Microchip Technology Shares Decline 4% Despite Exceeding Q3 Earnings Expectations
CHANDLER, Ariz. — Microchip Technology Incorporated (NASDAQ: MCHP), a leading semiconductor company, reported third-quarter fiscal 2026 results that surpassed analyst forecasts, yet its stock declined by 4% following the announcement.
The company posted an adjusted earnings per share (EPS) of $0.44, exceeding the analysts’ consensus estimate of $0.42. Revenue for the quarter reached $1.19 billion, beating the expected $1.17 billion and marking a 15.6% increase compared to the same period last year. Prior guidance issued on December 2, 2025, had projected an EPS of $0.40. Despite these positive results, Microchip’s shares experienced a 4% drop after the earnings release. Looking ahead to the fourth quarter, the company forecasted revenue between $1.24 billion and $1.28 billion, with an average estimate of $1.26 billion—slightly above the consensus estimate of $1.24 billion. The adjusted EPS guidance ranged from $0.48 to $0.52, also surpassing analyst expectations of $0.49 per share.
Steve Sanghi, Microchip’s Chairman and Chief Executive Officer, commented on the strong quarterly performance: “Our fiscal third-quarter results exceeded expectations, with net revenue of $1.186 billion representing a 4% sequential increase and a 15.6% rise year-over-year, well above our initial guidance. We believe the broad-based recovery across our end markets, along with significant margin expansion, reflects the tangible impact of executing our nine-point recovery plan.”
The company reported a notable improvement in gross margin, which rose to 60.5% on a non-GAAP basis from 52% in the third quarter of fiscal 2025. Management anticipates continued margin expansion toward a long-term target of 65%, driven by normalization of inventory levels and enhanced factory utilization.
Additionally, Microchip declared a quarterly dividend of 45.5 cents per share for the fiscal third quarter, distributing approximately $246.1 million to shareholders during the December quarter.
Looking forward, Microchip projects continued quarterly growth, with the midpoint of Q4 revenue guidance indicating a 6.2% increase from the previous quarter and a 29.8% rise compared to the corresponding quarter last year.
The mixed market reaction despite strong earnings reflects investor caution in the semiconductor sector amid ongoing market uncertainties. Investors will be closely watching the company’s execution of its recovery initiatives and margin improvement strategies in the coming quarters.
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