On a GAAP basis: gross profit of 59.6%; operating income of $151.7 million and 12.8% of net sales; net income attributable to common stockholders of $34.9 million; and EPS of $0.06 per diluted share. Our updated guidance provided on December 2, 2025 was GAAP EPS of $0.02 per diluted share.
On a Non-GAAP basis: gross profit of 60.5%; operating income of $337.8 million and 28.5% of net sales; net income of $252.8 million; and EPS of $0.44 per diluted share. Our updated guidance provided on December 2, 2025 was Non-GAAP EPS of $0.40 per diluted share.
Returned approximately $246.1 million to common stockholders in the December quarter through dividends.
Quarterly dividend on common stock declared for the March quarter of 45.5 cents per share.
Midpoint of net sales guidance for the March 2026 quarter of $1.260 billion, which would be up 6.2% sequentially and 29.8% year-over-year.
CHANDLER, Ariz., Feb. 05, 2026 (GLOBE NEWSWIRE) -- (NASDAQ:MCHP) - Microchip Technology Incorporated, a leading provider of smart, connected, and secure embedded control solutions, today reported results for the three months ended December 31, 2025.
Steve Sanghi, Microchip's CEO and President commented that, "Our fiscal third quarter results exceeded our expectations, with net sales of $1.186 billion growing 4% sequentially, and 15.6% year-over-year, well above our original guidance. We believe the broad-based recovery across our end markets, combined with significant margin expansion, demonstrates the tangible impact of our nine-point recovery plan execution. Our non-GAAP operating profit grew sequentially more than our net sales did in the December quarter, highlighting the operational momentum we have in our business."
Mr. Sanghi added, "We have made substantial progress on inventory reduction, which is positioning us to improve operational efficiency as we ramp manufacturing capacity in the March quarter. Our non-GAAP gross margins have expanded significantly from 52% in the March 2025 quarter to 60.5% this quarter, reflecting the cumulative impact of our operational improvements. As we continue to normalize inventory and improve factory utilization, we expect our gross margins to expand further toward our long-term target of 65%."
Eric Bjornholt, Microchip's Chief Financial Officer, said, "Our third quarter results demonstrate the strength of our operational model, which is now generating meaningful cash flow improvement. This quarter, we reduced net debt by $26 million, as our operating cash flow resumed covering our debt obligations and dividend payments. We remain focused on debt reduction as a priority and believe our improving operational performance positions us well to continue strengthening our balance sheet in the quarters ahead."
Rich Simoncic, Microchip's Chief Operating Officer, said, "We are seeing strong momentum in our connectivity business driven by concurrent modernization cycles in automotive and industrial markets. Our Ethernet connectivity solutions, ranging from 10BASE-T1S to higher-speed single-pair industrial Ethernet standards, combined with our product portfolio form our Total System Solution approach. This strategy reduces complexity, cost, and time to market, enabling us to capture significant design opportunities with leading OEMs and industrial manufacturers."
Mr. Sanghi concluded, "Our March quarter starting backlog is substantially better than the December quarter levels, and our booking momentum remains strong. As we ramp our manufacturing capacity, we expect gross margin improvements and continued customer engagement across our diversified end markets. Taking all these factors into account, we expect March quarter net sales of $1.260 billion plus or minus $20.0 million, representing approximately 6.2% sequential growth and 29.8% year-over-year growth at the midpoint. As we move into the typically stronger quarters ahead, we believe we are well-positioned to deliver sustained sequential growth and enhanced shareholder value while maintaining a disciplined approach given the evolving macro environment."
The following table summarizes Microchip's reported result for the three months ended December 31, 2025.
Three Months Ended December 31, 2025(1)
Net sales
$1,186.0
GAAP
%
Non-GAAP(2)
%
Gross profit
$706.9
59.6%
$717.4
60.5%
Operating income
$151.7
12.8%
$337.8
28.5%
Other expense
$(58.1)
$(58.1)
Income tax provision
$30.9
$26.9
Net income
$62.7
$252.8
Dividends on Series A Preferred Stock
$(27.8)
—
Net income attributable to common stockholders
$34.9
2.9%
$252.8
21.3%
Diluted net income per common share
$0.06
$0.44
(1) In millions, except per share amounts and percentages of net sales.(2) See the "Use of Non-GAAP Financial Measures" section of this release.
Net sales for the third quarter of fiscal 2026 were $1.186 billion, up 15.6% from net sales of $1.026 billion in the prior year's third fiscal quarter.
GAAP net income attributable to common stockholders for the third quarter of fiscal 2026 was $34.9 million, or $0.06 per diluted share, up from GAAP net loss attributable to common stockholders of $53.6 million, or $0.10 per diluted share, in the prior year's third fiscal quarter. For the third quarters of fiscal 2026 and fiscal 2025, GAAP results were adversely impacted by amortization of acquired intangible assets associated with our previous acquisitions.
