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Microchip Q1 Earnings Beat Estimates, Sales Down Y/Y, Shares Drop
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Key Takeaways
{\"0\":\"Microchip\'s fiscal Q1 EPS beat estimates but fell 49.1% year over year on lower sales.\",\"1\":\"Fiscal Q1 revenues of $1.08B topped forecasts, up 10.8% sequentially, but down 13.4% yearly.\",\"2\":\"Fiscal Q2 outlook sees up to 5.1% sequential sales growth and higher gross margins.\"}
Microchip Technology (MCHP - Free Report) reported first-quarter fiscal 2026 non-GAAP earnings of 27 cents per share, which beat the Zacks Consensus Estimate by 12.5% but fell 49.1% year over year.
Net sales of $1.08 billion decreased 13.4% year over year and beat the Zacks Consensus Estimate by 2.06%. Sequentially, revenues increased 10.8%.
Following the fiscal first-quarter results, Microchip shares were down more than 5.2% at the time of writing this article. MCHP shares have jumped 15.4%, outperforming the broader Zacks Computer and Technology sector’s appreciation of 12.2% year to date.
Microchip’s Segmental Details
Sales from Mixed-signal Microcontroller, Analog and Other accounted for 49.5%, 29.4% and 21.1% of net sales, respectively.
Microchip Technology Incorporated Price, Consensus and EPS Surprise
In terms of channel, direct sales accounted for 53%, while 47% came from distribution.
Geographically, revenues from the Americas, Europe and Asia contributed 28.6%, 21% and 50.4% to net sales, respectively.
MCHP’s Operating Results
Non-GAAP gross margin contracted 560 basis points (bps) on a year-over-year basis to 54.3% but expanded 240 bps sequentially.
Non-GAAP research & development expenses, as a percentage of net sales, increased 350 bps year over year to 21.1%. Non-GAAP selling, general & administrative expenses, as a percentage of net sales, jumped 180 bps to 12.6%.
Non-GAAP operating expenses, as a percentage of net sales, were 33.7% compared with 28.4% reported in the year-ago quarter.
Consequently, the non-GAAP operating margin declined to 20.7% compared with 31.5% reported in the year-ago quarter. Sequentially, operating margin expanded 670 bps.
Microchip’s Balance Sheet & Cash Flow
As of June 30, 2025, cash and short-term investments totaled $566.5 million compared with $771.7 million as of March 31.
As of June 30, 2025, total debt (long-term plus current portion) was $5.46 billion compared with $5.63 billion as of March 31.
Inventory at the end of June 2025 was 214 days, down from 251 days at the end of March 2025. Distribution inventory days reduced by four days to 29 days.
For the fiscal first quarter, cash flow from operating activities was $275.6 million compared with $205.9 million in the previous quarter.
Free cash flow was $257.7 million compared with $191.7 million in the previous quarter.
Microchip returned roughly $245 million to shareholders through dividends in the fiscal first quarter. The company announced a quarterly dividend of 45.5 cents per share.
MCHP Offers Positive Q2 Guidance
Microchip expects net sales to be $1.13 billion (+/-$20 million) at mid-point for the second quarter of fiscal 2026, which reflects roughly 5.1% sequential growth.
The company expects inventory at the end of the September quarter to be between 195 and 200 days.
Non-GAAP earnings are anticipated between 30 cents per share and 36 cents per share.
Non-GAAP gross margin is anticipated between 55% and 57%. Non-GAAP operating expenses are projected to be 32.4-32.8%. Non-GAAP operating margin is anticipated to be 22.2-24.6%.
Zacks Rank & Other Stocks to Consider
Microchip currently carries a Zacks Rank #2 (Buy).
Image: Bigstock
Microchip Q1 Earnings Beat Estimates, Sales Down Y/Y, Shares Drop
Key Takeaways
Microchip Technology (MCHP - Free Report) reported first-quarter fiscal 2026 non-GAAP earnings of 27 cents per share, which beat the Zacks Consensus Estimate by 12.5% but fell 49.1% year over year.
