Microchip (MCHP) AI Stock Analysis

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Microchip

(NASDAQ:MCHP)

Rating:58Neutral

Price Target:

$64.00

▼(-0.78% Downside)

Microchip's overall stock score reflects significant financial challenges, with declining revenue and profitability. However, the positive earnings call sentiment and strategic efforts to improve margins and inventory management provide some optimism. Technical indicators suggest caution, as bearish momentum persists.

Positive Factors

Demand Recovery

Microchip experienced a clear pickup in demand as nearly all KPIs showed meaningful improvements.

Revenue Growth

Microchip Technology is expected to exhibit the highest EPS growth among its peers.

Negative Factors

Gross Margin Challenges

Inventory write-downs and underutilization charges are decreasing, but the impact of these expenses continue to weigh on NG gross margin.

Market Share Decline

MCHP’s market share of the overall MCU industry declined ~500bps YoY in CY24 which may be hard to win back vs competitors further along in the recovery process.

Microchip (MCHP) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$32.89B

Dividend Yield2.82%

Average Volume (3M)8.49M

Price to Earnings (P/E)84.3

Beta (1Y)1.79

Revenue Growth-35.70%

EPS Growth-113.08%

CountryUS

Employees22,300

SectorTechnology

Sector Strength96

IndustrySemiconductors

Share Statistics

EPS (TTM)0.27

Shares Outstanding539,679,700

10 Day Avg. Volume10,418,849

30 Day Avg. Volume8,489,182

Financial Highlights & Ratios

PEG Ratio519.48

Price to Book (P/B)3.67

Price to Sales (P/S)5.91

P/FCF Ratio33.69

Enterprise Value/Market Cap1.30

Enterprise Value/Revenue9.74

Enterprise Value/Gross Profit17.37

Enterprise Value/Ebitda41.21

Forecast

1Y Price Target

$75.80

Price Target Upside17.52% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering22

Microchip Business Overview & Revenue Model

Company DescriptionMicrochip Technology Incorporated (MCHP) is a leading provider of smart, connected, and secure embedded control solutions. The company operates in various sectors including automotive, industrial, consumer electronics, and communications. Microchip designs and manufactures a broad range of microcontrollers, analog semiconductors, memory products, and development tools, catering to both high-volume and niche applications. With a focus on innovation and customer-centric solutions, Microchip supports a diverse array of industries by providing products that enable advanced functionalities and connectivity in electronic systems.

How the Company Makes MoneyMicrochip generates revenue primarily through the sale of its semiconductor products, including microcontrollers, analog devices, and memory chips. The company benefits from a diverse customer base across multiple industries, which helps stabilize its revenue streams. Key revenue sources include direct sales to original equipment manufacturers (OEMs) and distributors, as well as royalties from licensing agreements. Microchip also engages in partnerships with technology firms to develop integrated solutions, enhancing its product offerings and market reach. Additionally, the company invests in research and development to continuously innovate and improve its product portfolio, which contributes to long-term revenue growth.

Microchip Key Performance Indicators (KPIs)

Any

Revenue by Product Line

Revenue by Product Line
Breaks down sales across different product lines, identifying key revenue drivers and potential areas for growth or decline.

Chart InsightsMicrochip's revenue across product lines is experiencing significant challenges, with notable declines in Mixed Signal Microcontrollers and Analog segments. The earnings call highlights strategic efforts to address these issues, including closing a manufacturing facility and reducing inventory levels. Despite introducing new products like 64-bit RISC-V processors and expanding the Wi-Fi portfolio, the company faces a cautious outlook due to revenue declines and inventory management hurdles. Management is focused on recovery and operational efficiency improvements, aiming to stabilize financial performance in the coming quarters.

Data provided by:

Main Street Data

Microchip Earnings Call Summary

Earnings Call Date:Aug 07, 2025

(Q1-2026)

% Change Since: -2.60%|

Next Earnings Date:Oct 30, 2025

Earnings Call Sentiment Positive

Microchip's Q1 FY2026 earnings call conveyed a strong performance with notable sales growth, margin improvements, and successful inventory reduction efforts. Despite facing challenges with employee compensation, inventory write-offs, and specific market lags, the company's strong bookings and future guidance reflect a positive outlook.

