Revenue Up 36% in the Half. Net Margins Above 50%. No Debt. A New CEO After 25 Years.

NVE Corporation makes spintronic sensors, signal isolators, and anti-tamper memory in a leased cleanroom facility in Eden Prairie, Minnesota, with 42 employees. First-half FY2027 revenue rose 36% to $16.9M and net income rose 39% to $9.6M, although the second quarter fell 8% after orders were pulled into the first and a large medical device customer adjusted its inventory. The company keeps more than half of its revenue as net income, carries no debt, and pays $1.00 a share every quarter. The margins are the strength; whether earnings cover the dividend is the test.

Analysis

NVE Corporation develops and sells devices built on spintronics, a nanotechnology that uses the spin of electrons rather than their charge, from a leased 21,362 square foot facility in Eden Prairie, Minnesota, that includes its own cleanroom wafer production area. Its shares trade on Nasdaq. The product lines are sensors for factory automation and medical devices, isolators that pass signals safely between circuits in power conversion and industrial equipment, power and interface products, and low-density MRAM memory for tamper detection in military and industrial systems. It sells through distributors in more than 75 countries, including America II Electronics, Angst+Pfister, and Digi-Key, directly to manufacturers, and through private-brand partnerships with large chipmakers. FY2026, the year ended March 31, 2026, produced revenue of $26.3M and net income of $15.2M with 42 employees.

The second quarter of FY2027 is why the desk is writing now. Revenue for the quarter ended September 30, 2026 was $5.83M, down 8% from $6.35M, and net income was $3.17M, or $0.65 per diluted share, against $3.31M, or $0.68. The quarter is half of the story. The first quarter produced $11.03M of revenue, up 81%, so the first half reached $16.87M, up 36%, with net income of $9.57M, up 39%, and diluted earnings of $1.97 per share against $1.42. The company also changed chief executives on August 6, 2026, for the first time since 2001.

The Human Translation: NVE makes tiny chips that sense magnetic fields and pass signals safely between electrical circuits, used in factory equipment, medical implants, and military hardware. It keeps more than half of every sales dollar as profit, owes nothing, and pays shareholders $1.00 a share every quarter. Sales jumped in the spring quarter and dipped in the summer one, mostly because some orders arrived early and a big medical customer worked down its stock. The bet is that new sensors for robots and implants grow sales enough to keep paying that dividend out of earnings.

The two quarters have to be read together, and the company explains why. The 10-Q attributes the second-quarter decline to a customer's rescheduled orders, which resulted from a temporary change to that customer's inventory requirements, and to lower defense sales. On the October 21 call, principal financial officer Daniel Nelson described a short-term inventory adjustment at one of the company's large medical device customers and a 95% decrease in defense product sales, and chief executive Peter Eames said the variability came primarily from orders pulled into the first quarter from the second. Nelson said the company expects second-half revenue to be consistent with the first half, and Eames said he expects a return to growth next quarter.

Distribution is where the demand signal is clearest. Nelson said distributor sales rose 67% in the second quarter on strengthening industry conditions, and Eames put first-half distributor growth at roughly 40%. Eames said the distributor share of revenue is fairly steady, usually between about one third and two thirds. The channel carries a margin cost. Gross margin rose to 83.6% in FY2025 on a larger share of direct sales and a more profitable mix, then fell to 78.7% in FY2026, which the company attributed to a less profitable mix and increased distributor sales. It was 81.3% in the first quarter of FY2027 on higher volume and 78.2% in the second.

The operating structure explains the margins. Second-quarter gross profit was $4.56M. Research and development expense fell 17% to $727,345 as staff were redeployed, and selling, general, and administrative expense rose 44% to $630,314, mainly because director stock options were valued at a higher grant-date stock price. Operating income was about $3.21M, or 55% of revenue. Interest income added $474,727, and the effective tax rate fell to 14% from 20%, which the company attributes to more favorable treatment of foreign-derived income under the 2025 federal tax law. It expects a rate in the low to mid teens for the rest of the fiscal year: 13% to 15% in the 10-Q, and 14% to 16% on the call. Net income was 54% of revenue.

