Core Viewpoint - Microchip Technology Incorporated will present at the Wells Fargo 9th Annual TMT Summit on November 18, 2025, showcasing its position as a leading provider of smart, connected, and secure embedded control solutions [1]. Company Overview - Microchip Technology Inc. is a broadline supplier of semiconductors, focusing on innovative design solutions that address challenges at the intersection of emerging technologies and durable end markets [3]. - The company provides easy-to-use development tools and a comprehensive product portfolio that supports customers throughout the design process, from concept to completion [3]. - Headquartered in Chandler, Arizona, Microchip serves various markets, including industrial, automotive, consumer, aerospace and defense, communications, and computing [3].

Core Insights - Microchip Technology introduces the LAN866x family of 10BASE-T1S endpoint devices to simplify in-vehicle networking by eliminating the need for software development at each network node, thereby reducing complexity and costs [1][3][4] Group 1: Product Features - The LAN866x endpoints serve as bridges that translate Ethernet packets to local digital interfaces, designed to be software-less, which streamlines silicon usage and reduces physical footprint [2][3] - These endpoints support standard-based Remote Control Protocol (RCP), enabling centralized control of edge nodes for data streaming and device management [2][3] - The solution utilizes a 10BASE-T1S multidrop topology, promoting an all-Ethernet zonal architecture that minimizes cabling and software integration costs [2][3] Group 2: Market Applications - The LAN866x endpoints are suitable for critical automotive applications, including lighting systems, audio systems, and various control functions, providing direct bridging of Ethernet data to local digital interfaces [3][4] - The endpoints facilitate the control of LED drivers for lighting, audio data transmission, and management of sensors and actuators over the network [3] Group 3: Company Commitment - Microchip is dedicated to delivering innovative solutions and supporting customers with technical expertise and development tools to reduce design complexity and accelerate market readiness [4] - The company’s Single Pair Ethernet (SPE) solutions encompass a wide range of transceivers, bridges, and switches, designed to ensure reliable, high-speed data transmission while simplifying wiring and reducing costs [4]

Market Overview - U.S. stocks closed mixed, with the Nasdaq Composite decreasing approximately 0.2% during the session, and the Nasdaq fell 3% last week, while the S&P 500 and Dow each declined over 1% [1] Analyst Insights - Wall Street analysts frequently update stock picks, but their track records in predicting market movements can be inconsistent, leading to confusion among investors regarding which opinions to trust [2] - Benzinga's Analyst Ratings API compiles high-quality stock ratings through partnerships with major sell-side banks, providing daily updates on ratings changes three hours before the U.S. equity market opens [3] Top Analyst Picks - Benzinga offers access to the latest analyst ratings, allowing traders to sort through ratings based on analyst accuracy [4] - Notable analysts and their recent ratings include: - **Aaron Rakers (Citigroup)**: Maintained a Buy rating on Sandisk Corporation (NASDAQ:SNDK) with a price target increase from $150 to $280, indicating a potential upside of around 12% [5] - **Analyst from Stifel**: Maintained a Buy rating on Coherent Corp. (NYSE:COHR) with a price target increase from $140 to $168, suggesting a potential upside of about 6% [5] - **Analyst from Truist Securities**: Reiterated a Hold rating on Microchip Technology Incorporated (NASDAQ:MCHP) and reduced the price target from $64 to $60, expecting a 5% surge [5] - **Analyst from RBC Capital**: Maintained a Sector Perform rating on SolarEdge Technologies, Inc. (NASDAQ:SEDG) with a price target increase from $25 to $34, anticipating a 17% decline [5] - **Analyst from Wells Fargo**: Maintained an Overweight rating on Micron Technology, Inc. (NASDAQ:MU) with a price target increase from $220 to $300, expecting a 20% gain [7]

