Core Insights - Microchip Technology (MCHP) is expected to report its first-quarter fiscal 2026 results on August 7, with anticipated net sales between $1.02 billion and $1.07 billion, and non-GAAP earnings projected between 18 cents and 26 cents per share [1][7] - The Zacks Consensus Estimate for revenues in the first quarter of fiscal 2026 is $1.05 billion, reflecting a 15.1% decline compared to the same quarter last year [1][2] Revenue and Earnings Expectations - The consensus estimate for fiscal first-quarter earnings is set at 24 cents per share, indicating a year-over-year decline of 54.7% [2] - Microchip has beaten the Zacks Consensus Estimate in three of the last four quarters, with an average negative earnings surprise of 2.42% [2] Inventory and Margin Insights - The company has been facing macroeconomic challenges, but improving inventory levels are expected to positively impact gross margins, with inventory days projected to decrease to between 215 and 225 by the end of the fiscal first quarter [3][4][7] - The previous quarter's inventory levels reached 251 days, an increase of 15 days sequentially [3] Sector Performance and Innovations - Microchip is benefiting from strong design wins in the industrial, aerospace, and automotive sectors, with innovations such as 64-bit RISC-V processors and advanced Wi-Fi solutions contributing to revenue growth [5] - The company's focus on high-growth areas like aerospace, defense, and AI is expected to enhance adoption across automotive, industrial, and AI/ML markets, further boosting revenues [5] Earnings Prediction Model - According to the Zacks model, Microchip has an Earnings ESP of -0.19% and a Zacks Rank of 2, indicating a lower likelihood of an earnings beat compared to other stocks with a positive Earnings ESP [6]

Industry Overview - The semiconductor industry has rebounded significantly, driven by strong sales and increased investment in artificial intelligence (AI) by major companies [1][2] - Robust demand across various sectors has led to a notable increase in chipmakers' revenues, contributing to overall market gains and the tech rally [2] Sales Performance - Global semiconductor sales reached $179.7 billion in Q2 2025, marking a 7.8% increase from Q1 2025 and a 19.6% rise year-over-year from $50.1 billion in June 2024 [4][5] - The semiconductor market is projected to continue growing, with strong performance in the Asia Pacific and Americas regions [5] Revenue Growth - In 2024, global semiconductor revenues were $627.6 billion, a 19.1% increase from $526.8 billion in 2023 [6] - The first quarter of 2025 generated $167.7 billion in revenues, reflecting an 18.8% increase compared to the same period in 2024 [6] Demand Drivers - High demand for data center chips and memory products has been a significant factor in the industry's growth, with expectations of maintaining double-digit growth into 2025 due to ongoing AI investments [7] Investment Opportunities - Recommended semiconductor stocks include RF Industries, Ltd. (RFIL), Monolithic Power Systems, Inc. (MPWR), and Microchip Technology (MCHP), all of which have strong earnings growth and favorable Zacks rankings [3][9] - RFIL is expected to see over 100% earnings growth this year, with a Zacks Rank 1 [10] - MPWR anticipates a 21% earnings growth rate, holding a Zacks Rank 2 [12] - MCHP projects a 5.3% earnings growth rate, also with a Zacks Rank 2 [14]

Core Insights - Microchip Technology has launched the Adaptec® SmartRAID 4300 series of NVMe® RAID storage accelerators aimed at enhancing support for server OEMs, storage systems, data centers, and enterprise customers [1] - The SmartRAID 4300 series offers a high-performance Software-Defined Storage (SDS) solution specifically designed for modern AI data center environments, significantly improving access to NVMe storage [1][2] Product Features - The SmartRAID 4300 family disaggregates Microchip's Smart Storage platform into separate software and hardware components, utilizing PCIe® storage controllers for CPU offload and RAID acceleration [2] - Internal testing has demonstrated up to a 7x increase in input/output (I/O) performance compared to previous generations [2] - The architecture allows for scalability and flexibility, supporting Gen 4 and Gen 5 PCIe host CPUs with up to 32 CPU-attached x4 NVMe devices and 64 logical drives/RAID arrays [3] Efficiency and Security - The solution optimizes power efficiency through techniques such as automatic idling of processor cores and autonomous power reduction capabilities, while maintaining end-to-end data integrity [4] - Security features include hardware root of trust, secure boot/update, attestation, and Self-Encrypting Drive (SED) support for enterprise-class data protection [4] Management Tools - The SmartRAID 4300 series is supported by a suite of management tools, including the Adaptec maxView™ tool with an HTML5-based web GUI, ARCCONF CLI, and compatibility with Adaptec SmartRAID tools for ease of integration [6] Availability - The Adaptec SmartRAID 4300 accelerators are available for production integration, with details obtainable through Microchip sales representatives or authorized distributors [7]

