Microchip Technology’s second quarter saw a negative market reaction, with management attributing results to ongoing inventory correction, sequential sales growth across all product lines, and cost reduction efforts. CEO Stephen Sanghi emphasized that the company’s broad-based recovery was driven by improvements in both microcontroller and analog segments, as well as a substantial reduction in inventory levels. Sanghi acknowledged recent workforce reductions and pay cuts, noting, “18,000 employees of Microchip worked all last year on a pay cut, have not received a bonus or a salary increase in 1.5 years and suffered through a gut-wrenching global layoff earlier this year in March.”
Is now the time to buy MCHP? Find out in our full research report (it’s free).
Microchip Technology (MCHP) Q2 CY2025 Highlights:
- Revenue: $1.08 billion vs analyst estimates of $1.06 billion (13.4% year-on-year decline, 1.7% beat)
- Adjusted EPS: $0.27 vs analyst estimates of $0.24 (13.2% beat)
- Adjusted EBITDA: $285.8 million vs analyst estimates of $243.4 million (26.6% margin, 17.4% beat)
- Revenue Guidance for Q3 CY2025 is $1.13 billion at the midpoint, roughly in line with what analysts were expecting
- Adjusted EPS guidance for Q3 CY2025 is $0.33 at the midpoint, above analyst estimates of $0.32
- Operating Margin: 3%, down from 17.7% in the same quarter last year
- Inventory Days Outstanding: 213, down from 251 in the previous quarter
- Market Capitalization: $35.48 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Microchip Technology’s Q2 Earnings Call
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Vivek Arya (Bank of America): Asked if above-seasonal sales growth would continue into December. CEO Stephen Sanghi replied that he expects results to remain above seasonal in both December and March, though precise numbers were not provided.
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Harsh Kumar (Piper Sandler): Questioned the timeline for distributor inventory normalization. CFO Eric Bjornholt said the sell-in/sell-through gap is shrinking but could take a few quarters to fully close.
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Blayne Curtis (Jefferies): Inquired about the causes and timing of lengthening lead times. Sanghi explained that shortages are currently isolated to substrates and packaging, rather than wafer supply, and advised customers to extend order visibility.
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James Schneider (Goldman Sachs): Asked about lagging end markets and gross margin implications. Simoncic noted that automotive is the slowest to recover, while Bjornholt clarified that the company’s gross margin targets account for ongoing product mix changes.
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Quinn Bolton (Needham & Co.): Sought clarity on when factory utilization charges would decline more sharply. Sanghi said substantial improvement is expected starting in the December quarter, with continued progress as inventory normalizes.
Catalysts in Upcoming Quarters
Looking forward, the StockStory team will be monitoring (1) continued progress in reducing overall and distributor inventory days, (2) the pace at which automotive and other lagging end markets show demand normalization, and (3) whether lead time extensions remain manageable or become more widespread. Execution on AI-driven product enhancements and the ability to maintain margin recovery as utilization ramps will also serve as critical markers of Microchip Technology’s near-term trajectory.
Microchip Technology currently trades at $65.45, down from $66.24 just before the earnings. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free).
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