MCHP

Technology

Microchip Technology

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Market Data

Financials

XBRL · SEC EDGAR

2008–2025(18yr)

Revenue

Net Income

Free CF

Metric	FY 2008	FY 2009	FY 2010	FY 2011	FY 2012	FY 2013	FY 2014	FY 2015	FY 2016	FY 2017	FY 2018	FY 2019	FY 2020	FY 2021	FY 2022	FY 2023	FY 2024	FY 2025Latest	YoY
Revenue	$1.0B	$903.3M	$947.7M	$1.5B	$1.4B	$1.6B	$1.9B	$2.1B	$2.2B	$3.4B	$4.0B	$5.3B	$5.3B	$5.4B	$6.8B	$8.4B	$7.6B	$4.4B	-42.3%
Gross Profit	$624.9M	$516.5M	$534.2M	$874.4M	$792.4M	$838.5M	$1.1B	$1.2B	$1.2B	$1.8B	$2.4B	$2.9B	$3.2B	$3.4B	$4.4B	$5.7B	$5.0B	$2.5B	-50.6%
Gross Margin	60.3%	57.2%	56.4%	58.8%	57.3%	53.0%	58.4%	57.3%	55.5%	51.6%	60.8%	54.8%	61.5%	62.1%	65.2%	67.5%	65.4%	56.1%	-9.4pp
Operating Income	$301.7M	$233.3M	$245.0M	$474.2M	$396.5M	$178.6M	$458.9M	$425.6M	$352.3M	$275.8M	$936.3M	$714.3M	$647.1M	$998.1M	$1.8B	$3.1B	$2.6B	$296.3M	-88.5%
Operating Margin	29.1%	25.8%	25.8%	31.9%	28.7%	11.3%	23.8%	19.8%	16.2%	8.1%	23.5%	13.4%	12.3%	18.4%	27.1%	36.9%	33.7%	6.7%	-26.9pp
Net Income	$296.8M	$245.6M	$217.0M	$418.9M	$336.7M	$127.4M	$395.3M	$369.0M	$324.1M	$164.6M	$255.4M	$355.9M	$570.6M	$349.4M	$1.3B	$2.2B	$1.9B	-$500.0K	-100.0%
Net Margin	28.7%	27.2%	22.9%	28.2%	24.3%	8.1%	20.5%	17.2%	14.9%	4.8%	6.4%	6.7%	10.8%	6.4%	18.8%	26.5%	25.0%	-0.0%	-25.0pp
Free Cash Flow	—	—	—	—	$367.6M	$454.6M	—	—	—	—	$1.2B	$1.4B	$1.5B	$1.8B	$2.5B	$3.1B	$2.6B	$772.1M	-70.4%
FCF Margin	—	—	—	—	26.6%	28.7%	—	—	—	—	30.5%	27.0%	28.0%	33.5%	36.3%	37.1%	34.2%	17.5%	-16.6pp
EPS (Diluted)	$1.40	$1.31	$1.16	$2.15	$1.65	$0.62	$1.82	$1.65	$1.49	$0.71	$1.03	$1.42	$2.23	$1.29	$2.27	$4.02	$3.48	$-0.01	-100.3%

Total Debt$5.6B

Cash & Equiv.$771.7M

Net Debt$4.9B

4 min read

1. THE BIG PICTURE

Microchip is a business in the midst of a high-stakes pivot, attempting to transition from a severe 42.3% revenue collapse to a "nine-point recovery plan" (8-K). While management touts its "Total System Solution" as a way to lock in customers, Microchip Technology’s actual performance is dictated by its ability to clear excess inventory and manage a heavy $5.1 billion debt load while its primary end markets undergo volatile modernization cycles.

2. WHERE THE RISKS HIT HARDEST

Microchip’s claimed advantage of manufacturing control is directly threatened by its third-party dependence. While management asserts that owning its factories makes it a "low-cost producer," 64% of its fiscal 2025 sales actually came from products manufactured at outside foundries (10-K Item 1). This reliance on contractors strips away the very control Microchip claims to have over production yields and costs, especially during the "capacity ramps" planned for 2026.

