Microchip (MCHP) AI Stock Analysis

• Market Cap: $35.54B
• Dividend Yield: 2.83%
• Average Volume (3M): 7.70M
• Price to Earnings (P/E): 84.3
• Beta (1Y): 1.83
• 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: 7,466,979
• 30 Day Avg. Volume: 7,698,945
• 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: 1.21
• Enterprise Value/Revenue: 10.12
• Enterprise Value/Gross Profit: 18.58
• Enterprise Value/Ebitda: 50.95
• 1Y Price Target: $76.71
• Price Target Upside: 19.08% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 21

• Rating: 54 Neutral
• Price Target: $66.00 ▲(2.45% Upside)

Microchip's overall stock score reflects significant challenges in financial performance and valuation, with declining revenue and profitability. However, the optimistic guidance and strategic progress highlighted in the earnings call provide a positive outlook. Technical analysis shows mixed signals, adding uncertainty to the stock's short-term performance.

Positive Factors

Strategic Market Progress

Microchip's advancements in defense and AI sectors show its ability to capture emerging market opportunities, supporting long-term growth.

Inventory Management

Effective inventory management reduces costs and improves cash flow, enhancing operational efficiency and financial health over time.

Sequential Sales Growth

Consistent sales growth across geographies and product lines indicates strong demand and market penetration, underpinning future revenue stability.

Negative Factors

Declining Profitability

Negative profit margins reflect operational inefficiencies, which can hinder reinvestment and long-term financial sustainability if not addressed.

Employee Morale Challenges

Low employee morale can impact productivity and innovation, potentially affecting the company's ability to maintain competitive advantages.

Underutilization Charges

High underutilization charges indicate inefficiencies in production capacity, which can lead to increased costs and reduced profitability.

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 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 under pressure with declining revenue and profitability. The income statement shows negative growth and margins, while the balance sheet indicates improved leverage but negative ROE. Cash flow generation is challenged, though operational cash conversion remains 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: 64.42
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Positive
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

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 64.42 is below the 20-day moving average (MA) of 64.84, below the 50-day MA of 66.26, and above the 200-day MA of 58.81, indicating a neutral trend. The MACD of -0.30 indicates Negative momentum. The RSI at 45.96 is Neutral, neither overbought nor oversold. The STOCH value of 44.87 is Neutral, 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	42.51B	23.21	56.80%	0.63%	34.30%	352.35%
NXPI	76 Outperform	56.99B	26.80	22.45%	1.79%	-7.53%	-21.88%
SWKS	74 Outperform	11.80B	31.62	9.41%	3.53%	-8.24%	-48.31%
ON	67 Neutral	20.51B	46.80	5.87%	―	-17.93%	-75.83%
STM	67 Neutral	24.87B	41.26	3.66%	1.24%	-22.97%	-78.58%
MCHP	54 Neutral	$35.54B	84.25	-2.24%	2.83%	-35.70%	-113.08%
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%