The annual record shows a company that has been rebuilding its base. Revenue reached $38.3M in FY2023 with net income of $22.7M, then fell 22% to $29.8M in FY2024 on lower product sales and contract research revenue, in what Baker called a semiconductor industry downturn. FY2025 fell another 13% to $25.9M on decreased purchases by existing customers, and FY2026 rose 1.8% to $26.3M on price increases and higher purchases by existing customers. If the second half of FY2027 matches the first, as management said it expects, the year would produce about $33.7M of revenue, up roughly 28% from FY2026 and still below the FY2023 peak. The desk treats that as management's stated expectation, not a forecast of its own.

The quarterly figures show the shape of the recovery. Revenue was $5.06M in the third quarter of FY2025 and $7.27M in the fourth. FY2026 ran $6.10M, $6.35M, $6.22M, and $7.65M, the last up 5% with net income up 27%. The first quarter of FY2027 then produced $11.03M and the second $5.83M. Read together, the last two quarters average $8.43M, above any quarter of FY2026, which is the case for a higher base. Read separately, the second quarter is the weakest since the third quarter of FY2025, which is the case for caution. The chart in this dossier tracks the eight quarters.

Defense is the most variable line in the business. NVE sells MRAM and other parts into military and anti-tamper applications, and the 10-Q states plainly that defense sales depend on government procurement cycles and can be highly variable. Defense product sales rose in the first quarter and fell 95% in the second. The non-defense business carries the base. In his 2026 shareholder letter, Daniel Baker wrote that fourth-quarter FY2026 net income rose 27% on a 34% increase in core non-defense sales. The desk reads defense as a swing factor in any single quarter, not as the foundation of the thesis.

Medical devices carry the company's best-known customer relationship. The FY2026 10-K names Abbott Laboratories among the company's major customers and describes a supplier partnering agreement that runs through December 31, 2027; the prior year's report gave an expiration of December 31, 2025, so the term was extended by two years. NVE sensors often replace electromechanical magnetic switches in medical devices, where small size and very low power matter. On the July call, management described two new wafer-level sensors for implantable devices, including versions designed for use around MRI scanners, and in October it said it is pursuing other implantable applications such as neurostimulators. The filings do not quantify customer concentration, and the 10-K lists reliance on several large customers as a risk.

The production expansion is the bridge to new products. The company substantially completed a multiyear expansion of its facility during FY2026, with fixed asset purchases of $2.19M that year, mostly production equipment, and it expects FY2027 purchases to be significantly less. Baker's 2026 letter says it increased production capacity and allowed the company to make even smaller and more precise wafer-level chip-scale packaged parts. Recent launches include wafer-level sensors measuring 0.55 millimeters square, the smallest products NVE has made, and a family of seven gear sensors aimed at encoders, servo systems, and humanoid robotics. In July, Eames, then head of advanced technology, called robotics probably the strongest growing area for the technology, and in October he said he sees the potential for several NVE sensors per humanoid robot, possibly in the tens. He also said a typical part sells for about $1 to $2, and that design wins can take a couple of quarters, sometimes less, to turn into larger orders.

Those price points set the scale of the opportunity. At $1 to $2 a part, adding $5M of annual revenue takes several million units, which is why management describes a sequence of samples, then purchases in the low thousands, then volume that scales by factors of ten. Baker said in July that most new-product volume had come from existing customers, with new customers starting more slowly, and Eames said in October that the expansion space has begun shifting from research toward production, though the shift is still small. The desk reads robotics as a design-win pipeline with real samples and early orders, not yet a revenue line that can be measured in the filings.

Leadership changed with continuity. Daniel Baker, president and chief executive since 2001, retired from the role at the August 6 annual meeting and was elected chairman. Peter Eames, who joined NVE in 2003 after a doctorate in condensed matter physics at the University of Minnesota, has led advanced technology since 2016, ran research and development, and managed the production expansion. Terrence Glarner, chairman since 2001, remains a director. The board grew from five to seven seats with Eames and Carolyn Valentine, president of Grason-Stadler, a Demant company. The 10-K lists hearing aids among the targets of NVE's next-generation sensor work.

