Microchip Technology reported a Q4 FY2025 net sales of $970.5 million, a sequential decline of 5.4% and a year-over-year drop of 26.8%. The GAAP net loss was $156.8 million (-0.29 per share), while non-GAAP net income was $61.4 million (+$0.11 per diluted share). The quarter reflected a pronounced inventory correction following a multi-year post-COVID cycle, with gross margins around mid-50s (GAAP 51.6%, non-GAAP 52.0%) and operating income negative on a GAAP basis but meaningfully positive on a non-GAAP basis (non-GAAP operating margin ~14% of revenue). Management framed the results as a bottoming event in a broader nine-point recovery plan designed to resize manufacturing, reduce inventory, reorient megatrends, and restore a premium growth trajectory. The company guided for a June quarter net sales of about $1.045 billion (±$25 million) with non-GAAP gross margin in the 52.2%–54.2% range and non-GAAP operating margin of roughly 17.4%–20.8%, implying significant leverage as inventory destocking accelerates. Management signaled a durable path to margin expansion through lower underwriting and reserve charges, improved utilization as inventory declines, and a continued emphasis on AI/ML, embedded AI tooling, and advanced peripherals. The call also highlighted strategic shifts (AI replacing 5G in megatrends; Network and Connectivity replacing ADAS; China strategy realignment) and robust product pipeline (Switchtec PCIe switches, MPLAB AI coding assistant, PIC64, 10BASE-T1S). Looking ahead, Microchip’s stated long-term non-GAAP gross margin target is 65%, with capital expenditures guided to be ≤$100 million for fiscal 2026, and debt reduction/credit metrics improving following a $1.485 billion mandatory convertible preferred issue. Investors should monitor the pace of inventory relief, distributor sell-through versus sell-in, ramp in end-market demand (notably defense, industrial, and AI-related segments), and potential tariff/geo-political impacts on global demand. The company’s balance sheet remains strong on a post-restructuring basis, with cash of $771.7 million and net debt down meaningfully after deleveraging actions, though total inventory sits at a elevated level at 251 days at quarter-end.