MICROCHIP TECHNOLOGY INC
For the period ended Mar 31, 2026. Filed May 21, 2026.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2026 · Filed May 21, 2026
MCHP$58.35-10.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2025-03-31; filed 2025-05-23.
0000827054-25-000077
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2026-03-31; filed 2026-05-21.
0000827054-26-000016
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 177 previous paragraphs and 174 current paragraphs.
108 unchanged; 52 reworded; 13 added; 16 removed; 1 previous and 1 current paragraphs rearranged.
Tables are not compared: 6 previous and 7 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (13)
Current report
•Our expectations regarding our inventory levels and revenue growth;
Current report
•The benefits and risks of the use of artificial intelligence by us, our partners and customers, or malicious third parties and its impact on our products, our labor and technological needs, and regulatory or intellectual property compliance;
Current report
•The impact on our business from the global minimum tax (GMT) and the Side-by-Side system introduced by the Organisation for Economic Co-operation and Development;
Current report
During fiscal 2025, our overall business was weak as we navigated through a large inventory correction due to our customers holding excess levels of inventory. In March 2025, we implemented a business recovery plan which included restructuring actions to reduce our costs, resize our manufacturing operations and reduce our headcount. In fiscal 2026, we saw an improvement in our business due to increased demand after our customers reduced excess inventory levels. Net sales in all our product lines and all our geographies increased in fiscal 2026 compared to fiscal 2025. Consistent with our recovery plan, we reduced inventory in fiscal 2026 compared to fiscal 2025 and we are now in a significant revenue growth mode and we expect our inventory to continue to decline as we appropriately manage our manufacturing and foundry resources. However, there continues to be uncertainty regarding overall macroeconomic conditions, including increased geopolitical tensions, risk of a recession, and the effects of potential trade policies, including tariffs.
Current report
•intense competition in our key markets;
Current report
Net sales of our mixed-signal microcontroller products increased approximately 4.7% in fiscal 2026 compared to fiscal 2025. The increase in net sales was primarily due to increased demand after customers reduced excess inventory levels as well as new customer design win activity entering production.
Current report
Net sales from our analog product line increased approximately 14.9% in fiscal 2026 compared to fiscal 2025. The increase in net sales was primarily due to increased demand due to a portion of our customer base having reduced excess inventory levels as well as new customer design win activity entering production.
Current report
Special Charges and Other, Net
Current report
The Organisation for Economic Co-operation and Development has introduced a global minimum corporate tax framework (GMT), with phased implementation starting January 1, 2024. While the U.S. has not adopted GMT, several countries where we operate have enacted related legislation, and others are expected to follow. In January 2026, the Organisation for Economic Co-operation and Development published a side-by-side system, which excludes U.S. multi-national entities from certain aspects of the GMT. We will continue to monitor developments around this guidance. The impact of the GMT for the fiscal year ended March 31, 2026 was not material to our financial results.
Current report
In July 2025, the U.S. government enacted the One Big Beautiful Bill Act (OBBBA), which includes permanent extensions of certain Tax Cuts and Jobs Act provisions and changes to the international tax framework. The effects of these changes have been recognized in the period ending March 31, 2026. The impact of OBBBA for the fiscal year ended March 31, 2026 was not material to our financial results. We will continue to evaluate the broader implications of OBBBA, including the effects of future regulatory guidance and interpretations.
Current report
•in fiscal 2026, $1.20 billion of cash used to paydown our 4.25% 2025 Notes and $173.7 million of net proceeds generated from our Commercial Paper program, and $900.0 million of proceeds generated from the issuance of our 2026 Senior Convertible Debt, and
Current report
Dividends and Share Repurchases
Current report
With respect to shares of our Series A Preferred Stock, dividends are cumulative at an annual rate of 7.50% on the liquidation preference of $1,000.00 per share of Series A Preferred Stock. To date, our cumulative dividend payments on our Series A Preferred Stock have totaled approximately $108.5 million. A quarterly cash dividend of $18.750 per share of Series A Preferred Stock was declared on May 7, 2026 and will be paid on June 15, 2026 to the holders of Series A Preferred Stock of record as of June 1, 2026.
