Microchip Technology (MCHP) guided its September quarter to revenue growth of about 40% year over year at the midpoint, marking its seventh consecutive quarter of above-seasonal growth, and said gross margins are expected to hold in the 66.5% range.
Eric Bjornholt, senior vice president and chief financial officer, told analysts at Citi’s 2026 Global TMT Conference on September 9 that bookings remain broad-based across product lines, business units and geographies. He noted that the company has been in a period of growth for some time.
Gross margin guidance includes non-recurring higher licensing revenue at 100% gross margin and pricing adjustments distributed across inventory. The company’s longer-term, through-cycle targets remain at 65% non-GAAP gross margin and 40% non-GAAP operating margin.
Revenue growth has accelerated recently. Microchip’s last twelve months ended with 21% growth, and fiscal 2027 is forecast by analysts to bring a further 36% gain. Gross margins are expected to stay in the 66% to 67% range through fiscal 2027.
Segment performance was highlighted across multiple divisions. Automotive revenue grew roughly 29% year over year, while aerospace and defense now accounts for approximately $1 billion in revenue, or about 17% of the business, up from $600 million in 2022. Aerospace and defense represented just 11% of the business in fiscal 2024 before rising to 17% in fiscal 2025.
Data Center Solutions and the standard product portfolio are each expected to reach about $500 million in calendar years 2025 and 2026, combining for 69% growth in 2026. Production and meaningful revenue contributions for PCIe Gen 6 switches and retimers are expected to begin in calendar 2027, with one program potentially representing a $100 million annual opportunity in 2027. External estimates size the PCIe market at roughly $10 billion and retimers at about $2 billion by 2030.
Bjornholt said the company currently has 14 design wins on PCIe Gen 6 — 12 on switches and two on retimers — and noted that its Gen 6 products are the only ones built on 3-nanometer technology at TSMC.
On manufacturing, Microchip produces 35% of its wafers in-house and outsources 65%. Assembly and test are approximately 70% internal, primarily through facilities in Thailand and the Philippines. The company closed Fab 2 in Arizona last year, which represented 25% of its 8-inch capacity, and relocated tools to Colorado and Oregon. Management believes it can return to peak revenue within its existing fab footprint.
The balance sheet remains strong. Net debt to EBITDA is expected to end below 2.5 times this quarter, distribution inventory stands at low levels around 25 days, the current ratio is 1.92 and debt-to-equity is 0.84.
On the edge AI front, Bjornholt pointed to growing customer demand and said acquisitions such as Hailo will significantly accelerate the company’s product roadmap.
Microchip shares were trading around $73.38, with a P/E of 107 and a PEG ratio of 0.36. Analyst price targets ranged from $80 to $135.
