Core Insights - Microchip Technology (MCHP) reported quarterly earnings of $0.44 per share, exceeding the Zacks Consensus Estimate of $0.43 per share, and showing a significant increase from $0.20 per share a year ago, resulting in an earnings surprise of +3.38% [1] - The company achieved revenues of $1.19 billion for the quarter ended December 2025, surpassing the Zacks Consensus Estimate by 0.08% and increasing from $1.03 billion year-over-year [2] - Microchip Tech shares have appreciated approximately 22.8% since the beginning of the year, significantly outperforming the S&P 500's gain of 0.5% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.48, with projected revenues of $1.23 billion, and for the current fiscal year, the EPS estimate is $1.52 on revenues of $4.6 billion [7] - The estimate revisions trend for Microchip Tech was favorable ahead of the earnings release, contributing to a Zacks Rank 1 (Strong Buy) for the stock, indicating expected outperformance in the near future [6] Industry Context - The Semiconductor - Analog and Mixed industry, to which Microchip Tech belongs, is currently ranked in the top 12% of over 250 Zacks industries, suggesting a positive outlook for stocks within this sector [8]

Financial Data and Key Metrics Changes - Net sales for the December quarter were $1.186 billion, up 4% sequentially and 15.6% year-over-year, exceeding original guidance [6][18] - Non-GAAP gross margin was 60.5%, up 379 basis points sequentially, while GAAP gross margin was 59.6% [7][19] - Non-GAAP net income was $252.8 million, with earnings per diluted share at $0.44, exceeding guidance by $0.04 [7][8] - Total operating expenses were $555.2 million, representing 32% of sales, with operating income at 28.5% of sales [6][8] - Cash flow from operating activities was $341.4 million, with adjusted free cash flow at $305.6 million [10] Business Line Data and Key Metrics Changes - Sales from microcontroller and analog businesses were flat sequentially, while growth was driven by networking, data center, FPGA, and licensing business units [18] - Distribution sell-through was $11.7 million higher than sell-in, indicating a reduction in distributor inventory [18] - The adjusted EBITDA for the December quarter was $402 million, representing 33.9% of net sales [10] Market Data and Key Metrics Changes - Net sales growth was observed in the Americas and Europe, while sales in Asia remained flat [18] - The strongest sales performance was noted in the aerospace and defense sector, along with networking data center solutions [19] Company Strategy and Development Direction - The company is focusing on modernizing connectivity solutions in automotive and industrial markets, particularly through Ethernet-based architectures [12][14] - A strategic collaboration with Hyundai Motor Group was announced to integrate 10BASE-T1S solutions into next-generation vehicle platforms [14] - The company aims to leverage its comprehensive Ethernet portfolio to capture opportunities in Industry 4.0 and automotive modernization cycles [15][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the recovery of end markets, including automotive, industrial, communication, data center, aerospace and defense, and consumer sectors [19] - The company anticipates net sales for the March quarter to be $1.26 billion ±$20 million, representing a 6.2% sequential growth and up 29.8% year-over-year [24] - Management noted challenges with lead times and substrate availability, but overall demand remains strong [22][23] Other Important Information - The company expects to maintain a non-GAAP tax rate of about 10% for fiscal year 2026 [9] - Total debt decreased by $12.1 million sequentially, with net debt down by $26 million [10] - Capital expenditures for fiscal year 2026 are expected to be at or below $100 million [11] Q&A Session Summary Question: How should the continued strength versus seasonality be viewed? - Management indicated that distribution inventory is largely corrected, with strong backlog and bookings supporting growth into typically strong quarters [27] Question: Update on inventory reserve and underutilization charges? - Management expects inventory reserves to normalize, with underutilization charges continuing to decline gradually as factories ramp up [29] Question: Clarification on December's microcontroller and analog segment performance? - The upside in December was primarily driven by stronger performance in product segments, despite microcontroller and analog being flat [34] Question: Thoughts on customer inventory behavior? - Management noted that while customers are not restocking yet, they are buying at consumption rates as inventories correct [44][46] Question: Insights on backlog for the June quarter? - Management reported strong bookings in January, indicating a higher backlog for the June quarter compared to the March quarter [51]