Removed paragraphs (16)
Previous report
•Our expectation that the global minimum tax (GMT) will not have a material impact on our fiscal 2026 results;
Previous report
•Our expectations regarding the amount, timing, and future applications for investment tax credits under the CHIPS Act;
Previous report
During fiscal 2024, many of our customers felt the adverse effects of slowing economic activity, increasing business uncertainty, persistent inflation and higher interest rates and we received requests to push out or cancel backlog resulting from customer actions to reduce inventory levels. Although we began to see evidence of improvements in our business in the March 2024 quarter which have continued in fiscal 2025, such as a decrease in customer requests to push out or cancel backlog while the number of expedites and shipment pull in requests grew, the overall macroeconomic environment remained weak throughout fiscal 2025 as we navigated through a large inventory correction. With our inventory levels being high and having ample capacity in place, on December 2, 2024, we announced our decision to close our Tempe, Arizona wafer fabrication facility that we refer to as Fab 2. Many of the process technologies that run in Fab 2 also run in our Oregon and Colorado factories, which both have ample clean room space for expansion. The closure of Fab 2 was completed in May 2025 and we expect that it will generate annual cash savings of approximately $90 million. Due to the high levels of inventory of the products which are manufactured in Fab 2, we do not expect to see income statement savings from the closure until the start of the June 2026 quarter based on a first-in first-out basis. We expect that the Fab 2 closure will begin to help us moderate our inventory levels. On March 3, 2025, we announced additional restructuring actions to reduce costs, resize manufacturing operations and to reduce headcount at our Fab 4 and Fab 5 facilities and our backend manufacturing facility in the Philippines which will result in approximately $25 million in annual savings from the temporarily reduced compensation costs. These actions resulted in a reduction of inventory in the March 2025 quarter. We also announced a 10% headcount reduction across our company to decrease our operating expenses, which reduction will be fully implemented by the June 2025 quarter. We expect this action to reduce our ongoing operating expenses by approximately $90 million to $100 million on an annualized basis. Consistent with the macroeconomic environment, most of our factory expansion activity remains paused, we have reduced our planned capital investments, and we remain focused on reducing our inventory levels and days of inventory through fiscal 2026.
Previous report
There continues to be uncertainty regarding overall macroeconomic conditions, including increased geopolitical tensions, risk of a recession, and the effects of potential trade policies, including tariffs. Long established global trade relationships are potentially changing in fundamental ways that make it difficult to predict how global supply chains and economic environments will be affected. For example, in March and April 2025, the U.S. imposed tariffs on imports from China and other countries and foreign governments imposed additional tariffs on imports from the U.S. It is unclear what tariffs will apply to semiconductors during this time of change.
Previous report
While we continue to evaluate the potential impacts of these proposed tariffs and our ability to mitigate their related impacts, these tariffs and any retaliatory tariffs imposed may adversely impact our revenue and cost of goods sold in the U.S. and internationally. The imposition of tariffs could impact our supply chain for rare earth and other materials and cause a decrease in the sales of products to customers located in China, other customers selling to Chinese end users, or other global customers, which could materially and adversely affect our business, financial condition and results of operations. The ultimate impact of any tariffs will depend on various factors, including whether semiconductors continue to be exempt from tariffs and any changes to the amount, scope and nature of the tariffs imposed by the U.S. or other countries. For additional information, see “Item 1A. Risk Factors”, including the risk factor titled “We may lose sales if suppliers of raw materials, components or equipment fail to meet our or our customers' needs, increase prices, are impacted by increases in tariffs, or such raw materials, components or equipment become restricted or unavailable."
Previous report
Net sales of our mixed-signal microcontroller products decreased approximately 47.3% in fiscal 2025 compared to fiscal 2024. The decrease in net sales was primarily due to adverse economic conditions, including slowing economic activity, increasing business uncertainty, competitive pressures, persistent inflation, high interest rates, and shorter product lead times, which factors resulted in many customers having higher levels of inventory and delaying or reducing orders.
