Executive Summary
Microchip Technology reported QQ1 2026 revenue of $1.0755 billion, marking a sequential rebound (+10.8% QoQ) after a year-over-year decline of 13.4%. The quarter delivered a solid gross margin of 53.6% and an EBITDA of $211.3 million, but the company posted a net loss of $18.6 million, driven by higher interest expense and other non-operating items, with an implied net margin of -1.73% and an EPS of -0.086. Despite the bottom-line softness, the business generated robust operating cash flow of $275.6 million and free cash flow of $257.7 million, underscoring strong working capital and non-cash adjustments, while continuing meaningful capital discipline (capex of $17.9 million) and shareholder-friendly activity (dividends of $270.6 million). The balance sheet shows a material leverage position, with total debt of $5.495 billion and net debt of $4.928 billion, against total equity of $6.858 billion, resulting in a net debt to EBITDA proxy well into the high teens to low twenties range for a quarterly snapshot. The investment thesis hinges on a path to deleveraging, ongoing investment in high-margin MCU and analog portfolios, and a potential rebound in demand as enterprise/industrial and automotive markets recovery cycles progress. Investors should monitor leverage progression, gross margin resilience, and any shifts in product mix that could lift operating and net margins over time.
Key Performance Indicators
QoQ: 10.82% | YoY:-13.36%
QoQ: 15.09% | YoY:-21.74%
QoQ: 132.00% | YoY:-85.35%
QoQ: 87.97% | YoY:-114.39%
QoQ: 70.48% | YoY:-135.83%
Key Insights
Revenue: $1,075.5M; YoY: -13.36%; QoQ: +10.82%
Gross Profit: $576.7M; Gross Margin: 53.62%; YoY: -21.74%; QoQ: +15.09%
Operating Income: $32.1M; Operating Margin: 2.98%; YoY: -85.35%; QoQ: +132.00%
EBITDA: $211.3M; EBITDA Margin: 19.65%
Net Income: -$18.6M; Net Margin: -1.73%; YoY: -114.39%; QoQ: +87.97%
EPS: -$0.086; Diluted EPS: -$0.086; YoY: -135.83%; QoQ: +70.48%
D&A: $171.1M; Interest Expense: $57.4M; Other Income/Expenses Net: -$47.9M; Tax Expense: $2.8M
Cash Flow: Net cash provided by...
Financial Highlights
Revenue: $1,075.5M; YoY: -13.36%; QoQ: +10.82%
Gross Profit: $576.7M; Gross Margin: 53.62%; YoY: -21.74%; QoQ: +15.09%
Operating Income: $32.1M; Operating Margin: 2.98%; YoY: -85.35%; QoQ: +132.00%
EBITDA: $211.3M; EBITDA Margin: 19.65%
Net Income: -$18.6M; Net Margin: -1.73%; YoY: -114.39%; QoQ: +87.97%
EPS: -$0.086; Diluted EPS: -$0.086; YoY: -135.83%; QoQ: +70.48%
D&A: $171.1M; Interest Expense: $57.4M; Other Income/Expenses Net: -$47.9M; Tax Expense: $2.8M
Cash Flow: Net cash provided by operating activities $275.6M; Capex $17.9M; Free Cash Flow $257.7M; Operating Cash Flow Margin not explicitly provided but implied by revenue and costs
Liquidity & Leverage: Cash & Equivalents $566.5M; Total Debt $5.4945B; Net Debt $4.928B; Current Ratio ~2.31x; Quick Ratio ~1.12x; Debt/Equity ~0.80x; Net Debt/EBITDA ~23.3x (quarterly proxy)
Capital Allocation: Dividends Paid $270.6M; Common Stock Issued $12.4M; Net Financing Cash Flow -$443.9M; Net Change in Cash -$205.2M; Cash at End of Period $566.5M
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
1.08B |
-13.36% |
10.82% |
| Gross Profit |
576.70M |
-21.74% |
15.09% |
| Operating Income |
32.10M |
-85.35% |
132.00% |
| Net Income |
-18.60M |
-114.39% |
87.97% |
| EPS |
-0.09 |
-135.83% |
70.48% |
Management Commentary
Transcript highlights not provided in the supplied data. As a result, management quotes and call-by-call insights could not be extracted. If transcript data becomes available, this section should summarize strategic themes (strategy, operations, market conditions), with context and implications for investors.
Forward Guidance
No formal forward guidance was included in the provided data. Sector context suggests ongoing cyclicality in semiconductor demand with potential tailwinds from automotive, IoT, and industrial automation. Key forward-looking factors for Microchip include: (1) achieving operating margin expansion through product mix (MCUs, analog, timing, and security products) and cost discipline; (2) progress on deleveraging to reduce net debt to EBITDA; (3) sustaining or improving R&D efficiency to defend competitive position in embedded controls; (4) managing inventory and working capital to support free cash flow generation. Investors should monitor any updated guidance on revenue trajectory, gross margin targets, and debt optimization, as well as macro indicators for semi cap equipment allocation and end-market demand.