Microchip’s Q4 Beats Estimates; Raises Q1 Guidance to $1.26B Revenue, $0.50 EPS
Microchip reported Q4 revenue of $1.19 billion, beating consensus by 0.6% with 15.6% year-on-year growth, and adjusted EPS of $0.44 topped estimates by 2.7% while operating margin climbed to 12.8% from 3% last year. For Q1 CY2026 the company guided to $1.26 billion revenue and $0.50 EPS at midpoints, above forecasts, underpinned by normalized distribution inventories and strength in networking, data center and FPGA lines.
1. Q4 Performance and Margin Expansion
Microchip delivered Q4 revenue of $1.19 billion versus $1.18 billion expected and adjusted EPS of $0.44 versus $0.43, driven by 15.6% year-over-year sales growth. Operating margin expanded to 12.8% from 3% a year earlier, supported by outperformance in networking, data center, FPGA product lines and ongoing inventory correction in distribution.
2. Analyst Questions on Inventory, Margins and Capital Allocation
Analysts probed sustainability of above-seasonal growth amid corrected distribution inventories and strong backlog, timeline for achieving long-term gross margin targets, customer restocking dynamics, sustainability of licensing revenue and the prioritization of debt reduction over share repurchases.
3. Raised Q1 Guidance and Key Catalysts
The company set Q1 CY2026 revenue guidance at $1.26 billion and EPS at $0.50 midpoints, topping estimates of $1.23 billion and $0.49, reflecting demand in automotive Ethernet, industrial connectivity and defense markets. Key drivers to watch include customer inventory normalization, mix shift toward higher-margin products and adoption in aerospace, data center and industrial segments.