second quarter of fiscal 2027
Filed Nov 5, 2026Microchip reported second-quarter fiscal 2027 net sales of $1.622 billion, up 42.2% year over year and 9.2% sequentially, with GAAP diluted EPS of $0.68 and non-GAAP diluted EPS of $0.97.
Net sales exceeded the August 6, 2026 guidance midpoint, year-over-year growth was 42.2%, profitability expanded substantially from the prior-year quarter, and operating cash flow and free cash flow increased sharply. December-quarter guidance calls for modest sequential revenue movement following $53 million of infrequent September-quarter revenue items.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Q2 fiscal 2027 net salesGAAP | $1.62B | 9.2% | 42.2% |
| Q2 fiscal 2027 gross profitGAAP | $1.07B | – | – |
| Q2 fiscal 2027 gross profit percentageGAAP | 65.9% | – | – |
| Q2 fiscal 2027 gross profitnon-GAAP | $1.08B | – | – |
| Q2 fiscal 2027 gross profit percentagenon-GAAP | 66.5% | – | – |
| Q2 fiscal 2027 research and development expensesGAAP | $318.5M | – | – |
| Q2 fiscal 2027 research and development expensesnon-GAAP | $274.5M | – | – |
| Q2 fiscal 2027 selling, general and administrative expensesGAAP | $186.9M | – | – |
| Q2 fiscal 2027 selling, general and administrative expensesnon-GAAP | $163.4M | – | – |
| Q2 fiscal 2027 amortization of acquired intangible assetsGAAP | $90.2M | – | – |
| Q2 fiscal 2027 special charges and other, netGAAP | $7.9M | – | – |
| Q2 fiscal 2027 operating expensesGAAP | $603.5M | – | – |
| Q2 fiscal 2027 operating expensesnon-GAAP | $437.9M | – | – |
| Q2 fiscal 2027 operating incomeGAAP | $464.5M | – | – |
| Q2 fiscal 2027 operating income marginGAAP | 28.6% | – | – |
| Q2 fiscal 2027 operating incomenon-GAAP | $639.9M | – | – |
| Q2 fiscal 2027 operating income marginnon-GAAP | 39.5% | – | – |
| Q2 fiscal 2027 other expense, netGAAP | −$47M | – | – |
| Q2 fiscal 2027 income tax provisionGAAP | $16.1M | – | – |
| Q2 fiscal 2027 income tax rateGAAP | 3.9% | – | – |
| Q2 fiscal 2027 income tax provisionnon-GAAP | $33.7M | – | – |
| Q2 fiscal 2027 income tax ratenon-GAAP | 5.7% | – | – |
| Q2 fiscal 2027 net incomeGAAP | $401.4M | – | – |
| Q2 fiscal 2027 net income attributable to common stockholdersGAAP | $373.6M | – | – |
| Q2 fiscal 2027 net incomenon-GAAP | $559.2M | – | – |
| Q2 fiscal 2027 diluted net income per common shareGAAP | $0.68 | – | – |
| Q2 fiscal 2027 diluted net income per common sharenon-GAAP | $0.97 | – | – |
| Q2 fiscal 2027 diluted common shares outstandingGAAP | 550.6M | – | – |
| Q2 fiscal 2027 diluted common shares outstandingnon-GAAP | 574.4M | – | – |
| Q2 fiscal 2027 cash flow from operationsGAAP | $419.2M | – | – |
| Q2 fiscal 2027 capital expendituresGAAP | −$23.1M | – | – |
| Q2 fiscal 2027 free cash flowother | $396.1M | – | – |
| Six months ended September 30, 2026 net salesGAAP | $3.11B | – | – |
| Six months ended September 30, 2026 operating incomeGAAP | $801.3M | – | – |
| Six months ended September 30, 2026 net income attributable to common stockholdersGAAP | $575.6M | – | – |
| Six months ended September 30, 2026 non-GAAP net incomenon-GAAP | $997.8M | – | – |
| Six months ended September 30, 2026 diluted net income per common shareGAAP | $1.05 | – | – |
| Six months ended September 30, 2026 non-GAAP diluted net income per common sharenon-GAAP | $1.74 | – | – |
| Six months ended September 30, 2026 cash flow from operationsGAAP | $930.7M | – | – |
| Six months ended September 30, 2026 free cash flowother | $893.7M | – | – |
Third Quarter Fiscal Year 2027 outlook
- Revenue$1.573 to $1.638 billion
- Gross marginGAAP 62.9% to 63.9%; Non-GAAP 64.0% to 65.0%
- Operating expensesGAAP 36.7% to 37.4%; Non-GAAP 26.5% to 27.0%
- NoteGAAP operating income: 25.5% to 27.2%; Non-GAAP operating income: 37.0% to 38.5%.
