We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Can an Expanding Portfolio Help Microchip Stock to Rise in 2026?
Read MoreHide Full Article
Key Takeaways
MCHP expects Q3 FY26 sales of $1.185B, above its prior $1.109-$1.149B guidance range.
Improved inventory conditions and strong December bookings support MCHP's sales outlook.
New AI-ready products and a cost-saving fab restructuring plan are boosting MCHP's prospects.
Microchip Technology (MCHP - Free Report) shares have surged 28% in a year, underperforming the Zacks Semiconductor – Analog and Mixed industry’s return of 28.7% but outperforming the Zacks Computer & Technology sector’s appreciation of 24.7%. The company is suffering from a challenging macroeconomic condition and a high inventory level. Microchip’s channel inventory decreased to 199 days at the end of the second quarter of fiscal 2026, and underutilization stood at $51 million. MCHP expects inventory at the end of the September quarter to be between 195 days and 200 days.
However, the company’s expanding portfolio is expected to boost prospects. Silicon Storage Technology (SST), a subsidiary of MCHP, and United Microelectronics announced the completion of all requirements and release to production of SST’s embedded Superflash Gen 4 with full automotive grade 1 capability on UMC’s 28HPC+foundry process platform.
Microchip also announced the release of its JANPTX family of non-hermetic plastic Transient Voltage Suppressor devices that meet the MIL-PRF-19500 qualification, offering high-reliability protection for aerospace and defense applications. The company also launched a custom-designed software for its MEC1723 Embedded Controller, specifically designed to provide support for NVIDIA DGX Spark personal AI supercomputers.
MEC1723 EC’s capabilities are optimized with the help of this software, which provides for system management of AI workloads on the NVIDIA DGX platform. Apart from managing power sequencing, alerts and system-level energy regulation, the MEC 1723 Embedded Controllers also handle critical firmware operations. The software is designed to support the next generation of notebook and desktop applications across industrial, data center and consumer markets.
AI Investment, Restructuring Plan to Boost MCHP’s Prospects
Microchip benefits from growing AI investments. The company’s Gen 4 and Gen 5 data center products are witnessing strong sales growth. Its new products are expected to gain traction with the launch of the industry's first 3-nanometer-based PCIe Gen 6 switch that powers modern AI infrastructure. These switches offer double bandwidth, lower latency, advanced security and high-density AI connectivity for next-generation cloud and data center performance.
The success of the restructuring plan also bodes well for MCHP’s prospects. The company announced the closure of Fab 2 manufacturing operations in May 2025 and began transferring the process technologies from Fab 2 to Fab 4 in Gresham, OR, and Fab 5 in Colorado Springs, CO. It has paused capital expenditure plans for Fab 4 and Fab 5. Microchip is also right-sizing Fab 4 and Fab 5 through a layoff that will save $25 million annually.
Microchip now expects net sales to be about $1.185 billion for the third quarter of fiscal 2026. The expected net sales figure is well above MCHP’s original guidance range of $1.109 to $1.149 million, provided on Nov. 6, 2025. The company revised its net sales guidance on Dec. 2, 2025, when it expected results to come in at the higher end of its original guidance. MCHP is set to report third-quarter fiscal 2026 results on Feb. 5.
The revised net sales guidance reflects a broad-based recovery in most of Microchip’s end markets, driven by improving inventory conditions at distributors as well as direct customers. The company saw strong bookings in December and expects further improvement in the March quarter.
The Zacks Consensus Estimate for third-quarter fiscal 2026 net sales is pegged at $1.19 billion, indicating a year-over-year increase of 15.5%. The consensus mark for the fiscal third-quarter earnings is pegged at 41 cents per share, up by 3 cents over the past 30 days, indicating a year-over-year jump of 105%.
Microchip Technology Incorporated Price and Consensus
Long-term earnings growth rates for Analog Devices, Ciena, and KLA are currently pegged at 18.5%, 41.75% and 10.6%, respectively. Shares of Analog Devices, Ciena and KLA have surged 37%, 187.2% and 107%, respectively, in the trailing 12-month period.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Can an Expanding Portfolio Help Microchip Stock to Rise in 2026?