Q1-2026 Updates

Positive Updates

Strong Sequential Sales Growth

Microchip reported a 10.8% sequential sales growth, with net sales up in all geographies and product lines, particularly in microcontroller and analog businesses.

Improved Gross and Operating Margins

Non-GAAP gross margin increased by 230 basis points sequentially, and non-GAAP operating margin improved by 670 basis points.

Successful Inventory Reduction

Inventory was reduced by $124 million sequentially, with the target being a $350 million reduction for the fiscal year.

Record Bookings and Strong Guidance

Bookings for July were the highest in three years, and guidance for Q2 FY2026 indicates a continued strong performance with net sales expected to be $1.13 billion.

Significant Progress in Aerospace and Defense

Microchip's aerospace and defense business is strengthening, with recent significant device qualifications and product portfolio expansion.

Negative Updates

Employee Salary and Bonus Challenges

Microchip employees worked through the quarter without salary increases or bonuses, following a global layoff earlier in the year.

Inventory Write-Offs and Underutilization Charges

The company recorded $77.1 million in inventory write-offs and $51.5 million in underutilization charges, impacting gross margin by 12 percentage points.

Automotive Market Lagging

The automotive market is still lagging compared to other segments, despite overall strong growth in other areas.

Concerns About Lead Time Extensions

Lead times are starting to extend from 4-8 weeks to potentially 8-12 weeks for certain products, signaling potential supply chain pressures.

Company Guidance

During the Microchip Q1 Fiscal 2026 financial results conference call, the company provided guidance for the second quarter of fiscal year 2026, projecting net sales to be approximately $1.13 billion, plus or minus $20 million. They anticipate a non-GAAP gross margin between 55% and 57%, and non-GAAP operating expenses ranging from 32.4% to 32.8% of sales. The non-GAAP operating profit is expected to be between 22.2% and 24.6% of sales, with non-GAAP diluted earnings per share estimated to be between $0.30 and $0.36. The company highlighted a strong recovery in net sales, up 10.8% sequentially, and reported progress in inventory reduction, aiming for a $350 million decrease for the fiscal year. Additionally, Microchip noted improvements in non-GAAP gross margin by 230 basis points and operating margin by 670 basis points sequentially. They also recorded a significant decrease in inventory days, from 251 to 214, and plan for further reductions.

Microchip Financial Statement Overview

Summary

Microchip is facing revenue and profitability challenges, with declining income and cash flow metrics. Despite improvements in equity, high debt levels present a financial risk. The company needs to improve its revenue trajectory and manage financial leverage to enhance stability.

Income Statement

Neutral

The income statement shows a decline in total revenue from $8.44B in 2023 to $4.40B in 2025 and a negative net income in 2025, signaling financial challenges. Gross profit margins have declined from 67.5% in 2023 to 56.1% in 2025, reflecting reduced profitability. Despite this, EBIT and EBITDA margins remained relatively stable, indicating operational efficiency. However, the overall revenue trend is unfavorable, and the net loss is a significant concern.

Balance Sheet

Neutral

The balance sheet indicates a decrease in total debt from $6.44B in 2023 to $5.63B in 2025, which is positive. However, the debt-to-equity ratio remains high, suggesting potential financial risk. Stockholders' equity increased from $6.51B in 2023 to $7.08B in 2025, improving the equity ratio. Nevertheless, the high level of total liabilities relative to equity raises concerns about financial leverage and stability.

Cash Flow

Positive

The cash flow statement shows a significant drop in operating cash flow from $3.62B in 2023 to $898M in 2025, which is concerning. Free cash flow, although reduced, remains positive, indicating some financial flexibility. The decline in cash flow metrics suggests challenges in cash generation, but the company's ability to maintain positive free cash flow is a positive aspect.

