- Microchip’s 1st quarter adjusted earnings per share (EPS) rose to 27 cents, beating the estimate of 24 cents. However, this is lower compared to 53 cents year-over-year (y/y).
- Adjusted gross margin decreased to 54.3% from 59.9% y/y, yet it surpassed the estimate of 53.4%.
- Research and development (R&D) expenses increased by 5.7% y/y to $255.5 million, slightly higher than the projected $250.5 million.
- Net sales fell by 13% y/y to $1.08 billion, exceeding the estimate of $1.06 billion.
- For the second quarter, Microchip forecasts adjusted gross margin to range between 55% and 57%, with an estimate of 55.2%.
- Second-quarter net sales are projected to be between $1.11 billion and $1.15 billion, aligning with the estimate of $1.13 billion.
- Capital expenditures for the quarter ending September 30, 2025, are expected to be between $35 million and $40 million. For the full fiscal year 2026, they are projected to be at or below $100 million.
- Microchip made significant progress in reducing inventory, with a decrease of $124.4 million in inventory dollars, distribution inventory days reduced to 29 days from 33, and inventory days on the balance sheet down to 214 days.
- The company observed improvements in sequential margin expansion due to operational enhancements, including lower inventory write-offs and reduced underutilization charges.
- Analyst ratings include 17 buys and 8 holds, with no sell recommendations.
Microchip Technology on Smartkarma
Analysts on Smartkarma, like Baptista Research, have been closely monitoring Microchip Technology‘s recent financial results and strategic decisions. In a report titled “Microchip Technology Slashes $100M in Costs with Bold Restructuring Plan But Is It Enough To Sustain Margins?”, CEO Steve Sanghi detailed a nine-point recovery plan to enhance the company’s performance. Actions such as resizing the manufacturing footprint, refining focus areas, and strengthening customer relations are key components of this initiative.
In another analysis titled “Microchip Technology: These Are The 5 Biggest Challenges In Its Path!” by Baptista Research, the company’s Q3 Fiscal 2025 results highlighted a challenging business environment due to an inventory correction post-pandemic super cycle. With net sales decline and weaknesses in key product categories, Microchip Technology is implementing a 9-point strategic plan to restructure operations and drive performance improvement. These insights provide valuable perspectives for investors evaluating Microchip Technology‘s future prospects.
A look at Microchip Technology Smart Scores
| Factor | Score | Magnitude |
|---|---|---|
| Value | 2 | |
| Dividend | 4 | |
| Growth | 3 | |
| Resilience | 2 | |
| Momentum | 5 | |
| OVERALL SMART SCORE | 3.2 |
Smart Score is a compound score for the Company indicating its overall outlook. It is derived by taking an equally weighted average of underlying Factor scores computed by Smartkarma
Microchip Technology is positioned for strong long-term performance based on the Smartkarma Smart Scores. With a high Momentum score of 5, the company shows significant positive price movement and market trends, indicating a promising future ahead. Additionally, a solid Dividend score of 4 suggests reliable and stable dividend payouts, appealing to income-seeking investors. Although the Value and Resilience scores are moderate at 2, the Growth score of 3 indicates potential for expansion and development in the coming years. Overall, Microchip Technology‘s Smart Scores point towards a favorable outlook for the company.
Microchip Technology Incorporated is a leading firm in designing, manufacturing, and marketing microcontrollers, mixed-signal products, and application development systems for embedded control applications. The company also focuses on linear/mixed-signal, power management, and thermal management products. With a diverse portfolio and strong Smart Scores in areas like Dividend and Momentum, Microchip Technology is well-positioned to thrive in the dynamic tech industry and deliver value to shareholders over the long term.
Disclaimer: This article by Smartkarma is general in nature and based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Note that our articles may not factor in the latest price-sensitive company announcements or qualitative material.
While all reasonable care has been taken in the preparation, Smartkarma makes no assurance about the accuracy of any generated data or content. All content is indicative only and should be independently checked for accuracy and confirmed before use. Smartkarma accepts no responsibility for any loss or damage caused as a result of any inaccuracy or error within the Lab online tools or generated data.
Have feedback on this article? Concerned about the content? Get in touch with us directly.
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Analytics and News
- ✓ Events & Webinars