Net sales of $1.08 billion decreased 13.4% year over year and beat the Zacks Consensus Estimate by 2.06%. Sequentially, revenues increased 10.8%.
Following the fiscal first-quarter results, Microchip shares were down more than 5.2% at the time of writing this article. MCHP shares have jumped 15.4%, outperforming the broader Zacks Computer and Technology sector’s appreciation of 12.2% year to date.
Microchip’s Segmental Details
Sales from Mixed-signal Microcontroller, Analog and Other accounted for 49.5%, 29.4% and 21.1% of net sales, respectively.
Microchip Technology Incorporated Price, Consensus and EPS Surprise
Microchip Technology Incorporated price-consensus-eps-surprise-chart | Microchip Technology Incorporated Quote
In terms of channel, direct sales accounted for 53%, while 47% came from distribution.
Geographically, revenues from the Americas, Europe and Asia contributed 28.6%, 21% and 50.4% to net sales, respectively.
MCHP’s Operating Results
Non-GAAP gross margin contracted 560 basis points (bps) on a year-over-year basis to 54.3% but expanded 240 bps sequentially.
Non-GAAP research & development expenses, as a percentage of net sales, increased 350 bps year over year to 21.1%. Non-GAAP selling, general & administrative expenses, as a percentage of net sales, jumped 180 bps to 12.6%.
Non-GAAP operating expenses, as a percentage of net sales, were 33.7% compared with 28.4% reported in the year-ago quarter.
Consequently, the non-GAAP operating margin declined to 20.7% compared with 31.5% reported in the year-ago quarter. Sequentially, operating margin expanded 670 bps.
Microchip’s Balance Sheet & Cash Flow
As of June 30, 2025, cash and short-term investments totaled $566.5 million compared with $771.7 million as of March 31.
As of June 30, 2025, total debt (long-term plus current portion) was $5.46 billion compared with $5.63 billion as of March 31.
Inventory at the end of June 2025 was 214 days, down from 251 days at the end of March 2025. Distribution inventory days reduced by four days to 29 days.
For the fiscal first quarter, cash flow from operating activities was $275.6 million compared with $205.9 million in the previous quarter.
Free cash flow was $257.7 million compared with $191.7 million in the previous quarter.
Microchip returned roughly $245 million to shareholders through dividends in the fiscal first quarter. The company announced a quarterly dividend of 45.5 cents per share.
MCHP Offers Positive Q2 Guidance
Microchip expects net sales to be $1.13 billion (+/-$20 million) at mid-point for the second quarter of fiscal 2026, which reflects roughly 5.1% sequential growth.
The company expects inventory at the end of the September quarter to be between 195 and 200 days.
Non-GAAP earnings are anticipated between 30 cents per share and 36 cents per share.
Non-GAAP gross margin is anticipated between 55% and 57%. Non-GAAP operating expenses are projected to be 32.4-32.8%. Non-GAAP operating margin is anticipated to be 22.2-24.6%.
Zacks Rank & Other Stocks to Consider
Microchip currently carries a Zacks Rank #2 (Buy).
Lumentum (LITE - Free Report) , Cisco Systems (CSCO - Free Report) , and Vipshop (VIPS - Free Report) are some other stocks worth considering in the broader Zacks Computer and Technology sector. While Vipshop currently sports a Zacks Rank #1 (Strong Buy), Cisco and Lumentum carry a Zacks Rank #2 each. You can see the complete list of today’s Zacks #1 Rank stocks here.
Lumentum shares have jumped 32.3% year to date. Lumentum is set to report its second-quarter 2025 results on Aug. 12.
Cisco Systems shares have appreciated 18.2% year to date. Cisco is set to report its fourth-quarter fiscal 2025 results on Aug. 13.
Vipshop shares are up 12.3% year to date. Vipshop is set to report its second-quarter 2025 results on Aug. 14.