Furthermore, the Total System Solution strategy, intended to provide "the large portion of silicon requirements" for customers, is undermined by a reliance on turns orders. Because a significant portion of sales depends on orders received and shipped within the same quarter, Microchip cannot reliably forecast if its design wins will translate into revenue, making its "operational momentum" highly susceptible to sudden macroeconomic cooling (Risks).

3. WHAT THE NUMBERS SAY TOGETHER

The financial data reveals a stark divergence between recent momentum and long-term trends. While the most recent quarter showed a 15.6% revenue increase, the trailing twelve-month (TTMTTMTrailing Twelve Months — the most recent full year of financial data, updated on a rolling basis each quarter) revenue growth remains a dismal -42.3% (XBRL). This suggests the current "recovery" is a mean-reversion from a deep cyclical trough rather than a structural breakout. The $173 million in inventory write-downs and unabsorbed capacity charges in fiscal 2025 highlight how quickly Microchip Technology’s high-fixed-cost manufacturing model can turn against it when demand falters.

Despite a razor-thin net margin of 0.7%, Microchip maintains a respectable Free Cash Flow (FCFFCFFree Cash Flow — cash left after paying for operations and capital investments; what the company can actually spend, save, or return to shareholders) margin of 19.9% (XBRL). This indicates the business remains a cash generator even when GAAPGAAPGenerally Accepted Accounting Principles — the standard U.S. accounting rules all public companies must follow earnings are suppressed by restructuring and inventory charges. However, with short interest at 5.6% of the float, a segment of the market remains skeptical that this cash flow can comfortably service the $5.1 billion in net debt while Microchip Technology pauses factory expansions at Fab 4 and Fab 5 (Supplemental Signals).

4. IS IT WORTH IT AT THIS PRICE?

At a forward P/EP/EPrice-to-Earnings ratio — share price divided by annual earnings per share; how much investors pay per dollar of profit. Higher P/E = higher growth expectations of 24.7x, Microchip is trading almost exactly in line with the peer median of 25.0x (Yahoo Finance). This valuation appears to be "at fair value" only if one accepts the market’s implied long-term growth rate of 8.4% (CAPM analysis).

This expectation is difficult to reconcile with Microchip's -42.3% TTMTTMTrailing Twelve Months — the most recent full year of financial data, updated on a rolling basis each quarter revenue growth, especially when compared to peers like Amphenol (APH), which grew 51.7% over the same period and trades at a similar 26.7x forward multiple. If Microchip’s growth slows to a more modest 5.0% pace, the justified multiple would drop to 13.4x—representing a roughly 46% downside from current levels. The primary risk that could trigger this re-rating is the potential $502 million in combined tax liabilities in Malaysia and Germany, which would severely strain Microchip Technology's cash position (Risks).

5. WHAT WOULD CHANGE THIS VIEW?

Cautious if the $410 million tax assessment in Malaysia is upheld, as this would represent nearly half of Microchip Technology's annual free cash flow and complicate debt repayment.
Constructive if the percentage of "turns orders" declines significantly, signaling that customers are moving toward long-term supply agreements and providing better revenue visibility.
Constructive if GAAPGAAPGenerally Accepted Accounting Principles — the standard U.S. accounting rules all public companies must follow gross margins reach the guided 60.5% upper bound, proving that the inventory reduction plan has successfully restored manufacturing efficiency (8-K).

6. BOTTOM LINE

Structural Advantage: A "Total System Solution" ecosystem that integrates hardware, software, and a global technical service network to create high customer switching costs. Bottom Line: Microchip is a cyclical recovery play priced for a perfect execution that its current lack of demand visibility may not be able to guarantee.

