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ADI vs. MCHP: Which Semiconductor Stock Has an Upside Now?
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Key Takeaways
ADI posted 40% revenue growth, driven by broad-based gains across all end markets.
ADI's data-center revenues surged as optical and power sales each grew more than 100%.
MCHP expects 40.6% year-over-year sales growth at the midpoint for fiscal second-quarter 2027.
Analog Devices (ADI - Free Report) and Microchip Technology (MCHP - Free Report) are two of the largest semiconductor players catering to industrial, automotive, communications, consumer and data center end markets, making their businesses quite diversified. With the recent boom in the semiconductor industry, the question remains: which stock has more upside potential? Let us break down their fundamentals, growth prospects, market challenges and valuation to determine which offers a more compelling investment case.
The Case for ADI Stock
Analog Devices delivered a strong fiscal third-quarter 2026 result, with revenues rising 40% year over year to $4.02 billion, supported by growth across all end markets. ADI’s adjusted operating margin expanded to 50%, while adjusted earnings per share (EPS) jumped 68% to $3.45. Analog Devices expects fourth-quarter revenues of $4.3 billion and adjusted EPS of $3.86 at the midpoint. Broad-based demand, improving profitability and stronger guidance indicate that ADI’s recovery could extend across multiple quarters.
ADI’s industrial business contributed 49% of revenue, which grew 53% year over year and 10% sequentially to $1.97 billion. The growth in this segment was primarily led by automated test equipment, electronic test and measurement, aerospace and defense, and automation. ADI sees longer-term opportunities from factory automation, robotics and physical AI, where increasing sensing, motion-control, power and connectivity requirements can expand semiconductor content.
Analog Devices’ communications revenues surged 84% year over year and 18% sequentially to $654.5 million, with data centers accounting for roughly 80% of the segment. ADI’s optical and power revenue each grew more than 100% year over year, highlighting strong AI infrastructure demand. Management expects continued data-center strength, while the Empower Semiconductor acquisition expands ADI’s power-management capabilities. ADI expects its optical circuit switching revenues to roughly double in fiscal 2026.
ADI’s automotive revenues increased 16% year over year and 14% sequentially to $998.2 million, supported by ADAS, infotainment and electric powertrains. Its hybrid manufacturing model is also improving supply flexibility as demand strengthens. Meanwhile, ADI generated $4.9 billion of free cash flow over the trailing 12 months and returned $5.17 billion to shareholders. Strong cash generation, buybacks and dividends provide additional support as industrial, automotive and AI infrastructure demand recovers.
The Zacks Consensus Estimate for ADI’s fiscal 2026 and 2027 revenues indicates year-over-year growth of 37% and 22%, respectively. The consensus mark for EPS suggests a robust year-over-year improvement of 66% for fiscal 2026 and 25% for fiscal 2027. The earnings estimates for ADI’s fiscal 2026 have been revised upward in the past 60 days.
Image Source: Zacks Investment Research
The Case for MCHP Stock
Microchip is expanding its data-center portfolio as AI infrastructure drives demand for high-speed connectivity and embedded control. PCIe Gen6 design wins reached 14 by September 2026, while the company expects its data-center portfolio to generate about $1 billion in calendar 2026 revenues. Future Gen6 switch and retimer contributions could provide an additional growth catalyst from 2027 onward.
Aerospace and defense remains another important growth avenue, representing 16.7% of June-quarter revenues. Microchip’s business has expanded from roughly $600 million in 2022 to approximately $1 billion, supported by defense inventory rebuilding and multiyear demand. Its radiation-tolerant, radiation-hardened and FPGA products address space and defense applications requiring high reliability, long lifecycles and stringent performance requirements.
Improving bookings, factory utilization and expense discipline are supporting operating leverage as Microchip’s recovery progresses. Management reported its strongest bookings quarter in roughly four years and expects fiscal second-quarter 2027 gross margins of 66-67% and operating margins of 38.5-39.5%. The pending Hailo acquisition could accelerate Microchip’s edge-AI roadmap while adding complementary technology and engineering capabilities.
However, external manufacturing dependence, China exposure and elevated leverage remain important risks. Microchip sources approximately 65% of wafers externally, creating potential bottlenecks if AI-driven demand tightens foundry and assembly capacity. China represents roughly 17-18% of revenue and faces increasing local competition. Meanwhile, net debt was 2.85 times adjusted EBITDA, limiting flexibility for buybacks and larger acquisitions.
For the second quarter of fiscal 2027, Microchip expects net sales between $1.589 billion and $1.618 billion, which suggests sequential growth of 7-9%, with the midpoint implying approximately 40.6% year-over-year growth. The company expects non-GAAP earnings of 91-95 cents per share. The Zacks Consensus Estimate for MCHP’s second-quarter fiscal 2027 earnings indicates year-over-year growth of 162.8%. Estimates have remained unchanged for the past 30 days.
Image Source: Zacks Investment Research
ADI vs. MCHP: Price Performance and Valuation
Year to date, MCHP shares have climbed 17.3% compared with the 41.1% rise in ADI shares.
YTD Performance Chart
Image Source: Zacks Investment Research
On the valuation front, MCHP trades at a P/S multiple of 5.85X, lower than its median of 6.95X. ADI trades at a forward 12-month P/S multiple of 10.22X, lower than its median of 11.22X.
Forward 12-Month (P/S) Valuation Chart
Image Source: Zacks Investment Research
Conclusion: Buy ADI Stock Now
ADI has the stronger overall growth profile, supported by a broader recovery across industrial, automotive and communications markets, accelerating AI infrastructure demand and stronger upward revisions to earnings estimates. While MCHP offers significant recovery potential, its higher external manufacturing dependence, China exposure and leverage create additional execution risks. Given the factors, ADI seems to be a better investment choice at present. ADI carries a Zacks Rank #2 (Buy), while MCHP has a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
View the Zacks #1 Rank List
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ADI vs. MCHP: Which Semiconductor Stock Has an Upside Now?