Core Insights - Microchip Technology (MCHP) reported non-GAAP earnings of 35 cents per share for Q2 fiscal 2026, exceeding the Zacks Consensus Estimate by 6.06% but down 24% year over year [1] - Net sales reached $1.14 billion, a 2% decrease year over year, but slightly above the Zacks Consensus Estimate by 0.75%, with a sequential increase of 6% [1][9] - Following the earnings report, Microchip shares fell over 9%, although they have increased 3.5% year to date, outperforming the broader Zacks Computer and Technology sector's 27.1% appreciation [2] Segment Performance - Sales from Mixed-signal Microcontroller, Analog, and Other segments contributed 51.3%, 28.2%, and 20.6% to net sales, respectively [3] - The Microcontroller segment saw a sequential growth of 9.7%, driven by strong demand for 32-bit MCUs, while the Analog segment grew by 1.7% sequentially [3] - Direct sales accounted for 55% of total sales, with the remaining 45% coming from distribution channels [3] Geographic Revenue Breakdown - Revenue contributions by region were 29.7% from the Americas, 19.7% from Europe, and 50.6% from Asia [4] - Sales increased in the Americas and Asia, while revenue remained flat in Europe [4] Operating Results - Non-GAAP gross margin decreased by 290 basis points year over year to 56.7%, but improved by 236 basis points sequentially [5] - Product gross margin was reported at 67.4%, supported by a favorable product mix [5] - Non-GAAP operating margin declined to 24.3% compared to 29.3% in the previous year, although it expanded sequentially by 364 basis points [7] Financial Position - As of September 30, 2025, cash and short-term investments totaled $236.8 million, down from $566.5 million as of June 30 [8] - Total debt was reported at $5.38 billion, a slight decrease from $5.46 billion in June [8] - Inventory days decreased to 199 days from 214 days at the end of June 2025 [8] Cash Flow and Shareholder Returns - Cash flow from operating activities was $88.1 million, down from $275.6 million in the previous quarter [9] - Free cash flow also decreased to $38.3 million from $257.7 million in the prior quarter [10] - The company returned approximately $245.8 million to shareholders through dividends, announcing a quarterly dividend of 45.5 cents per share [10] Future Guidance - For Q3 fiscal 2026, Microchip projects net sales of approximately $1.13 billion, reflecting a 1% sequential decline, with anticipated non-GAAP earnings between 34 and 40 cents per share [11] - Non-GAAP gross margin is expected to range between 57.2% and 59.2%, with operating margin projected between 24.5% and 26.9% [12]

Core Insights - Microchip Technology Inc. reported strong third-quarter results, indicating improving demand despite customer caution regarding inventory restocking [1][2] - JP Morgan analyst Harlan Sur maintained an Overweight rating with a price target of $77, reflecting confidence in the company's growth trajectory [1] Financial Performance - Revenue for the September quarter reached $1.14 billion, a 6% increase quarter over quarter, surpassing expectations [4] - Gross margin improved to 56.7%, despite an 11-point negative impact from inventory write-downs and underutilization charges [2][4] - Earnings per share (EPS) also exceeded forecasts, although fourth-quarter guidance was below consensus due to delayed customer restocking [5] Market Dynamics - Bookings showed steady improvement throughout the quarter, with October demand surpassing that of September and August [2] - Customers are currently trimming inventories and delaying restocking until early 2026, but Microchip's strong backlog suggests potential revenue growth in the March quarter and beyond [3] Growth Drivers - The company’s product margins have already exceeded the long-term target of 65%, indicating gradual profitability gains [4] - Microchip's expansion into the data center market is expected to be a significant growth driver starting in 2027, contingent on customer adoption and market share growth [4]

