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1. Company Snapshot

1.a. Company Description

Microchip Technology Incorporated develops, manufactures, and sells smart, connected, and secure embedded control solutions in the Americas, Europe, and Asia.The company offers general purpose 8-bit, 16-bit, and 32-bit microcontrollers; 32-bit embedded microprocessors markets; and specialized microcontrollers for automotive, industrial, computing, communications, lighting, power supplies, motor control, human machine interface, security, wired connectivity, and wireless connectivity applications.It also provides development tools that enable system designers to program microcontroller and microprocessor products for specific applications; field-programmable gate array (FPGA) products; and analog, interface, mixed signal, and timing products comprising power management, linear, mixed-signal, high-voltage, thermal management, discrete diodes and metal oxide semiconductor field effect transistors (MOSFETS), radio frequency (RF), drivers, safety, security, timing, USB, Ethernet, wireless, and other interface products.


In addition, the company offers memory products consisting of serial electrically erasable programmable read-only memory, serial flash memories, parallel flash memories, serial static random access memories, and serial electrically erasable random access memories for the production of very small footprint devices; and licenses its SuperFlash embedded flash and NVM technologies to foundries, integrated device manufacturers, and design partners for use in the manufacture of microcontroller products, gate array, RF, analog, and neuromorphic compute products that require embedded non-volatile memory, as well as provides engineering services.Further, it offers wafer foundry and assembly, and test subcontracting manufacturing services; and timing systems products, application specific integrated circuits, and aerospace products.Microchip Technology Incorporated was incorporated in 1989 and is headquartered in Chandler, Arizona.

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1.b. Last Insights on MCHP

Breaking News: Microchip Technology Incorporated recently updated its quarterly guidance at the UBS Global Technology and AI Conference, citing better-than-expected performance. The semiconductor maker reported strong bookings, indicating a recovery in key end markets. As a result, the company raised its forecast. Microchip also introduced a new power monitoring solution that reduces the power required to measure power consumption in portable devices. Analysts at various firms have given mixed recommendations, with some reiterating a buy rating, while others maintain a hold or neutral stance.

1.c. Company Highlights

2. Microchip's Q2 Fiscal 2026 Earnings: A Closer Look

Microchip's Q2 Fiscal 2026 financial results showed net sales of $1.14 billion, up 6% sequentially, with a non-GAAP gross margin of 56.7% and non-GAAP earnings per diluted share of $0.35, beating analyst estimates of $0.3304. The company's microcontroller and analog businesses grew sequentially, with the MCU business increasing 9.7%. Inventory days decreased to 199 days, and the company generated $88.1 million in cash flow from operating activities.

Publication Date: Nov -08

📋 Highlights
  • Sequential Revenue Growth:: Q2 2026 net sales rose to $1.14B (+6% QoQ), driven by 9.7% growth in microcontroller business.
  • Gross Margin Resilience:: Non-GAAP gross margin held at 56.7%, with projected Q3 range of 57.2–59.2% despite 1% sales decline.
  • Data Center Innovation:: Launched industry-first 3-nm PCIe Gen 6 switch, targeting $2B TAM with 10% CAGR through 2035.
  • Cost Optimization:: Fab 2 closure and factory rightsizing expected to generate $115M annual savings, improving long-term margins.
  • Inventory Challenges:: Charges impact gross margin by ~5% currently, but projected to decline rapidly with 6–10% sales growth in next quarters.

Segment Performance

The company's data center and compute segment, which accounted for 19% of total revenues in fiscal 2025, is expected to contribute more, with a strategic shift towards advanced nodes and high-performance products. Microchip highlighted its 3-nanometer Gen 6 Switchtec device, with plans to release it to production by June 2026, targeting hyperscaler, enterprise OEM, and ODM customers.

Gross Margin Profile

The company's gross margin profile is expected to improve, driven by utilization and decreasing inventory charges. Microchip expects substantial improvement in the next fiscal year, with a long-term model of 65%. However, near-term challenges due to underutilization charges and inventory write-downs are expected to impact gross margins. The current impact of inventory charges is around 5 percentage points to gross margin, which is expected to come down over the next several quarters.

Guidance and Outlook

Microchip expects net sales for Q3 Fiscal 2026 to be $1.129 billion, down 1% sequentially, with a non-GAAP gross margin between 57.2% and 59.2% of sales. The company is seeing recovery in key end markets, including automotive, industrial, and data center. Despite a cautious tone in the business environment, Microchip expects to "hunker down" for this quarter and then regain momentum.

Valuation Metrics

With a P/E Ratio of -163.58 and an EV/EBITDA of 59.74, it's clear that the market is pricing in significant growth expectations for Microchip. The company's P/S Ratio of 7.21 suggests that the stock may be slightly overvalued. However, the Dividend Yield of 3.23% provides a relatively stable source of return. Analysts estimate next year's revenue growth at 5.3%, which may not be enough to justify the current valuation.