Financial Data and Key Metrics Changes - Net sales for the December quarter were $1.186 billion, up 4% sequentially and 15.6% year-over-year, exceeding original guidance [5][16] - Non-GAAP gross margins were 60.5%, up 379 basis points sequentially, while GAAP gross margins were 59.6% [6][17] - Non-GAAP net income was $252.8 million, with earnings per diluted share at $0.44, which was $0.04 above the high end of guidance [6][7] - Total operating expenses were $555.2 million, with non-GAAP operating income at 28.5% of sales [7][9] - Cash flow from operating activities was $341.4 million, with adjusted free cash flow at $305.6 million [9] Business Line Data and Key Metrics Changes - Sales from microcontroller and analog businesses were flat sequentially, while growth came from networking, data center, FPGA, and licensing business units [16] - Distribution sell-through was $11.7 million higher than sell-in, indicating a reduction in distributor inventory [16] - The adjusted EBITDA for the December quarter was $402 million, representing 33.9% of net sales [9] Market Data and Key Metrics Changes - Net sales growth was observed in the Americas and Europe, while sales in Asia were flat [16] - The strongest sales performance was noted in the aerospace and defense sector, as well as in networking data center solutions [17] Company Strategy and Development Direction - The company is focusing on modernizing connectivity in automotive and industrial markets, with a strategic collaboration with Hyundai Motor Group to integrate 10BASE-T1S solutions [12][13] - The company aims to capture opportunities in Industry 4.0 and automotive Ethernet, with a comprehensive portfolio of Ethernet solutions [14][15] - The company is positioned to benefit from significant growth in the automotive and industrial Ethernet connectivity markets, projected to be worth tens of billions by 2030 [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the recovery of end markets, including automotive, industrial, communication, data center, aerospace and defense, and consumer sectors [17] - The company anticipates net sales for the March quarter to be $1.26 billion ±$20 million, representing 6.2% sequential growth and 29.8% year-over-year growth [22] - Management noted challenges with lead times and substrate availability, but overall demand remains strong [20][21] Other Important Information - The company expects to maintain a non-GAAP tax rate of about 10% for fiscal year 2026 [8] - Total debt decreased by $12.1 million sequentially, with net debt down by $26 million [9] - The company plans to prioritize debt reduction over share buybacks until a more favorable debt leverage ratio is achieved [105][106] Q&A Session Summary Question: How should the continued strength versus seasonality be viewed? - Management indicated that distribution inventory is largely corrected, with strong backlog and bookings for the current quarter, leading to confidence in growth [25] Question: Update on inventory reserve and underutilization charges? - Management expects inventory reserves to normalize, with underutilization charges continuing to decrease gradually as factories ramp up [27][28] Question: Clarification on microcontroller and analog segments? - The upside in December was primarily driven by stronger performance in product segments, while licensing growth was anticipated [32] Question: Customer inventory behavior and restocking signs? - Management noted that while customers are still drawing down inventories, some products are starting to be purchased at consumption rates, but restocking has not yet begun [42][43] Question: Backlog for the June quarter? - Management reported that January bookings were strong, and the June quarter backlog is higher than the March quarter backlog at the same point in time [48] Question: Thoughts on the aerospace and defense segment? - Management highlighted strong growth driven by increased defense budgets and commercial airplane production, benefiting the company significantly [74][75] Question: Growth in FPGA business? - Management indicated that FPGA is experiencing significant growth and gaining market share, although specific numbers are not disclosed [85]