Previous report
Net sales from our analog product line decreased approximately 42.6% in fiscal 2025 compared to fiscal 2024. The decrease in net sales was primarily due to adverse economic conditions, including slowing economic activity, increasing business uncertainty, persistent inflation, high interest rates, and shorter product lead times, which factors resulted in many customers having higher levels of inventory and delaying or reducing orders.
Previous report
Special Charges (Income) and Other, Net
Previous report
Loss on settlement of debt in fiscal 2025 was $1.7 million compared to $12.2 million in fiscal 2024. In fiscal 2025, the loss primarily related to the amendment and restatement of our Revolving Credit Facility. In fiscal 2024, the loss related to the settlement of a portion of our outstanding Convertible Debt.
Previous report
We are subject to taxation in many jurisdictions in which we have operations. The effective tax rates that we pay in these jurisdictions vary widely, but they are generally lower than our combined U.S. federal and state effective tax rate. Our domestic blended statutory tax rate in each of fiscal 2025 and fiscal 2024 was approximately 22%. Our non-U.S. blended statutory tax rates in fiscal 2025 and fiscal 2024 were lower than this amount. The difference in rates applicable in foreign jurisdictions results from a number of factors, including lower statutory rates, tax holidays, financing arrangements and other factors. Our effective tax rate has been and will continue to be impacted by the geographical dispersion of our earnings and losses.
Previous report
Our foreign tax rate differential benefit primarily relates to our operations in Malta taxed at a 5.0% statutory tax rate and Ireland taxed at a 12.5% statutory tax rate. Additionally, our Thailand manufacturing operations are currently subject to numerous tax holidays granted to us based on our investment in property, plant, and equipment in Thailand. Our tax holiday periods in Thailand expire at various times in the future; however, we actively seek to obtain new tax holidays, otherwise we will be subject to tax at the statutory tax rate of 20.0%. We do not expect the future expiration of any of our tax holiday periods in Thailand to have a material impact on our effective tax rate.
Previous report
In January 2025, we received several assessments from the German Tax Authorities (GTA) regarding the German extraterritorial taxation of royalty payments between nonresidents (referred to as offshore receipts in respect of intangible property or ORIP) and intellectual property transfers by nonresidents (referred to as extraterritorial capital gains taxation or ETT). If the assessment is upheld, it could result in income taxes and penalties up to $92.0 million. The timing of adjudicating this matter is uncertain but could occur in the next 12 months.
Previous report
In August 2022, the U.S. government enacted the Inflation Reduction Act into law. The Inflation Reduction Act includes a new corporate alternative minimum tax (Corporate AMT) of 15.0% on the adjusted financial statement income (AFSI) of corporations with average AFSI exceeding $1.00 billion over a three-year period, as well as a 1% excise tax on the net fair market value of stock repurchases made after December 31, 2022. The Corporate AMT is effective beginning in fiscal 2024. The Inflation Reduction Act did not have a material impact on the year ending March 31, 2025 and the year ending March 31, 2024.
Previous report
As of March 31, 2025, 55 countries have enacted various aspects of the Organisation for Economic Co-operation and Development’s Base Erosion and Profit Shifting Project to ensure that multinational enterprises pay a GMT. In 38 of those countries, the GMT is effective for tax years beginning in our fiscal 2025. As of March 31, 2025, the impact of GMT on our fiscal 2025 results is not material.
