Microchip shares fall on weak outlook

Microchip Technology Inc (NASDAQ: MCHP) reported second-quarter earnings that beat analyst expectations, but shares fell 3.4% in after-hours trading due to weak guidance for the upcoming quarter.

The semiconductor company posted adjusted earnings per share of $0.46, surpassing the analyst estimate of $0.43. Revenue for the quarter came in at $1.16 billion, slightly above the consensus estimate of $1.15 billion but down 48.4% YoY.

Microchip's outlook for the third quarter fell short of expectations. The company forecasts EPS of $0.25-$0.35, well below the consensus of $0.46. Revenue guidance of $1.025-1.095 billion also missed the analyst estimate of $1.18 billion.

President and CEO Ganesh Moorthy cited an ongoing inventory correction and macroeconomic weakness, particularly in Europe, as factors impacting the company's performance. "The 'green shoots' we saw in recent quarters have progressed unevenly with essentially flat sequential bookings, normalized cancellation rates and much higher expedite requests," Moorthy stated.

Despite the challenges, Microchip declared a record quarterly dividend of 45.5 cents per share, representing a 3.6% increase from the previous year. The company also returned $261 million to stockholders through dividends and share repurchases during the quarter.

Chief Financial Officer Eric Bjornholt emphasized the company's focus on cost discipline and balance sheet management while preparing for an anticipated market recovery. Microchip's Total (EPA:TTEF) System Solutions approach continues to gain traction, particularly in AI-accelerated servers for data center markets.

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