Microchip (MCHP) AI Stock Analysis

• Market Cap: $35.08B
• Dividend Yield: 2.86%
• Average Volume (3M): 9.68M
• Price to Earnings (P/E): 84.3
• Beta (1Y): 1.81
• Revenue Growth: -35.70%
• EPS Growth: -113.08%
• Country: US
• Employees: 22,300
• Sector: Technology
• Sector Strength: 88
• Industry: Semiconductors
• EPS (TTM): 0.27
• Shares Outstanding: 539,679,700
• 10 Day Avg. Volume: 8,412,163
• 30 Day Avg. Volume: 9,678,687
• PEG Ratio: N/A
• Price to Book (P/B): N/A
• Price to Sales (P/S): N/A
• P/FCF Ratio: N/A
• Enterprise Value/Market Cap: 1.22
• Enterprise Value/Revenue: 10.12
• Enterprise Value/Gross Profit: 18.58
• Enterprise Value/Ebitda: 50.95
• 1Y Price Target: $77.64
• Price Target Upside: 22.08% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 20

• Rating: 53 Neutral
• Price Target: $66.00 ▲(3.77% Upside)

Microchip's overall stock score reflects significant challenges in financial performance, particularly in profitability and revenue growth. While the earnings call provided optimistic guidance and highlighted improvements, technical indicators and valuation metrics remain weak. The company's ability to address these financial challenges and capitalize on strategic opportunities in defense and AI markets will be crucial for future performance.

Positive Factors

Demand

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

Earnings

Microchip announced better results, but in-line guidance as the business recovers strongly from the 1Q bottom.

Revenue Growth

Bookings are increasing every month, indicating plenty of upside to revenue and margins.

Negative Factors

Capital Return

Microchip's intention to deleverage the balance sheet by taking share repurchases off the table may impact its capital return program, which has been significant for investors.

Gross Margins

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

Market Share

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 Business Overview & Revenue Model

Company Description

Microchip 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 Money

Microchip 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 Financial Statement Overview

Summary

Microchip's financial performance is challenged by declining revenue and profitability, as indicated by negative growth rates and margins. While leverage management has improved, profitability remains a concern with negative ROE. Cash flow generation is under pressure, although operational cash conversion is efficient.

Income Statement

Microchip's income statement shows declining revenue with a negative growth rate of -3.77% in the TTM period, indicating challenges in maintaining sales momentum. The gross profit margin has decreased from previous years, and the net profit margin has turned negative, reflecting operational inefficiencies and potential cost management issues. The EBIT and EBITDA margins have also declined, suggesting reduced profitability.

Balance Sheet

The balance sheet reveals a moderate debt-to-equity ratio of 0.80 in the TTM period, which is an improvement from previous years, indicating better leverage management. However, the return on equity is negative, highlighting profitability challenges. The equity ratio remains stable, suggesting a balanced asset structure.

Cash Flow

Cash flow analysis shows a decline in free cash flow growth by -6.02% in the TTM period, indicating potential cash generation issues. The operating cash flow to net income ratio is strong, suggesting efficient cash conversion from operations. However, the free cash flow to net income ratio indicates a reliance on cash reserves to cover negative net income.

Breakdown	TTM	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	4.24B	4.40B	7.63B	8.44B	6.82B	5.44B
Gross Profit	2.31B	2.47B	5.00B	5.70B	4.45B	3.38B
EBITDA	841.40M	1.04B	3.44B	4.10B	2.87B	1.83B
Net Income	-148.40M	-500.00K	1.91B	2.24B	1.29B	349.40M
Balance Sheet
Total Assets	14.98B	15.37B	15.87B	16.37B	16.20B	16.48B
Cash, Cash Equivalents and Short-Term Investments	566.50M	771.70M	319.70M	234.00M	319.40M	282.00M
Total Debt	5.49B	5.67B	6.03B	6.60B	7.85B	9.07B
Total Liabilities	8.12B	8.30B	9.22B	9.86B	10.30B	11.14B
Stockholders Equity	6.86B	7.08B	6.66B	6.51B	5.89B	5.34B
Cash Flow
Free Cash Flow	725.60M	772.10M	2.61B	3.13B	2.47B	1.82B
Operating Cash Flow	796.60M	898.10M	2.89B	3.62B	2.84B	1.92B
Investing Cash Flow	-199.20M	-287.80M	-392.10M	-599.50M	-477.70M	-173.30M
Financing Cash Flow	-346.00M	-158.30M	-2.41B	-3.10B	-2.33B	-1.86B

Microchip Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 63.60
• 50DMA: Negative
• 100DMA: Positive
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For MCHP, the sentiment is Negative. The current price of 63.6 is below the 20-day moving average (MA) of 65.37, below the 50-day MA of 68.84, and above the 200-day MA of 58.72, indicating a neutral trend. The MACD of -0.65 indicates Positive momentum. The RSI at 40.83 is Neutral, neither overbought nor oversold. The STOCH value of 18.95 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for MCHP.

Microchip Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
MPWR	79 Outperform	$40.03B	21.76	66.50%	0.68%	34.30%	352.35%
NXPI	76 Outperform	$59.21B	27.75	23.11%	1.74%	-7.53%	-21.88%
SWKS	74 Outperform	$11.12B	29.86	6.61%	3.85%	-8.24%	-48.31%
ON	69 Neutral	$20.28B	46.27	5.72%	―	-17.93%	-75.83%
STM	66 Neutral	$24.06B	38.30	3.72%	1.16%	-22.97%	-78.58%
Sector *	61 Neutral	$35.45B	8.20	-10.60%	1.91%	8.56%	-9.51%
MCHP	53 Neutral	$35.08B	84.25	-2.24%	2.86%	-35.70%	-113.08%

Microchip Corporate Events

Microchip Elects New Board Members at Annual Meeting

At the annual meeting of stockholders held on August 19, 2025, Microchip‘s stockholders elected several individuals to the Board of Directors, including Ellen L. Barker, Rick Cassidy, Matthew W. Chapman, Victor Peng, Karen M. Rapp, and Steve Sanghi. Additionally, the appointment of Ernst & Young LLP as the independent registered public accounting firm for the fiscal year ending March 31, 2026, was ratified. However, the proposal to approve the compensation of named executives on an advisory basis was not approved.