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.