Microchip falls 10% as a clean earnings beat is undone by soft guidance
Microchip beat on sales and profit in its September quarter — $0.97 a share against $0.94 expected — but the stock fell 10.02% to $58.35 after December-quarter guidance came in below expectations and seven analysts cut their price targets.
📊 Scorecard: our Bearish call on $MCHP is scored from $58.35, the last close before it ran. Its first result comes after the next close.
The News
Microchip Technology fell 10.02% to $58.35 on Friday, November 6, from $64.85, the semiconductor index's notable laggard on a day 28 of its 30 members rose. The company reported fiscal second-quarter 2027 results after Thursday's close: earnings of $0.97 a share against the $0.94 consensus, and revenue of $1.62 billion against $1.61 billion expected — a beat on both lines, with revenue up 42.2% from a year earlier and 9.2% from the previous quarter. Net sales of $1.622 billion came in above the high end of the company's own guidance, and non-GAAP operating margin reached 39.5% of sales.
The market sold the outlook instead. For the December quarter Microchip guided revenue to a range of a 3% decline to 1% growth from the September quarter, and non-GAAP earnings of $0.87–$0.95 a share, with the midpoint below what analysts expected. The company also flagged that about $53 million of one-time revenue in the September quarter will not repeat. Guidance is the company's own forecast for the next quarter, and for a chipmaker it matters more than the quarter just reported, because investors are buying the next three months, not the last three.
Analysts cut targets across the street on Friday: KeyCorp to $120 from $135 while keeping its Overweight rating, Truist to $62 from $90, Susquehanna to $100 from $120, Cantor Fitzgerald to $100 from $125, Needham to $85 from $120, Evercore ISI to $75 from $117, and Rosenblatt to $115 from $120. Most kept favorable ratings even as they cut the numbers — the average price target is $95.33 and the consensus rating is still “Moderate Buy” — but the cuts say the recovery will be slower than hoped. Microchip also declared a $0.455 quarterly dividend, payable December 8 to holders of record November 23. The stock is now down 28.07% over five sessions.
Net sales of $1.622 billion were above the high end of guidance.
Why It Matters
Microchip is a test of the chip cycle outside the AI spotlight. It makes microcontrollers — the small brains inside cars, factory machines, medical devices and appliances — plus analog chips, timing parts and programmable logic. Those markets recover more slowly than AI datacenters, and a beat that comes with a soft guide tells investors the recovery in cars and industrial equipment has not arrived yet. The 42.2% revenue jump looks strong, but it is measured against a weak year-ago quarter, and the December guide says the next quarter will be flat at best.
The target cuts matter because they show how the street is repricing the same story. Cutting a target from $117 to $75, as Evercore did, or from $90 to $62, as Truist did, while keeping a buy rating is analysts saying: we still like the company, but the price we will pay for it has fallen by a third. That is the market's way of saying a clean beat is not enough when the guide disappoints — and it is a warning for the rest of the non-AI chip names reporting this month.
Analyst's Take
Our call is Bearish. A 10% fall on a beat is the market's clearest verdict: the quarter was fine, the outlook is not, and seven target cuts in one day say the recovery trade in Microchip is on hold. The contrast with the rest of the sector underlines it: on a day when AMD rose 11.04%, Intel 7.71% and TSMC 6.33%, Microchip was the index's notable laggard, falling while 28 of 30 members rose — the market's way of saying this was a Microchip story, not a chip story. The dividend and the “Moderate Buy” consensus cushion the fall, but neither changes the guide.
What to watch: whether December-quarter bookings stabilize or slip further, whether the industrial and automotive customers Microchip serves start ordering again, and whether the next non-AI chip earnings — the real test of this cycle — follow the same pattern of beat-then-guide-down.
Are you bullish or bearish on this story?
By The Numbers
FAQ
Why did the stock fall if earnings beat expectations?
Because investors buy the future, not the past. The September quarter beat — $0.97 a share against $0.94 expected — but December-quarter guidance came in below expectations: revenue flat at best and earnings of $0.87–$0.95. A soft guide outweighs a good quarter.
What is guidance?
A company's own forecast for the next quarter — in this case revenue and earnings for the three months ending in December. Analysts compare it with their own estimates, and a guide below expectations usually pushes the stock down even when the reported quarter was strong.
What is a price target?
An analyst's estimate of where a stock could trade in about a year. Seven analysts cut Microchip's target on Friday — Evercore ISI to $75 from $117, Truist to $62 from $90 — while most kept buy ratings. A cut says the analyst expects less from the stock, not necessarily that the company is in trouble.
What does Microchip actually make?
Microcontrollers and related chips — the small control brains inside cars, factory equipment, medical devices, appliances and communications gear — plus analog, timing and programmable-logic parts. It is not an AI datacenter chipmaker, so its cycle follows cars and industry, not AI spending.
What is non-GAAP earnings?
Earnings adjusted to strip out items such as share-based pay and the cost of past acquisitions, which the company says shows its core performance better. Microchip's non-GAAP earnings were $0.97 a share; on the standard GAAP measure they were $0.68.
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Source: MarketBeat / Finnhub