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

——Mkt cap — · 52-wk —–— · YTD — · delayed
Updated Aug 12, 2026Q4 FY2026 reviewed
Microchip designs and manufactures embedded control, analog, FPGA, data-center, and memory silicon used throughout AI infrastructure.
Data center +98% YoY
June quarter data center revenue grew 97.8% year over year.
Book-to-bill >1
Strongest booking quarter in about four years.
GM 63.8%
Non-GAAP gross margin in June quarter.
14 Gen6 wins, $0
Management says shipped nothing yet on 14 PCIe Gen6 design wins.
The Buildout Takeaway
Microchip has moved from an inventory-correction story to a supply-constrained growth story. The data center mix is becoming central to the narrative, but the near-term ceiling is set by foundry and OSAT capacity, and the 2027 Gen6 revenue is still unproven.
Analyst coverage
46 analysts·32 Buy14 Hold0 Sell
Coverage is thin — only 5 price estimates, so no target is shown
Management guidance
Q2 FY2027 guidance: net sales up 8% sequentially ±1% · non-GAAP gross margin 66% to 67% · non-GAAP EPS $0.91 to $0.95 · FY2027 capex about $100M
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 develops, manufactures, and sells smart, connected, and secure embedded control solutions. For the AI infrastructure build-out, it supplies the silicon surrounding the accelerator—PCIe switching and retimers, power management, timing, memory, security, and FPGAs—rather than GPUs or HBM. That makes it a broad indirect AI-infrastructure supplier whose content spans rack power, system management, and connectivity.

Market Cap—
Revenue (TTM)$4.7B
Revenue Growth+7.1%
EBITDA Margin (TTM)25.0%
Net Debt$5.3B
Earnings Beats6 of 7
P/E (TTM)—
EV/EBITDA (TTM)—

What We Like

  • Data center reached 17.1% of June-quarter revenue, up 97.8% year over year, making it the #2 end market.
  • June was the strongest booking quarter in about four years, with book-to-bill well above one.
  • PCIe Gen6 design wins rose from 3 in February to 14 as of August 6, and a larger win is expected to bring $100M+ in CY2027.
  • September non-GAAP gross margin is guided to 66–67%, above the long-term 65% model, though management says not to expect further increases.
  • Adjusted free cash flow was $478.6M in June, and net debt fell $170M to 2.85x adjusted EBITDA.

What We’re Watching

  • The AI-specific portion of data center revenue is not disclosed; the 97.8% growth is all data center, not AI-only.
  • The 14 PCIe Gen6 design wins have shipped nothing yet; the larger win is scheduled for CQ1 2027 production.
  • Distribution replenishment has not yet begun: distributors sit at 25 days, low end of range, but customers aren't placing long-dated orders.
  • A large portion of the 66–67% September gross margin guide is one-time licensing and price-reserve benefit; management declined to quantify.
Bottom Line

The thesis is strengthening based on the disclosed record: guidance has been raised across revenue, gross margin, and EPS, and management has shifted from inventory-recovery language to growth-and-constraint language. The open question is whether foundry, OSAT, and substrate allocation is enough to convert the 14 PCIe Gen6 design wins and the broader backlog into shipped revenue on schedule.

Next upThe next catalyst is the September 2026 quarter report, guided to +8% sequential revenue, which tests whether supply constraints cap the guide. The Hailo edge-AI acquisition is also expected to close in September 2026.
Last Quarter — Q4 FY2026

Earnings Beat

Microchip reported June-quarter net sales of $1.485 billion, up 13.2% sequentially and 38% year over year. Non-GAAP gross margin was 63.8%, including $38.5 million of underutilization charges, and non-GAAP EPS was $0.76, $0.07 above the midpoint of guidance. Management called it the strongest booking quarter in about four years.

MetricQ4 FY2026Q3 FY2026Q4 FY2025YoY
Revenue$1.3B$1.2B$970M+35.1%
Gross margin61.0%59.6%51.6%+940bps
EBITDA$385M$324M$87M+343.8%
EPS$0.26$0.06$-0.29−191.5%
Distributor inventory days2526n/a—
We’re comfortable that we’re going to be in this — about this range for at least the next few quarters.— Eric Bjornholt, CFO, August 6, 2026

Management tone: Management shifted from inventory-recovery language to growth-and-constraint language. On the August 6 call, executives paired strong demand language with repeated warnings not to extrapolate certain growth rates or margins; they guided gross margin above the long-term target while simultaneously discouraging further increases.

Management Guidance

For the September 2026 quarter, management guided net sales up 8% sequentially ±1%, which at the midpoint implies about $1.604 billion and +40.6% year over year. Non-GAAP gross margin is guided to 66% to 67%, non-GAAP operating expenses to about 27.5% of sales, non-GAAP operating profit to 38.5% to 39.5% of sales, and non-GAAP EPS to $0.91 to $0.95. The FY2027 non-GAAP tax rate is expected to be about 7.5%. Management attributed the margin guide partly to strong licensing, full-quarter pricing, lower inventory write-offs, and lower underutilization charges.