Breakdown	TTM	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	4.40B	4.40B	7.63B	8.44B	6.82B	5.44B
Gross Profit	2.47B	2.47B	5.00B	5.70B	4.45B	3.38B
EBITDA	1.04B	1.04B	3.44B	4.11B	2.88B	1.85B
Net Income	-500.00K	-500.00K	1.91B	2.24B	1.29B	349.40M
Balance Sheet
Total Assets	15.37B	15.37B	15.87B	16.37B	16.20B	16.48B
Cash, Cash Equivalents and Short-Term Investments	771.70M	771.70M	319.70M	234.00M	319.40M	282.00M
Total Debt	5.67B	5.78B	6.16B	6.60B	7.85B	9.07B
Total Liabilities	8.30B	8.30B	9.22B	9.86B	10.30B	11.14B
Stockholders Equity	7.08B	7.08B	6.66B	6.51B	5.89B	5.34B
Cash Flow
Free Cash Flow	772.10M	772.10M	2.61B	3.13B	2.47B	1.82B
Operating Cash Flow	898.10M	898.10M	2.89B	3.62B	2.84B	1.92B
Investing Cash Flow	-287.80M	-287.80M	-392.10M	-599.50M	-477.70M	-173.30M
Financing Cash Flow	-158.30M	-158.30M	-2.41B	-3.10B	-2.33B	-1.86B

Microchip Technical Analysis

Technical Analysis Sentiment

Neutral

Last Price64.50

Price Trends

50DMA

69.37

Negative

100DMA

59.15

Positive

200DMA

59.60

Positive

Market Momentum

MACD

-1.81

Positive

RSI

40.96

Neutral

STOCH

16.70

Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For MCHP, the sentiment is Neutral. The current price of 64.5 is below the 20-day moving average (MA) of 68.94, below the 50-day MA of 69.37, and above the 200-day MA of 59.60, indicating a neutral trend. The MACD of -1.81 indicates Positive momentum. The RSI at 40.96 is Neutral, neither overbought nor oversold. The STOCH value of 16.70 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for MCHP.

Microchip Risk Analysis

Microchip disclosed 46 risk factors in its most recent earnings report. Microchip reported the most risks in the "Legal & Regulatory" category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Microchip Peers Comparison

Overall Rating

UnderperformOutperform

Sector (50)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
MPWR	76 Outperform	$40.26B	21.89	66.50%	0.67%	34.30%	352.35%
NXPI	74 Outperform	$51.72B	24.24	23.11%	1.84%	-7.53%	-21.88%
SWKS	71 Outperform	$10.47B	28.10	6.61%	3.91%	-8.24%	-48.31%
ON	63 Neutral	$19.26B	43.94	5.72%	―	-17.93%	-75.83%
STM	60 Neutral	$22.43B	36.11	3.72%	1.17%	-22.97%	-78.58%
MCHP	58 Neutral	$32.89B	84.25	-2.24%	2.82%	-35.70%	-113.08%
Sector *	50 Neutral	C$3.52B	1.80	-5.03%	7.64%	16.86%	-2.92%

* Technology Sector Average

Performance Comparison

MCHP

Microchip

64.50

-12.49

-16.22%

MPWR

Monolithic Power

840.56

-20.13

-2.34%

NXPI

NXP Semiconductors

220.05

-23.41

-9.62%

ON Semiconductor

50.01

-22.90

-31.41%

SWKS

Skyworks Solutions

71.69

-31.33

-30.41%

STM

STMicroelectronics

26.25

-3.40

-11.47%

Microchip Corporate Events

Executive/Board ChangesBusiness Operations and Strategy

Microchip Appoints Rick Cassidy to Board of Directors

Neutral

May 2, 2025

On May 1, 2025, Microchip Technology Incorporated announced the appointment of Rick Cassidy, a senior executive from Taiwan Semiconductor Manufacturing Co. Ltd., to its Board of Directors, effective May 2, 2025. This appointment increases the board size from six to seven members, reflecting a strategic move to enhance corporate governance and strategy development.

Glossary

BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.Date of analysis: Aug 11, 2025