Microchip (MCHP) Bank of America 2026 Global Technology Conference summary

Data center business update

• Data center and compute represent about 18% of revenue, estimated at $787 million for calendar 2025, with the Data Center Solutions Business Unit contributing $302.7 million and expected to grow to $500 million in 2026.

• The Data Center Solutions Business Unit focuses on storage controllers, PCIe and CXL memory controllers, and PCI Express switches, with recent wins in Gen 6 switch designs and a strong competitive position.

• The shift from GPU-centric to CPU-centric architectures in data centers is driving demand for PCI Express, benefiting from the so-called "CPU renaissance."

• Winning eight Gen 6 switch designs before production is seen as unprecedented, with strong customer engagement and potential for accelerated growth.

• The company is cautious in forecasting data center growth but sees significant upside if design wins translate into production.

Pricing and margin strategy

• Operational cost increases have been absorbed without passing them to customers, but rising supplier costs now necessitate price increases, to be implemented in the coming weeks.

• Price increases will be tailored by product, customer, and channel, with no average disclosed to maintain flexibility and competitive positioning.

• The approach aims to be margin neutral, but slight accretion is possible due to the imprecision of matching cost increases to price hikes.

• Customers are expected to be understanding of the price increases, given the company's restraint compared to competitors who have already raised prices.

• Measures will be taken to prevent pre-buying at old prices, with backlog and incremental orders scheduled at new prices.

Market and innovation drivers

• Growth is transitioning from inventory depletion to innovation-driven, with new design wins and product introductions in data center, automotive, aerospace/defense, and industrial markets.

• Automotive innovation includes consolidating in-car protocols to Ethernet-based networks, with significant content per vehicle and leadership in T1S standards.

• Aerospace and defense growth is supported by increased aviation production, military hardware replenishment, and renewed interest in space.

• Industrial growth is driven by onshoring and automation, increasing demand for sensors, microcontrollers, and robotics components.