Microchip (MCHP) AI Stock Analysis

• Market Cap: $40.65B
• Dividend Yield: 2.79%
• Average Volume (3M): 8.21M
• Price to Earnings (P/E): ―
• Beta (1Y): 1.93
• Revenue Growth: -23.36%
• EPS Growth: -131.15%
• Country: US
• Employees: 22,300
• Sector: Technology
• Sector Strength: 88
• Industry: Semiconductors
• EPS (TTM): 0.35
• Shares Outstanding: 540,446,840
• 10 Day Avg. Volume: 7,138,807
• 30 Day Avg. Volume: 8,207,866
• PEG Ratio: 519.48
• Price to Book (P/B): 3.67
• Price to Sales (P/S): 5.91
• P/FCF Ratio: 33.69
• Enterprise Value/Market Cap: 0.99
• Enterprise Value/Revenue: 9.54
• Enterprise Value/Gross Profit: 19.05
• Enterprise Value/Ebitda: 52.43
• 1Y Price Target: $77.47
• Price Target Upside: 5.56% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 18
• EPS Forecast (FY): N/A
• Revenue Forecast (FY): N/A

• Rating: 62 Neutral
• Price Target: $79.00 ▲(7.64% Upside)

The score is primarily held back by weak financial performance—losses and a steep TTM revenue decline—despite solid cash flow resilience. Technicals are a meaningful positive, with the stock trading above major moving averages and positive MACD, though overbought RSI adds risk. Earnings-call guidance is cautiously supportive on margin/profit improvement, while valuation remains constrained by the negative P/E, partly offset by a moderate dividend yield.

Positive Factors

Diverse product portfolio

A broad product portfolio across multiple end markets (automotive, industrial, consumer, aerospace) reduces revenue concentration risk and smooths cycles. This diversification supports durable demand, cross-selling, and resilience if one segment weakens over a 2–6 month horizon.

Strong cash generation

Resilient operating and free cash flow metrics provide financial flexibility to fund R&D, capital spending, and inventory normalization. Solid cash conversion helps absorb cyclical revenue weakness and supports strategic investments without excessive new leverage.

Strategic push into AI/data center

Shifting toward advanced-node, high-performance products and launching an AI business unit aligns the company with secular AI/data-center demand. Winning designs at advanced process nodes can enable higher ASPs and durable competitive positioning over coming quarters.

Negative Factors

Sharp revenue decline

A steep trailing twelve‑month revenue drop and negative margins indicate weak demand or customer inventory destocking. Restoring top-line momentum and profitability is structural to long‑term returns; failing to do so would pressure margins, ROE, and reinvestment capacity.

Inventory write-offs and underutilization

Material inventory write-offs and underutilization charges erode margins and show execution issues in demand forecasting and capacity planning. These charges can persistently reduce profitability and indicate cyclical exposure or product mix mismatches over multiple quarters.

Restructuring and capacity constraints

Facility sales, technology transitions, and substrate capacity constraints create operational risk and potential production bottlenecks. Restructuring can improve long‑term cost structure, but near‑to‑mid term disruptions may limit revenue recovery and keep underutilization charges elevated.

Microchip Business Overview & Revenue Model

Company Description

Microchip Technology Incorporated develops, manufactures, and sells smart, connected, and secure embedded control solutions in the Americas, Europe, and Asia. The company offers general purpose 8-bit, 16-bit, and 32-bit microcontrollers; 32-bit embedded microprocessors markets; and specialized microcontrollers for automotive, industrial, computing, communications, lighting, power supplies, motor control, human machine interface, security, wired connectivity, and wireless connectivity applications. It also provides development tools that enable system designers to program microcontroller and microprocessor products for specific applications; field-programmable gate array (FPGA) products; and analog, interface, mixed signal, and timing products comprising power management, linear, mixed-signal, high-voltage, thermal management, discrete diodes and metal oxide semiconductor field effect transistors (MOSFETS), radio frequency (RF), drivers, safety, security, timing, USB, Ethernet, wireless, and other interface products. In addition, the company offers memory products consisting of serial electrically erasable programmable read-only memory, serial flash memories, parallel flash memories, serial static random access memories, and serial electrically erasable random access memories for the production of very small footprint devices; and licenses its SuperFlash embedded flash and NVM technologies to foundries, integrated device manufacturers, and design partners for use in the manufacture of microcontroller products, gate array, RF, analog, and neuromorphic compute products that require embedded non-volatile memory, as well as provides engineering services. Further, it offers wafer foundry and assembly, and test subcontracting manufacturing services; and timing systems products, application specific integrated circuits, and aerospace products. Microchip Technology Incorporated was incorporated in 1989 and is headquartered in Chandler, Arizona.

