THE ESSENTIALS IN 30 SECONDS

  • Microchip reported September-quarter net sales of $1.622 billion, up 42.2% year over year, and guided the December quarter to $1.573–1.638 billion.
  • CEO Steve Sanghi said lead times for most standard products have gone from four to eight weeks to between six and 32 weeks.
  • He blamed AI companies for taking capacity at outsourced assembly and test providers; the stock dropped about 10% on November 6.

Microchip Technology, a US maker of microcontrollers and other chips, reported its fiscal second-quarter results on November 5. Revenue grew strongly, but management spent much of the earnings call describing a supply chain that the company says AI demand has squeezed.

Strong quarter, softer outlook

Net sales for the quarter ended September 30 reached $1.622 billion, up 42.2% from a year earlier and 9.2% from the previous quarter, according to the company's release. Non-GAAP earnings came to $0.97 per share, ahead of the $0.93 consensus cited by Investing.com, and GAAP earnings to $0.68. Data center sales topped $250 million, up 55.7% year over year, and CEO Steve Sanghi said the business is on course to reach $1 billion in calendar 2026.

For the December quarter, Microchip guided net sales to $1.573–1.638 billion, between a 3% decline and a 1% increase from the September quarter, with non-GAAP earnings of $0.87–0.95 per share. Chief financial officer Eric Bjornholt said about $53 million of September revenue would not repeat. Investing.com reported that the midpoint was below analyst estimates, and the shares fell about 10% on November 6, to around $58.

Capacity taken by AI buyers

On the call, Sanghi said lead times for most standard products, historically four to eight weeks, now range from six to 32 weeks. He said AI companies "came in and took over the whole factory," referring to outsourced assembly and test (OSAT) providers, and added that some substrates cannot be obtained. Shifting work in-house or to another provider takes about six months, he said.

He also expects major foundries and OSATs to raise prices again from around January. For now, Microchip plans to absorb those increases rather than raise its own prices.

Backlog and open questions

Sanghi said the company entered the December quarter with more backlog than three months earlier and a book-to-bill ratio well above one, but that some high-margin orders cannot be fulfilled and are shifting to the March quarter. Pressed on demand, he went as far as calling the data center market a bubble, and said its growth rate would have to slow considerably. Whether the delayed orders turn into revenue next quarter, and how long AI buyers keep their hold on packaging and test lines, remains to be seen.