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Microchip Technology MCHP reported fourth-quarter fiscal 2025 non-GAAP earnings of 11 cents per share, which beat the Zacks Consensus Estimate by 28.57% and plunged 81.5% year over year.
Net sales of $970.5 million decreased 26.8% year over year and beat the Zacks Consensus Estimate by 0.98%. Sequentially, revenues declined 5.4%. The figure was $10.5 million above the midpoint of Microchip’s guidance.
Following the impressive fiscal fourth-quarter results, Microchip shares were up more than 13% at the time of writing this article. The company provided solid guidance with accelerating inventory write-offs that are expected to boost gross margin. MCHP shares have declined 14.3% compared with the Zacks Computer and Technology sector’s fall of 9.1% year to date.
Sales from Mixed-signal Microcontroller, Analog and Other accounted for 49.2%, 27% and 23.8% of net sales, respectively. Revenues from Microcontroller, Analog, FPGA and Other businesses declined sequentially.
Microchip Technology Incorporated price-consensus-eps-surprise-chart | Microchip Technology Incorporated Quote
In terms of channel, direct sales accounted for 55%, while 45% came from distribution.
Geographically, revenues from the Americas, Europe and Asia contributed 29.3%, 21.6% and 49.2% to net sales, respectively.
Non-GAAP gross margin contracted 830 basis points (bps) on a year-over-year basis to 52%.
Non-GAAP research & development expenses, as a percentage of net sales, increased 730 bps year over year to 23.7%. Non-GAAP selling, general & administrative expenses, as a percentage of net sales, jumped 330 bps to 14.3%.
Non-GAAP operating expenses, as a percentage of net sales, were 38% compared with 27.4% reported in the year-ago quarter.
Consequently, the non-GAAP operating margin declined to 14% compared with 32.9% reported in the year-ago quarter.
As of March 31, 2025, cash and short-term investments totaled $771.7 million compared with $586 million as of Dec. 31, 2024.
As of March 31, 2025, total debt (long-term plus current portion) was $5.63 billion compared with $6.75 billion as of Dec. 31, 2024.
Inventory at the end of March 2025 was 251 days, down from 266 days at the end of December 2024.
For the fiscal fourth quarter, cash flow from operating activities was $205.9 million compared with $43.6 million in the previous quarter.
Free cash flow was $191.7 million compared with $22.8 million in the previous quarter.
Microchip returned roughly $244.8 million to shareholders through dividends in the fiscal fourth quarter. The company announced a quarterly dividend of 45.5 cents per share.
Microchip expects net sales to be $1.02-$1.07 billion for the first quarter of fiscal 2026.
Non-GAAP earnings are anticipated between 18 cents per share and 26 cents per share. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)
Non-GAAP gross margin is anticipated between 52.2% and 54.2%.
Non-GAAP operating expenses are projected to be 33.4-34.8%.
Non-GAAP operating margin is anticipated to be 17.4-20.8%.
For fiscal 2026, Microchip expects capital expenditure of roughly $100 million.
Microchip currently carries a Zacks Rank #3 (Hold).
Chegg CHGG, Broadcom AVGO, and TaskUs TASK are some better-ranked stocks in the broader Zacks Computer & Technology sector. Each of the three stocks carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Chegg is set to report first-quarter 2025 results on May 12. Broadcom is set to report its second-quarter fiscal 2025 results on June 5. Marvell Technology is set to report its first-quarter fiscal 2026 results on May 29.
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This article originally published on Zacks Investment Research (zacks.com).
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