TLDR
- Microchip grows sales and margins but faces a sharp post-earnings drop.
- Strong demand boosts revenue as after-hours trading turns volatile.
- Expanding margins highlight recovery despite sudden stock weakness.
- Connectivity gains and guidance lift outlook amid price pressure.
- Microchip posts broad growth while after-hours selling hits shares.
Microchip Technology saw sharp movement after posting solid quarterly results and issuing stronger guidance, as the stock dropped in after-hours trading. The company closed at $78.04, down 0.24%, yet it fell to $72.54 later, showing sudden post-earnings pressure. The firm reported rising sales and expanding margins that reinforced confidence in its ongoing recovery plan.
Quarter Shows Broad Growth and Strong Margin Expansion
Microchip Technology reported $1.186 billion in quarterly net sales, and the figure rose 15.6% from the prior year. The company exceeded its updated outlook, and it achieved sequential growth supported by broad demand across industrial and automotive markets. It expanded non-GAAP gross margin to 60.5%, marking a significant gain from early fiscal 2025.
The firm delivered GAAP net income of $34.9 million, and it posted non-GAAP net income of $252.8 million. These figures reflected stronger operating leverage, and they signaled improving efficiency across manufacturing and supply operations. Non-GAAP operating income reached 28.5% of net sales, showing notable performance improvement.
Microchip reduced inventory levels during the quarter, and it strengthened factory utilization ahead of expected volume increases. This shift supported margin expansion, and it positioned the company to scale production more efficiently. Operational cash flow resumed covering debt and dividends, allowing Microchip to reduce net debt by $26 million.
Connectivity Demand and System Strategy Drive Additional Momentum
The company reported renewed strength in its connectivity segment, and modernization cycles supported adoption across multiple markets. Ethernet solutions contributed to new design wins, and Microchip highlighted gains across automotive and industrial applications. Its total system approach simplified integration for clients and reduced cost and complexity.
This strategy helped deepen relationships with major manufacturers, and it opened new opportunities across long-cycle programs. Microchip emphasized continued traction in single-pair Ethernet offerings, and these products aligned with expanding industrial automation needs. The segment benefited from rising demand for secure and scalable networking components.
Backlog improved meaningfully entering the March quarter, and booking activity signaled broader engagement across customers. This trend supported expectations for sequential growth, and the company prepared to lift capacity to meet demand. Microchip projected $1.260 billion in March-quarter net sales at the midpoint.
Guidance Points to Higher Revenue and Stable Operating Model
Microchip issued its fiscal fourth-quarter outlook, and it projected net sales between $1.240 billion and $1.280 billion. The company expects non-GAAP EPS between $0.48 and $0.52, and it anticipates further margin expansion as utilization improves. Capital spending will remain controlled, keeping total fiscal 2026 investments at or below $100 million.
The company declared a quarterly common dividend of 45.5 cents, and it maintained its preferred stock dividend schedule. These actions reflected ongoing cash discipline, and they supported Microchip’s broader capital return plan. Management signaled confidence in sustained sequential growth through stronger operational performance.
Microchip continues adjusting capacity expansion plans, and it aims to balance efficiency with long-term market needs. This approach supports stable operations, and it enables targeted equipment deployment across manufacturing sites. Microchip sees sustained momentum heading into the stronger seasonal period.
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