Financial Data and Key Metrics Changes - Net sales for the December quarter were $1.186 billion, up 4% sequentially and 15.6% year-over-year, exceeding original guidance [4][15] - Non-GAAP gross margin was 60.5%, up 379 basis points sequentially, while GAAP gross margin was 59.6% [5][16] - Non-GAAP net income was $252.8 million, with earnings per diluted share at $0.44, which was $0.04 above the high end of original guidance [5] - Total operating expenses were $555.2 million, with non-GAAP operating income at 28.5% of sales [5][16] - Cash flow from operating activities was $341.4 million, with adjusted free cash flow at $305.6 million [7][8] Business Line Data and Key Metrics Changes - Sales growth primarily came from networking, data center, FPGA, and licensing business units, while microcontroller and analog businesses were flat sequentially [15] - Distribution sell-through was $11.7 million higher than sell-in, indicating a reduction in distributor inventory [15] Market Data and Key Metrics Changes - Net sales increased sequentially in the Americas and Europe, while remaining flat in Asia [15] - The strongest sales performance was noted in the aerospace and defense sector, as well as networking data center solutions [16] Company Strategy and Development Direction - The company is focusing on modernizing connectivity solutions in automotive and industrial markets, particularly through Ethernet-based architectures [10][12] - A strategic collaboration with Hyundai Motor Group was announced to integrate 10BASE-T1S solutions into next-generation vehicle platforms [12] - The company aims to leverage its comprehensive Ethernet portfolio to capture opportunities in Industry 4.0 and automotive modernization cycles [13][14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the recovery across most end markets, including automotive, industrial, communication, and data center sectors [16] - The company anticipates net sales for the March quarter to be $1.26 billion ±$20 million, representing a 6.2% sequential growth and up 29.8% year-over-year [20] - Management noted challenges with lead times and substrate availability but remains optimistic about future growth [19] Other Important Information - The company expects to maintain a non-GAAP tax rate of about 10% for fiscal year 2026 [6] - Total debt decreased by $12.1 million sequentially, with net debt down by $26 million [8] - Capital expenditures for fiscal year 2026 are expected to be at or below $100 million [9] Q&A Session Summary Question: How should the continued strength versus seasonality be viewed? - Management indicated that distribution inventory is largely corrected, with strong backlog and bookings contributing to confidence in growth [24] Question: Update on inventory reserve and underutilization charges? - Management expects inventory reserves to normalize, with underutilization charges continuing to decline gradually [26] Question: Clarification on December's microcontroller and analog segments? - The upside in December was primarily driven by stronger performance in product segments, not licensing [30] Question: Thoughts on customer inventory behavior? - Management noted that while customers are not restocking yet, they are buying at consumption rates as inventories normalize [40] Question: Backlog for the June quarter? - Management reported that January bookings were strong, and the June quarter backlog is higher than the March quarter backlog at the same point in time [46] Question: FPGA business growth? - The FPGA segment is experiencing significant growth, with the company gaining market share [83]

Core Viewpoint - Microchip Technology has forecasted fourth-quarter profit below Wall Street estimates, raising concerns about the impact of a memory-supply crunch on the broader semiconductor industry [1] Company Summary - Microchip Technology's profit forecast for the fourth quarter is lower than expected by Wall Street, indicating potential challenges ahead for the company [1] Industry Summary - The memory-supply crunch is raising concerns about its effects on the wider semiconductor industry, suggesting that other companies may also face similar challenges [1]

Investor Presentation Fiscal Third Quarter 2026 A Leading Provider of Smart, Connected and Secure Embedded Solutions SAFE HARBOR Forward Looking Statement Safe Harbor: During the course of this presentation, we will make projections or other forward-looking statements regarding the future financial performance of the company (including our guidance) or future events, including our strategy, growth drivers, enhanced profitability, shareholder value creation, scalable bandwidth, enabling disaggregate compute, ...