Core Insights - Microchip Technology (MCHP) reported quarterly earnings of $0.35 per share, exceeding the Zacks Consensus Estimate of $0.33 per share, but down from $0.46 per share a year ago, indicating an earnings surprise of +6.06% [1] - The company generated revenues of $1.14 billion for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 0.75%, although this is a decrease from $1.16 billion in the same quarter last year [2] - Microchip Tech has outperformed consensus EPS estimates three times over the last four quarters [2] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.39 on revenues of $1.16 billion, while for the current fiscal year, the estimate is $1.44 on revenues of $4.58 billion [7] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Industry Context - The Semiconductor - Analog and Mixed industry is ranked in the top 24% of over 250 Zacks industries, suggesting a favorable outlook compared to the bottom 50% of ranked industries [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Financial Data and Key Metrics Changes - Net sales for the September quarter were $1.14 billion, reflecting a 6% sequential increase and exceeding guidance by $10.4 million [15][24] - Non-GAAP gross margin was reported at 56.7%, impacted by inventory reserve charges of $71.8 million and underutilization charges of $51 million [15][24] - Non-GAAP operating margin increased to 24.3% of sales, with operating expenses at 32.4% of sales [15] - Non-GAAP net income was $199.1 million, translating to earnings per diluted share of $0.35, which was $0.02 above guidance [15] Business Line Data and Key Metrics Changes - The microcontroller (MCU) business grew 9.7% sequentially, while the analog business saw a 1.7% increase [4] - Sales from data center products, particularly Gen 4 and Gen 5, showed strong growth, although from previously low levels [4][21] Market Data and Key Metrics Changes - Sales growth was observed in the Americas and Asia, while Europe remained flat, which is considered acceptable for a summer quarter [4] - The data center market exhibited the strongest sales performance, with significant increases in bookings and shipments of PCIe switches and related products [21] Company Strategy and Development Direction - The company is focusing on advanced technology, highlighted by the introduction of the industry's first 3-nanometer-based PCIe Gen 6 switch, aimed at enhancing AI infrastructure [10][12] - A strategic shift towards high-performance data center products is underway, with plans to expand offerings in the AI and FPGA markets [76] Management's Comments on Operating Environment and Future Outlook - Management noted a softer overall business environment compared to previous quarters, impacting December quarter guidance, which is expected to be down 1% sequentially [28][29] - Despite the current challenges, there is optimism for strong performance in the March, June, and September quarters of 2026, driven by improved backlog and bookings [50][52] Other Important Information - Inventory levels decreased by $73.8 million sequentially, with inventory days down to 199 days [16][17] - The company is undergoing a restructuring plan, including the sale of its Fab 2 facility, which is expected to be completed by December 2025 [7][8] Q&A Session Summary Question: How does the current environment compare to 90 days ago? - Management indicated a slightly softer tone in the business environment, affecting December quarter guidance, which is better than seasonal expectations [28] Question: What is the outlook for inventory reserve and underutilization charges? - Management stated that while it is difficult to predict, they expect these charges to decrease in stronger quarters ahead [30][31] Question: What is the status of long-term supply agreements (LTSAs)? - Management clarified that they have been flexible with customers regarding LTSAs, allowing them to adjust their requirements without forcing purchases [39][40] Question: What drives confidence in above-seasonal growth for the next three quarters? - Confidence is based on improved backlog visibility and strong bookings, with expectations for inventory replenishment in the March quarter [50][52] Question: What is the expected impact of inventory charges on gross margins? - Management indicated that as inventory charges decrease, gross margins are expected to improve, potentially reaching a target of 65% in the future [66][68]

Financial Data and Key Metrics Changes - Net sales for the September quarter were $1.14 billion, reflecting a 6% sequential increase and exceeding guidance by $10.4 million [15][24] - Non-GAAP gross margin was reported at 56.7%, impacted by $51 million in underutilization charges and $71.8 million in inventory reserve charges [15][24] - Non-GAAP operating margin increased to 24.3% of sales, with operating expenses at 32.4% of sales [15] - Non-GAAP net income was $199.1 million, translating to earnings per diluted share of $0.35, which was $0.02 above guidance [15][24] Business Line Data and Key Metrics Changes - The microcontroller (MCU) business grew 9.7% sequentially, while the analog business saw a 1.7% increase [4] - Sales from Gen 4 and Gen 5 data center products experienced strong growth, although from previously low levels [4][21] Market Data and Key Metrics Changes - Sales growth was observed in the Americas and Asia, while Europe remained flat, which is considered acceptable for a summer quarter [4] - The data center market showed the strongest sales performance, with significant increases in bookings and shipments of PCIe switches and related products [21] Company Strategy and Development Direction - The company is focusing on advanced technology products, including the introduction of the industry's first 3 nm-based PCIe Gen 6 switch, aimed at enhancing AI infrastructure [9][10] - A strategic shift towards high-performance data center products is underway, with plans to expand offerings in the FPGA business unit and AI-focused initiatives [76] Management's Comments on Operating Environment and Future Outlook - The management noted a softer overall business environment compared to previous expectations, impacting guidance for the December quarter [28] - Despite a challenging December quarter, the company anticipates strong momentum in the following quarters, particularly in March, June, and September 2026 [25][50] Other Important Information - Inventory levels decreased by $73.8 million sequentially, with inventory days down to 199 days [16][17] - The company has entered into a purchase and sales agreement to sell its Fab 2 wafer fabrication facility as part of a restructuring plan [7][8] Q&A Session Summary Question: Characterization of current business environment versus 90 days ago - The company noted a slightly softer tone in the business environment, impacting December quarter guidance, which is better than seasonal expectations [28] Question: Update on inventory reserve and underutilization charges - Management indicated uncertainty in predicting future charges but expects improvements in the coming quarters as sales grow [30][31] Question: Insights on long-term supply agreements (LTSAs) - The company clarified that it has dismantled many obligations under LTSAs, allowing customers flexibility in their purchasing [36][39] Question: Confidence in above-seasonal growth for the next three quarters - The company cited strong visibility in backlog and bookings as key drivers for confidence in upcoming quarters [47][50] Question: Expectations for gross margin improvements - Management indicated that inventory write-offs are expected to normalize quicker than underutilization charges, with a path to improved gross margins [80][82]

