Microchip Technology 2026 Q1 Earnings Misses Targets as Net Loss Widens

Microchip Technology (MCHP) reported its fiscal 2026 Q1 earnings on August 7th, 2025. The results fell short of expectations, with the company swinging to a loss and revenue declining year-over-year. Despite sequential growth, the quarter did not meet previous guidance. Management emphasized operational improvements and inventory reductions, while forecasting modest sequential revenue growth for the next quarter.

Revenue
Microchip Technology reported total revenue of $1.08 billion in 2026 Q1, reflecting a 13.4% decrease from $1.24 billion in the same period a year earlier. On a sequential basis, however, revenue increased by 10.8% to $1.0755 billion, slightly exceeding the midpoint of its revised guidance of $1.0575 billion. The company attributed the sequential improvement to improved sell-through and reduced channel inventory, while the year-over-year decline was driven by macroeconomic headwinds and inventory destocking across the supply chain.

Earnings/Net Income
The company swung to a net loss of $0.09 per diluted share in 2026 Q1, compared to a net profit of $0.24 per diluted share in 2025 Q1. On a GAAP basis, Microchip reported a net loss of $-18.60 million, a 114.4% deterioration from a net income of $129.30 million a year ago. Non-GAAP net income for the quarter was $154.7 million, or $0.27 per diluted share, down from $289.9 million, or $0.53 per diluted share, in the prior year. The earnings shortfall was largely due to ongoing amortization of acquired intangible assets and operational costs, despite improved gross and operating margins on a non-GAAP basis.

Price Action
The stock price of Microchip Technology has declined in recent trading sessions, with a 2.34% drop on the latest trading day, a 2.03% decline during the most recent full trading week, and an 11.19% drop month-to-date. The underperformance reflects investor concerns over the earnings miss and broader macroeconomic uncertainties.

Post Earnings Price Action Review
The investment strategy of buying Microchip Technology shares following the earnings report and holding for 30 days yielded a total return of 18.03%, with a compound annual growth rate (CAGR) of 5.86%. However, the return underperformed the benchmark, which returned 48.67%. The Sharpe ratio of 0.14 indicates a modest risk-adjusted return, while the maximum drawdown of 0% suggests the strategy avoided significant losses during the volatile post-earnings period.

CEO Commentary
Steve Sanghi, CEO and President of Microchip Technology, highlighted a strong start to fiscal 2026, with sequential revenue growth and improvements in financial and operational metrics. He noted a significant inventory reduction of $124.4 million and emphasized the company's progress under the nine-point recovery plan. Sanghi expressed optimism about the business’s momentum and its ability to capitalize on the industry recovery, with the trifecta effect of improved sell-through, sell-in/sell-out alignment, and direct customer inventory normalization driving growth.

Guidance
For the September quarter, Microchip expects net sales of $1.130 billion ±$20.0 million, representing approximately 5.1% sequential growth at the midpoint. The company is maintaining a disciplined approach amid the evolving macroeconomic environment, with July bookings reaching the highest level since July 2022. Operational improvements, including declining inventory write-offs and reduced underutilization charges, are expected to support margin expansion and cash flow generation as the business continues to execute its strategic roadmap.

Additional News
Microchip Technology announced a quarterly cash dividend of 45.5 cents per share for its common stock, payable on September 5, 2025, to stockholders of record on August 22, 2025. The company also declared a dividend of $18.750 per share on its 7.50% Series A Mandatory Convertible Preferred Stock. Capital expenditures for the September 2025 quarter are expected to range between $35 million and $40 million, with full-year fiscal 2026 capex anticipated to be at or below $100 million. The company has paused most factory expansion actions in response to the slow macroeconomic environment but plans to selectively expand production capacity and add research and development equipment.