Microchip (MCHP) Q1 2027 earnings summary

Executive summary

• Net sales for Q1 FY2027 reached $1.485 billion, up 38% year-over-year and 13.2% sequentially, exceeding guidance, driven by improved demand and reduced customer inventory levels.

• Non-GAAP net income was $438.6 million ($0.76 per share), up from $154.7 million year-over-year; GAAP net income was $202.0 million ($0.37 per share).

• Operational improvements included higher factory utilization, inventory days reduction, and strong distribution sell-through.

• Returned $246.9 million to shareholders via dividends in the June quarter.

• Completed closure of Fab 2 wafer facility, consolidating operations and incurring special charges.

Financial highlights

• Non-GAAP gross margin was 63.8% (up 222 bps sequentially); GAAP gross margin was 63.2%.

• Non-GAAP operating income was 35.1% of sales; GAAP operating income was $336.8 million (22.7% of net sales).

• Adjusted EBITDA was $1.798 billion trailing 12 months; free cash flow for the quarter was $497.6 million (33.5% of net sales).

• Net debt decreased by $170 million to $5.2 billion; net debt to adjusted EBITDA at 2.85x.

• Distributors accounted for 52% of net sales; Americas, Europe, and Asia contributed 29%, 19.2%, and 51.8% of net sales, respectively.

Outlook and guidance

• Q2 FY2027 net sales expected between $1.589 and $1.618 billion, up 7–9% sequentially and ~40.6% year-over-year at midpoint.

• Non-GAAP gross margin guidance is 66%-67%, above long-term target, driven by favorable product mix, licensing, price increases, and lower underutilization charges.

• Non-GAAP EPS guidance is $0.91–$0.95, up 165.7% year-over-year and 22.4% sequentially at midpoint.

• Capital expenditures for FY2027 expected at ~$100 million.

• December quarter expected to be better than typical seasonality, which is usually down 3%-5%.