How the Company Makes Money

Microchip generates revenue primarily through the sale of its semiconductor products, including microcontrollers, analog devices, and memory products. The company operates on a business-to-business model, selling to original equipment manufacturers (OEMs) and other industrial clients. Key revenue streams include direct sales from product lines, royalties from licensing its technology, and service agreements that provide ongoing support and development for clients. Additionally, Microchip has formed significant partnerships and collaborations with technology leaders and industry players, enhancing its market reach and driving sales through joint product offerings and integrated solutions. The company's focus on research and development also allows it to innovate continuously, meeting the evolving demands of its customer base, which further contributes to its earnings.

Microchip Financial Statement Overview

Summary

Microchip faces significant challenges in profitability with declining revenues and negative net income. However, the company maintains a stable balance sheet with manageable leverage and strong cash flow generation. To improve its financial standing, Microchip needs to focus on reversing revenue declines and enhancing profitability while leveraging its solid cash flow position.

Income Statement

Microchip's income statement shows significant challenges with a negative net profit margin of -4.39% in TTM, indicating losses. Revenue has sharply declined by 55.2% in the TTM period, reflecting a downturn in sales. Gross profit margin remains moderate at 54.06%, but EBIT and EBITDA margins are weak, especially with EBIT at -0.94%. The company needs to address these profitability issues to improve its financial health.

Balance Sheet

The balance sheet reveals a moderate debt-to-equity ratio of 0.80 in TTM, suggesting manageable leverage. However, the return on equity is negative at -2.78%, indicating inefficiencies in generating returns for shareholders. The equity ratio stands at 46.28%, showing a stable capital structure. While leverage is under control, the company must focus on improving profitability to enhance shareholder value.

Cash Flow

Cash flow analysis shows resilience with a positive free cash flow growth rate of 3.97% in TTM. The operating cash flow to net income ratio is strong at 0.81, indicating good cash generation relative to net income. The free cash flow to net income ratio is also healthy at 0.90. Despite profitability challenges, the company maintains solid cash flow metrics, which is a positive sign for liquidity.

Breakdown	TTM	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	4.21B	4.40B	7.63B	8.44B	6.82B	5.44B
Gross Profit	2.11B	2.47B	5.00B	5.70B	4.45B	3.38B
EBITDA	766.30M	1.04B	3.44B	4.10B	2.87B	1.83B
Net Income	-185.10M	-500.00K	1.91B	2.24B	1.29B	349.40M
Balance Sheet
Total Assets	14.47B	15.37B	15.87B	16.37B	16.20B	16.48B
Cash, Cash Equivalents and Short-Term Investments	236.80M	771.70M	319.70M	234.00M	319.40M	282.00M
Total Debt	5.41B	5.67B	6.03B	6.60B	7.85B	9.07B
Total Liabilities	7.77B	8.30B	9.22B	9.86B	10.30B	11.14B
Stockholders Equity	6.70B	7.08B	6.66B	6.51B	5.89B	5.34B
Cash Flow
Free Cash Flow	754.40M	772.10M	2.61B	3.13B	2.47B	1.82B
Operating Cash Flow	841.10M	898.10M	2.89B	3.62B	2.84B	1.92B
Investing Cash Flow	-197.00M	-287.80M	-392.10M	-599.50M	-477.70M	-173.30M
Financing Cash Flow	-693.40M	-158.30M	-2.41B	-3.10B	-2.33B	-1.86B

Microchip Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 73.39
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Neutral
• STOCH: Negative

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 73.39 is above the 20-day moving average (MA) of 67.56, above the 50-day MA of 61.55, and above the 200-day MA of 60.98, indicating a bullish trend. The MACD of 3.18 indicates Negative momentum. The RSI at 67.06 is Neutral, neither overbought nor oversold. The STOCH value of 85.56 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for MCHP.

Microchip Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
MPWR	75 Outperform	$45.94B	24.49	64.03%	0.62%	30.48%	339.29%
ON	73 Outperform	$25.01B	76.67	3.87%	―	-16.13%	-81.06%
NXPI	70 Neutral	$60.69B	29.62	21.19%	1.79%	-6.81%	-23.16%
SWKS	63 Neutral	$9.02B	19.56	7.89%	4.37%	-2.18%	-16.84%
MCHP	62 Neutral	$40.65B	-162.51	-2.85%	2.79%	-23.36%	-131.15%
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%
STM	60 Neutral	$25.68B	50.70	3.00%	1.28%	-17.33%	-76.71%