Core Viewpoint - Microchip Technology has introduced the Adaptec SmartRAID 4300 series, a high-performance NVMe RAID storage accelerator designed to enhance data access speeds in modern AI data center environments, addressing traditional storage bottlenecks [1][2]. Product Features - The SmartRAID 4300 series employs a disaggregated architecture, separating software and hardware components to optimize data flows and connectivity, resulting in up to 7x I/O performance gains compared to previous generations [2][3]. - The architecture allows for direct writes from the host CPU to NVMe endpoints, offloading parity-based redundancy to the accelerator hardware, which enhances scalability and flexibility [3][4]. - The accelerators support Gen 4 and Gen 5 PCIe host CPUs, accommodating up to 32 CPU-attached x4 NVMe devices and 64 logical drives/RAID arrays [3]. Security and Efficiency - The SmartRAID 4300 series includes advanced security features such as hardware root of trust, secure boot/update, attestation, and Self-Encrypting Drive (SED) support, ensuring enterprise-class data protection [4]. - Specific design techniques, including automatic idling of processor cores and autonomous power reduction, optimize power efficiency while maintaining data integrity [4]. Management Tools - The series is supported by a suite of management tools, including the Adaptec maxView™ tool, which offers a web GUI for remote and local management, ensuring compatibility with existing Adaptec SmartRAID tools [6]. - Out-of-band management is facilitated through DMTF standards, PLDM, and Redfish® Device Enablement via MCTP protocol [6]. Availability - The Adaptec SmartRAID 4300 accelerators are available for production integration, with details accessible through Microchip sales representatives or authorized distributors [7].

Core Viewpoint - Wall Street analysts predict that Microchip Technology (MCHP) will report a significant decline in quarterly earnings and revenues compared to the previous year, indicating potential challenges for the company in the upcoming earnings release [1]. Earnings Estimates - Analysts forecast quarterly earnings of $0.24 per share, reflecting a year-over-year decline of 54.7% [1]. - Revenue is anticipated to be $1.05 billion, which represents a decrease of 15.1% compared to the same quarter last year [1]. - There has been an upward revision of 1.4% in the consensus EPS estimate over the past 30 days, indicating a reappraisal of projections by analysts [2]. Key Metrics Projections - Analysts estimate 'Net Sales- Mixed-signal Microcontrollers' at $525.59 million, suggesting an 18.5% decline year over year [5]. - The 'Net Sales- Other' category is projected to be $243.63 million, indicating an 8.4% decrease from the prior-year quarter [5]. - 'Net Sales- Analog' is expected to reach $281.86 million, reflecting a year-over-year change of 14.7% [5]. Stock Performance - Over the past month, Microchip Tech shares have recorded a return of -9.2%, contrasting with the Zacks S&P 500 composite's +0.6% change [6]. - Despite the recent performance, MCHP holds a Zacks Rank 2 (Buy), suggesting it may outperform the overall market in the near future [6].

Core Viewpoint - Microchip Technology (MCHP) is anticipated to report a year-over-year decline in earnings and revenues for the quarter ended June 2025, which could significantly influence its stock price depending on the actual results compared to estimates [1][3]. Earnings Expectations - The upcoming earnings report is expected to show earnings of $0.24 per share, reflecting a decline of 54.7% year-over-year, with revenues projected at $1.05 billion, down 15.1% from the previous year [3]. - The consensus EPS estimate has been revised 1.37% higher in the last 30 days, indicating a slight positive adjustment from analysts [4]. Earnings Surprise Prediction - The Zacks Earnings ESP model indicates that the Most Accurate Estimate for Microchip Tech is lower than the Zacks Consensus Estimate, resulting in an Earnings ESP of -0.19%, suggesting a bearish outlook [11]. - Despite the negative Earnings ESP, the company holds a Zacks Rank of 2 (Buy), complicating predictions of an earnings beat [11]. Historical Performance - In the last reported quarter, Microchip Tech exceeded the consensus EPS estimate by 10%, having beaten estimates three times over the last four quarters [12][13]. Industry Comparison - In contrast, ON Semiconductor Corp. is expected to report earnings of $0.54 per share for the same quarter, indicating a year-over-year decline of 43.8%, with revenues projected at $1.45 billion, down 16.4% [17][18]. - ON Semiconductor has a positive Earnings ESP of +16.85% and a Zacks Rank of 2, suggesting a higher likelihood of beating the consensus EPS estimate [18][19].

