Microchip Technology vs. TE Connectivity: Two Mature Chip Plays, One Better Buy

Core Insights - Microchip Technology is experiencing a recovery with a sequential revenue increase for three consecutive quarters, while TE Connectivity is achieving record orders and significant growth across its segments [1] Group 1: Microchip Technology (MCHP) - Revenue for Q3 FY26 reached $1.186 billion, reflecting a 4% sequential increase and a 15.6% year-over-year growth [2] - Non-GAAP gross margins improved to 60.5%, up from 52% a year ago, indicating effective management strategies [2] - The CEO has implemented a nine-point recovery plan focusing on closing underperforming fabs, normalizing inventory, and rebuilding customer relationships [2] - Guidance for the March quarter anticipates net sales of $1.260 billion, suggesting nearly 30% year-over-year growth [6] - The forward P/E ratio is approximately 24x, with a dividend yield of 2.9%, although the stock has seen a 23% decline over the past month [8] Group 2: TE Connectivity (TEL) - Q1 FY2026 revenue reached $4.67 billion, a 22% increase year-over-year, with record orders of $5.1 billion, up 28% [3] - The Industrial Solutions segment grew by 38% year-over-year, driven by AI data center connectivity and grid hardening [3] - The CEO highlighted strong performance against strategic goals, resulting in over 30% earnings growth and more than 20% sales growth, both exceeding guidance [3] - TE's AI data center revenue tripled from $300 million in FY2024 to over $900 million in FY2025, with expectations of 20% growth in hyperscaler capex for FY2026 [5] - The forward P/E ratio is closer to 18x, indicating a business with more near-term earnings visibility [9] Group 3: Comparative Analysis - Microchip is in a turnaround phase, while TE is already in growth mode, capturing current AI infrastructure spending [9] - Analysts suggest that TE's near-term earnings visibility may be worth examining alongside Microchip's ongoing margin recovery story [9]