Key Takeaways for Microchip Stock as of August 2026
- Beat Across the Board: Microchip reported June-quarter revenue of $1.485B, up 38% YoY and 13% sequentially, with non-GAAP EPS of $0.76 landing $0.07 above the midpoint of the guidance management set in May.
- September Guide: Management guided Q2 revenue up 8% sequentially to $1.6B at the midpoint, 41% above the year-ago quarter, and non-GAAP EPS to $0.91-$0.95, up 166% YoY at the midpoint.
- Data Center Doubling: June-quarter data center sales rose 98% YoY, and Microchip now expects total data center revenue near $1B in CY2026, up 69% from $591M the prior year.
- Margin Ceiling: Guided gross margin of 66%-67% clears the 65% long-term model, a level Sanghi told investors not to expect higher.
Microchip stock just cleared management’s own long-term margin model. See the full non-GAAP breakdown and track Microchip stock on TIKR for free →
Microchip’s Q1 Earnings Break Above Its Own Margin Model as Data Center Sales Double
Microchip Technology (MCHP) cleared the high end of its own guidance across every non-GAAP line in the June quarter, reporting revenue of $1.485 billion on August 6, up 38% from a year earlier and 13% sequentially. Non-GAAP earnings landed at $0.76 per share, $0.07 above the midpoint management had set in May.
The margin story carried the print. Non-GAAP gross margin reached 63.8%, a 222-basis-point sequential jump, while non-GAAP operating margin expanded 452 basis points to 35.1%. Adjusted EBITDA of $587.8 million ran at 39.6% of sales, and adjusted free cash flow hit $478.6 million.
The September guide is where the recovery picks up speed. Microchip expects revenue up 8% sequentially, $1.6 billion at the midpoint and 41% above the year-ago quarter, with non-GAAP EPS of $0.91 to $0.95. That midpoint puts earnings up 166% year over year and 22% sequentially.
That EPS jump rides a gross margin guide of 66% to 67%, above the company’s own 65% long-term target. CEO Steve Sanghi addressed the overshoot directly on the Q1 earnings call: “At this point, we will leave the long-term model unchanged. You should not expect non-GAAP gross margin percentage to continue to rise above this level.” A rich licensing quarter at 100% margin and a one-time distribution pricing benefit lift the figure, and both fade next quarter.
Behind the numbers sits a data center business scaling fast. Sales into data centers rose 98% year over year in the June quarter, and Microchip expects total data center revenue near $1 billion in calendar 2026, up 69% from $591 million in 2025. The company logged 14 Gen6 design wins, 12 on its PCIe switch and two on its retimer, none shipping in volume yet.
The strength ran wide. Aerospace and defense grew 46% year over year, automotive 29%, and communication 53%, while distribution sell-through climbed 17% sequentially as the channel inventory correction ended. Bookings marked Microchip’s strongest quarter in about four years, and lead times are now stretching as foundry and packaging capacity tightens.
Data center sales nearly doubled and 14 Gen6 design wins remain pre-volume. Follow the design-win pipeline behind Microchip stock on TIKR for free →
TIKR Values Microchip Stock at $149, Betting the Upcycle Has Room to Run
TIKR’s mid-case model values Microchip at $149 by March 2031, implying 76% total return from the current price of $85, or 13% annualized over the next 4.6 years.
That 13% annual return frames Microchip stock as a steady compounder rather than a quick cyclical bounce, an outcome that leans on earnings growth rather than a higher multiple.
The path there runs through the drivers this quarter surfaced: data center revenue set to near $1 billion in 2026, aerospace and defense compounding off a multiyear buildup, and gross margin already sitting above the 65% model. The September guide already points that way, with EPS set to rise 166% year over year, so the target leans on operating momentum the business is showing now, not a rerating.
TIKR’s model sees 76% upside to $149 over the next 4.6 years. Analyze the full Microchip stock valuation on TIKR for free →
Should You Invest in Microchip Technology?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