Financial Performance - Net sales for the three months ended December 31, 2025, were $1,186.0 million, representing a 15.6% increase compared to $1,026.0 million in the same period of 2024[110]. - Gross profit for the three months ended December 31, 2025, was $706.9 million, representing 59.6% of net sales, compared to $561.4 million or 54.7% in 2024[130]. - Operating income for the three months ended December 31, 2025, was 12.8%, significantly up from 3.0% in the same period of 2024[108]. - Total revenue for the nine months ended December 31, 2025, was $1.2238 billion, compared to $1.7655 billion for the year ended March 31, 2025[180]. - Total net loss for the nine months ended December 31, 2025, was $128.6 million, compared to a net loss of $192.0 million for the year ended March 31, 2025[180]. Sales and Product Lines - Mixed-signal microcontrollers accounted for 49.5% of net sales in the three months ended December 31, 2025, down from 52.0% in 2024[115]. - Analog product line net sales increased by 18.4% in the three months ended December 31, 2025, reaching $322.9 million compared to $272.7 million in 2024[121]. - Net sales from the other product line increased by 25.7% in the three months ended December 31, 2025, primarily due to sales of intellectual property rights[124]. - The company experienced a sequential increase in net sales in the mixed-signal microcontroller and analog product lines during the December 2025 quarter compared to the September 2025 quarter[99]. Research and Development - Research and development expenses as a percentage of net sales were 23.1% for the three months ended December 31, 2025, compared to 24.0% in the same period of 2024[108]. - R&D expenses for Q3 2025 were $274.3 million, representing 23.1% of net sales, an increase from $246.2 million or 24.0% of net sales in Q3 2024[138]. - R&D expenses increased by $28.1 million, or 11.4%, for the three months ended December 31, 2025, compared to the same period last year[139]. - The company plans to continue investments in new and enhanced products, focusing on mixed-signal microcontrollers, digital signal controllers, and FPGAs[104]. Manufacturing and Operations - The closure of the Tempe, Arizona wafer fabrication facility (Fab 2) was completed in May 2025, with production being transferred to Oregon and Colorado locations[101]. - The company aims to maintain a high level of manufacturing control by owning wafer fabrication facilities, which contributes to being one of the lowest cost producers in the embedded control industry[101]. - Overall inventory levels decreased to $1.06 billion at December 31, 2025, from $1.29 billion at March 31, 2025[132]. - The company maintained 201 days of inventory at December 31, 2025, compared to 251 days at March 31, 2025[132]. - Approximately 65% of net sales came from products produced at outside wafer foundries during the three months ended December 31, 2025[136]. Expenses and Cash Flow - Selling, general and administrative expenses for Q3 2025 were $168.5 million, or 14.2% of net sales, down from 15.4% in Q3 2024[141]. - Selling, general and administrative expenses increased by $10.3 million, or 6.5%, for the three months ended December 31, 2025, primarily due to higher employee compensation costs[142]. - Amortization of acquired intangible assets for Q3 2025 was $107.6 million, down from $122.6 million in Q3 2024[145]. - Net cash provided by operating activities was $705.1 million for the nine months ended December 31, 2025, driven by net income of $85.8 million[165]. - Net cash used in investing activities was $143.4 million for the nine months ended December 31, 2025, compared to $231.8 million in the same period of 2024[166]. - Net cash used in financing activities was $1.08 billion for the nine months ended December 31, 2025, compared to $194.1 million in the same period of 2024, primarily due to $1.20 billion used to pay down 4.25% 2025 Notes[168]. Debt and Dividends - As of December 31, 2025, the principal amount of outstanding indebtedness was $5.39 billion, with no borrowings under the Revolving Credit Facility[171]. - A quarterly cash dividend of $0.455 per share was declared on February 5, 2026, expected to total approximately $246.5 million for the March 2026 quarter[174]. - Cumulative dividend payments on common stock have totaled approximately $8.37 billion to date[174]. - The company plans to finance the repayment of its fixed rate debt maturing within the next 12 months by issuing new fixed rate debt or using available borrowings[183]. Economic and Market Conditions - The company anticipates continued fluctuations in operating results and gross margins due to global economic conditions and competitive pricing pressures[96]. - The company is committed to enhancing its cybersecurity risk management processes in response to ongoing threats[96]. - Inflation has not materially impacted the company's operating results recently, but significant inflationary pressures could adversely affect them[184]. - Sales in Asia accounted for 48.3% of total net sales in the three months ended December 31, 2025, down from 53.1% in 2024[128]. - Distributors accounted for approximately 47% of net sales in the three months ended December 31, 2025, compared to 43% in 2024[125]. Financial Covenants and Grants - The maximum total leverage ratio financial covenant was amended to 5.50 to 1.00 for periods ending March 31, 2025, and June 30, 2025, reducing to 3.50 to 1.00 for periods after the Covenant Relief Period[170]. - The company expects to receive $162 million in CHIPS Act grants for two U.S. wafer fabrication facilities, pending final approval from the U.S. Department of Commerce[167]. - Capital expenditures for the nine months ended December 31, 2025, were $76.9 million, down from $111.8 million in the same period of 2024, with expectations to remain at or below $100.0 million over the next 12 months[167].