3. NewsRoom

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S&P 500 Gains and Losses Today: Paramount and Netflix Slide; Microchip Technology Surges on Strong Guidance

Dec -03

Source: investopedia.com

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Microchip Technology Incorporated (MCHP) Presents at UBS Global Technology and AI Conference 2025 Transcript

Dec -03

Source: seekingalpha.com

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Why Microchip Technology Rallied Double-Digits Today

Dec -03

Source: fool.com

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Top Stock Movers Now: American Eagle Outfitters, Microchip Technology, Netflix, and More

Dec -03

Source: investopedia.com

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Microchip Halves the Power Required to Measure How Much Power Portable Devices Consume

Dec -03

Source: globenewswire.com

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Touchstone Value Fund Q3 2025 Portfolio Update

Dec -03

Source: seekingalpha.com

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Microchip Technology raises profit, revenue expectations for third quarter

Dec -02

Source: reuters.com

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Microchip Technology Raises Financial Guidance for Sales and EPS for Third Quarter of Fiscal Year 2026

Dec -02

Source: globenewswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (12.19%)

6. Segments

Semiconductor Products

Expected Growth: 12.3%

Microchip Technology Incorporated's growth is driven by increasing demand for IoT devices, 5G infrastructure and rising adoption of artificial intelligence and machine learning in various applications.

Technology Licensing

Expected Growth: 4.5%

Increasing demand for semiconductor intellectual property and licensable bipolar CMOS DMOS semiconductor process driven by growing need for efficient power management and rising adoption of IoT devices and automotive applications.

7. Detailed Products

Microcontrollers (MCUs)

Microchip's microcontrollers are designed to provide a high level of performance, low power consumption, and advanced peripherals for a wide range of applications.

Analog and Interface Products

Microchip's analog and interface products include amplifiers, data converters, interface devices, and power management devices.

Memory and Storage

Microchip's memory and storage products include serial EEPROMs, serial flash, and parallel flash devices.

RF and Wireless Solutions

Microchip's RF and wireless solutions include Wi-Fi, Bluetooth, and LoRa modules and devices.

Security and Authentication

Microchip's security and authentication products include cryptographic coprocessors, secure boot, and secure authentication devices.

Power Management and Interface

Microchip's power management and interface products include power management ICs, battery management, and interface devices.

Sensors and Actuators

Microchip's sensors and actuators include temperature sensors, pressure sensors, and motor control devices.

8. Microchip Technology Incorporated's Porter Forces

Forces Ranking

Threat Of Substitutes

Microchip Technology Incorporated faces moderate threat from substitutes, as customers have limited alternatives for its microcontrollers and analog semiconductors. However, the company's focus on innovation and customer relationships helps mitigate this threat.

Bargaining Power Of Customers

Microchip Technology Incorporated's customers have limited bargaining power due to the company's diverse customer base and lack of concentration. The company's strong relationships with customers also reduce the bargaining power of individual customers.

Bargaining Power Of Suppliers

Microchip Technology Incorporated has a diverse supplier base, which reduces the bargaining power of individual suppliers. The company's strong relationships with suppliers and its ability to negotiate prices also mitigate this threat.

Threat Of New Entrants

The threat of new entrants is low for Microchip Technology Incorporated due to the high barriers to entry in the semiconductor industry. The company's strong brand recognition, intellectual property, and established customer relationships also make it difficult for new entrants to gain traction.

Intensity Of Rivalry

The semiconductor industry is highly competitive, with several established players competing for market share. Microchip Technology Incorporated faces intense rivalry from companies like Texas Instruments, STMicroelectronics, and Analog Devices, which can lead to pricing pressure and increased marketing expenses.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 47.54%
Debt Cost 3.95%
Equity Weight 52.46%
Equity Cost 11.90%
WACC 8.12%
Leverage 90.61%

11. Quality Control: Microchip Technology Incorporated passed 6 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Lam Research

A-Score: 5.5/10

Value: 0.8

Growth: 8.1

Quality: 8.3

Yield: 2.0

Momentum: 9.0

Volatility: 4.7

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KLA

A-Score: 5.4/10

Value: 0.8

Growth: 8.4

Quality: 7.9

Yield: 2.0

Momentum: 8.5

Volatility: 5.0

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Applied Materials

A-Score: 4.9/10

Value: 1.6

Growth: 8.1

Quality: 8.1

Yield: 2.0

Momentum: 5.0

Volatility: 4.7

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Texas Instruments

A-Score: 4.5/10

Value: 1.5

Growth: 3.6

Quality: 6.9

Yield: 6.0

Momentum: 3.0

Volatility: 6.0

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Monolithic Power Systems

A-Score: 4.4/10

Value: 0.6

Growth: 9.3

Quality: 8.0

Yield: 1.0

Momentum: 4.0

Volatility: 3.3

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Microchip Technology

A-Score: 3.3/10

Value: 2.9

Growth: 1.9

Quality: 3.6

Yield: 5.0

Momentum: 2.5

Volatility: 4.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

64.72$

Current Price

64.72$

Potential

-0.00%

Expected Cash-Flows