- NoteGAAP other expense, net: $47.7 to $48.3 million; Non-GAAP other expense, net: $47.5 to $48.5 million.
- NoteGAAP income tax provision: $67.1 to $91.3 million; Non-GAAP income tax provision: $34.7 to $37.9 million.
- NoteGAAP net income: $285.9 to $305.8 million; Non-GAAP net income: $498.8 to $545.1 million.
- NoteGAAP net income attributable to common stockholders: $258.1 to $278.0 million; Non-GAAP net income attributable to common stockholders: $498.8 to $545.1 million.
- NoteGAAP diluted net income per common share: $0.47 to $0.50; Non-GAAP diluted net income per common share: $0.87 to $0.95.
- NoteGAAP diluted common shares outstanding: Approximately 551.0 to 552.0 million shares; Non-GAAP diluted common shares outstanding: Approximately 574.8 to 575.8 million shares.
- NoteCapital expenditures for the quarter ending December 31, 2026 are expected to be about $35 million.
- NoteCapital expenditures for all of fiscal 2027 are expected to be approximately $100 million.
- NoteNet sales are expected to be between down 3% and up 1% sequentially, with a midpoint of down 1%.
- NoteThe midpoint of December-quarter guidance represents year-over-year growth of approximately 35.4%.
Capital returns
- Returned approximately $247.6 million to common stockholders in the September quarter through dividends.
- Quarterly cash dividend on common stock of 45.5 cents per share, payable on December 8, 2026 to stockholders of record on November 23, 2026.
- Quarterly cash dividend on the 7.50% Series A Mandatory Convertible Preferred Stock of $18.750 per share, which represents $0.9375 per depositary share, payable on December 15, 2026 to stockholders of record on December 1, 2026.
What drove it
- Management cited broad-based growth across end markets, driven by industrial and data center applications.
- PCIe Gen6 switch and retimer design wins grew to 24 to date from 12 at the end of the June quarter.
- Management said bookings remained robust and book-to-bill was well above one.
- Management cited product and technology introductions across data center, aerospace and defense, automotive and industrial applications.
- Non-GAAP operating expenses grew well below net sales, according to the CFO.
- Microchip completed the Hailo acquisition on September 17th and the Vorago Technologies acquisition on October 8th.
Concerns
- Management expects normal seasonal factors in the December quarter.
- September-quarter revenue included about $53 million of infrequent revenue items that do not repeat in the December quarter.
- Guidance excludes potential GAAP gains or charges from the ongoing evaluation of restructuring activities, including the sale of the Fab 2 wafer fabrication facility in Tempe, Arizona.
- GAAP operating-expense guidance excludes certain Special Charges and Other, net that may be incurred during the quarter ending December 31, 2026.
- Lead times are lengthening across the supply chain, and the company is working to expand capacity and secure additional wafer allocation.
- Inventories increased to $1,117.3 million from $1,035.4 million at March 31, 2026.
What to watch
- December-quarter net sales within the $1.573 to $1.638 billion guidance range and the stated sequential range of down 3% to up 1%.
- Gross-margin performance versus GAAP guidance of 62.9% to 63.9% and non-GAAP guidance of 64.0% to 65.0%.
- Whether bookings and book-to-bill remain robust as lead times lengthen.
- The pace of capacity expansion and wafer-allocation availability.
- Integration and expected benefits from the Hailo and Vorago Technologies acquisitions.
- Capital expenditures versus expected spending of about $35 million for the December 2026 quarter and approximately $100 million for fiscal 2027.