Source: Synthesis · LLM Analysis

4 min read

1. Top 5 Material Risks

Reliance on Turns Orders: A significant portion of net sales depends on orders received and shipped within the same quarter. Because these orders are difficult to predict during economic volatility, Microchip Technology faces challenges in forecasting revenue and managing production capacity.
Third-Party Manufacturing Dependence: Approximately 64% of net sales in fiscal 2025 came from products produced at outside wafer foundries. Reliance on these contractors reduces control over production, yields, and costs, and any failure by these partners to meet demand or quality standards directly impacts Microchip Technology's ability to fulfill orders.
Geopolitical and Trade Exposure: With 75% of net sales made to foreign customers in fiscal 2025—including 17% in China and 16% in Taiwan—Microchip Technology is highly vulnerable to trade restrictions, tariffs, and political instability. Specifically, export controls and potential retaliatory actions by foreign governments could limit market access and increase operational costs.
Inventory and Capacity Management: Microchip Technology has experienced excess inventory levels, leading to write-downs and unabsorbed capacity charges of $173.0 million in fiscal 2025. Pausing factory expansion at Fab 4 and Fab 5 reflects the difficulty in balancing manufacturing capacity with fluctuating demand.
Cybersecurity and IT Disruptions: Microchip Technology relies on complex IT systems and has been the target of verifiable attacks, including an August 2024 incident that temporarily impacted manufacturing facilities and order fulfillment. Future breaches could result in significant remediation costs, regulatory fines, and reputational damage.

2. Company-Specific Risks

Integration of Acquisitions: Microchip Technology’s growth strategy relies on acquisitions, such as the 2018 purchase of Microsemi. Integration is complex and costly, and Microchip Technology may fail to realize anticipated synergies or face unforeseen liabilities, including litigation and regulatory investigations related to acquired businesses.
Goodwill and Intangible Asset Impairment: As of March 31, 2025, Microchip Technology held $6.68 billion in goodwill and $2.39 billion in net intangible assets. A decline in market capitalization or reduced estimates of future cash flows could trigger impairment charges, negatively impacting the consolidated financial statements.
Technology Licensing Exposure: The SuperFlash and other technology licensing businesses depend on the market acceptance of licensed technologies and the ability to enforce license terms. Disputes over royalty payments can result in significant legal fees and management distraction.
Debt Servicing and Refinancing: With $5.66 billion in outstanding indebtedness as of March 31, 2025, Microchip Technology faces increased interest expense if it refinances maturing notes, such as the $1.20 billion in 4.250% 2025 Notes, in a higher interest rate environment.

3. Regulatory/Legal Risks

Tax Disputes: Microchip Technology is currently contesting significant tax assessments. The Malaysian Inland Revenue Board has proposed an adjustment that could result in taxes and penalties of up to $410.0 million. Additionally, the German Tax Authorities have issued assessments regarding royalty payments and intellectual property transfers that could result in liabilities of up to $92.0 million.
Export Controls: Microchip Technology must comply with evolving U.S. export regulations, including those restricting sales to certain Chinese entities and "military end-users." Failure to obtain necessary licenses or comply with trade sanctions could result in fines, seizure of products, and loss of export privileges.
Environmental Compliance: Microchip Technology is subject to stringent regulations regarding hazardous substances and greenhouse gas emissions. Compliance costs are rising, and failure to meet these standards—or the requirements of the SEC’s climate-related disclosure rules—could lead to significant monetary penalties and operational shutdowns.

4. Financial Impact Map

Turns Orders Volatility → Net Sales → High uncertainty in quarterly revenue forecasting due to short lead times.
Third-Party Foundry Dependence → Cost of Goods Sold → Potential for increased manufacturing costs and reduced margins if contractors raise prices or fail to provide capacity.
Unabsorbed Capacity Charges → Gross Margin → $173.0 million charge in fiscal 2025 due to operating below normal capacity levels.
Tax Disputes (Malaysia/Germany) → Income Tax Provision / Cash Flow → Potential liability of up to $502.0 million combined in taxes and penalties.
Debt Refinancing → Interest Expense → Expected increase in interest costs upon refinancing of $1.20 billion in 2025 Notes due to higher prevailing interest rates.

Source: 10-K Item 1A · LLM Analysis

Recent Filings

Form	Filed	Period
8-K	Feb 2026	—
10-Q	Feb 2026	Dec 2025
14A	Jul 2025	—
10-K	May 2025	Mar 2025