Microchip Technology's Sales Growth Accelerates for Fourth Straight Quarter
Microchip Technology posted net sales of $1.485 billion in the June quarter, up 38.0% from a year earlier, and guided to a further acceleration in the current period.
Microchip Technology (MCHP) reported fiscal first-quarter net sales of $1.485 billion, up 38.0% from a year earlier and up 13.2% from the prior quarter, exceeding the high end of its own guidance range, whose midpoint was $1.456 billion.
The result extended a run of accelerating growth that began after a low point in the September 2024 quarter, when sales fell 2.0% from a year earlier. Growth turned positive at 15.6% in the December quarter, climbed to 35.1% in March, and reached 38.0% in June. The chipmaker's full fiscal 2025, which ended in May, produced net sales of $4.713 billion, up 7.1% for the year, a pace far slower than the quarter-over-quarter growth rates now being posted, underscoring how much of the annual total came from the back half of the year.
Profitability moved alongside the top line. Non-GAAP gross margin expanded to 63.8% in the June quarter, above the high end of guidance and continuing a climb from 56.7% in September, 60.5% in December and 61.6% in March. GAAP operating margin rose to 22.7% of net sales from 16.6% in March and 12.8% in December, a trajectory the company attributed to higher factory utilization, while non-GAAP operating margin reached 35.1%, up from 30.6% in March and 28.5% in December.
GAAP earnings swung to $0.37 a diluted share from a net loss of $0.09 a share in the year-ago quarter. Non-GAAP earnings rose to $0.76 a share from $0.27 a year earlier and from $0.57 in the March quarter. Both figures cleared Microchip's own guidance, which had called for GAAP earnings of $0.28 to $0.29 a share and non-GAAP earnings of $0.67 to $0.71, marking the company's third consecutive quarter of outperforming its stated targets.
Demand indicators firmed alongside the results. Distribution sell-through increased meaningfully and the book-to-bill ratio was well above 1, language stronger than the "strong" bookings characterization used in prior quarters. In connectivity, design wins for PCIe Gen6 products doubled sequentially, to 12 programs exiting the June quarter from 6 at the end of March.
Inventory and balance-sheet metrics improved in tandem with the sales rebound. Inventory days fell to 175 at the end of June from 185 at the end of March, continuing a decline from 201 days in December, while net debt fell by approximately $170 million in the quarter, a faster pace of deleveraging than the $26 million reduction reported in December. Free cash flow margin rose to 33.5% of net sales from 24.0% a year earlier, with GAAP operating cash flow of $511.5 million, up from $275.6 million in the year-ago quarter.
For the September quarter, Microchip guided to net sales of $1.589 billion to $1.618 billion, implying sequential growth of 7% to 9% and year-over-year growth of roughly 40.6% at the midpoint, an acceleration from both the 38.0% just reported and the 35.3% growth rate the company had guided to for the June quarter back in May. Non-GAAP gross margin guidance for September of 66.0% to 67.0% points to a further step up from the 63.8% posted in June.