QS Research · Michael Burry's Scion Capital analyst template · 2006
MICROCHIP TECHNOLOGY INC (MCHP)
As of 2026-11-08 · 12/15 boxes filled from SEC filings and market data
Conclusion: LONG
Conviction medium · base case +41% · downside -14% · upside +90%
The market is treating MCHP as a leveraged cyclical still stuck near trough, but the September 2026 quarter beat guidance (net sales $1.6215B, +42.2% y/y) and TTM EBITDA is $1.83B versus $2.49B averaged over FY2021-FY2026. At today's 20.1x EV/EBITDA on normalized cycle-average EBITDA of $2.49B, EV is about $50.0B and equity about $44.8B after $5.06B net debt and $145.8M leases, or about $82/share (+41%). Downside at NXPI's 13.1x on the same normalized EBITDA is about $50/share (-14%), and upside at ADI's 26.3x is about $111/share (+90%); the multiple range is supported by the cited Q3 guidance step-down/supply bottlenecks on the low end and book-to-bill/design wins/acquisitions on the high end, not by cheapness alone. That clears the long rule, with the main caveat that TTM EBITDA is only about 73% of cycle average and TTM EV/EBITDA is already 20.1x.
Key numbers
- Share price: $58.35
- Market cap: $31.76B
- Latest financial period: TTM to Sep 30, 2026
- Revenue (TTM): $5.60B
- EV / EBITDA (TTM): 20.1x
- P/E (TTM): 43.7x
- Price / book: 4.78x
The 15 boxes
- ✓ 1. Long-form business notes
MCHP sells embedded control silicon — mixed-signal microcontrollers/microprocessors, analog, FPGA, memory, data-center storage/PCIe parts and SuperFlash licensing — through a direct and distributor network to about 101,000 customers, and it owns a large share of its fabs while outsourcing roughly 65% of FY2026 wafer supply. The cycle is visible in the numbers: revenue went $8.44B (FY2023) to $7.63B (FY2024) to $4.40B (FY2025) to $4.71B (FY2026), with operating income $3.12B to $2.57B to $296.3M to $490.1M over the same years. Between the FY2021 and FY2026 business sections the portfolio widened from 8/16/32-bit MCUs into 64-bit PIC64 microprocessors (July 2024), PCIe Gen 6 switching, CXL memory expansion and AI data-center storage controllers, while Fab 2 was closed in May 2025 and the Fab 4/Fab 5 expansions were paused through fiscal 2027. Because manufacturing is fixed-cost heavy, the swing in gross profit and operating income tracks volume, not a change in what the company sells.
- ✓ 2. Competitive advantage
Microchip's edge, as the sources show it, is an ecosystem moat — a broad embedded-control portfolio sold with software and development tools, with intra-family hardware/software/tool compatibility that raises migration cost — supported by gross margins that ran 56–68% across FY2021–FY2026, not by a manufacturing cost advantage: 65% of FY2026 net sales came from wafers made at outside foundries. The margin record shows real pricing power that compresses hard in the downcycle: gross margin fell from 67.5% in FY2023 to 56.1% in FY2025 while operating income fell from $3.12B to $296.3M, and it has only partly recovered to 57.7% and $490.1M in FY2026. Competition is with unnamed larger semiconductor companies and with cloners in China and Taiwan, so the advantage rests on switching costs and support rather than on licences or scale.
- ✓ 3. 10-Q takeaways
The September 2026 quarter (Q2 fiscal 2027) was a broad, above-guidance recovery: net sales of $1,621.5 million rose 42.2% year over year and 9.2% sequentially versus an August 6, 2026 guidance midpoint of $1.604 billion, with every product line and geography up sequentially. GAAP gross margin was 65.9% (from 55.9%) and GAAP operating income $464.5 million, or 28.6% of net sales, helped by favorable inventory-reserve, licensing and unabsorbed-capacity swings the company does not separately quantify. Inventory stayed flat in days (184 at September 30, 2026 vs 185 at March 31, 2026) while dollars rose to $1.12 billion, and December-quarter guidance calls for $1.573-$1.638 billion (midpoint down 1% sequentially) after about $53 million of infrequent September-quarter revenue items.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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