Microchip Technology Q2 Results: Shares Dip Amidst Improved Margins

Microchip Technology reported Q2 results that exceeded estimates, despite a 4% share drop. Analysts praised the results, outlook, and improving margins.

Microchip Technology Incorporated (NASDAQ: MCHP) reported its Q2 2025 financial results, which exceeded market expectations despite a 4% share drop. The company's revenue fell by 13.4% year-on-year to $1.08 billion, but this was a 1.7% beat over analyst estimates. The non-GAAP profit of $0.27 per share was 13.2% above analyst consensus, indicating a strong performance in earnings per share.

The company expects its revenue for the next quarter to be around $1.13 billion, aligning with analyst estimates. The adjusted EPS guidance for Q3 2025 is $0.33 at the midpoint, which is above analyst estimates of $0.31. However, the company's operating margin declined to 3% from 17.7% in the same quarter last year, and the free cash flow margin remained at 24%.

Analysts were generally positive about the results, with Citi analyst Christopher Danely noting that the results were good but below elevated expectations, causing the stock to sell off. KeyBanc and Stifel analysts maintained their buy ratings and price targets, highlighting the improving gross margins and revenue growth prospects.

The company's inventory days outstanding (DIO) increased to 213 days, which is 46 days above its five-year average, suggesting higher inventory levels. This could indicate a potential slowdown in demand, but the company's management remains optimistic about the future, guided by its nine-point recovery plan.

Overall, while the Q2 results were positive, the share drop and the slightly missed revenue guidance for the next quarter have investors cautious. The company's long-term prospects remain promising, with analysts expecting revenue to grow 16.4% over the next 12 months. However, the current downcycle may continue to deepen in the near term.

References:
[1] https://finance.yahoo.com/news/microchip-technology-nasdaq-mchp-posts-091537691.html
[2] https://seekingalpha.com/news/4482644-microchip-dips-on-q2-results-as-analysts-highlight-improving-margins
[3] https://www.marketbeat.com/instant-alerts/microchip-technology-incorporated-nasdaqmchp-given-average-rating-of-moderate-buy-by-brokerages-2025-08-07/