The balance sheet is the reason the business can absorb an uneven quarter. At September 30, 2026, cash was $3.97M and marketable securities $40.4M, a combined $44.4M against $43.5M at the fiscal year end. Total liabilities were $1.89M against total assets of $59.9M, and the company has no debt. Securities make up about two thirds of total assets, so interest income is a meaningful line: $1.89M in FY2026, about 12% of net income. That income has been drifting lower as the portfolio has shrunk: cash and securities fell from $48.0M to $43.5M during FY2026, and first-half interest income fell 6% to $924,647.

The dividend is where the operating record and the balance sheet meet. The board has declared $1.00 per share every quarter, $4.00 a year, and with 4,844,079 shares outstanding each payment costs about $4.84M. In FY2026 the company paid $19.35M of dividends against net income of $15.20M and operating cash flow of $16.66M, and the difference came out of the balance sheet. Earnings covered the dividend in the fourth quarter of FY2026 and the first quarter of FY2027, at $1.02 and $1.32 per share, but not in the second quarter, at $0.65. For the first half, diluted earnings were $1.97 against $2.00 declared, and operating cash flow of $11.13M exceeded the $9.68M paid. At first-half margins, a second half equal to the first would leave full-year earnings near $3.94 a share against $4.00 declared.

The company states its capital return policy directly. It made no share repurchases in FY2025, FY2026, or the first half of FY2027, and the 10-K says dividends are a more efficient way to return cash to shareholders; about $3.52M remains under the existing repurchase authorization. The dividend policy is subject to change at any time and each payment requires board approval. The next payment of $1.00 is due November 30, 2026 to holders of record on November 2. Directors and officers as a group own 2.1% of the shares, and the largest holders listed in the 2026 proxy are Defiance ETFs at 12.0%, BlackRock at 7.7%, and Vanguard at 5.0%.

The supply chain is the operational risk the 10-K names most clearly. Most wafers are bought from foreign manufacturers, alternate suppliers have not been qualified for many single-source wafers, and packaging is done mostly in Asia, so tariffs, duties, and trade barriers can raise costs. In FY2025 the company built inventory as a buffer against supply-chain disruption and tariffs. The 10-K also cites more competitors and more severe pricing pressure, and patents that could be challenged or circumvented; NVE holds more than 50 issued U.S. patents. On valuation, the desk makes no price targets, and the public record supports one observation: with operating expenses of about $1.5M a quarter in the first half, most added gross profit reaches operating income.

The scenario map has three branches. In the first, the second half matches the first as management expects, distributor demand holds, the medical customer's orders normalize, and the new sensors begin to ship in volume, carrying FY2027 revenue into the low $30M range with earnings close to the dividend. In the second, quarterly revenue settles back toward the FY2026 pace of $6M to $8M, earnings fall short of $4.00 a share, and the gap is funded from the balance sheet, as it was in FY2026. In the third, a large customer reduces purchases or the semiconductor cycle turns as it did in FY2024, revenue falls below $25M, and the dividend is tested against a $44.4M reserve. The desk names the branches so each filing can be read against them.

The checkpoint set, stated fully. First, revenue in the December and March quarters against management's statement that the second half will be consistent with the first, about $16.9M combined, and against its expectation of growth in the December quarter. Second, distributor sales and gross margin, which show whether demand is broadening and what the channel mix costs. Third, defense sales and the large medical customer's ordering, which explain most of the quarter-to-quarter swing. Fourth, earnings and operating cash flow against the $1.00 quarterly dividend. The third-quarter report is expected in late January on the company's past calendar. The thesis strengthens on growth with margins near 78% to 81%; it weakens if revenue stays near $6M while the dividend draws down cash and securities.

The Human Translation

NVE makes tiny chips that sense magnetic fields and pass signals safely between circuits, used in factory equipment, medical implants, and military hardware. It keeps more than half of every sales dollar as profit, owes nothing, and pays $1.00 a share every quarter. Sales jumped in the spring quarter and dipped in the summer as a big medical customer worked down its stock. The bet is that new sensors for robots and implants grow sales enough to keep paying that dividend from earnings.

Bottom Line

Watch whether the December quarter returns to growth, as management said it expects, and whether second-half revenue matches the first half's $16.9M. Then watch earnings against the $1.00 quarterly dividend: the first half earned $1.97 a share against $2.00 declared. Distributor sales and gross margin show whether demand is broadening or only shifting channel.

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