Key Takeaways:
Microchip Technology reported fiscal first-quarter net sales of $1.485 billion, up 38 percent from a year earlier and above the high end of guidance.
"Improving demand, continued inventory normalization, and stronger factory utilization contributed to better operational leverage during the quarter," Chief Executive Officer Steve Sanghi said.
Non-GAAP earnings per share of $0.76 topped the company's $0.67-$0.71 guidance range, while GAAP EPS of $0.37 beat the $0.32 consensus estimate. Non-GAAP gross margin expanded to 63.8 percent from 61.6 percent sequentially, and inventory days fell to 175 from 185. Free cash flow reached $497.6 million, and the company cut net debt by about $170 million.
Management guided September-quarter net sales to $1.589-$1.618 billion, up about 40.6 percent year over year, with non-GAAP EPS of $0.91-$0.95. Data center revenue is projected to reach roughly $1 billion in calendar 2026, up 69 percent from $591 million in 2025, driven by PCIe Gen 6 switches, retimers, power management and security products.
Data center was the fastest-growing end market, with revenue up 97.8 percent year over year, followed by communications at 53.3 percent and aerospace and defense at 45.6 percent. Automotive rose 29.3 percent and industrial 24.3 percent, with Sanghi saying both recoveries remain in early innings. PCIe Gen 6 design wins doubled sequentially to 12 programs.
The company returned $246.9 million to common stockholders through dividends and declared a September-quarter dividend of 45.5 cents per share. Net debt stood at $5.2 billion, a leverage ratio of 2.85 times adjusted EBITDA, with management prioritizing debt reduction over buybacks. A small tuck-in acquisition of AI-edge specialist Hailo is expected to close in September.
Shares fell 4.4 percent to $74.36 on the day. GuruFocus values the stock at $60.7, implying it trades 23.7 percent above fair value, with a GF Score of 78 out of 100. The September-quarter margin guide of 66 to 67 percent sits above the company's 65 percent long-term model, though Chief Financial Officer Eric Bjornholt cautioned that one-time licensing and distribution price-change benefits will not repeat.
The guidance raise points to management's expectation that the semiconductor upcycle will extend, with industrial and automotive recoveries still early. Investors will watch the September-quarter results for whether data center momentum and margin expansion hold as one-time benefits fade.
This article is for informational purposes only and does not constitute investment advice.
