Microchip Technology Incorporated (MCHP) | The Buildout — AI Infrastructure

——Mkt cap — · 52-wk —–— · YTD — · delayed
Updated Sep 22, 2026Q1 FY2027 reviewed
Microchip Technology designs embedded control chips, including PCIe switches and retimers that connect GPUs, CPUs and memory.
Revenue +38% YoY
June-quarter net sales $1.485B, up 13.2% sequentially.
Data center ~$1B CY26
Total data-center sales expected ~$1B in CY2026, up ~69% from ~$591M.
Book-to-bill above 1
Strongest booking quarter in about 4 years; backlog up entering September.
Net debt ~$5.2B
All cash beyond the dividend goes to debt paydown; no buyback or dividend raise.
The Buildout Takeaway
MCHP sells into almost every part of the electronics chain, so its recovery is broad rather than a single AI bet. The open question is whether the 14 PCIe Gen6 design wins convert to volume revenue in CY2027, and whether gross margin holds near 66%-67% once the one-time items fall away.
Analyst coverage
46 analysts·32 Buy14 Hold0 Sell
Coverage is thin — only 5 price estimates, so no target is shown
Management guidance
September 2026 quarter: net sales up 8% sequentially ±1% (~$1.603B midpoint, up 40.6% YoY) · non-GAAP gross margin 66%-67% · non-GAAP operating profit 38.5%-39.5% of sales · non-GAAP EPS $0.91-$0.95 · FY2027 non-GAAP tax ~7.5% · FY2027 capex ~$100M · net debt/adjusted EBITDA expected below 2.5.
Important: The Buildout is a data analytics platform. Content is generated by algorithms and AI agents using public filings, earnings transcripts, and market data. This is not personalized investment advice.
Our View

The Verdict

Microchip Technology designs and sells embedded control chips — the microcontrollers, analog parts, memory and connectivity silicon that other companies build into their own products. Two channels reach the AI buildout. The Data Center Solutions unit sells PCIe switches and retimers that connect GPUs to CPUs and CPUs to memory in accelerator racks, running as a second source alongside incumbents like Broadcom, Marvell and Astera Labs. The second channel is a long tail of catalog parts — power, timing, security, memory — sold to power-supply and module makers rather than to hyperscalers. The company also sells into industrial, aerospace and defense, automotive, communications and consumer markets. Because its parts are largely not single-source chokepoints, its AI exposure is broad rather than a bottleneck.

Market Cap—
Revenue (TTM)$5.1B
Revenue Growth+20.9%
EBITDA Margin (TTM)28.7%
Net Debt$5.1B
Earnings Beats6 of 7
P/E (TTM)—
EV/EBITDA (TTM)—

What We Like

  • Data-center revenue is set to roughly double: management guides total data-center sales from ~$591M in CY2025 (~14% of net sales) to ~$1B in CY2026, up ~69%.
  • The PCIe Gen6 pipeline is built and almost entirely ahead: 14 design wins (12 switch, 2 retimer), up from 6 the prior quarter, with one large win carrying $100M+ CY2027 revenue potential — and none of it shipping in volume yet.
  • Demand is broad, not single-market: June-quarter growth was data center +97.8%, communications +53.3%, aerospace and defense +45.6%, automotive +29.3% and industrial +24.3% year-over-year.
  • The channel is clear: management declared the distribution inventory correction complete, with distributor inventory at 25 days and distribution sell-through up 17% sequentially.
  • Deleveraging is on track: net debt/adjusted EBITDA was 2.85 at June 30, 2026 and is expected below 2.5 in the September quarter, with adjusted free cash flow of $478.6M in the June quarter.

