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]

Core Insights - Microchip Technology (MCHP) is expected to report third-quarter fiscal 2026 results on February 5, 2026, with net sales projected between $1.109 billion and $1.149 billion, indicating a sequential decline of approximately 1% at the midpoint, while year-over-year growth is estimated at 15.5% [1][2] Financial Performance - Non-GAAP earnings per share are anticipated to range from 34 cents to 40 cents, with the consensus estimate at 43 cents per share, reflecting a significant year-over-year growth of 115% [2] - MCHP has beaten the Zacks Consensus Estimate in three of the last four quarters, with an average surprise of 0.00% [2] Inventory and Production - The company has successfully reduced its inventory levels from a peak of 266 days to 199 days over three quarters, which is expected to continue positively impacting the upcoming results [3] - Distributor inventory levels were reduced to 27 days in the second quarter of fiscal 2026, and MCHP has scaled back its capital expenditures while maintaining sufficient manufacturing capacity to support production growth [4] Market Demand - Strong demand for Gen 4 and Gen 5 data center products, driven by inventory corrections among customers and increased AI data center build-outs, is anticipated to positively influence MCHP's third-quarter results [5][9] - The company is benefiting from strong design wins in high-growth sectors such as industrial, aerospace, and automotive, which is expected to enhance revenue performance [6] Earnings Prediction - The earnings model indicates a high likelihood of an earnings beat for MCHP, supported by a positive Earnings ESP of +1.34% and a Zacks Rank of 1 (Strong Buy) [7][8]

Core Insights - Microchip Technology (MCHP) is scheduled to report its second-quarter fiscal 2026 results on November 6, with expected net sales between $1.110 billion and $1.150 billion, indicating a sequential growth of approximately 5.1% [1][7] - The Zacks Consensus Estimate for revenues in the second quarter is $1.13 billion, reflecting a year-over-year decline of 2.74% [1][2] - Anticipated non-GAAP earnings per share (EPS) are projected to be between 30 and 36 cents, with the consensus mark for earnings also at 33 cents, representing a year-over-year decline of 28.26% [1][2] Financial Performance Expectations - Microchip's earnings have historically beaten the Zacks Consensus Estimate in three of the last four quarters, with an average surprise of 0.23% [2] - The company has been facing macroeconomic challenges but is expected to show improved inventory levels, which have decreased from 214 days in the first quarter to an anticipated range of 195 to 200 days by the end of the second quarter [2][3] Revenue and Margin Drivers - Improved inventory levels are expected to positively impact gross margins in the upcoming quarter, with revenues benefiting from inventory corrections at distributors and increased direct customer shipments [3][7] - The company has secured strong design wins in high-growth sectors such as industrial, aerospace, and automotive, which are likely to contribute to revenue growth in the reported quarter [4][7] Earnings Outlook - According to the Zacks model, Microchip has an Earnings ESP of 0.00% and a Zacks Rank of 3, indicating a neutral outlook for earnings performance [5]

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]