Q2 2026 Microchip Technology Inc Earnings Call Transcript
Key Points
- Microchip Technology Inc (MCHP) reported a 6% sequential sales growth, with net sales up in the Americas and Asia.
- The company's microcontroller business grew 9.7% sequentially, driven by strong contributions from 32-bit MCU.
- Non-GAAP gross margin increased by 236 basis points sequentially, and non-GAAP operating margin rose by 364 basis points.
- The company announced the industry's first 3-nanometer based PCIe Gen 6 switch, marking a significant milestone in AI infrastructure.
- Inventory levels have been reduced significantly, with a calendar year-to-date reduction of $261 million.
- Underutilization in factories resulted in a $51 million charge, impacting gross margins.
- Inventory write-offs and underutilization charges totaled $122.8 million, affecting non-GAAP gross margin.
- The December quarter is expected to be seasonally weak, with net sales projected to decline by 1% sequentially.
- Lead times for some products are increasing due to challenges with substrates and subcontracting capacity.
- The company is still facing inventory reserve charges and underutilization charges, which are expected to persist in the near term.
Greetings, and welcome to the Microchip's Q2 fiscal 2026 financial results conference call. (Operator Instructions) As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host, Steve Sanghi. Thank you, sir. You may begin.
Thank you, operator, and good afternoon, everyone. During the course of this conference call, we will be making projections and other forward-looking statements regarding future events or the future financial performance of the company. We wish to caution you that such statements are predictions and that actual events or results may differ materially.
We refer you to our press release of today as well as our recent filings with the SEC that identify important risk factors that may impact Microchip's business and results of operations. In attendance with me today are Rich Simoncic, Microchip's COO; Eric Bjornholt, Microchip's CFO; and Brian McCarson, Microchip's VP of Data Center
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