What We’re Watching

  • The 66%-67% gross-margin guide rests partly on non-repeatable items — a '100% gross margin' licensing quarter and a one-time distribution-inventory price benefit — and management says not to expect the level to rise further.
  • Foundry and OSAT constraints have 'spread broadly,' and expedite requests are 'going unsupported in the quarter'; management says constraints do not cap revenue, an assertion not yet verified.
  • The 14 DCS design wins have shipped nothing in volume, so the CY2027 data-center ramp depends on conversion that has not started.
  • Competition is a live risk: MCHP says it was late to Gen 5 and 'essentially lost all of our Gen 5 business,' and its Gen6 DCS design wins have shipped nothing in volume yet.
Bottom Line

On the revenue side the thesis is strengthening: every guide in the window was beaten, the June quarter was the strongest booking quarter in about four years, and management rebased its data-center number to roughly $1B for CY2026. On margin the record is narrower, because the guided peak rests on one-time items management would not size. The open question is whether the 14 PCIe Gen6 design wins convert to volume revenue in CY2027, and whether gross margin holds near 66%-67% once the non-repeatables fall away.

Next upThe next check is the December 2026 quarter, which management says should be 'better than seasonal' against a typical 3% to 5% sequential decline. It tests whether distribution replenishment and the pricing action hold gross margin near the 66%-67% ceiling once the licensing and inventory benefits lapse.
Last Quarter — Q1 FY2027

Earnings Beat

For the June 2026 quarter (fiscal 2027 first quarter) net sales were $1.485B, up 13.2% sequentially and 38% year-over-year. Non-GAAP gross margin was 63.8%, including $38.5M of capacity underutilization charges; GAAP gross margin was 63.2%. Management described it as the strongest booking quarter in about four years, with book-to-bill well above 1 and backlog entering September higher than backlog entering June.

MetricQ1 FY2027Q4 FY2026Q1 FY2026YoY
Revenue$1.5B$1.3B$1.1B+38.0%
Gross margin63.2%61.0%53.6%+960bps
EBITDA$494M$385M$203M+142.9%
EPS$0.42$0.26$-0.03−1310.1%
We believe that we have completed the distribution inventory correction. Our overall distribution inventory is now low and some replenishment needs to take place in the coming quarters.— Steve Sanghi, President and CEO, 2026-08-06

Management tone: On the June 2026 call management led with the expanded data-center disclosure before the financials, added a first seven-way end-market breakout and committed to repeat it each quarter, and declared the distribution inventory correction complete. They were direct on the margin ceiling, telling investors not to expect gross margin to rise above the guided level, and candid about having lost all their Gen 5 PCIe business after being late to market. They declined to give a leverage trigger for changing capital allocation, per-rack dollar content, or TAM and share figures.

Management Guidance

For the September 2026 quarter management guided net sales up 8% sequentially ±1% to a $1.603B midpoint, up 40.6% year-over-year, non-GAAP gross margin of 66%-67%, non-GAAP operating profit of 38.5%-39.5% of sales, and non-GAAP EPS of $0.91-$0.95. The gross-margin guide rests on several drivers management itemized: product mix, a '100% gross margin' licensing quarter, a price increase recovering prior cost inflation, lower inventory write-offs, and lower underutilization charges. Management flagged some of those as non-repeatable and said not to expect gross margin to rise above this level. For the December quarter management gave no number, only that it 'would be better than seasonal' against a typical 3% to 5% sequential decline.

Business Trajectory

Trajectory

On the audited spine, revenue has grown sequentially for four straight quarters, from $1,076M in the June 2025 quarter to $1,485M in the June 2026 quarter, and each quarter beat its own guide. GAAP gross margin has moved from 51.6% in the March 2025 trough quarter to 63.2%, and EBITDA margin from 8.9% to 33.2%. The stated drivers are lower underutilization charges, a distribution price action, and a recovery across data center, aerospace and defense, and industrial and automotive. Management still frames the December quarter as seasonally down 3% to 5%, only better than seasonal.

