Microchip Technology Live: Complete Coverage Of MCHP’s Q3 Earnings

Microchip did exactly what it needed to do — and nothing more.

• Results confirmed the recovery

• Margins expanded as expected

• Guidance pointed to continued improvement

• No negative surprises, but no upside shock

With the stock already pricing in a normalization cycle, this quarter serves as validation, not re-rating fuel. Investors will likely need either:

• faster-than-expected margin expansion toward 65%, or

• a sharper demand inflection

• Non-GAAP gross margin expanded to 60.5%

• Up sharply from ~52% in March 2025

• Long-term target remains ~65%

Margin improvement continues to be driven by inventory normalization and better factory utilization. However, this trajectory was already well telegraphed, limiting incremental upside for the stock.

CEO Steve Sanghi emphasized execution and recovery momentum:

“Our fiscal third quarter results exceeded our expectations… We believe the broad-based recovery across our end markets, combined with significant margin expansion, demonstrates the tangible impact of our nine-point recovery plan.”

The tone was confident but measured — focused on steady normalization rather than acceleration.

March 2026 Quarter Outlook

• Revenue midpoint: $1.260B

  • +6.2% sequential

  • +29.8% year over year

• Non-GAAP EPS: $0.48–$0.52

• Gross margin outlook: 60.5%–61.5%

Guidance was constructive but expected, reinforcing the recovery narrative without introducing upside surprise. Management reiterated confidence in sequential growth and further margin expansion as utilization improves.

Microchip delivered a clean execution quarter, beating EPS expectations on both a GAAP and non-GAAP basis while landing revenue essentially right on the company’s updated guide. Results confirmed that the business is recovering — but did not materially exceed what investors were already positioned for.

• Revenue grew 6% sequentially to $1.14B with improving margins—non-GAAP gross margin reached 56.7% despite $122.8M in underutilization and inventory charges. Product gross margin remains healthy at 67.4%, with data center business showing recovery as customer inventory corrections complete.
• Announced industry-first 3-nanometer PCIe Gen 6 switch for AI infrastructure, sampling to hyperscalers now with production expected June 2026. Device offers 15-20% power advantage over competitors, with TAM exceeding $2B annually growing 10%+ through 2035.
• Inventory decreased $73.8M to 199 days (down from 266 days) with plans to continue factory ramp-up. Guiding December quarter down 1% (better than typical seasonal -3% to -5%), expecting strong recovery in following three quarters as customer inventories normalize and backlog strengthens.