Microchip (MCHP) Q3 2026 earnings summary

Executive summary

• Net sales for the December quarter reached $1.186 billion, up 4% sequentially and 15.6% year-over-year, surpassing guidance and driven by improved customer demand, new design wins, and strong performance in networking, data center, FPGA, and licensing segments.

• Non-GAAP operating profit and EPS grew faster than net sales, reflecting strong operational momentum and margin expansion.

• Inventory levels decreased to $1.06 billion (201 days), down from $1.29 billion (251 days) at March 31, 2025, as part of an ongoing recovery plan.

• Maintained 141 consecutive quarters of non-GAAP profitability, demonstrating operational consistency.

• Focused on high-performance mixed-signal microcontrollers, analog, connectivity, and memory solutions, with strategic emphasis on diversified end markets including industrial, automotive, data center, and aerospace & defense.

Financial highlights

• GAAP gross margin was 59.6% and non-GAAP gross margin was 60.5%, both up significantly year-over-year; operating margin improved to 28.5% non-GAAP and 12.8% GAAP.

• Non-GAAP net income was $252.8 million ($0.44 per diluted share), while GAAP net income was $34.9 million ($0.06 per diluted share).

• Adjusted EBITDA for the quarter was $402 million (33.9% of net sales); trailing twelve-month adjusted EBITDA was $1.23 billion.

• Operating cash flow for the quarter was $341.4 million; adjusted/free cash flow was $305.6 million.

• Net debt reduced by $26 million sequentially; leverage ratio improved to 4.18x.

Outlook and guidance

• March 2026 quarter net sales guidance midpoint is $1.26 billion, up 6.2% sequentially and 29.8% year-over-year; non-GAAP gross margin expected between 60.5% and 61.5%, and non-GAAP EPS guidance is $0.48 to $0.52.

• Long-term model targets 65% gross margin and 40% operating margin through cycles.

• Capital expenditures for March 2026 quarter expected between $20 million and $23 million; full fiscal year capex at or below $100 million.

• Strong backlog and bookings, with June quarter backlog already higher than March quarter at the same point in time.

• Management expects continued fluctuations in operating results, gross margins, and product mix due to macroeconomic and industry conditions.