Revenue & Margin Trajectory
RevenueGross margin$0$1.0B$2.0B$871M$834M$903M$972M$1.0B$994M$1.0B$1.2B$1.4B$1.4B$1.3B$1.3B$1.3B$1.3B$1.3B$1.3B$1.3B$1.4B$1.5B$1.6B$1.6B$1.8B$1.8B$2.0B$2.1B$2.2B$2.2B$2.3B$2.3B$1.8B$1.3B$1.2B$1.2B$1.0B$970M$1.1B$1.1B$1.2B$1.3B$1.5B47%63%Q2'17Q3Q4Q1'18Q2Q3Q4Q1'19Q2Q3Q4Q1'20Q2Q3Q4Q1'21Q2Q3Q4Q1'22Q2Q3Q4Q1'23Q2Q3Q4Q1'24Q2Q3Q4Q1'25Q2Q3Q4Q1'26Q2Q3Q4Q1'27
RevenueGross margin$0$1.0B$2.0B$871M$834M$903M$972M$1.0B$994M$1.0B$1.2B$1.4B$1.4B$1.3B$1.3B$1.3B$1.3B$1.3B$1.3B$1.3B$1.4B$1.5B$1.6B$1.6B$1.8B$1.8B$2.0B$2.1B$2.2B$2.2B$2.3B$2.3B$1.8B$1.3B$1.2B$1.2B$1.0B$970M$1.1B$1.1B$1.2B$1.3B$1.5B47%63%Q2'17Q3Q4Q1'18Q2Q3Q4Q1'19Q2Q3Q4Q1'20Q2Q3Q4Q1'21Q2Q3Q4Q1'22Q2Q3Q4Q1'23Q2Q3Q4Q1'24Q2Q3Q4Q1'25Q2Q3Q4Q1'26Q2Q3Q4Q1'27
Gross margin as reported.
Share Price — 12 Months
$50$100$052-wk high $103Sep '25DecMar '26JunSep '26
52-week range $51–$103.
Share Price — 12 Months
$50$100$052-wk high $103Sep '25DecMar '26JunSep '26
52-week range $51–$103.
The Numbers

The Model

The model projects FY+1 revenue of $6,375M with EBITDA of $2,384M, a 37.4% EBITDA margin. For FY+2 it projects revenue of $7,500M with EBITDA of $2,872M, a 38.3% margin. The near-term anchor is the disclosed data-center ramp toward ~$1B in CY2026 and the run of guides-beaten. FY+2 depends on the 14 PCIe Gen6 design wins converting to volume and on the industrial and automotive recoveries continuing.

Revenue & EBITDA Projections
REVENUE$4.7B$6.4B$7.5BFY26FY+1 (E)FY+2 (E)EBITDA & MARGIN$1.2B$2.4B$2.9B38.3%FY26FY+1 (E)FY+2 (E)
REVENUE$4.7B$6.4B$7.5BFY26FY+1 (E)FY+2 (E)EBITDA & MARGIN$1.2B$2.4B$2.9B38.3%FY26FY+1 (E)FY+2 (E)
Solid bars are reported actuals; outlined bars are model projections — not company guidance.
MetricFY2026Next FY (E)Following FY (E)
Revenue$4.7B$6.4B$7.5B
YoY Growth—+35.3%+17.6%
EBITDA$1.2B$2.4B$2.9B
EBITDA Margin25.0%37.4%38.3%

Projections are the median of 5 independent model runs. The model’s revenue sits 3.7% above analyst consensus.

For the September 2026 quarter management guided net sales up 8% sequentially ±1% to a $1.603B midpoint, up 40.6% year-over-year, non-GAAP gross margin of 66%-67%, non-GAAP operating profit of 38.5%-39.5% of sales, and non-GAAP EPS of $0.91-$0.95. The gross-margin guide rests on several drivers management itemized: product mix, a '100% gross margin' licensing quarter, a price increase recovering prior cost inflation, lower inventory write-offs, and lower underutilization charges. Management flagged some of those as non-repeatable and said not to expect gross margin to rise above this level. For the December quarter management gave no number, only that it 'would be better than seasonal' against a typical 3% to 5% sequential decline.

