Microchip (MCHP) Q2 2026 earnings summary

Executive summary

• Net sales reached $1.14 billion, up 6% sequentially but down 2% year-over-year, exceeding guidance midpoint, with strong data center, aerospace, and defense market engagement and robust design activity.

• Microcontroller business grew 9.7% sequentially, analog up 1.7%, and data center products saw strong sales growth from low levels.

• Launched industry's first 3nm PCIe Gen 6 switch, targeting AI and enterprise data center markets.

• Operational improvements and disciplined cost management drove financial progress despite a gradual market recovery.

• Completed closure and sale agreement of Tempe, Arizona wafer fabrication facility (Fab 2) as part of restructuring.

Financial highlights

• Net sales for the September quarter were $1.14 billion, up 6% sequentially and $10.4 million above guidance midpoint.

• Non-GAAP gross margin was 56.7%, impacted by $51 million underutilization and $71.8 million inventory reserve charges.

• Non-GAAP operating margin was 24.3% of sales; non-GAAP net income was $199.1 million; non-GAAP EPS was $0.35.

• GAAP net income was $13.9 million or $0.03 per share, positively impacted by an IRS audit settlement.

• Adjusted EBITDA was $341.8 million (30% of net sales); trailing 12-month adjusted EBITDA was $1.103 billion.

Outlook and guidance

• December quarter net sales expected to be down 1% sequentially at midpoint, with non-GAAP gross margin between 57.2% and 59.2%.

• Non-GAAP operating profit projected to increase by over $13 million sequentially at midpoint.

• March, June, and September 2026 quarters expected to be strong, with March quarter sales likely up sequentially.

• Adjusted free cash flow expected to match dividend payments, with excess used to reduce borrowings.

• Capital expenditures for the next 12 months expected at or below $100 million, with most factory expansion paused.