Microchip Technology delivered a stronger-than-expected fiscal second quarter, with sales up 42.2% and earnings above its own guidance. The chipmaker expects seasonal softness in the December quarter, but says demand, bookings and design wins remain firm.
- US$1.622 billion quarterly sales, up 42.2% year on year
- GAAP diluted EPS of US$0.68 and non-GAAP EPS of US$0.97
- 24 PCIe Gen6 data-centre design wins, double the June-quarter tally
- December-quarter sales forecast at US$1.573 billion to US$1.638 billion
- Hailo and Vorago Technologies acquisitions completed
Data-centre demand pushes Microchip past guidance
Microchip Technology Incorporated (NASDAQ:MCHP) cleared its own fiscal second-quarter targets with US$1.622 billion in sales, up 42.2% from a year earlier and 9.2% sequentially. The result exceeded the company’s US$1.604 billion guidance midpoint, while diluted GAAP earnings reached US$0.68 a share, above the previously guided US$0.53 to US$0.54 range.
The earnings lift was also visible on Microchip’s adjusted figures. Non-GAAP diluted EPS came in at US$0.97, ahead of the guided US$0.91 to US$0.95 range, with non-GAAP operating income at US$639.9 million, or 39.5% of sales. On a GAAP basis, operating income was US$464.5 million, or 28.6% of revenue. The gap reflects excluded items including share-based compensation, acquisition-related costs, acquired-intangible amortisation and special charges, so the two measures are not interchangeable.
Industrial and data-centre orders lead the recovery
Chief executive Steve Sanghi said growth was broad-based across Microchip’s end markets, with industrial and data-centre applications providing the main momentum. The company said book-to-bill remained well above one, although it did not provide a precise ratio, and pointed to 24 PCIe Gen6 switch and retimer design wins, up from 12 at the end of the June quarter.
That design-win count is an early indicator of product adoption rather than a measure of booked revenue. Still, it gives the data-centre story more substance than a general demand claim. Microchip also cited new products and technology introductions spanning aerospace and defence, automotive, robotics, industrial applications and the intelligent edge as potential sources of longer-term demand.
December guidance allows for seasonality, not a collapse
Microchip expects fiscal third-quarter sales of US$1.573 billion to US$1.638 billion, implying a midpoint decline of 1% from the September quarter. Management said normal seasonal revenue declines are typically 3% to 5%, and noted that the September quarter included about US$53 million of infrequent revenue that will not recur. On the company’s framing, the outlook is therefore 5% to 7% better than normal seasonality, although that comparison depends on the treatment of those one-off items.
Non-GAAP gross margin is forecast at 64% to 65%, compared with 66.5% in the latest quarter, while non-GAAP diluted EPS is expected at US$0.87 to US$0.95. Lead times are lengthening across the supply chain, and Microchip said it is seeking additional wafer allocation and selectively adding equipment. At the same time, fiscal 2027 capital expenditure remains forecast at approximately US$100 million, reflecting a cautious approach to factory expansion.
Acquisitions add edge AI and radiation-hardened capability
Microchip completed its acquisition of Hailo, an accelerated edge-AI processor provider, on September 17 and bought Vorago Technologies, a supplier of radiation-hardened microcontrollers and microprocessors, on October 8. The release did not quantify the acquisitions’ contribution to the quarter or provide financial targets for their integration, leaving their effect on future growth to be demonstrated through products, design wins and margins.
The company returned approximately US$247.6 million to common shareholders through dividends during the September quarter and declared a new common dividend of US$0.455 a share. It also declared a preferred-stock dividend equivalent to US$0.9375 per depositary share. Separately, Victor Peng told the board he would step down because of time commitments, including his role as chief executive of PsiQuantum.
Bottom Line?
The immediate test is whether Microchip can convert stronger bookings and data-centre design wins into sustained revenue while lengthening lead times and a lighter capital-spending plan limit capacity.
Questions in the middle?
- Can the 24 PCIe Gen6 design wins begin contributing material revenue, and on what timetable?
- Will wafer allocation and lengthening lead times constrain growth if demand continues to strengthen?
- How quickly will Hailo and Vorago Technologies contribute to Microchip’s product mix and profitability?