What Could Go Right — and Wrong

What good looks like
  • The DCS design wins convert to volume, and the single large Gen6 win reaches its $100M+ CY2027 revenue target or exceeds it.
  • Foundry and OSAT capacity grows as suppliers build more factories, easing the external constraint and letting strong bookings convert faster.
  • Data center proves a durable multiyear leg, with management pointing to 'significant growth from data centers in 2027 and thereafter.'
  • Aerospace and defense becomes a genuine multiyear leg: it is already +45.6% YoY at 16.7% of June-quarter sales, one of management's two 'very strong' large end markets.
  • Hailo closes and edge AI scales: management says the deal 'advances our roadmaps by about five years' and brings products that already have design wins.
What could go wrong
  • Gross margin peaks at or below 66%-67% and rolls off as the one-time licensing and inventory benefits lapse and the price increase proves 'one and done.'
  • External foundry and OSAT constraints bind longer than management expects, so bookings do not convert at pace.
  • PCIe competition displaces MCHP before its Gen6 volumes ramp — its DCS Gen6 design wins have shipped nothing in volume and have yet to convert.
  • The cycle rolls over sooner than the multiyear drivers imply; industrial and automotive growth is recovering but, in management's words, still 'trying to catch up.'
  • AI demand continues to crowd out foundry and OSAT capacity, keeping the non-data-center majority of the business supply-constrained.
What’s Next

Looking Ahead

Over the next 12 months the markers are the September 2026 quarter (net sales up 8% sequentially, gross margin 66%-67%), the December quarter management expects to be better than seasonal, and the CY2027 data-center ramp that depends on 14 design wins not yet shipping in volume. Two discrete events are flagged but not delivered: the Hailo acquisition, expected to close around September 2026, and the Fab 2 sale, which slipped from a prior December 2025 expectation. Management has also committed to reporting the seven end markets each quarter from here.

Catalysts
  • September 2026Hailo acquisition close — Small edge-AI deal; management says it 'advances our roadmaps by about five years.'
  • 2026Hyundai pilot ramp — 10BASE-T1S automotive Ethernet pilot production begins.
  • December 2026 quarterDecember quarter results — Guided as 'better than seasonal' vs a typical 3%-5% decline.
  • CQ1 2027Large Gen6 win production — One PCIe Gen6 win starts production with $100M+ CY2027 potential.
  • CY2027DCS volume ramp — 14 PCIe Gen6 design wins move from won to shipping revenue.
Numbers

Financials

Annual Summary

MetricFY2025FY2026TTMYoY
Revenue$4.4B$4.7B$5.1B+7.1%
Gross Margin55.8%57.5%60.2%+175bps
EBITDA$1.0B$1.2B$1.5B+12.7%
EBITDA Margin23.8%25.0%28.7%+125bps
Net Income−$0M$202M$451M+40540.0%
Free Cash Flow$772M$871M$1.1B—
Net Cash————

Key Ratios (Trailing)

Valuation
  • P/E TTM—
  • EV/EBITDA TTM—
  • EV/Revenue TTM—
  • Price/FCF TTM—
Profitability
  • Gross Margin (TTM)60.2%
  • EBITDA Margin (TTM)28.7%
  • Net Margin (TTM)8.8%
  • ROIC5.4%
  • FCF Conversion75.6%
  • SBC / Revenue5.4%
Reference

The Company

Microchip Technology develops, manufactures and sells embedded control solutions — the chips other companies put inside their products to control, connect, power and secure them. Its portfolio spans general-purpose and specialized mixed-signal microcontrollers, microprocessors, analog, FPGA, data center, networking and memory products. In fiscal 2026, net sales were $4,713.1M, split across Mixed-signal Microcontrollers (50.0%), Analog (28.2%) and Other (21.8%). The company describes itself as serving automotive, aerospace and defense, communications, consumer appliances, data centers and computing, and industrial end markets, and it frames AI/ML and data centers among the trends its portfolio supports.

