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Microchip
(NASDAQ:MCHP)
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Rating:62Neutral
Price Target:
$106.00
▲(34.59% Upside)
Action:Reiterated
Date:06/06/26
The score is primarily supported by resilient cash flow and an improving balance-sheet leverage profile, alongside constructive technical momentum with price above key moving averages. The main offset is valuation risk driven by an extremely high P/E, compounded by materially weaker profitability versus the 2022–2024 peak cycle.
Positive Factors
Strong free cash flow generation
Sustained FCF (~$871M in 2026, +6.2% YoY) provides durable internal financing for R&D, capital expenditures, dividends or buybacks. Reliable cash conversion cushions the business through semiconductor cycles and funds strategic initiatives without heavy reliance on external capital.
Negative Factors
Sharp profitability compression
A collapse in margins from mid-30s to ~10% operating and net margin to ~4% signals structural margin pressure or adverse mix shifts. Persistently lower profitability weakens returns, limits reinvestment capacity, and threatens the long-term ability to convert revenue into shareholder value.
Read all positive and negative factors
Positive Factors
Negative Factors
Strong free cash flow generation
Sustained FCF (~$871M in 2026, +6.2% YoY) provides durable internal financing for R&D, capital expenditures, dividends or buybacks. Reliable cash conversion cushions the business through semiconductor cycles and funds strategic initiatives without heavy reliance on external capital.
Read all positive factors
Microchip Key Performance Indicators (KPIs)
Any
Revenue by Segment
Examines sales performance across various business segments, shedding light on which areas are contributing most to overall growth.
Examines sales performance across various business segments, shedding light on which areas are contributing most to overall growth.
Data provided by:
The Fly
The FlyMicrochip (MCHP) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$47.93B
Dividend Yield2.79%
Average Volume (3M)12.52M
Price to Earnings (P/E)333.2
Beta (1Y)2.04
Revenue Growth7.08%
EPS GrowthN/A
CountryUS
Employees22,300
SectorTechnology
Sector Strength88
IndustrySemiconductors
Share Statistics
EPS (TTM)0.26
Shares Outstanding543,008,360
10 Day Avg. Volume12,712,352
30 Day Avg. Volume12,517,427
Financial Highlights & Ratios
PEG Ratio-0.04
Price to Book (P/B)5.44
Price to Sales (P/S)7.42
P/FCF Ratio40.17
Enterprise Value/Market Cap1.17
Enterprise Value/Revenue11.95
Enterprise Value/Gross Profit20.69
Enterprise Value/Ebitda40.20
Forecast
1Y Price Target
$113.55Price Target Upside44.17% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering21
EPS Forecast (FY)3.15
Revenue Forecast (FY)$6.18B
Microchip Business Overview & Revenue Model
Company Description
Microchip Technology Incorporated creates, produces, and sells intelligent, interconnected, and secure embedded control solutions to customers throughout the Americas, Europe, and Asia. The company's core offerings include a range of microcontroll...
How the Company Makes Money
Microchip primarily makes money by selling semiconductor devices and related development ecosystems to original equipment manufacturers (OEMs) and electronics manufacturers through a mix of direct sales and distribution channels. Its main revenue ...
Microchip Earnings Call Summary
Earnings Call Date:Feb 05, 2026
(Q3-2026)
| % Change Since: |
Next Earnings Date:Aug 04, 2026
Earnings Call Sentiment Positive
The call presents a constructive operational and financial recovery: revenue and backlog strengthened materially (Q3 net sales +4% sequential, +15.6% YoY; March guidance +6.2% sequential), non-GAAP margins and free cash flow improved, and the company announced meaningful design wins and strategic partnerships (Hyundai, Gen6 PCIe wins). However, noteworthy near-term headwinds remain — inventory days are high, meaningful inventory reserves and underutilization charges continue, leverage is still elevated (net debt/EBITDA 4.18) and certain supply-chain/foundry constraints are broadening. Management is prioritizing debt reduction and cautious OpEx discipline while investing to support growth. On balance, the positive execution, improving demand and strong guidance outweigh the operational and balance-sheet challenges.Positive Updates
Revenue Growth and Guidance Beat
Net sales for December were $1.186 billion, up 4% sequentially and 15.6% year-over-year, and above the high end of prior guidance. Guidance for March is $1.26 billion ± $20 million (midpoint +6.2% sequential, +29.8% YoY). Book-to-bill in December was well above 1 and backlog entering March materially higher than entering December.
Negative Updates
Inventory Reserve and Underutilization Charges
December included $58.4 million of new inventory reserves and $51.7 million of capacity underutilization charges (non-GAAP basis). Management indicated underutilization charges will persist and may take years to fully normalize, representing a multi-quarter headwind to gross margin.
Read all updates
Q3-2026 Updates
Positive
Negative
Revenue Growth and Guidance Beat
Net sales for December were $1.186 billion, up 4% sequentially and 15.6% year-over-year, and above the high end of prior guidance. Guidance for March is $1.26 billion ± $20 million (midpoint +6.2% sequential, +29.8% YoY). Book-to-bill in December was well above 1 and backlog entering March materially higher than entering December.
