting increased end-user demand [21] Question: Comparison of intellectual property with competitors - Management stated that while they have had discussions about licensing their IP, they focus on different markets than competitors like Everspin [22] Question: Applications of MRAM technology - Management clarified that MRAM is a non-volatile memory technology with potential applications in specialized areas, and they plan to monetize their IP through licensing [44] Question: Marketing strategies and effectiveness - Management highlighted increased marketing efforts, particularly through trade shows and digital content, which have shown positive results [25]

Financial Data and Key Metrics Changes - Revenue for the third quarter of fiscal 2026 increased by 23% year over year, driven by a 16% increase in product sales and a 335% increase in contract R&D revenue [3][4] - Gross margin decreased to 79% from 84% in the prior year quarter due to a less profitable product mix and increased distributor sales [4] - Net income increased by 11% to $3.38 million or $0.70 per diluted share, up from $3.05 million or $0.63 per share [6][7] - Total operating expenses decreased by 12% compared to the third quarter of fiscal 2025 [4] Business Line Data and Key Metrics Changes - Product sales increased by 16%, while contract R&D revenue saw a significant increase of 335% [4] - The decrease in R&D expenses was attributed to the completion of certain projects and resource reallocation [5] Market Data and Key Metrics Changes - For the first nine months of fiscal 2026, total revenue increased by 0.4% to $18.7 million, with a 0.8% increase in product sales offset by an 8% decrease in contract R&D [8] - Accounts receivable decreased by $1.1 million, indicating improved customer payment timing [8] Company Strategy and Development Direction - The company aims to develop advanced electronics for high-value markets, including medical devices and autonomous vehicles, focusing on miniaturization and high sensitivity [12] - New equipment has been installed to enhance production capabilities, allowing for more precise manufacturing of spintronic devices [11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about returning to a more normal flow in the defense business, which had been relatively weak [35] - The company is focused on increasing sales to existing customers while also adding new products to their portfolio [40] Other Important Information - The effective tax rate increased to 20% due to non-cash impacts of tax law changes, with an expected full-year tax rate of 16%-17% [6] - The company has made significant investments in marketing and trade shows, which are expected to yield positive results in future sales [27][28] Q&A Session Summary Question: Discussion on magnetic navigation in GPS-compromised areas - Management acknowledged the potential of their sensors for this application but noted that the technology is still evolving and not yet mature [18][19] Question: Status of new equipment and its impact on sales - Management confirmed that the new equipment is on schedule and is expected to enhance product sales and profitability [20][21] Question: Inventory levels of distributors - Management indicated that distributor sales are picking up, suggesting that previous inventory issues have been resolved [23] Question: Comparison of intellectual property with competitors - Management stated that while they operate in a different market than Everspin, they believe their intellectual property has significant value and are open to licensing opportunities [24] Question: Potential for recurring customer orders - Management emphasized the importance of existing customers and the goal to increase sales through new products and repeat orders [40]

Financial Data and Key Metrics Changes - Revenue for Q3 2026 increased by 23% year-over-year, driven by a 16% increase in product sales and a 335% increase in contract R&D revenue [3][4] - Gross margin decreased to 79% from 84% in the prior year due to a less profitable product mix and increased distributor sales [4] - Net income increased by 11% to $3.38 million or $0.70 per diluted share, up from $3.05 million or $0.63 per share [6] - Operating margin was 60%, pre-tax margin was 68%, and net margin was 54% [6] Business Line Data and Key Metrics Changes - Product sales increased by 16%, while contract R&D revenue saw a significant increase of 335% [4] - Total operating expenses decreased by 12%, attributed to a 9% decrease in R&D expenses and a 19% decrease in SG&A [4][5] Market Data and Key Metrics Changes - For the first nine months of fiscal 2026, total revenue increased by 0.4% to $18.7 million, with a 0.8% increase in product sales offset by an 8% decrease in contract R&D [7] - Accounts receivable decreased by $1.1 million, indicating improved customer payment timing [7] Company Strategy and Development Direction - The company aims to develop advanced electronics for high-value markets, including medical devices and autonomous vehicles, focusing on miniaturization and low power consumption [11] - New equipment has been installed to enhance production capabilities, allowing for more precise manufacturing of spintronic devices [10] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about returning to a more normal flow in the defense business, which had been relatively weak [29] - The company anticipates that investments in R&D and new products will pay off in future sales, particularly in the medical device sector [30] Other Important Information - The company has extended its supplier agreement with Abbott Laboratories for two years, which includes price increases for 2026 and 2027 [12] - The company is actively participating in trade shows to promote its products and generate leads [13] Q&A Session Summary Question: Discussion on magnetic navigation in GPS-compromised areas - Management acknowledged interest in MagNav technology for defense applications but noted it is still in a nascent stage [15][17] Question: Status of new equipment and its impact on sales - Management confirmed that new equipment is on schedule and expected to enhance product sales and profitability [18][19] Question: Inventory levels among distributors - Management reported that distributor sales are increasing, indicating a recovery from previous inventory build-up [20][21] Question: Comparison of intellectual property with competitors - Management stated that while they operate in a different market than Everspin, their intellectual property remains valuable and applicable to MRAM [22][23] Question: Marketing strategies and effectiveness - Management highlighted increased marketing efforts, particularly through trade shows and digital content, which have shown positive results [24][25] Question: Concerns about rare earth magnets and design wins - Management confirmed ongoing interest in rare earth-free ferrite magnets and noted some sales have been generated from this initiative [26][27] Question: Insights on the defense business volatility - Management expressed optimism about returning to a more stable flow in the defense sector [28][29] Question: Recurring customer orders and revenue expectations - Management emphasized the goal of increasing sales to existing customers and adding new products to drive consistent revenue growth [33][34]

Revenue Performance - Total revenue for the quarter ended December 31, 2025, increased by 23% compared to the same quarter in 2024, driven by a 16% increase in product sales and a 335% increase in contract research and development revenue [60]. - Contract research and development revenue represented 7.2% of total revenue for the quarter ended December 31, 2025, compared to 2.0% in the prior-year quarter [60]. Gross Margin and Expenses - Gross margin for the third quarter of fiscal 2026 was 79% of revenue, down from 84% in the prior-year quarter, attributed to a less profitable product mix and increased distributor sales [61]. - Total expenses decreased by 12% for the third quarter of fiscal 2026, with research and development expenses down by 9% and selling, general, and administrative expenses down by 19% [62]. Net Income and Tax Rate - Net income for the first nine months of fiscal 2026 decreased by 8% to $10.3 million, or $2.12 per diluted share, primarily due to decreased gross margin and increased effective tax rate [71]. - The effective tax rate increased to 20% for the third quarter of fiscal 2026 from 15% in the prior-year quarter, primarily due to unfavorable non-cash impacts of tax law changes [64]. - The company expects a full-year tax rate of 16% to 17% for fiscal 2026, factoring in anticipated advanced manufacturing investment tax credits [65]. Cash Position and Dividends - Cash and cash equivalents were $3,408,531 as of December 31, 2025, a decrease of $4,628,033 from March 31, 2025, due to net cash used in investing and financing activities [73]. - Cash dividends paid to shareholders during the first nine months of fiscal 2026 totaled $14,511,498, with an additional dividend of $1.00 per share announced for payment on February 27, 2026 [79]. Other Income - Interest income decreased by 3% due to a reduction in the marketable securities portfolio, while other income decreased significantly by $135,057 [63].