MCHP is heavily fab-light. In fiscal 2026, 65% of net sales came from products produced at outside wafer foundries (fiscal 2025: 64%), and it outsources all of its 300mm wafer requirements. It keeps most back-end work in-house — 67% of assembly and 69% of test performed internally — through sites concentrated in the Philippines and Thailand. Front-end fabs include Gresham, Oregon (8-inch) and Colorado Springs, Colorado (6-inch); Fab 2 in Tempe, Arizona closed in May 2025 and is held for sale. Management says there is no plan to build an owned 300mm fab and that it will rely on foundry partners.

Business Segments

Mixed-signal Microcontrollers
50.0% of fiscal 2026 net sales
Broad family of proprietary general-purpose mixed-signal microcontrollers; includes the PIC64 processor family, storage controllers and Switchtec PCIe Gen3-Gen6 switches and retimers.
Growth driver: PCIe Gen6 switches and retimers into data centers
Analog
28.2% of fiscal 2026 net sales
Power management, linear, mixed-signal, high voltage, thermal management, discrete diodes and MOSFETs, RF, gate drivers, safety, security, timing and interface products.
Growth driver: Data-center grid-to-rack and in-rack power content
Other
21.8% of fiscal 2026 net sales
FPGAs, SuperFlash licensing and royalties, IP sales, engineering services, memory products, timing systems, wafer-foundry and assembly/test subcontracting, and aerospace products.
Growth driver: Licensing royalties and memory demand

Competitive Landscape

Microchip competes with major semiconductor companies, and its own 10-K notes that some rivals have greater market recognition and greater financial, technical, marketing and distribution resources. Its competitive exposure differs by product. In PCIe switches and retimers it runs as a second source alongside incumbents such as Broadcom, Marvell and Astera Labs, and it is candid that it was late to Gen 5 and lost that generation's business. In microcontrollers and analog it faces large embedded players including Texas Instruments, ADI, NXP, STMicro, Infineon and Renesas.

  • Astera Labs
    Names MCHP among its principal competitors in its filing; the peer read-through shows PCIe 6 already more than 50% of its revenue and Scorpio X in volume production, while MCHP has shipped nothing in volume on DCS Gen6.
  • Silicon Motion
    Its filing names Microchip: 'We face competition from several competitors, including Microchip and Phison…'
  • NXP
    Names MCHP as a competitor in its filing; the peer read-through shows record $3.5B quarterly revenue and backlog growing through quarter+3.
  • SiTime
    Names MCHP as a competitor in the timing market; the peer read-through shows customers ordering 12-18 months in advance.
  • Texas Instruments
    Named in the microcontroller and analog competitor set; not separately discussed.
Names come from MCHP's own filings and from competitor filings that name MCHP; peer figures are from the supply-chain-intelligence pass, which found no neighbor naming MCHP directly.

Supply Chain

MCHP sits in the middle of the semiconductor supply chain. It designs chips, buys most wafers from outside foundries, runs most assembly and test in-house, and sells through distributors and direct OEMs. No verified peer in the read-through named MCHP.

Supplier
Outside wafer foundries (unnamed)
Produced products equal to 65% of fiscal 2026 net sales; all 300mm wafer requirements outsourced.
Supplier
ASE and Amkor
Outsourced assembly and test; management named both as building more capacity.
Supplier
CEVA
NeuPro NPU IP family licensed across MCHP's roadmap.
→
Breadth across hundreds of designs
MCHP
Fab-light designer: outsources 300mm wafers, keeps most assembly and test in-house.
→
Arrow Electronics
12% of FY2026 net sales
Largest distributor; 10% in FY2025.
LITEON and Delta
Power-supply and module makers taking catalog data-center products.

Related companies

Customers
ARW · Arrow Electronics
Suppliers
CEVA · CEVA
Competitors
ADTN · ADTRANALAB · Astera LabsAMD · Advanced Micro DevicesMRVL · Marvell TechnologyMTSI · MACOM Technology SolutionsMXL · MaxLinear

See all Silicon Design companies → · How this layer works: Chapter 1, The Chip →

Analysis updated Sep 22, 2026, reviewing Q1 FY2027. Prices delayed. Built with The Buildout’s published methodology. Not investment advice. No positions held. © The Buildout 2026.

More on MCHP: Earnings recap