Core Insights - Microchip Technology Incorporated reported strong fiscal third quarter results, with net sales of $1.186 billion, reflecting a 4% sequential growth and a 15.6% year-over-year increase, surpassing original guidance [2][4][6] - The company achieved significant margin expansion, with non-GAAP gross margins increasing from 52% in March 2025 to 60.5% in the December quarter, driven by operational improvements and inventory reduction efforts [2][4][8] - The outlook for the March quarter anticipates net sales of approximately $1.260 billion, indicating a sequential growth of 6.2% and a year-over-year growth of 29.8% at the midpoint [2][4][10] Financial Performance - Net sales for the three months ended December 31, 2025, were $1.186 billion, up from $1.026 billion in the same quarter of the previous year [4][6] - GAAP gross profit was reported at $706.9 million, with a gross margin of 59.6%, while non-GAAP gross profit reached $717.4 million, with a gross margin of 60.5% [4][5] - Operating income on a GAAP basis was $151.7 million (12.8% of net sales), while non-GAAP operating income was $337.8 million (28.5% of net sales) [4][5][8] Cash Flow and Debt Management - The company reduced net debt by $26 million during the quarter, with operating cash flow improving to cover debt obligations and dividend payments [2][4] - Approximately $246.1 million was returned to common stockholders through dividends in the December quarter, with a quarterly dividend of 45.5 cents per share declared for the March quarter [4][9] Market Dynamics and Strategy - Strong momentum in the connectivity business is noted, particularly in automotive and industrial markets, supported by modernization cycles [2][4] - The company is focused on improving operational efficiency and ramping up manufacturing capacity, with expectations for further gross margin improvements as inventory normalizes [2][4] Future Guidance - The midpoint of net sales guidance for the March 2026 quarter is set at $1.260 billion, projecting a sequential growth of 6.2% and a year-over-year growth of 29.8% [4][10] - The company remains optimistic about sustained sequential growth and enhancing shareholder value while maintaining a disciplined approach amid evolving macroeconomic conditions [2][4]

CHANDLER, Ariz., Feb. 05, 2026 (GLOBE NEWSWIRE) -- Microchip Technology (Nasdaq: MCHP) today announced a collaboration with Hyundai Motor Group (HMG) to explore the adoption of advanced in-vehicle network solutions based on 10BASE-T1S Single Pair Ethernet (SPE) technology. This cooperation effort is intended to support the development of more efficient, reliable and scalable vehicle architectures that meet the evolving demands of future mobility. The rapid advancement of Advanced Driver-Assistance Systems ( ...

Core Insights - Post-quantum cryptography (PQC) is becoming a significant investment opportunity by 2026 due to government mandates for its adoption, creating immediate revenue prospects for vendors [2][4][5] Industry Overview - The global PQC market is projected to grow from $0.42 billion in 2025 to $2.84 billion by 2030, reflecting a compound annual growth rate (CAGR) of 46%, driven by sectors such as government, telecom, finance, and critical infrastructure [5] - The adoption of PQC has accelerated following the U.S. National Institute of Standards and Technology (NIST) finalizing its first PQC standards, which provide practical tools for data protection against quantum-based cyber risks [4] Company Analysis Lattice Semiconductor (LSCC) - LSCC is positioned as a key beneficiary of PQC adoption, having launched the first secure control FPGA family compliant with NIST standards, targeting various markets including government and automotive [8] - The Zacks Consensus Estimate for LSCC's 2026 earnings is $1.47, indicating a 40% improvement from 2025, with a revenue estimate of $631 million suggesting 21.1% growth [9] Microchip Technology (MCHP) - MCHP is strategically aligned for the post-quantum transition with its crypto-agile MCUs and FPGAs, focusing on long-lifecycle customers in government and industrial sectors [10] - The Zacks Consensus Estimate for MCHP's fiscal 2027 earnings is $2.54 per share, projecting a 67.5% improvement from fiscal 2026, with a revenue estimate of $5.48 billion indicating 19% growth [12] STMicroelectronics (STM) - STM emphasizes a roadmap-driven approach to PQC, offering crypto-agile hardware and software libraries that support NIST standards, focusing on smooth migration rather than immediate monetization [13] - The Zacks Consensus Estimate for STM's 2026 earnings is $1.05 per share, projecting a 98.1% improvement from 2025, with a revenue estimate of $13.15 billion suggesting 11.5% growth [14]