Microchip (MCHP)
NASDAQ:MCHP
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Microchip
(NASDAQ:MCHP)
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Rating:58Neutral
Price Target:
$70.00
▼(-2.18% Downside)
Action:ReiteratedDate:02/12/26
The score is held back primarily by weakened GAAP profitability (TTM loss and margin compression) despite solid free cash flow and manageable—though still meaningful—leverage. Offsetting that, the latest earnings call points to a tangible recovery with strong revenue and non-GAAP margin/EPS guidance, while technicals show a medium-term uptrend but neutral near-term momentum. Valuation is constrained by the negative P/E, partially balanced by a ~2.45% dividend yield.
Positive Factors
Cash Generation
Microchip's strong TTM cash generation (~$820M FCF, ~$911M operating cash flow) is a durable cushion versus cyclical earnings. Reliable free cash flow supports debt paydown, dividends and selective investment, improving financial flexibility as operational recovery continues over coming quarters.
Negative Factors
Elevated Leverage
Leverage remains materially elevated (net debt/adjusted EBITDA ~4.18 and total debt near $5.4B). Until GAAP earnings and adjusted EBITDA recover sustainably, leverage limits strategic flexibility, forces prioritization of debt reduction over buybacks, and raises refinancing sensitivity.
Read all positive and negative factors
Positive Factors
Negative Factors
Cash Generation
Microchip's strong TTM cash generation (~$820M FCF, ~$911M operating cash flow) is a durable cushion versus cyclical earnings. Reliable free cash flow supports debt paydown, dividends and selective investment, improving financial flexibility as operational recovery continues over coming quarters.
Read all positive factors
Microchip (MCHP) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$38.72B
Dividend Yield2.79%
Average Volume (3M)8.59M
Price to Earnings (P/E)246.1
Beta (1Y)1.96
Revenue Growth-23.36%
EPS Growth-131.15%
CountryUS
Employees22,300
SectorTechnology
Sector Strength88
IndustrySemiconductors
Share Statistics
EPS (TTM)0.44
Shares Outstanding541,135,440
10 Day Avg. Volume7,800,989
30 Day Avg. Volume8,592,205
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 Cap1.13
Enterprise Value/Revenue10.04
Enterprise Value/Gross Profit19.46
Enterprise Value/Ebitda49.47
Forecast
1Y Price Target
$87.28Price Target Upside21.97% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering19
EPS Forecast (FY)2.67
Revenue Forecast (FY)$5.71B
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 em...
How the Company Makes Money
Microchip primarily makes money by selling semiconductors and related embedded-system products to original equipment manufacturers (OEMs) and electronics manufacturers that incorporate Microchip components into end products. The company’s key reve...
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 Earnings Call Summary
Earnings Call Date:Feb 05, 2026
(Q3-2026)
| % Change Since: |
Next Earnings Date:May 11, 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
34
Negative
Balance Sheet
60
Neutral
Cash Flow
63
Positive
| Breakdown | TTM | Mar 2025 | Mar 2024 | Mar 2023 | Mar 2022 | Mar 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 4.37B | 4.40B | 7.63B | 8.44B | 6.82B | 5.44B |
| Gross Profit | 2.25B | 2.47B | 5.00B | 5.70B | 4.45B | 3.38B |
| EBITDA | 887.00M | 1.04B | 3.44B | 4.10B | 2.87B | 1.83B |
| Net Income | -96.60M | -500.00K | 1.91B | 2.24B | 1.29B | 349.40M |
Balance Sheet | ||||||
| Total Assets | 14.33B | 15.37B | 15.87B | 16.37B | 16.20B | 16.48B |
| Cash, Cash Equivalents and Short-Term Investments | 250.70M | 771.70M | 319.70M | 234.00M | 319.40M | 282.00M |
| Total Debt | 5.40B | 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 | 6.56B | 7.08B | 6.66B | 6.51B | 5.89B | 5.34B |
Cash Flow | ||||||
| Free Cash Flow | 819.90M | 772.10M | 2.61B | 3.13B | 2.47B | 1.82B |
| Operating Cash Flow | 911.00M | 898.10M | 2.89B | 3.62B | 2.84B | 1.92B |
| Investing Cash Flow | -199.40M | -287.80M | -392.10M | -599.50M | -477.70M | -173.30M |
| Financing Cash Flow | -1.05B | -158.30M | -2.41B | -3.10B | -2.33B | -1.86B |
Microchip Technical Analysis
Positive
71.56
Price Trends
70.57
Positive
67.77
Positive
66.44
Positive
Market Momentum
0.21
Negative
62.26
Neutral
89.48
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 71.56 is above the 20-day moving average (MA) of 65.33, above the 50-day MA of 70.57, and above the 200-day MA of 66.44, indicating a bullish trend. The MACD of 0.21 indicates Negative momentum. The RSI at 62.26 is Neutral, neither overbought nor oversold. The STOCH value of 89.48 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive 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
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
76 Outperform | $66.50B | 70.69 | 17.89% | 0.62% | 30.48% | 339.29% | |
64 Neutral | $27.05B | 183.93 | 1.53% | ― | -16.13% | -81.06% | |
64 Neutral | $8.48B | 30.39 | 6.83% | 4.37% | -2.18% | -16.84% | |
63 Neutral | $51.64B | 27.14 | 20.73% | 1.79% | -6.81% | -23.16% | |
61 Neutral | $37.18B | 12.37 | -10.20% | 1.83% | 8.50% | -7.62% | |
58 Neutral | $38.72B | 246.12 | -1.42% | 2.79% | -23.36% | -131.15% | |
56 Neutral | $35.46B | 136.11 | 0.97% | 1.28% | -17.33% | -76.71% |
* Technology Sector Average
MCHP
Microchip
71.56
33.81
89.56%
MPWR
Monolithic Power
1,353.85
819.11
153.18%
NXPI
NXP Semiconductors
204.37
37.02
22.12%
ON
ON Semiconductor
68.65
33.03
92.73%
SWKS
Skyworks Solutions
56.36
1.05
1.90%
STM
STMicroelectronics
39.48
19.22
94.84%
Microchip Corporate Events
Business Operations and StrategyPrivate Placements and Financing
Microchip Issues Convertible Notes to Optimize Capital Structure
Positive
Feb 11, 2026
On February 9–11, 2026, Microchip Technology issued $900 million of 0% Convertible Senior Notes due 2030 in a private Rule 144A placement, generating net proceeds of about $883.3 million after fees. The notes, which are senior unsecured obli...
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.