Microchip Q2 FY2027 Revenue Rises 42%, Q3 Midpoint at $1.606 Billion

Microchip Technology Inc. (NASDAQ: MCHP) reported fiscal second-quarter 2027 revenue of $1.622 billion, up 42.2% from a year earlier and 9.2% sequentially, while sharply higher margins drove a 177.1% increase in non-GAAP diluted earnings per share. The company’s third-quarter guidance points to revenue of $1.606 billion at the midpoint, slightly below the second-quarter level.

Non-GAAP gross margin reached 66.5%, an increase of 980 basis points year over year and 267 basis points from the prior quarter. Non-GAAP operating margin rose to 39.5%, up 1,516 basis points year over year and 437 basis points sequentially. Non-GAAP diluted EPS was $0.97, compared with $0.35 a year earlier and $0.76 in the preceding quarter.

Adjusted free cash flow totaled $377.1 million, equivalent to 23.3% of net sales. Adjusted EBITDA for the trailing 12 months was $2.162 billion, or 38.6% of trailing sales. Microchip’s ratio of net debt to adjusted trailing-12-month EBITDA declined to 2.36 times in September 2026 from 2.85 times in the prior quarter.

Data center portfolio targets $1 billion

Microchip is focusing its organic growth efforts on total system solutions and long-term technology trends across microcontrollers, analog products, connectivity and networking, computing, and artificial intelligence and machine learning.

The company expects revenue from its total data center portfolio to grow 69.3% year over year to $1 billion in calendar 2026. That portfolio spans PCIe switches and retimers, storage and memory controllers, Ethernet products, power-management components, embedded-control products, security solutions, and timing and synchronization devices.

Microchip also identified single-pair Ethernet as a growth area, estimating a $4 billion serviceable available market across automotive, aerospace, robotics, industrial vehicles, building controls and other applications. The company said the opportunity includes replacing billions of legacy network nodes.

Fiscal third-quarter outlook

For fiscal 2027’s third quarter, Microchip’s guidance midpoint calls for GAAP revenue of $1.6055 billion. At that level, the company expects a non-GAAP gross margin of 64.5%, an operating margin of 37.75% and diluted EPS of $0.91. Operating expenses are projected at 26.75% of revenue.

The outlook compares with second-quarter revenue of $1.6215 billion, a 66.5% non-GAAP gross margin and a 39.5% non-GAAP operating margin. Microchip’s longer-term model targets industry growth plus contributions from its newer growth pillars, alongside gross margin of 65%, operating margin of 40% and operating expenses equal to 25% of revenue through industry cycles.

Capital returns and risks

Microchip returned $247.6 million through common dividends during the quarter and announced a dividend of $0.455 per share for the fiscal third quarter. From fiscal 2019 through the second quarter of fiscal 2027, the company generated about $14.7 billion of adjusted free cash flow, paid down $7.3 billion of debt, distributed roughly $5.6 billion in dividends and repurchased approximately $2.4 billion of shares.

The company cautioned that its outlook remains exposed to changes in global economic conditions, inflation, interest rates, tariffs and geopolitical tensions. Other risks include shifts in customer demand and order patterns, inventory and manufacturing-capacity management, pricing pressure, reliance on third-party wafer foundries, foreign-exchange movements, acquisition-related matters, tax changes and potential disruptions affecting customers, suppliers or transportation networks.