Business Trajectory

Trajectory

Quarterly revenue has climbed from $1,075.5 million in the June 2025 quarter to $1,485 million in the June 2026 quarter. Non-GAAP gross margin expanded from 60.5% in December to 63.8% in June, with September guided to 66–67%. The drivers are a broad industrial and automotive recovery plus rapid data center growth.

Revenue & Margin Trajectory
RevenueGross margin$0$1.0B$2.0B$799M$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$1.3B44%61%Q1'17Q2Q3Q4Q1'18Q2Q3Q4Q1'19Q2Q3Q4Q1'20Q2Q3Q4Q1'21Q2Q3Q4Q1'22Q2Q3Q4Q1'23Q2Q3Q4Q1'24Q2Q3Q4Q1'25Q2Q3Q4Q1'26Q2Q3Q4
RevenueGross margin$0$1.0B$2.0B$799M$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$1.3B44%61%Q1'17Q2Q3Q4Q1'18Q2Q3Q4Q1'19Q2Q3Q4Q1'20Q2Q3Q4Q1'21Q2Q3Q4Q1'22Q2Q3Q4Q1'23Q2Q3Q4Q1'24Q2Q3Q4Q1'25Q2Q3Q4Q1'26Q2Q3Q4
Gross margin as reported.
Share Price — 12 Months
$50$100$052-wk high $102Aug '25NovFeb '26MayAug '26
52-week range $51–$102.
Share Price — 12 Months
$50$100$052-wk high $102Aug '25NovFeb '26MayAug '26
52-week range $51–$102.
The Numbers

The Model

The model projects FY+1 revenue of $6,250 million with EBITDA of $2,188 million (35.0% margin), and FY+2 revenue of $7,200 million with EBITDA of $2,779 million (38.6% margin). The near term is anchored on the recovery and the data-center ramp; FY+2 reflects continued PCIe Gen6 design-win conversion and industrial/automotive improvement.

Revenue & EBITDA Projections
REVENUE$4.7B$6.2B$7.2BFY26FY+1 (E)FY+2 (E)EBITDA & MARGIN$1.2B$2.2B$2.8B38.6%FY26FY+1 (E)FY+2 (E)
REVENUE$4.7B$6.2B$7.2BFY26FY+1 (E)FY+2 (E)EBITDA & MARGIN$1.2B$2.2B$2.8B38.6%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$6.2B$7.2B
YoY Growth—+32.6%+15.2%
EBITDA$1.2B$2.2B$2.8B
EBITDA Margin25.0%35.0%38.6%

Projections are the median of 5 independent model runs. The model’s revenue sits 0.8% above analyst consensus.

For the September 2026 quarter, management guided net sales up 8% sequentially ±1%, which at the midpoint implies about $1.604 billion and +40.6% year over year. Non-GAAP gross margin is guided to 66% to 67%, non-GAAP operating expenses to about 27.5% of sales, non-GAAP operating profit to 38.5% to 39.5% of sales, and non-GAAP EPS to $0.91 to $0.95. The FY2027 non-GAAP tax rate is expected to be about 7.5%. Management attributed the margin guide partly to strong licensing, full-quarter pricing, lower inventory write-offs, and lower underutilization charges.

What Could Go Right — and Wrong

What good looks like
  • A large 'mega' PCIe Gen6 design win is announced; management says the current $100M+ CY2027 expectation could look small.
  • Foundry, substrate, and OSAT allocations increase enough to support stronger near-term revenue growth above the current supply-constrained pace.
  • Aerospace and defense primes convert the discussed 4x–8x production increases into actual component orders.
  • Distributor replenishment begins in earnest from 25 days of inventory, adding cyclical sell-in catch-up.
  • Data center catalog revenue proves durable, supporting the other-BU path from roughly $288M in CY2025 to roughly $500M in CY2026.
What could go wrong
  • PCIe Gen6 design wins slip or fail to convert; there is no shipped revenue yet on the 14 wins.
  • Gross margin falls after one-time licensing and distribution price-reserve benefits roll off.
  • Foundry, substrate, or OSAT constraints tighten further, capping revenue despite strong bookings.
  • Distribution customers delay long-dated orders, leaving replenishment demand unfulfilled.
  • Aerospace and defense programs remain on the come, and orders do not materialize at the pace discussed.
What’s Next

Looking Ahead

Over the next twelve months, management is guiding September revenue up 8% sequentially, and expects the December quarter to be better than the typical -3% to -5% seasonality. Calendar 2026 data center revenue is targeted at about $1 billion, up roughly 69%, and the first larger PCIe Gen6 win is expected to enter production in CQ1 2027 with $100 million-plus revenue in CY2027. The Hailo acquisition is expected to close in September 2026.

