Microchip (MCHP) Citi’s 2026 Global TMT Conference summary

Business performance and demand trends

• Achieved six consecutive quarters of above-seasonal growth, with guidance for a seventh; September quarter midpoint up 40% year-over-year.

• Bookings activity reached a four-year high in June and remained strong through July and August; backlog continues to grow.

• Distribution inventory remains low at 25 days, with no significant customer restocking observed.

• Strong bookings across all product lines, business units, and geographies; no notable regional or product weakness.

• Industrial and automotive end markets have recovered, with automotive growing 29% year-over-year and industrial also showing strong growth.

Supply chain, capacity, and pricing

• Internal capacity is strong despite closing the Arizona fab; 35% of wafer production is in-house, 65% external.

• Assembly and test operations are 70% in-house, with expansion capability in Thailand and the Philippines.

• Some tightness in foundry partner nodes and assembly/test vendors due to AI-driven demand; lead times have extended in certain areas.

• Pricing adjustments implemented mid-August to early September to offset supply chain cost increases; first price increase in the cycle, modest and well received.

Financial outlook and margins

• Gross margin guidance for the current quarter is 66.5%, including one-time benefits from licensing revenue and distribution price adjustments.

• Expect gross margins to remain flat at 66%-67% through fiscal 2027, targeting 65% non-GAAP gross margin and 40% non-GAAP operating margin through the cycle.

• Focus on inventory management and competitive pricing to maintain high margins and drive operating margin improvement.