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FY2026 Q3
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Microchip Technology Incorporated earnings call
Buzzberg read
Customers are pulling in orders, leading to strong bookings and expedite requests.
Microchip delivered a strong beat-and-raise quarter, with revenue up 4% sequentially on broad-based strength and guided fiscal Q4 revenue up another 6.2% sequentially, well above normal seasonality. The recovery appears to be broadening into mainstream products, with lead times and capacity constraints starting to emerge. Fiscal Q3 (Dec-2025) revenue was $1.186B, $56M above the top end of guidance, with gross margin reaching 60.5% a quarter earlier than expected.
Buzzberg read Customers are pulling in orders, leading to strong bookings and expedite requests. Microchip delivered a strong beat-and-raise quarter, with revenue up 4% sequentially on broad-based strength and guided fiscal Q4 revenue up another 6.2% sequentially, well above normal seasonality. The recovery appears to be broadening into mainstream products, with lead times and capacity constraints starting to emerge. Fiscal Q3 (Dec-2025) revenue was $1.186B, $56M above the top end of guidance, with gross margin reaching 60.5% a quarter earlier than expected. Read full analysisCollapse analysis
Microchip delivered a strong beat-and-raise quarter, with revenue up 4% sequentially on broad-based strength and guided fiscal Q4 revenue up another 6.2% sequentially, well above normal seasonality. The recovery appears to be broadening into mainstream products, with lead times and capacity constraints starting to emerge. Fiscal Q3 (Dec-2025) revenue was $1.186B, $56M above the top end of guidance, with gross margin reaching 60.5% a quarter earlier than expected.
- Fiscal Q4 (Mar-2026) revenue guidance of $1.26B (+/- $20M) implies ~6.2% sequential growth, significantly above the typical 2-3% seasonal increase.
- Management highlighted a major design win with Hyundai Motor Group for its 10BASE-T1S automotive Ethernet products and provided a $100M+ revenue design win for its Gen6 PCIe switch in 2027.
- Inventory corrections appear complete at distribution, with the sell-in/sell-through gap narrowing to $11.7M, and direct customer inventories normalizing, driving a sharp increase in expedite requests.
Revenue$1.186B+4% QoQ
EPS$0.44+26% QoQ
Gross margin59.6%Reported
Operating margin12.79%Reported
6 grounded callouts
What matters now
The highest-signal changes from the call.
Data Center
PCIe Gen6 switch secures three design wins, one expected $100M+ in 2027.
Margins
Gross margin recovery to 65% target will be gradual, not immediate.
Show 3 more callouts
Automotive
Hyundai collaboration for automotive Ethernet T1S solutions announced.
Capital Allocation
Debt reduction prioritized over buybacks, no buybacks until leverage down significantly.
Guidance
Bookings are strong, June quarter backlog higher than March quarter at same point.
Reported period
Actuals
| Metric | Reported | Change |
|---|---|---|
| Revenue | $1.186B | +4% QoQ |
| EPS | $0.44 | +26% QoQ |
| Gross margin | 59.6% | Reported |
| Operating margin | 12.79% | Reported |
| Free cash flow | $0.3189B | Reported |
| Capex | $0.0225B | Reported |
Forward-looking
Forward guidance
| Metric | Period | Range | Midpoint | Status |
|---|---|---|---|---|
| Capex | FY2026 | $100M | $100M | Guided |
| EPS | FY2026 Q4 | $0.48–$0.52 | $0.50 | Guided |
| Gross margin | FY2026 Q4 | 60.5%–61.5% | 61% | Guided |
| Operating margin | FY2026 Q4 | 28.8%–30.2% | 29.5% | Guided |
| Revenue | FY2026 Q4 | $1.24B–$1.28B | $1.26B | Guided |
AI, capex & demand read
Management read
Upbeat
Management is optimistic about recovery, with strong bookings, backlog growth, and multiple design wins, while acknowledging gross margin recovery will be gradual.
Management AI read
AI is not explicitly discussed in the transcript.
Investment and capacity
Capital expenditures are expected to be at or below $100 million for fiscal year 2026. Management is focused on bringing down debt and returning cash flow to debt reduction rather than major capex expansion.
all 3 named companies below
Companiesreturns since call
Customers
Customers
Matthias Kästner
Hyundai has committed to Microchip's T1S Ethernet architecture for next-gen platforms, a substantial design-win that should drive automotive connectivity revenue growth for Microchip.
Evidence
“Today, we issued a press release in which we announced a strategic collaboration with Hyundai Motor Group to integrate our Tempest T1S solutions into next-generation vehicle platforms.”
Supply chain
Supply chain
Steve Sange
Microchip is seeing capacity constraints at a 'run-of-the-mill' foundry and on certain advanced nodes, with lead times bouncing off bottom and expedite requests up significantly, signaling early supply tightness. — This suggests the broader analog/microcontroller cycle is shifting from a buyer's market to a seller's market, potentially allowing peers to raise prices or exert better terms.
Evidence
“We are running into challenges on certain kinds of substrates and subcontracting capacity and also some foundry constraints on very advanced nodes. These challenges were isolated to specific areas but are now starting to spread more”
External signals
Supply-chain alpha · 2returns since call
Microchip is seeing capacity constraints at a 'run-of-the-mill' foundry and on certain advanced nodes, with lead times bouncing off bottom and expedite requests up significantly, signaling early supply tightness.
Evidence
“We are running into challenges on certain kinds of substrates and subcontracting capacity and also some foundry constraints on very advanced nodes. These challenges were isolated to specific areas but are now starting to spread more broadl…”
Microchip is gaining share in serial EEPROM because competitors are shifting capacity to higher-demand flash memory, and Microchip can leverage its internal fabs for this product.
Evidence
“So a lot of our competitors, especially in Asia, are moving that serial E-squared capacity into the broader flash memory. And therefore, we're picking up market share and we're getting a lot of strength in our memory business because our s…”
Methodology & coverage
Management-only analysis. All 3 validated company mentions are shown. Reported actuals and forward guidance are kept separate. Public evidence is limited to eight short attributed quotes. AI-generated analysis can be incomplete or wrong; verify important claims against the original source.