Chip Inventory Down! Microchip Beats Forecast, Shares Surge 7%
On May 8 (local time), Microchip Technology Inc., a leading provider of microcontrollers (MCUs) and analog semiconductors, reported financial results for the fourth quarter of fiscal year 2025 (ended March 31, 2025), surpassing market expectations. The company also issued a stronger-than-anticipated outlook for the first quarter of fiscal year 2026. Executives stated that Microchip has emerged from the bottom of the current industry downcycle, with a significant reduction in excess chip inventory and more aggressive inventory normalization expected in the coming quarter. Following the announcement, Microchip's stock surged 7.43% in after-hours trading to $52.79.
In Q4 FY2025, Microchip recorded revenue of $970.5 million, representing a 26.8% year-over-year decline and a 5.4% sequential drop—slightly below analysts' consensus estimate of $962.8 million. Non-GAAP net income was $61.4 million, with earnings per share (EPS) of $0.11, exceeding the midpoint of the company's guidance range ($0.05–$0.15), though still down from $0.57 in the same quarter last year. Gross margin stood at 52.0%.
Steve Sanghi, CEO and President of Microchip, commented:“Our Q4 revenue of $970.5 million exceeded the midpoint of our guidance, signaling that we have likely moved past the bottom of the current industry cycle. We've taken decisive actions under our nine-point plan—enhancing manufacturing efficiency, optimizing inventory levels, and sharpening strategic priorities—to improve operational performance. As we exit a challenging fiscal year, we are confident that Microchip is well-positioned to seize emerging growth opportunities in a dynamic market environment.”
Sanghi highlighted the success of the company's inventory reduction strategy as a major achievement in Q4. Total inventory value decreased by $62.8 million, with days of inventory on hand dropping by 4 days to 33 days. On the balance sheet, inventory days were reduced by 15 compared to the end of December 2024. He added that further reductions are expected in the June quarter as manufacturing optimizations near completion.
“During the fourth quarter, we achieved a positive book-to-bill ratio for the first time in nearly three years, marking a clear inflection point,” Sanghi noted. “Order volume in April exceeded that of any month in the March quarter. Despite ongoing geopolitical uncertainty and potential tariff impacts, we forecast net sales for the first quarter of FY2026 to range between $1.02 billion and $1.07 billion. Our priority is to convert this positive momentum into long-term value while maintaining our commitment to dividends and sustainable growth.”
