Executive Summary
Microchip Technology reported QQ4 2025 revenue of $970.5 million, down 26.8% year over year and 5.4% quarter over quarter, with a gross margin of 51.6% ($501.1 million gross profit). Despite a solid gross margin, operating income was negative at -$100.3 million and net income declined to -$154.6 million, translating to an EPS of -$0.29. The EBITDA of $86.6 million yields an EBITDA margin of approximately 8.9%, underscoring cost and mix pressures in a softer demand environment.
From a liquidity and capital allocation perspective, the balance sheet illustrates a substantial debt load: total debt of $5.781 billion and net debt of $4.894 billion, against cash and cash equivalents of $771.7 million. Operating cash flow stood at $205.9 million with free cash flow of $191.7 million for QQ4 2025. The company also reported meaningful financing activity including common stock issued of $1.4695 billion and dividends paid of $244.8 million, contributing to a net cash increase of $185.7 million for the period. Absent formal near term guidance in the filing, the key questions for investors center on the trajectory of profitability, debt reduction, and how the company will translate its solid gross margin into sustained earnings growth.
Looking forward, the near-term environment remains challenged by demand cyclicality in the semiconductor market and a high leverage profile. However, Microchip’s diversified product portfolio spanning microcontrollers, embedded processors, memory, and foundry/assembly services positions it to address automotive, industrial, and IoT opportunities. The critical questions are whether the company can stabilize revenue, improve operating leverage, and deleverage to restore shareholder value while continuing to invest in growth initiatives.
Key Performance Indicators
QoQ: -5.41% | YoY:-26.80%
QoQ: -10.74% | YoY:-36.56%
QoQ: -424.60% | YoY:-139.57%
QoQ: -188.43% | YoY:-199.94%
QoQ: -190.87% | YoY:-200.00%
Key Insights
Revenue performance: QQ4 2025 revenue of $970.5 million, YoY decline of 26.8% and QoQ decline of 5.4%.
Gross profit: $501.1 million; gross margin 51.63% (vs. prior periods in the filing with similar margins around the mid-50s).
Operating income: -$100.3 million; operating margin -10.33% (YoY and QoQ deterioration driven by lower revenue and fixed cost absorption).
Net income and EPS: net income -$154.6 million; net margin -15.93% (EPS -$0.29, diluted -$0.29).
EBITDA and margins: EBITDA $86.6 mil...
Financial Highlights
Revenue performance: QQ4 2025 revenue of $970.5 million, YoY decline of 26.8% and QoQ decline of 5.4%.
Gross profit: $501.1 million; gross margin 51.63% (vs. prior periods in the filing with similar margins around the mid-50s).
Operating income: -$100.3 million; operating margin -10.33% (YoY and QoQ deterioration driven by lower revenue and fixed cost absorption).
Net income and EPS: net income -$154.6 million; net margin -15.93% (EPS -$0.29, diluted -$0.29).
EBITDA and margins: EBITDA $86.6 million; EBITDA margin ~8.92%.
Cash flow: net cash from operating activities $205.9 million; free cash flow $191.7 million; capex $14.2 million; operating cash flow to sales ratio near 21% for QQ4 2025.
Balance sheet and liquidity: cash and equivalents $771.7 million; total debt $5.781 billion; long-term debt $5.7455 billion; net debt $4.8944 billion; total assets $15.3746 billion; total stockholders’ equity $7.0783 billion.
Capital allocation and leverage: common stock issued $1.4695 billion; dividends paid $244.8 million; debt repayments of $1.1184 billion; net financing activity shows positive cash flow despite large debt load.
Valuation context: price-to-sales around 26.81x; price-to-earnings is negative (due to loss in QQ4 2025).
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
970.50M |
-26.80% |
-5.41% |
| Gross Profit |
501.10M |
-36.56% |
-10.74% |
| Operating Income |
-100.30M |
-139.57% |
-424.60% |
| Net Income |
-154.60M |
-199.94% |
-188.43% |
| EPS |
-0.29 |
-200.00% |
-190.87% |
Key Financial Ratios
operatingProfitMargin
-10.3%
dividendPayoutRatio
-155.9%
priceEarningsRatio
-41.48
Management Commentary
Transcript not provided in the input data. In a typical Microchip earnings call, management commentary would cover demand signals from automotive and industrial end markets, product mix evolution toward higher-margin embedded solutions, cost control initiatives, and progress on the roadmap for memory licensing and foundry services. Given the QQ4 2025 results, anticipated themes would likely include discussion of gross margin resilience despite lower revenue, steps to enhance operating leverage, investment in R&D for MCU/MPU platforms, and strategic actions to address the heavy debt load. No direct quotes are available from the supplied data to anchor this section.
Forward Guidance
No formal forward guidance is disclosed in the provided QQ4 2025 filing. Based on the revenue trajectory and profitability mix, a cautious near-term outlook is prudent. Potential drivers for improvement include: (1) stabilization or modest growth in end-market demand from automotive, industrial automation, and IoT applications that rely on Microchip’s MCU/embedded processing and analog portfolios; (2) favorable product mix toward higher-margin solutions and successful cost-structure optimization to improve operating leverage; (3) continued monetization of licensing opportunities for SuperFlash and other non-volatile memory technologies, and (4) gradual deleveraging through a combination of free cash flow generation and disciplined capital allocation. Investors should monitor: order intensity, supply chain dynamics, pricing/mix discipline, raw material costs, foreign exchange impacts, and the trajectory of debt reduction versus cash generation.