Catalysts
  • September 2026Hailo acquisition expected close — Edge-AI deal expected to close; integration and revenue trajectory begin.
  • September 2026September quarter earnings — Tests whether revenue lands at +8% sequential guide or supply limits upside.
  • December 2026December quarter report and guide — First full-quarter price increase effect; better than seasonality expected.
  • CQ1 2027Larger Gen6 win production — Management expects significant growth from data centers in 2027 and thereafter as design wins proceed to production.
  • Calendar 2027PCIe Gen6 design-win conversion — Management expects significant data center growth as wins ramp.
Numbers

Financials

Annual Summary

MetricFY2025FY2026TTMYoY
Revenue$4.4B$4.7B$4.7B+7.1%
Gross Margin55.8%57.5%57.7%+175bps
EBITDA$1.0B$1.2B$20.7B+12.7%
EBITDA Margin23.8%25.0%25.0%+125bps
Net Income−$0M$202M$202M+40540.0%
Free Cash Flow$772M$871M$16.8B—
Net Cash————

Key Ratios (Trailing)

Valuation
  • P/E TTM—
  • EV/EBITDA TTM—
  • EV/Revenue TTM—
  • Price/FCF TTM—
Profitability
  • Gross Margin (TTM)57.7%
  • EBITDA Margin (TTM)25.0%
  • Net Margin (TTM)4.3%
  • ROIC3.3%
  • FCF Conversion73.9%
  • SBC / Revenue5.4%
Reference

The Company

Microchip develops, manufactures, and sells smart, connected, and secure embedded control solutions. Its product set spans general-purpose and specialized mixed-signal microcontrollers, microprocessors, analog, FPGA, data center, networking, and memory products. In the AI-infrastructure build-out, Microchip supplies the silicon around the compute engine—PCIe switches and retimers, storage and NVMe controllers, power management, timing, security, and FPGAs—rather than the accelerator itself.

Manufacturing is split between internal and external capacity. About 65% of fiscal 2026 net sales came from products produced at outside wafer foundries, and all 300mm wafer requirements are outsourced. The company operates fabs in Gresham, Oregon and Colorado Springs, assembly and test sites in the Philippines and Thailand, and R&D centers in India, France, and Taiwan. Management says there is no plan to build its own 300mm fab.

Business Segments

Mixed-signal Microcontrollers
50.0% of FY2026 net sales; $2,355.4M
General-purpose MCUs, PIC64 processors, storage and memory controllers, and Switchtec PCIe switches.
Growth driver: PCIe Gen6 switch and MCU content in data center and auto.
Analog
28.2% of FY2026 net sales; $1,329.0M
Power management, linear, RF, timing, and interface products.
Growth driver: Catalog power and timing content around AI racks.
Other
21.8% of FY2026 net sales; $1,028.7M
FPGA, SuperFlash licensing, memory, timing systems, and aerospace products.
Growth driver: Licensing and aerospace/defense rebuild.

Competitive Landscape

Microchip competes across analog, MCU, FPGA, timing, and PCIe switching. The supplied sources identify Broadcom, Marvell, and Astera Labs in the PCIe switch/retimer context; detailed MCU/analog and FPGA competitor names are not documented in the provided material. Management acknowledged Microchip was late to the PCIe Gen5 cycle and is now competing in Gen6 with 14 design wins.

  • Broadcom
    Named as a PCIe switch supplier in the source; not discussed further.
  • Marvell
    Named as a PCIe competitor; neighbor read-through says Marvell is raising interconnect growth expectations.
  • Astera Labs
    Named as a PCIe competitor; neighbor read-through notes Astera Labs already has PCIe 6 revenue in volume ramp.
Competitor names are limited to those documented in the provided sources: Broadcom, Marvell, and Astera Labs appear in PCIe-related context; no verified MCU/analog or FPGA competitor names are available in the supplied material.

Supply Chain

Microchip sits between outsourced foundries and OSAT suppliers and a downstream mix of distributors, OEMs, and data-center equipment makers. Approximately 65% of net sales come from outside foundries, with all 300mm wafers outsourced.

Supplier
TSMC
3nm foundry partner for the PCIe Gen6 switch; management cited line of sight to capacity.
Supplier
ASE
Named OSAT supplier adding factory capacity.
Supplier
Amkor
Named OSAT supplier adding factory capacity.
→
Broad catalog + 3nm PCIe Gen6
MCHP
Internal fabs, assembly/test, and outsourced 300mm foundry/OSAT capacity.
→
Arrow Electronics
12% of FY2026 net sales
Largest distributor and largest customer.
Hyundai Motor Group
10BASE-T1S Ethernet collaboration; pilot ramps expected in 2026 and into 2027.
Boeing / SpaceX
Named as A&D demand context, not formal disclosed contracts.
LITEON and Delta
Power-supply and module makers for catalog data-center products.

Analysis updated Aug 12, 2026, reviewing Q4 FY2026. Prices delayed. Built with The Buildout’s published methodology. Not investment advice. No positions held. © The Buildout 2026.

More on MCHP: Earnings recap