Microchip to Report Q3 Earnings: What's in Store for the Stock?

Microchip Technology MCHP is set to report third-quarter fiscal 2026 results on Feb. 5, 2026.

Microchip expects net sales to be in the range of $1.109-$1.149 billion for the third quarter of fiscal 2026, implying roughly 1% sequential decline in the midpoint. The Zacks Consensus Estimate for third-quarter fiscal 2026 revenues is pegged at $1.19 billion, indicating year-over-year growth of 15.5%.

Non-GAAP earnings per share are anticipated to be between 34 cents and 40 cents. The consensus mark for fiscal third-quarter earnings is pegged at 43 cents per share, revised upward over the past seven days, suggesting 115% year-over-year growth.

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

Let us see how things might have shaped up for MCHP prior to the announcement:

Key Factors to Note for MCHP’s Q3 Results

Microchip has been going through a transitional phase where the company has been able to reduce its inventory levels from its peak of 266 days to 199 days in the second quarter of fiscal 2026, in a span of three quarters. This inventory correction is likely to have persisted in the to-be-reported quarter, bringing the inventory to healthy levels. MCHP’s focus on reducing factory underutilization is expected to have remained a tailwind for the to-be-reported quarter.

MCHP’s distributor inventory level was reduced by two days to 27 days in the second quarter of fiscal 2026. In the previous quarters, MCHP had increased its capital expenditure to expand its production capabilities for a selective ramp-up. Now the company has reduced its planned capital investments, keeping sufficient manufacturing capacity to support the growth of its production capabilities. This is expected to have proved to be a tailwind in the third quarter of fiscal 2026.

Strong traction in Gen 4 and Gen 5 data center products, as MCHP’s customers are going through inventory correction, is likely to have reflected positively in the to-be-reported quarter. Strength in AI data center build-out, propelled by rising demand from hyperscalers committing to large-scale deployment, is likely to drive MCHP’s third-quarter fiscal 2026 results.

Microchip benefits from strong design wins, particularly in the industrial, aerospace, and automotive sectors, which is noteworthy. The company’s focus on high-growth areas like aerospace, defence, and AI, with innovations in microcontrollers, PCIe switches, and AI tools, is boosting adoption across automotive, industrial, and AI/ML markets. This is expected to have boosted revenues in the to-be-reported quarter.

Earnings Whispers for MCHP Stock

Our proven model predicts an earnings beat for MCHP Holding this earnings season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat, which is the case here.

Earnings ESP, which represents the difference between the Most Accurate Estimate ($0.43 per share) and the Zacks Consensus Estimate ($0.43 per share), is +1.34%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: MCHP sports a Zacks Rank #1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks With Favorable Combination

Here are some stocks you may want to consider in the broader Zacks Computer and Technology sector, as our model shows that these, too, have the right combination of elements to post an earnings beat:

IPG Photonics IPGP has an Earnings ESP of +15.08% and sports a Zacks Rank #1 at present. IPG Photonics shares have surged 22.1% in the trailing six-month period. IPG Photonics is set to report fourth-quarter 2025 results on Feb. 12.

Lattice Semiconductor LSCC has an Earnings ESP of +3.67% and a Zacks Rank #2 at present. Shares of Lattice Semiconductor have gained 70.1% in the trailing six-month period. Lattice Semiconductor is set to report fourth-quarter 2025 results on Feb. 10.

Cloudflare Inc. NET has an Earnings ESP of +0.20% and a Zacks Rank #3 at present. Shares of Cloudflare have lost 12.6% in the trailing six-month period. Cloudflare is slated to report fourth-quarter 2025 results on Feb. 10.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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

Zacks Investment Research