Non-GAAP net income for the third quarter of fiscal 2026 was $252.8 million, or $0.44 per diluted share, up from non-GAAP net income of $107.3 million, or $0.20 per diluted share, in the prior year's third fiscal quarter. For the third quarters of fiscal 2026 and fiscal 2025, our non-GAAP results exclude the effect of share-based compensation, restructuring charges, cybersecurity incident expenses, expenses related to our acquisition activities (including intangible asset amortization, severance, other restructuring costs, and legal and other general and administrative expenses including legal fees and expenses for litigation and investigations related to our Microsemi acquisition), professional services associated with certain legal matters, loss on settlement of debt, (gain) loss on available-for-sale investments, and dividends on our Series A Mandatory Convertible Preferred Stock. For the third quarters of fiscal 2026 and fiscal 2025, our non-GAAP income tax expense is presented based on projected cash taxes for the applicable fiscal year, excluding transition tax payments under the Tax Cuts and Jobs Act. A reconciliation of our non-GAAP and GAAP results is included in this press release.
Microchip announced today that its Board of Directors declared a quarterly cash dividend on its common stock of 45.5 cents per share, which is payable on March 10, 2026 to stockholders of record on February 23, 2026. The Microchip Board also declared a quarterly cash dividend on Microchip's 7.50% Series A Mandatory Convertible Preferred Stock of $18.750 per share (which represents $0.9375 per depositary share) which is payable on March 16, 2026 to stockholders of record on March 1, 2026.
Fourth Quarter Fiscal Year 2026 Outlook:
The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially.
Microchip Consolidated Guidance
Net Sales
$1.240 to $1.280 billion
GAAP(5)
Non-GAAP Adjustments(1)
Non-GAAP(1)
Gross Profit
59.5% to 60.5%
$11.9 to $12.9 million
60.5% to 61.5%
Operating Expenses(2)
45.5% to 46.1%
$178.0 to $182.0 million
31.3% to 31.7%
Operating Income
13.5% to 15.0%
$189.9 to $194.9 million
28.8% to 30.2%
Other Expense, net
$55.2 to $55.8 million
$(0.2) to $0.2 million
$55.0 to $56.0 million
Income Tax Provision
$39.0 to $41.0 million(3)
$(8.9) to $(7.8) million
$30.1 to $33.2 million(4)
Net income
$72.4 to $95.5 million
$198.6 to $202.9 million
$271.0 to $298.4 million
Dividends on Series A Preferred Stock
$(27.8) million
$27.8 million
—
Net income attributable to common stockholders
$44.6 to $67.7 million
$226.4 to $230.7 million
$271.0 to $298.4 million
Diluted Common Shares Outstanding
Approximately 548.0 to 548.4 million shares
21.0 to 21.6 million shares
Approximately 569.0 to 570.0 million shares
Diluted net income per common share
$0.08 to $0.12
$0.40
$0.48 to $0.52
(1) See the "Use of Non-GAAP Financial Measures" section of this release for information regarding our non-GAAP guidance.(2) We are not able to estimate the amount of certain Special Charges and Other, net that may be incurred during the quarter ending March 31, 2026. Therefore, our estimate of GAAP operating expenses excludes certain amounts that may be recognized as Special Charges and Other, net in the quarter ending March 31, 2026.(3) The forecast for GAAP tax expense excludes any unexpected tax events that may occur during the quarter, as these amounts cannot be forecasted.(4) Represents the expected cash tax rate for fiscal 2026, excluding any transition tax payments associated with the Tax Cuts and Jobs Act.(5) Our GAAP guidance excludes the impact of any potential gains or charges related to our ongoing evaluation of restructuring activities including the sale of our Fab 2 wafer fabrication facility.
Capital expenditures for the quarter ending March 31, 2026 are expected to be between $20 million and $23 million. Capital expenditures for all of fiscal 2026 are expected to be at or below $100 million. Consistent with the slow macroeconomic environment in fiscal 2025, we have paused most of our factory expansion actions and reduced our planned capital investments through fiscal 2026. However, we are adding capital equipment to selectively expand our production capacity and add research and development equipment.
Under the GAAP revenue recognition standard, we are required to recognize revenue when control of the product changes from us to a customer or distributor. We focus our sales and marketing efforts on creating demand for our products in the end markets we serve and not on moving inventory into our distribution network. We also manage our manufacturing and supply chain operations, including our distributor relationships, towards the goal of having our products available at the time and location the end customer desires.
