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Diodes (Nasdaq: DIOD), the analog semiconductor supplier, has been initiated with a buy rating and $135 price target by Bank of America (BofA), which expects the company to grow earnings per share at a 58% annual rate from 2026 to 2028, well ahead of the 35% forecast for analog chip peers.

The target rests on 17 times 2028 pro forma earnings per share, which reflects normalized earnings.

Diodes makes small, high-volume analog and discrete chips used in power management, timing and connectivity in cars, servers and factories, and ships 45 billion units a year to 50,000 customers.

The forward price-to-earnings multiple has dropped from about 38 to below 17 in recent months, reflecting concern that growth and earnings are near a peak, which the bank disputes.

Diodes has outgrown its market in every upturn since 2001 and holds less than 2% of a $134 billion addressable market, relying on acquisitions and early design wins.

Auto should lead the next phase, with Diodes' content per vehicle rising 50% in two years to $239 and further growth potential from connectivity, driver assistance and electric vehicles.

AI data center sales, now 12% of the total, could triple by 2030 as the value of Diodes chips in each server rack increases.

Gross margins have lagged the revenue recovery by six quarters, and customer notice data points to margin-boosting activity in the second half of 2026 and 2027, implying upside to consensus gross margins.

Larger analog rivals that can bundle products, and subsidized Chinese suppliers at the low end, could squeeze Diodes, which sits in the middle of the analog value chain.

Its hybrid manufacturing model can limit its ability to capture demand in an upturn and leaves it exposed to cost increases, and its small scale is a risk.

Shares of Diodes rose over 6% to trade at $109.85 on Tuesday afternoon.

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Two Value Tech Stocks Trading Near a Breakout LevelDiodes NASDAQ: DIOD reported second-quarter revenue growth of 22% from a year earlier and issued third-quarter guidance that calls for continued expansion in sales, gross margin and adjusted earnings, citing demand across automotive, industrial and AI-related applications.

Revenue for the quarter ended June 30 was $445.5 million, up from $366.2 million in the same period of 2025 and 10% above $405.5 million in the first quarter. President and CEO Gary Yu said the result marked the company’s sixth consecutive quarter of double-digit year-over-year revenue growth and was supported by growth in every geographic region as well as record global point-of-sale activity.

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Yu said Diodes’ automotive revenue reached a record 21% of product revenue during the quarter. He attributed the performance to expanding semiconductor content and market-share gains in automotive, industrial and AI-server applications.

Profitability Improved as Revenue Expanded Second-quarter gross profit was $147.6 million, representing a gross margin of 33.1%, compared with 31.5% a year earlier and 31.8% in the prior quarter. Yu said cost and operating initiatives implemented during the market slowdown contributed to a 160-basis-point year-over-year improvement in gross margin.

GAAP net income was $46.6 million, or $1.00 per diluted share, compared with $46.1 million, or $0.99 per diluted share, in the prior-year quarter. The GAAP result included approximately $20 million in unrealized gains on investments, according to CFO Brett Whitmire.

On a non-GAAP basis, adjusted net income was $32.5 million, or $0.70 per diluted share, compared with $15 million, or $0.32 per diluted share, a year ago and $19.8 million, or $0.43 per diluted share, in the first quarter. Adjusted results excluded, net of tax, investment gains, acquisition-related intangible amortization, board and officer retirement expenses, and acquisition-related costs.

Cash flow from operations totaled $68.5 million, while free cash flow was $34.8 million after $33.6 million in capital expenditures. The company had approximately $442 million in cash equivalents, restricted cash and short-term investments at quarter-end, against approximately $40 million of total debt.

Inventory days declined to approximately 152 from 157 in the first quarter. Finished-goods inventory days fell to 51 from 55. Whitmire said inventory dollars increased by $11.8 million to $504.6 million to support customer requirements, anticipated growth and longer manufacturing lead times.

Third-Quarter Outlook Calls for Further Growth For the third quarter, Diodes expects revenue of approximately $510 million, plus or minus 3%. At the midpoint, that would represent a 30% year-over-year increase and a 14% sequential increase.

The company forecast GAAP gross margin of 35%, plus or minus 1%, and non-GAAP adjusted earnings per share of $1.05, plus or minus $0.10. Yu said the expected results would include another 190 basis points of sequential gross-margin improvement and bring the company closer to its three-year targets of $2 billion in annual revenue and more than $4 in non-GAAP EPS.

Senior Vice President of Worldwide Sales and Marketing Emily Yang said Diodes expects growth in nearly all end markets during the third quarter. She identified AI-related applications, particularly server motherboards, automotive market-share gains, industrial recovery, seasonal consumer demand and networking demand as expected contributors.

Automotive and Computing Led End-Market Growth Automotive revenue increased 15% sequentially and more than 37% year over year, Yang said. The company cited demand for voltage-translation ICs, power-management products, networking devices, power protection, motor control, automotive lighting and electrification-related components.

Industrial revenue grew 5% sequentially and more than 24% from a year earlier. Yang said demand was supported by AI infrastructure, automation, robotics, energy management, healthcare and smart-infrastructure applications. The company also pointed to the shift toward 400-volt and 800-volt power architectures in AI-related applications as a potential driver for its power-management and discrete-product portfolios.

Computing revenue rose 18% sequentially and 33% year over year, making it the company’s strongest growth driver, according to Yang. She said Diodes secured multiple server-platform design wins for clock generators and timing solutions as customers transition to newer PCI Express architectures. New timing products are ramping into AI-server platforms, she added.

Consumer revenue increased almost 10% sequentially and 17% year over year, though Yang said the overall market remained affected by memory shortages and slower demand. Communication revenue declined 7% sequentially and about 3% year over year, reflecting softer Chinese smartphone demand. Networking demand remained strong, Yang said, aided by investment in AI infrastructure and enterprise networking.

Elevate Deal and Capacity Plans Yu also discussed Diodes’ proposed acquisition of Elevate Semiconductor, a fabless semiconductor company focused on integrated circuits for automated test equipment. He said the acquisition would add a higher-margin product line centered on low-power, high-density signal-chain amplifiers and data converters, complementing Diodes’ analog and mixed-signal portfolio.

The company expects the transaction to be immediately accretive and to add roughly $15 million of revenue in the first 12 months after closing. Yu said Elevate’s revenue is expected to grow at a compound annual rate above 20% over the following four years, with gross margin “significantly higher” than Diodes’ corporate average.

On manufacturing, Yu said Diodes is increasing utilization at its wafer fabs, migrating some production from six-inch to eight-inch wafers and using external partners in Korea and Taiwan to add capacity. He said the company performs about 75% of assembly and testing internally and is selectively expanding capacity for packages including DFN and CSP. Diodes currently produces about half of its wafers internally and sources the other half externally, he said.

Yang said channel inventory declined both in dollars and weeks during the quarter and remained below the company’s normal range of 11 to 14 weeks. In response to a question about potential double ordering, she said the company did not see evidence of double booking or shipments building channel inventory.

About Diodes (NASDAQ:DIOD)Diodes Incorporated NASDAQ: DIOD is a global manufacturer and supplier of high‐performance discrete, logic, analog and mixed‐signal semiconductor products. Headquartered in Plano, Texas, the company designs and develops a broad range of discrete components, standard logic functions, power management circuits, interface products and array products. Its portfolio includes rectifiers, MOSFETs, general‐purpose diodes, voltage regulators, comparators, buffers and other building blocks for electronic systems.

Diodes Incorporated serves a variety of end markets such as automotive, computing, communications, consumer electronics, industrial and lighting.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected].

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