Key Takeaways
Analog Devices (ADI - Free Report) and Microchip Technology (MCHP - Free Report) are two of the largest semiconductor players catering to industrial, automotive, communications, consumer and data center end markets, making their businesses quite diversified. With the recent boom in the semiconductor industry, the question remains: which stock has more upside potential? Let us break down their fundamentals, growth prospects, market challenges and valuation to determine which offers a more compelling investment case.
The Case for ADI Stock
Analog Devices delivered a strong fiscal third-quarter 2026 result, with revenues rising 40% year over year to $4.02 billion, supported by growth across all end markets. ADI’s adjusted operating margin expanded to 50%, while adjusted earnings per share (EPS) jumped 68% to $3.45. Analog Devices expects fourth-quarter revenues of $4.3 billion and adjusted EPS of $3.86 at the midpoint. Broad-based demand, improving profitability and stronger guidance indicate that ADI’s recovery could extend across multiple quarters.
ADI’s industrial business contributed 49% of revenue, which grew 53% year over year and 10% sequentially to $1.97 billion. The growth in this segment was primarily led by automated test equipment, electronic test and measurement, aerospace and defense, and automation. ADI sees longer-term opportunities from factory automation, robotics and physical AI, where increasing sensing, motion-control, power and connectivity requirements can expand semiconductor content.
Analog Devices’ communications revenues surged 84% year over year and 18% sequentially to $654.5 million, with data centers accounting for roughly 80% of the segment. ADI’s optical and power revenue each grew more than 100% year over year, highlighting strong AI infrastructure demand. Management expects continued data-center strength, while the Empower Semiconductor acquisition expands ADI’s power-management capabilities. ADI expects its optical circuit switching revenues to roughly double in fiscal 2026.
ADI’s automotive revenues increased 16% year over year and 14% sequentially to $998.2 million, supported by ADAS, infotainment and electric powertrains. Its hybrid manufacturing model is also improving supply flexibility as demand strengthens. Meanwhile, ADI generated $4.9 billion of free cash flow over the trailing 12 months and returned $5.17 billion to shareholders. Strong cash generation, buybacks and dividends provide additional support as industrial, automotive and AI infrastructure demand recovers.
The Zacks Consensus Estimate for ADI’s fiscal 2026 and 2027 revenues indicates year-over-year growth of 37% and 22%, respectively. The consensus mark for EPS suggests a robust year-over-year improvement of 66% for fiscal 2026 and 25% for fiscal 2027. The earnings estimates for ADI’s fiscal 2026 have been revised upward in the past 60 days.
Image Source: Zacks Investment Research
The Case for MCHP Stock
Microchip is expanding its data-center portfolio as AI infrastructure drives demand for high-speed connectivity and embedded control. PCIe Gen6 design wins reached 14 by September 2026, while the company expects its data-center portfolio to generate about $1 billion in calendar 2026 revenues. Future Gen6 switch and retimer contributions could provide an additional growth catalyst from 2027 onward.
Aerospace and defense remains another important growth avenue, representing 16.7% of June-quarter revenues. Microchip’s business has expanded from roughly $600 million in 2022 to approximately $1 billion, supported by defense inventory rebuilding and multiyear demand. Its radiation-tolerant, radiation-hardened and FPGA products address space and defense applications requiring high reliability, long lifecycles and stringent performance requirements.
Improving bookings, factory utilization and expense discipline are supporting operating leverage as Microchip’s recovery progresses. Management reported its strongest bookings quarter in roughly four years and expects fiscal second-quarter 2027 gross margins of 66-67% and operating margins of 38.5-39.5%. The pending Hailo acquisition could accelerate Microchip’s edge-AI roadmap while adding complementary technology and engineering capabilities.
However, external manufacturing dependence, China exposure and elevated leverage remain important risks. Microchip sources approximately 65% of wafers externally, creating potential bottlenecks if AI-driven demand tightens foundry and assembly capacity. China represents roughly 17-18% of revenue and faces increasing local competition. Meanwhile, net debt was 2.85 times adjusted EBITDA, limiting flexibility for buybacks and larger acquisitions.
For the second quarter of fiscal 2027, Microchip expects net sales between $1.589 billion and $1.618 billion, which suggests sequential growth of 7-9%, with the midpoint implying approximately 40.6% year-over-year growth. The company expects non-GAAP earnings of 91-95 cents per share. The Zacks Consensus Estimate for MCHP’s second-quarter fiscal 2027 earnings indicates year-over-year growth of 162.8%. Estimates have remained unchanged for the past 30 days.
Image Source: Zacks Investment Research
ADI vs. MCHP: Price Performance and Valuation
Year to date, MCHP shares have climbed 17.3% compared with the 41.1% rise in ADI shares.
YTD Performance Chart
Image Source: Zacks Investment Research
On the valuation front, MCHP trades at a P/S multiple of 5.85X, lower than its median of 6.95X. ADI trades at a forward 12-month P/S multiple of 10.22X, lower than its median of 11.22X.
Forward 12-Month (P/S) Valuation Chart
Image Source: Zacks Investment Research
Conclusion: Buy ADI Stock Now
ADI has the stronger overall growth profile, supported by a broader recovery across industrial, automotive and communications markets, accelerating AI infrastructure demand and stronger upward revisions to earnings estimates. While MCHP offers significant recovery potential, its higher external manufacturing dependence, China exposure and leverage create additional execution risks. Given the factors, ADI seems to be a better investment choice at present. ADI carries a Zacks Rank #2 (Buy), while MCHP has a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.