Use of Non-GAAP Financial Measures: Our non-GAAP adjustments, where applicable, include the effect of share-based compensation, restructuring charges, cybersecurity incident expenses, expenses related to our acquisition activities (including intangible asset amortization, severance, other restructuring costs, and legal and other general and administrative expenses including legal fees and expenses for litigation and investigations related to our Microsemi acquisition), professional services associated with certain legal matters, loss on settlement of debt, (gain) loss on available-for-sale investments, and dividends on our Series A Mandatory Convertible Preferred Stock. For the third quarters of fiscal 2026 and fiscal 2025, our non-GAAP income tax expense is presented based on projected cash taxes for the fiscal year, excluding transition tax payments under the Tax Cuts and Jobs Act.
We are required to estimate the cost of certain forms of share-based compensation, including restricted stock units and our employee stock purchase plan, and to record a commensurate expense in our income statement. Share-based compensation expense is a non-cash expense that varies in amount from period to period and is affected by the price of our stock at the date of grant. The price of our stock is affected by market forces that are difficult to predict and are not within the control of management. Our other non-GAAP adjustments are either non-cash expenses, unusual or infrequent items, or other expenses related to transactions. Management excludes all of these items from its internal operating forecasts and models.
We are using non-GAAP operating expenses in dollars, including non-GAAP research and development expenses and non-GAAP selling, general and administrative expenses, non-GAAP other expense, net, and non-GAAP income tax rate, which exclude the items noted above, as applicable, to permit additional analysis of our performance.
Management believes these non-GAAP measures are useful to investors because they enhance the understanding of our historical financial performance and comparability between periods. Many of our investors have requested that we disclose this non-GAAP information because they believe it is useful in understanding our performance as it excludes non-cash and other charges that many investors feel may obscure our underlying operating results. Management uses non-GAAP measures to manage and assess the profitability of our business and for compensation purposes. We also use our non-GAAP results when developing and monitoring our budgets and spending. Our determination of these non-GAAP measures might not be the same as similarly titled measures used by other companies, and it should not be construed as a substitute for amounts determined in accordance with GAAP. There are limitations associated with using these non-GAAP measures, including that they exclude financial information that some may consider important in evaluating our performance. Management compensates for this by presenting information on both a GAAP and non-GAAP basis for investors and providing reconciliations of the GAAP and non-GAAP results.
Generally, gross profit fluctuates over time, driven primarily by the mix of products sold and licensing revenue; variances in manufacturing yields; fixed cost absorption; wafer fab loading levels; costs of wafers from foundries; inventory reserves; pricing pressures in our non-proprietary product lines; and competitive and economic conditions. Operating expenses fluctuate over time, primarily due to net sales and profit levels.
Diluted Common Shares Outstanding can vary for, among other things, the trading price of our common stock, the vesting of restricted stock units, the potential for incremental dilutive shares from our convertible debentures and our mandatory convertible preferred stock (additional information regarding our share count is available in the investor relations section of our website under the heading "Supplemental Information"), and repurchases or issuances of shares of our common stock. The diluted common shares outstanding presented in the guidance table above assumes an average Microchip stock price in the March 2026 quarter between $75 and $80 per share (however, we make no prediction as to what our actual share price will be for such period or any other period).
MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIESCONDENSED CONSOLIDATEDSTATEMENTS OF OPERATIONS(in millions, except per share amounts; unaudited)
Three Months Ended December 31,
Nine Months Ended December 31,
2025
2024
2025
2024
Net sales
$
1,186.0
$
1,026.0
$
3,401.9
$
3,431.1
Cost of sales
479.1
464.6
1,480.4
1,464.3
Gross profit
706.9
561.4
1,921.5
1,966.8
Research and development
274.3
246.2
792.1
728.6
Selling, general and administrative
168.5
158.2
500.1
465.7
Amortization of acquired intangible assets
107.6
122.6
323.3
368.3
Special charges and other, net
4.8
3.5
33.3
7.6
Operating expenses
555.2
530.5
1,648.8
1,570.2
Operating income
151.7
30.9
272.7
396.6
Other expense, net
(58.1
)
(77.0
)
(163.1
)
(189.4
)
Income (loss) before income taxes
93.6
(46.1
)
109.6
207.2
Income tax provision
30.9
7.5
23.8
53.1
Net income (loss)
62.7
(53.6
)
85.8
154.1
Dividends on Series A Preferred Stock
(27.8
)
—
(83.4
)
—
Net income (loss) attributable to common stockholders
$
34.9
$
(53.6
)
$
2.4
$
154.1
Basic net income (loss) per common share
$
0.06
$
(0.10
)
$
—
$
0.29
Diluted net income (loss) per common share
$
0.06
$
(0.10
)
$
—
$
0.28
Basic common shares outstanding
540.8
537.4
540.0