Financial Data and Key Metrics Changes - Net sales for Q2 2026 were $1.14 billion, reflecting a 6% sequential growth and exceeding the midpoint of guidance by $10.4 million [12][13] - Non-GAAP gross margin increased to 56.7%, impacted by inventory reserve charges of $71.8 million and underutilization charges of $51 million [12][13][22] - Non-GAAP operating margin rose to 24.3% of sales, with operating expenses at 32.4% of sales [13][22] - Non-GAAP net income was $199.1 million, translating to earnings per diluted share of $0.35, which was $0.02 above guidance [13][22] Business Line Data and Key Metrics Changes - Microcontroller (MCU) business grew 9.7% sequentially, driven by strong demand for 32-bit MCUs [3][4] - Analog business saw a 1.7% sequential increase [4] - Data center products, particularly Gen 4 and Gen 5, experienced strong sales growth, although from previously depressed levels [3][4] Market Data and Key Metrics Changes - Sales growth was observed in the Americas and Asia, while Europe remained flat, which is considered acceptable for a summer quarter [3] - The data center market showed the strongest performance, with increased bookings and shipments as inventory corrections occurred [18][19] Company Strategy and Development Direction - The company is focusing on advanced technology with the introduction of the industry's first 3-nanometer-based PCIe Gen 6 switch, aimed at enhancing AI infrastructure [4][8] - A strategic shift towards high-performance data center products is underway, with plans to expand offerings in the AI and FPGA markets [70] - The company aims to improve operational efficiency and reduce inventory write-offs and underutilization charges in the upcoming quarters [30][31] Management's Comments on Operating Environment and Future Outlook - Management noted a softer overall business environment compared to previous expectations, but still anticipates better-than-seasonal growth in the upcoming quarters [25][26] - The company expects net sales for the December quarter to be approximately $1.129 billion, down 1% sequentially, with a non-GAAP gross margin guidance of 57.2% to 59.2% [22][23] - Management expressed optimism about strong bookings and a robust backlog for the March quarter, indicating potential for sequential growth [45][46] Other Important Information - Inventory levels decreased by $73.8 million sequentially, with inventory days down to 199 days [14][15] - The company is undergoing a restructuring plan, including the sale of its Fab 2 facility, which is expected to close in December 2025 [5][6] Q&A Session Summary Question: How does the current environment compare to 90 days ago? - Management noted a slightly softer tone in the business environment, impacting guidance for the December quarter, but bookings were strong [25][26] Question: What is the outlook for inventory reserve and underutilization charges? - Management indicated uncertainty in predicting future charges but expects improvements in the upcoming quarters as sales grow [28][29] Question: What is the status of long-term supply agreements (LTSAs)? - Management clarified that they have been flexible with customers regarding LTSAs, allowing them to adjust their requirements without forcing purchases [34][36] Question: What drives confidence in above-seasonal growth for the next three quarters? - Management cited a strong backlog and increased bookings as indicators of potential growth, despite current low lead times [44][46] Question: What is the expected impact of underutilization and inventory write-offs on gross margins? - Management expects these charges to decrease over time, positively impacting gross margins as sales improve [60][62]

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