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A maker of microcontrollers and other embedded control chips—the small computers-on-a-chip that power everything from car engines to industrial machinery. Its product lineup spans the well-known PIC microcontroller family, analog chips, FPGAs, and memory, sold to about 101,000 customers. The company began in 1987 as a spinoff of General Instrument's microelectronics division, gained independence in 1989, and expanded through its 2018 purchase of Microsemi. A fun quirk: "PIC" originally stood for "Peripheral Interface Controller," reflecting the chips' early job of offloading tasks from larger processors.
Microchip revenue rose 38% to $1.48B in Q1 FY2027 as the inventory correction ended and gross margin reached 63.2%.
Microchip's recovery accelerated sharply. rose 38% to $1.48 billion and expanded 9.6 points to 63.2%, driven by demand returning after customer normalization and new design wins entering production. The company is now growing again, but a Malaysian tax dispute threatens up to $475 million.
Key takeaways
rose 38.0% to $1,484.7 million, the second consecutive quarter of growth and the fastest rate since the correction began in FY2024.
expanded to 63.2% from 53.6% a year earlier, helped by $68.6 million in lower , $13.0 million in lower , and higher licensing .
Mixed-signal microcontroller sales grew 38.8% to $739.1 million, analog grew 29.9% to $410.9 million, and the Other — including FPGAs, licensing, and memory — rose 47.6% to $334.7 million.
Section summaries
Management's Discussion and Analysis
Net sales surged 38% to $1.48B on recovering demand and design wins, driving gross margin to 63.2% from 53.6%.
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rose 38.0% to $1,484.7 million, driven by increased demand after customer normalization and new design wins entering production.
rose to $336.8 million from $32.1 million a year earlier, with reaching 22.7% after bottoming at -10.3% in Q1 FY2025.
was $511.5 million, nearly double the prior quarter, and reached $497.6 million as remained low.
The company disclosed that an adverse outcome in its Malaysian tax dispute could result in taxes and penalties of up to MYR 1.9 billion, approximately $474.7 million, though it believes the assessment is without merit.
What changed
The FY2026 10-K flagged Q1 FY2027 growth to confirm the recovery holds: revenue rose 38.0%, accelerating from 15.6% in Q3 FY2026 and 7.1% for the full year, confirming the recovery is strengthening.
at 63.2% has nearly returned to pre-correction levels last seen in Q4 FY2023, up from 59.6% in Q4 FY2026, as and unabsorbed capacity costs continue to fade.
The Malaysian tax dispute previously flagged at up to $410 million is now disclosed at up to MYR 1.9 billion, approximately $474.7 million, with a ruling possible within 18 months.
The Tempe Fab 2 closure flagged in FY2025 is now held for sale, with the company noting the facility's sale proceeds and timing as an open item.
What to watch
Q2 FY2027 growth rate to see if the 38% pace holds or accelerates as normalization completes and design wins continue ramping.
Resolution of the Malaysian IRB tax dispute, now disclosed at up to MYR 1.9 billion (~$474.7M), with a ruling possible within 18 months.
trajectory toward the 67-68% range last seen in FY2022-FY2023 as and unabsorbed capacity costs continue to decline.
Tempe Fab 2 sale proceeds and timing, as the facility is held for sale and closure savings are in progress.
increased $362.2 million to $938.9 million, with margin expanding to 63.2% from 53.6%, helped by lower ($13.0M favorable), lower ($68.6M favorable), and higher licensing .
Mixed-signal Microcontroller sales grew 38.8% to $739.1 million, grew 29.9% to $410.9 million, and Other (including FPGA, licensing, and memory) grew 47.6% to $334.7 million.
R&D expenses rose 20.9% to $308.9 million and SG&A rose 15.7% to $184.3 million, both primarily due to higher employee compensation and .
was $511.5 million; the company paid down $137.6 million in and returned $274.7 million to shareholders via common and preferred dividends.
The company disclosed a Malaysian tax dispute where an adverse outcome could result in taxes and penalties up to MYR 1.9 billion (approx. $474.7 million), though it believes the assessment is without merit.
Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk As of June 30, 2026, our current and long-term debt totaled $5.40 billion, all of which was fixed rate and not subject to interest rate exposure. We intend to finance the repayment of our fixed rate debt maturing within the next 12 months by issuing new fixed…
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Interest Rate Risk
As of June 30, 2026, our current and long-term debt totaled $5.40 billion, all of which was fixed rate and not subject to interest rate exposure. We intend to finance the repayment of our fixed rate debt maturing within the next 12 months by issuing new fixed rate debt, new notes or convertible debt or by using available borrowings under our Revolving Credit Facility, our Commercial Paper program or other instruments. If we refinance our fixed rate debt with variable rate debt, changes in interest rates will have a more significant impact on our interest expense. For additional information, refer to "Note 6. Debt" for a summary of our debt obligations by maturity date.
Inflation Risk
Inflation has not had a material adverse impact on our operating results in recent periods. However, if our costs were to continue to become subject to significant inflationary pressures, we may not be able to offset such higher costs through price increases which could adversely impact our operating results.
Microchip faces material risks from global trade policy shifts, geopolitical supply disruptions, customer concentration in China, and reliance on third-party manufacturing.
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Escalating U.S.-China trade tensions, including a suspended into U.S. analog chips and new Chinese retaliatory regulations, directly threaten sales in a market representing 19% of Q1 FY2027 .
Geopolitical instability in the Middle East is disrupting critical supplies of helium and bromine essential for wafer fabrication, while also increasing fuel and logistics costs.
Government actions restricting competitors like Nexperia have caused shortages of mature-node semiconductors, reducing production volumes and demand from Microchip's automotive and consumer customers.
A prolonged dispute with the Malaysian Inland Board could result in income taxes and penalties up to MYR 1.9 billion (approx. $474.7 million), with a ruling possible within 18 months.
The company's heavy reliance on outside wafer foundries for 67% of and third-party assembly/test contractors exposes it to capacity constraints, cost increases, and potential supply interruptions.
A U.S. Supreme Court ruling in February 2026 found certain tariffs unconstitutional, and while Microchip has received some refunds, the timing and amount of any further recoveries remain uncertain.