Core Insights - The focus is on identifying and analyzing companies that can play a significant role in today's geopolitics and leverage their intellectual property to become future leaders [1] - The investment strategy emphasizes growth companies, particularly in the mid-cap segment, across sectors such as biotechnology, computer chips, cloud technology, energy, and commodities [1] - A systematic approach will be employed, combining top-down and bottom-up analyses, with a focus on balance sheet evaluations and stress testing to assess the safety of business models [1] - Long-term capital appreciation is prioritized over short-term speculation [1] Sector Analysis - Key sectors of interest include: - Biotechnology - Computer Chips - Cloud Technology - Energy - Commodities [1] Investment Strategy - The investment style is geared towards growth companies with a mid-cap bias [1] - A systematic balance sheet analysis will be conducted, as many growing businesses struggle with funding [1] - Stress tests will be utilized to evaluate the robustness of investment theses [1]

Investment Rating - The report maintains a favorable outlook on the semiconductor industry, particularly favoring companies like Texas Instruments, Renesas, and Infineon [2][3]. Core Insights - The semiconductor inventory levels are showing signs of normalization, with MCU inventories stabilizing after a previous period of understocking [2][3]. - Pricing trends across various semiconductor categories have remained stable, with an average increase of 1% month-over-month and a 14% year-over-year increase [3][9]. - The report highlights a continued digestion of MCU inventories, which had previously been elevated, indicating a positive trend for the industry [3][12]. Summary by Relevant Sections Inventory Trends - MCU inventory has decreased by 1% month-over-month after a 5% decline in the previous month, while overall inventory levels were flat to down 2% across most categories [3][4]. - Capacitors and Sensors saw a month-over-month increase of 6% in inventory, contrasting with declines in other categories [4][15]. Pricing Trends - Pricing for MCUs remained flat month-over-month and increased by 1% year-over-year, while other categories experienced slight increases of 1-3% [4][15]. - The overall pricing environment is deemed manageable, with a year-over-year increase of 3% on a revenue exposure weighted basis [9][12]. Company Observations - The report notes that pricing for transistors increased by 1% month-over-month and 18% year-over-year, driven largely by bipolar transistors [4][15]. - Infineon has seen an increase in MCU inventory to 4% of the total, up from an average of 2.6%, indicating potential overstocking or market share gains [5][19].

Core Viewpoint - Marvell Technology (MRVL) and Microchip Technology (MCHP) are significant players in the Ethernet PHY transceiver market, each targeting different end markets and employing distinct strategies to navigate their respective challenges and opportunities [1]. Marvell Technology (MRVL) - Marvell Technology focuses on Ethernet PHY solutions for small and medium businesses, automotive, data centers, cloud, high-performance networking, and telecom [2]. - The company is divesting its automotive Ethernet business to Infineon for $2.5 billion to concentrate on core offerings for hyperscale and data center customers [4]. - MRVL's automotive and industrial segments have faced declining revenues over the past five quarters, with the automotive division recovering while the industrial division struggles [4]. - Broader challenges include lower gross margins in custom silicon and macroeconomic uncertainties, particularly regarding U.S.-China relations, which impact approximately 43% of MRVL's fiscal 2025 total revenues [5][6]. - Year-to-date, MRVL's shares have decreased by 35.9%, and it is trading at a forward sales multiple of 6.86X, significantly below its median of 9.47X over the past year [12][13]. - The Zacks Consensus Estimate for MRVL's fiscal 2026 EPS indicates a year-over-year growth of 77.71%, although estimates have been volatile [15]. Microchip Technology (MCHP) - Microchip Technology develops a variety of Ethernet PHYs for consumer electronics, automotive, aerospace, IoT, industrial, and enterprise applications, with a focus on data center and AI/ML use cases [7]. - The recently launched Single-Pair Ethernet for Edge Devices solution, 10BASE-T1S, is gaining strong adoption in various sectors [8]. - MCHP's industrial, automotive, consumer, and communications divisions are recovering, with rapid growth in its Aerospace & Defense business [9]. - The company's book-to-bill ratio improved to 1.07, indicating a healthy demand environment, with a projected top line of $4.54 billion reflecting a year-over-year growth of 3.2% [10]. - MCHP's stock has increased by 29.8% year-to-date, and it is trading at a forward sales multiple of 8.35X, above its median of 7.15X over the past year [12][13]. - The Zacks Consensus Estimate for MCHP's fiscal 2026 EPS suggests a year-over-year increase of 3.05%, with consistent upward revisions over the past 60 days [17]. Conclusion - MCHP is positioned favorably with innovative products and recovering margins, while MRVL faces significant challenges from macroeconomic factors and declining segments, making MCHP a more attractive investment option at present [11][19].

Company Performance - Microchip Technology (MCHP) has returned 29.8% year-to-date, significantly outperforming the average gain of 8.6% in the Computer and Technology sector [4] - Over the past 90 days, the Zacks Consensus Estimate for MCHP's full-year earnings has increased by 30.2%, indicating improved analyst sentiment and a more positive earnings outlook [4] - Microchip Technology is currently ranked 2 (Buy) in the Zacks Rank system, which highlights stocks with characteristics likely to outperform the market [3] Industry Context - Microchip Technology belongs to the Semiconductor - Analog and Mixed industry, which includes 10 individual stocks and is currently ranked 91 in the Zacks Industry Rank [6] - The Semiconductor - Analog and Mixed industry has gained an average of 11.2% year-to-date, indicating that MCHP is performing better than its industry peers [6] - Another notable stock in the Computer and Technology sector is Advanced Energy Industries (AEIS), which has returned 20.6% year-to-date and has a Zacks Rank of 2 (Buy) [5]