Balance sheet and cash flow
- Cash and short-term investments were $457.0 million at September 30, 2026, compared with $240.3 million at March 31, 2026.
- Inventories were $1,117.3 million at September 30, 2026, compared with $1,035.4 million at March 31, 2026.
- Long-term debt was $5,517.2 million at September 30, 2026, compared with $5,496.4 million at March 31, 2026.
- Stockholders' equity was $6,640.8 million at September 30, 2026, compared with $6,432.4 million at March 31, 2026.
- Q2 fiscal 2027 GAAP cash flow from operations was $419.2 million and free cash flow was $396.1 million.
- Six months ended September 30, 2026 GAAP cash flow from operations was $930.7 million and free cash flow was $893.7 million.
Analysis
Microchip delivered a strong second quarter of fiscal 2027. Net sales were $1,621.5 million, up 42.2% from $1,140.4 million in the prior-year quarter and up 9.2% sequentially. The company stated that the August 6, 2026 guidance midpoint was $1.604 billion. Management attributed the growth to broad-based end-market demand led by industrial and data center applications, while stating that bookings remained robust and book-to-bill was well above one.
Profitability improved materially from the prior-year period. GAAP gross profit percentage was 65.9%, compared with 55.9%, and GAAP operating income was $464.5 million, compared with $88.9 million. Non-GAAP gross profit percentage was 66.5%, compared with 56.7%, while non-GAAP operating income rose to $639.9 million from $277.2 million. The CFO said non-GAAP operating expenses grew well below net sales, supporting the higher profitability.
GAAP net income attributable to common stockholders was $373.6 million, or $0.68 per diluted share, compared with $13.9 million, or $0.03 per diluted share. Non-GAAP net income was $559.2 million, or $0.97 per diluted share, compared with $199.1 million, or $0.35 per diluted share. Cash generation also strengthened: operating cash flow was $419.2 million and free cash flow was $396.1 million, compared with $88.1 million and $51.6 million, respectively. Cash and short-term investments were $457.0 million, while long-term debt was $5,517.2 million at September 30, 2026.
Capital allocation included approximately $247.6 million returned to common stockholders through dividends and a declared common-stock quarterly dividend of 45.5 cents per share. The company also completed the Hailo and Vorago Technologies acquisitions. Management said its existing manufacturing footprint enables growth with modest incremental capital investment, and forecast capital expenditures of about $35 million for the December 2026 quarter and approximately $100 million for fiscal 2027.
For the third quarter of fiscal 2027, Microchip guided net sales to $1.573 to $1.638 billion, with GAAP gross profit of 62.9% to 63.9% and non-GAAP gross profit of 64.0% to 65.0%. Management expects net sales to range from down 3% to up 1% sequentially, with a midpoint of down 1%, and noted that about $53 million of infrequent revenue items in the September quarter will not repeat. Management nevertheless characterized the midpoint as approximately 35.4% year-over-year growth and 5% to 7% better than normal seasonality after considering the infrequent revenue items.
Management, verbatim
Our September quarter net sales were above the high end of our guidance, increasing 42.2% year over year and 9.2% sequentially to $1.622 billion.
Steve Sanghi, President and Chief Executive Officer
Bookings remained robust, with book-to-bill well above one, consistent with recent quarters.
Steve Sanghi, President and Chief Executive Officer
Our September quarter results reflect ongoing operational improvements, with non-GAAP operating expenses growing well below net sales and supporting higher profitability.
Eric Bjornholt, Corporate Senior Vice President and Chief Financial Officer
Not in the filing
stated, not guessed- Prior-quarter dollar values for reported Q2 metrics were not provided.
- Financial revenue or profit disclosures by operating segment were not provided.
- Share repurchase activity was not provided.
- A previous outlook section was not provided; therefore, no comparison of actual results with prior guidance is included.
- GAAP and non-GAAP tax-rate guidance for the third quarter of fiscal 2027 was not provided.
- Debt maturities, interest expense, and net debt were not provided.
Written by an AI language model from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure is checked against the filing text, and a metric the filing does not print, or whose value, prior period and change do not add up, is dropped from the metrics. The model can still misread a table, in the metrics or in the text, so check a number in the filing before you rely on it. Consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.