MCHP Raises Q3 Net Sales Guidance, Shares Rise on Improving Prospects

Microchip Technology MCHP announced on Monday that it expects net sales to be about $1.185 billion for the third quarter of fiscal 2026. The expected net sales figure is well above MCHP’s original guidance of $1.109 to $1.149 million range provided on Nov. 6, 2025. The company revised its net sales guidance on Dec. 2, 2025, when it was expected that results would come in at the higher end of its original guidance. MCHP is set to report third-quarter fiscal 2026 results on Feb. 5.

In terms of the bottom line, Microchip didn’t provide any update on Monday. The company revised its non-GAAP earnings guidance upward on Dec. 2 to 40 cents per share, which was in line with the higher end of the previous guidance range of 34-40 cents per share.

The revised net sales guidance reflects a broad-based recovery in most of Microchip’s end markets, driven by improving inventory conditions at distributors as well as direct customers. The company saw strong bookings in December and expects further improvement in the March quarter.

Microchip shares were up more than 9% at the time of writing this article. MCHP shares have surged 27.7% in a year, outperforming the Zacks Computer & Technology sector’s return of 25%.

MCHP’s Earnings Estimate Revision Shows Positive Trend

The Zacks Consensus Estimate for third-quarter fiscal 2026 net sales is pegged at $1.14 billion, indicating an year-over-year increase of 11.5%. The consensus mark for fiscal third-quarter earnings is pegged at 38 cents per share, unchanged over the past 30 days, indicating year-over-year jump of 90%.

Microchip’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed once, delivering an average surprise of 0.00%.

AI Investment, Restructuring Plan to Boost MCHP’s Prospects

Microchip benefits from growing AI investments. The company’s Gen 4 and Gen 5 data center products are witnessing strong sales growth. Its new products are expected to gain traction with the launch of the industry's first 3-nanometer-based PCIe Gen 6 switch that powers modern AI infrastructure. These switches offer double bandwidth, lower latency, advanced security and high-density AI connectivity for next-generation cloud and data center performance.

The success of the restructuring plan also bodes well for MCHP’s prospects. The company announced the closure of Fab 2 manufacturing operations in May 2025 and began transferring the process technologies from Fab 2 to Fab 4 in Gresham, Oregon and Fab 5 in Colorado Springs, Colorado. It has paused capital expenditure plans for Fab 4 and Fab 5. Microchip is also right-sizing Fab 4 and Fab 5 through a layoff that will save $25 million annually.

Microchip Technology Incorporated Price and Consensus

Zacks Rank & Stocks to Consider

Microchip currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader sector are Micron Technology MU, Ciena CIEN and NVIDIA NVDA, each of which currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rates for Micron Technology, Ciena and NVIDIA are currently pegged at 52.06%, 41.7% and 46.31%, respectively. Shares of Micron Technology, Ciena and NVIDIA have surged 225.3%, 189.8% and 35.7%, respectively, in a year.

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This article originally published on Zacks Investment Research (zacks.com).

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