Read all positive updates
Company Guidance
Microchip guided March quarter net sales of $1.26 billion ± $20 million (midpoint +6.2% sequential, +29.8% year‑over‑year), with non‑GAAP gross margin of 60.5%–61.5%, non‑GAAP operating expenses 31.3%–31.7% of sales, non‑GAAP operating profit 28.8%–30.2% of sales, and non‑GAAP diluted EPS of $0.48–$0.52. For fiscal 2026 they expect a non‑GAAP cash tax rate of about 10% and capital expenditures at or below $100 million, and they plan to use excess free cash flow above dividends to pay down debt (December adjusted free cash flow $305.6M; cash & investments $250.7M; total debt down $12.1M q/q; net debt down $26M q/q; net debt/adjusted EBITDA 4.18 vs. 4.69; trailing‑12‑month adjusted EBITDA $1.23B). Management noted inventory reserves should largely normalize in March (December inventory $1.058B, 201 days; distributors 28 days) while capacity underutilization charges ($51.7M in December) will decline only modestly as fabs ramp over a multi‑year period.Microchip Financial Statement Overview
Summary
Income Statement
60
Neutral
Balance Sheet
66
Positive
Cash Flow
72
Positive
| Breakdown | Mar 2026 | Mar 2025 | Mar 2024 | Mar 2023 | Mar 2022 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 4.71B | 4.40B | 7.63B | 8.44B | 6.82B |
| Gross Profit | 2.72B | 2.47B | 5.00B | 5.70B | 4.45B |
| EBITDA | 1.40B | 1.04B | 3.44B | 4.10B | 2.87B |
| Net Income | 202.20M | -500.00K | 1.91B | 2.24B | 1.29B |
Balance Sheet | |||||
| Total Assets | 14.37B | 15.37B | 15.87B | 16.37B | 16.20B |
| Cash, Cash Equivalents and Short-Term Investments | 240.30M | 771.70M | 319.70M | 234.00M | 319.40M |
| Total Debt | 5.54B | 5.67B | 6.03B | 6.60B | 7.85B |
| Total Liabilities | 7.93B | 8.30B | 9.22B | 9.86B | 10.30B |
| Stockholders Equity | 6.43B | 7.08B | 6.66B | 6.51B | 5.89B |
Cash Flow | |||||
| Free Cash Flow | 871.00M | 772.10M | 2.61B | 3.13B | 2.47B |
| Operating Cash Flow | 962.10M | 898.10M | 2.89B | 3.62B | 2.84B |
| Investing Cash Flow | -195.50M | -287.80M | -392.10M | -599.50M | -477.70M |
| Financing Cash Flow | -1.30B | -158.30M | -2.41B | -3.10B | -2.33B |
Microchip Technical Analysis
Positive
78.76
Price Trends
93.52
Negative
82.34
Positive
73.68
Positive
Market Momentum
-1.71
Positive
47.33
Neutral
51.96
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For MCHP, the sentiment is Positive. The current price of 78.76 is below the 20-day moving average (MA) of 91.81, below the 50-day MA of 93.52, and above the 200-day MA of 73.68, indicating a neutral trend. The MACD of -1.71 indicates Positive momentum. The RSI at 47.33 is Neutral, neither overbought nor oversold. The STOCH value of 51.96 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for MCHP.
Microchip Risk Analysis
Microchip disclosed 49 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
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
71 Outperform | $67.51B | 96.53 | 19.05% | 0.62% | 23.90% | -63.09% | |
70 Outperform | $73.35B | 27.70 | 26.14% | 1.79% | 2.37% | 13.28% | |
63 Neutral | $38.09B | 67.61 | 7.45% | ― | -9.04% | -4.21% | |
63 Neutral | $9.02B | 25.02 | 6.30% | 4.37% | 2.33% | -6.12% | |
62 Neutral | $47.93B | 333.17 | 3.05% | 2.79% | 7.08% | ― | |
62 Neutral | $63.83B | 417.09 | 0.86% | 1.28% | 0.79% | -86.68% | |
61 Neutral | $37.18B | 12.37 | -10.20% | 1.83% | 8.50% | -7.62% |
* Technology Sector Average
MCHP
Microchip
88.59
16.50
22.88%
MPWR
Monolithic Power
1,352.74
636.61
88.90%
NXPI
NXP Semiconductors
292.26
71.57
32.43%
ON
ON Semiconductor
95.96
36.89
62.45%
SWKS
Skyworks Solutions
60.38
-11.67
-16.19%
STM
STMicroelectronics
71.46
39.95
126.81%
Microchip Corporate Events
Executive/Board Changes
Microchip Appoints Former Executive Mitch Little as Director
Neutral
Jun 1, 2026
Microchip Technology’s board of directors has appointed former senior executive Mitch Little as an independent director, effective June 1, 2026, following a recommendation from its Nominating, Governance and Sustainability Committee. Little,...
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.