Executive Summary
Microchip Technology reported QQ3 2025 results underscored by a meaningful revenue level of $1.026 billion and a robust gross margin, but profitability remained pressured by operating expenses and timing-related dynamics. Revenue declined 41.89% year-over-year and 11.84% quarter-over-quarter, resulting in a net loss of $53.6 million and an EPS of -$0.0997 for the quarter. Despite softness in near-term earnings, the company generated healthy operating cash flow of $271.5 million and free cash flow of $253.4 million, supporting a cash balance of $586 million at period end.
The balance sheet remains heavily leveraged with total debt of $6.784 billion and net debt of approximately $6.198 billion, against total equity of about $6.031 billion and cash + short-term investments of $586 million. Leverage ratios are elevated (debt-to-capital ~0.53; interest coverage ~0.50), signaling a material dependence on ongoing cash flow to service debt. However, operating cash generation and a sizable first-lien cash cushion provide a degree of financial flexibility in a cyclical semiconductor environment.
Looking ahead, management guidance for QQ4 2025 is not provided in the input; thus the outlook rests on industry trends in embedded microcontrollers, automotive, and industrial applications, alongside Microchip’s ongoing product portfolio optimization and cost discipline. Investors should monitor (i) early signs of end-market stabilization in automotive/industrial segments, (ii) the pace of margin recovery through mix and cost actions, (iii) any deleveraging or capital allocation moves, including potential buybacks given the current leverage levels, and (iv) liquidity runway given working capital dynamics and capex cadence.
Key Performance Indicators
QoQ: -11.84% | YoY:-41.89%
QoQ: -16.02% | YoY:-49.88%
QoQ: -78.92% | YoY:-94.16%
QoQ: -168.37% | YoY:-112.79%
QoQ: -166.47% | YoY:-112.78%
Key Insights
Revenue: $1,026.0 million in QQ3 2025, down 41.89% YoY and 11.84% QoQ. Gross Profit: $561.4 million; Gross Margin ~54.72% (561.4 / 1026.0). Operating Income: $30.9 million; Operating Margin ~3.01%. EBITDA: $207.6 million; EBITDA Margin ~20.23%. Net Income: -$53.6 million; Net Margin -5.22%. EPS: -$0.0997. Cash Flow: Operating Cash Flow $271.5 million; Free Cash Flow $253.4 million. Cash at End: $586.0 million. Debt: Total debt $6.784 billion; Net debt $6.198 billion; Equity: ~$6.031 billion. Cur...
Financial Highlights
Revenue: $1,026.0 million in QQ3 2025, down 41.89% YoY and 11.84% QoQ. Gross Profit: $561.4 million; Gross Margin ~54.72% (561.4 / 1026.0). Operating Income: $30.9 million; Operating Margin ~3.01%. EBITDA: $207.6 million; EBITDA Margin ~20.23%. Net Income: -$53.6 million; Net Margin -5.22%. EPS: -$0.0997. Cash Flow: Operating Cash Flow $271.5 million; Free Cash Flow $253.4 million. Cash at End: $586.0 million. Debt: Total debt $6.784 billion; Net debt $6.198 billion; Equity: ~$6.031 billion. Current ratio: 2.25; Quick ratio: 1.232; Cash Ratio: 0.441. Dividends: $244.6 million paid; Dividend Yield ~0.80%; Payout Ratio negative (-4.56%) due to net loss. Valuation/Leverage: Debt-to-Capitalization ~0.53; EV/Revenue and other multiples imply a leveraged cap structure. Key trends: YoY revenue decline, improving free cash flow, cash generation despite net loss, and high inventory/receivables cycles as indicated by DSO ~75 days and DIO ~208 days.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
1.03B |
-41.89% |
-11.84% |
| Gross Profit |
561.40M |
-49.88% |
-16.02% |
| Operating Income |
30.90M |
-94.16% |
-78.92% |
| Net Income |
-53.60M |
-112.79% |
-168.37% |
| EPS |
-0.10 |
-112.78% |
-166.47% |
Key Financial Ratios
operatingProfitMargin
3.35%
operatingCashFlowPerShare
$0.51
freeCashFlowPerShare
$0.47
dividendPayoutRatio
-456%
priceEarningsRatio
-143.57
Management Commentary
No earnings call transcript data provided in the supplied input. As a result, transcript highlights and management quotes could not be extracted from the document. If you can provide the QQ3 2025 earnings call transcript, I can add themes, quotes, and management context by topic (strategy, operations, market conditions, guidance) with precise citations.
Forward Guidance
No formal forward guidance was included in the provided data. In the absence of explicit guidance, the outlook rests on industry drivers (embedded microcontrollers, automotive and industrial electronics, security and connectivity solutions) and Microchip’s ability to improve operating leverage. Scenarios:
- Base case: Modest revenue stabilization in upcoming quarters with gradual operating margin expansion toward the mid-single digits as product mix improves and fixed costs are absorbed. Free cash flow remains positive if working capital moves normalize and capex stays modest.
- Downside risk: Persistent demand softness in key end markets or continued supply chain constraints could delay margin recovery and exert pressure on cash conversion.