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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.
Microchip’s Segmental Details
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 and EPS Surprise
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.
MCHP’s Operating Results
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.
Microchip’s Balance Sheet & Cash Flow
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.