Key Takeaways
Microchip Technology (MCHP - Free Report) shares have surged 28% in a year, underperforming the Zacks Semiconductor – Analog and Mixed industry’s return of 28.7% but outperforming the Zacks Computer & Technology sector’s appreciation of 24.7%. The company is suffering from a challenging macroeconomic condition and a high inventory level. Microchip’s channel inventory decreased to 199 days at the end of the second quarter of fiscal 2026, and underutilization stood at $51 million. MCHP expects inventory at the end of the September quarter to be between 195 days and 200 days.
However, the company’s expanding portfolio is expected to boost prospects. Silicon Storage Technology (SST), a subsidiary of MCHP, and United Microelectronics announced the completion of all requirements and release to production of SST’s embedded Superflash Gen 4 with full automotive grade 1 capability on UMC’s 28HPC+foundry process platform.
Microchip also announced the release of its JANPTX family of non-hermetic plastic Transient Voltage Suppressor devices that meet the MIL-PRF-19500 qualification, offering high-reliability protection for aerospace and defense applications. The company also launched a custom-designed software for its MEC1723 Embedded Controller, specifically designed to provide support for NVIDIA DGX Spark personal AI supercomputers.
MEC1723 EC’s capabilities are optimized with the help of this software, which provides for system management of AI workloads on the NVIDIA DGX platform. Apart from managing power sequencing, alerts and system-level energy regulation, the MEC 1723 Embedded Controllers also handle critical firmware operations. The software is designed to support the next generation of notebook and desktop applications across industrial, data center and consumer markets.
AI Investment, Restructuring Plan to Boost MCHP’s Prospects
Microchip benefits from growing AI investments. The company’s Gen 4 and Gen 5 data center products are witnessing strong sales growth. Its new products are expected to gain traction with the launch of the industry's first 3-nanometer-based PCIe Gen 6 switch that powers modern AI infrastructure. These switches offer double bandwidth, lower latency, advanced security and high-density AI connectivity for next-generation cloud and data center performance.
The success of the restructuring plan also bodes well for MCHP’s prospects. The company announced the closure of Fab 2 manufacturing operations in May 2025 and began transferring the process technologies from Fab 2 to Fab 4 in Gresham, OR, and Fab 5 in Colorado Springs, CO. It has paused capital expenditure plans for Fab 4 and Fab 5. Microchip is also right-sizing Fab 4 and Fab 5 through a layoff that will save $25 million annually.
MCHP’s Earnings Estimate Revision Shows Positive Trend
Microchip now expects net sales to be about $1.185 billion for the third quarter of fiscal 2026. The expected net sales figure is well above MCHP’s original guidance range of $1.109 to $1.149 million, provided on Nov. 6, 2025. The company revised its net sales guidance on Dec. 2, 2025, when it expected results to come in at the higher end of its original guidance. MCHP is set to report third-quarter fiscal 2026 results on Feb. 5.
The revised net sales guidance reflects a broad-based recovery in most of Microchip’s end markets, driven by improving inventory conditions at distributors as well as direct customers. The company saw strong bookings in December and expects further improvement in the March quarter.
The Zacks Consensus Estimate for third-quarter fiscal 2026 net sales is pegged at $1.19 billion, indicating a year-over-year increase of 15.5%. The consensus mark for the fiscal third-quarter earnings is pegged at 41 cents per share, up by 3 cents over the past 30 days, indicating a year-over-year jump of 105%.
Microchip Technology Incorporated Price and Consensus
Microchip Technology Incorporated price-consensus-chart | Microchip Technology Incorporated Quote
Zacks Rank & Stocks to Consider
Microchip currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader sector are Analog Devices (ADI - Free Report) , Ciena (CIEN - Free Report) and KLA (KLAC - Free Report) , each of which currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rates for Analog Devices, Ciena, and KLA are currently pegged at 18.5%, 41.75% and 10.6%, respectively. Shares of Analog Devices, Ciena and KLA have surged 37%, 187.2% and 107%, respectively, in the trailing 12-month period.