Microchip Technology Incorporated (MCHP) Earnings & Analysis

Latest quarter

Microchip reported Q2 FY2027 revenue of $1.6 billion, up 42.2% from $1.1 billion a year earlier. Diluted earnings per share rose to $0.68 from $0.03. For the preceding June quarter, adjusted EPS was $0.76 against a consensus estimate of $0.70.

In its filing, Microchip attributed the year-on-year sales increase primarily to demand returning after customers reduced excess inventory, as well as customer designs entering production. Microcontroller sales increased 32.5%, analog sales rose 42.8%, and the other product line grew 65.6%, helped by licensing fees.

Gross margin rose to 65.9% from 55.9%; Microchip cited pricing, product mix, lower capacity and inventory charges, and higher licensing revenue. Operating margin increased to 28.6% from 7.80%. The filing reported $457.0 million in cash and cash equivalents at September 30, 2026.

Microchip’s GAAP gross and operating margins came within its guidance ranges for the quarter.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

On the preceding June-quarter call, CEO Steve Sanghi said customers were returning after working through excess inventory, while new designs and improved customer relationships were adding orders. He said Microchip believed its distribution inventory correction was complete, although distributors wanted customer orders before replenishing across their product ranges.

Sanghi said lead times were stretching as reduced inventories met constraints in foundries, substrates and subcontracted assembly and testing. Customers were requesting more expedited shipments, he said, and Microchip was asking them for longer-term orders. He added that capacity allocations were increasing and that the company was moving some assembly and testing work in-house.

On pricing, Sanghi said the increases implemented between mid-August and early September were intended to recover costs Microchip had absorbed. He expected a small effect in the September quarter and a full-quarter effect in December. He said the company had not planned routine increases, though new supplier cost increases could prompt another review.

Analysts asked whether the projected gross margin could last. CFO Eric Bjornholt said licensing revenue and the effect of repricing inventory at distributors were not fully repeatable; he did not break out their separate impacts. Sanghi said improved factory utilization and a full quarter of higher prices could help offset those effects, while supplier costs were also rising.

On data centers, Sanghi described demand across switches, controllers, power management and other products. Asked about market share, he said the breadth of the portfolio made it difficult to assess competitors’ positions and project Microchip’s share. He also said the company would use available cash beyond its dividend to reduce debt.

Looking ahead from that call, Sanghi said he expected the December quarter to be better than its usual seasonal pattern. Bjornholt said the company would provide its end-market breakdown quarterly.

Guidance

Microchip expects capital expenditures of about $35.0 million in Q3 FY2027, the quarter ending December 31, 2026. For the preceding quarter, its earlier spending guidance was $20.0 million to $25.0 million.