Previous report
•in fiscal 2024, $537.7 million of cash used to pay down certain principal of our debt, including settlement of a portion of our outstanding Convertible Debt, our 4.333% 2023 Notes, our 2.670% 2023 Notes, our 0.972% 2024 Notes, and our Revolving Credit Facility, partially funded by proceeds from borrowings on our 2025 Term Loan Facility, proceeds from the issuance of our Commercial Paper, and proceeds from the issuance of our 5.050% 2029 Notes, and
Previous report
Capital Returns
Reworded paragraphs (52)
Previous wording
•Our expectation that we will experience period-to-period fluctuations in operating results, gross margins, product mix and average gross profit per unit;
Current wording
•Our expectation that we will experience period-to-period fluctuations in operating results, gross margins, and product mix;
Previous wording
•Our ability to effectively utilize our facilities at appropriate capacity levels;
Current wording
•Our ability to effectively utilize our facilities at appropriate capacity levels or obtain sufficient capacity from our manufacturing, assembly and test sub-contractors;
Previous wording
•The amounts and timing, and our plans and expectations relating to the U.S. Statutory Notice of Deficiencies and proposed income adjustment from the Malaysian Inland Revenue Board;
Current wording
•The amounts and timing, and our plans and expectations relating to the proposed income adjustment from the Malaysian Inland Revenue Board;
Previous wording
•Our expected debt obligation maturities, including the conversion of debt, Depositary Shares, and Series A Preferred Stock, and plans to refinance our existing debt;
Current wording
•Our expected debt obligation maturities, including the conversion of debt, Depositary Shares, and Series A Preferred Stock, and plans to refinance or repay our existing debt;
Previous wording
•The impact of any failure by use to adequately control the storage, use, discharge and disposal of regulated substances;
Current wording
•The impact of any failure by us to adequately control the storage, use, discharge and disposal of regulated substances;
Previous wording
The following discussion should be read in conjunction with the consolidated financial statements and the related notes that appear elsewhere in this document, as well as with other sections of this Annual Report on Form 10-K, including "Item 8. Financial Statements and Supplementary Data." For an overview of our business and recent trends, refer to our "Business and Macroeconomic Environment" discussed below.
Current wording
The following discussion should be read in conjunction with the consolidated financial statements and the related notes that appear elsewhere in this document, as well as with other sections of this Annual Report on Form 10-K, including "Item 8. Financial Statements and Supplementary Data."
Previous wording
We begin our Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) with a discussion of our Business and Macroeconomic Environment followed by the Critical Accounting Policies and Estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results. We then discuss our results of operations for fiscal 2025 compared to fiscal 2024, followed by an analysis of changes in our balance sheet and cash flows, and discuss our financial commitments in the section titled "Liquidity and Capital Resources." Our liquidity and capital resources section generally discusses fiscal 2025 compared to fiscal 2024. For our discussion of our fiscal 2024 results compared to fiscal 2023 for both our results of operations and our liquidity and capital resources sections, refer to "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024 filed with the SEC on May 23, 2024 which is incorporated by reference herein.
Current wording
We begin our Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) with a discussion of our Business and Macroeconomic Environment followed by the Critical Accounting Policies and Estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results. We then discuss our results of operations for fiscal 2026 compared to fiscal 2025, followed by an analysis of changes in our balance sheet and cash flows, and discuss our financial commitments in the section titled "Liquidity and Capital Resources." Our liquidity and capital resources section generally discusses fiscal 2026 compared to fiscal 2025. For our discussion of fiscal 2025 results compared to fiscal 2024 for both our results of operations and our liquidity and capital resources sections, refer to "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended March 31, 2025 filed with the SEC on May 23, 2025 which is incorporated by reference herein.
Previous wording
Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. We review the accounting policies we use in reporting our financial results on a regular basis. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent liabilities. On an ongoing basis, we evaluate our estimates, including those related to revenue recognition, inventories, income taxes and contingencies. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Our results may differ from these estimates due to actual outcomes being different from those on which we based our assumptions. We review these estimates and judgments on an ongoing basis. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.
Current wording
Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. We review the accounting policies we use in reporting our financial results on a regular basis. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we evaluate our estimates, including those related to revenue recognition, inventories and income taxes. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Our results may differ from these estimates due to actual outcomes being different from those on which we based our assumptions. We review these estimates and judgments on an ongoing basis. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.
Previous wording
Overall, our estimates of adjustments to contract price due to variable consideration under our contracts with distributor customers, based on our assumptions, have been materially consistent with our actual results. However, these estimates are subject to management’s judgment and actual provisions could be different from our estimates, resulting in future adjustments to our revenue and operating results. A 100-basis point increase in the blended price concession rate would have changed the measurement of our refund liability recorded within accrued liabilities by $5.0 million as of March 31, 2025.
Current wording
Overall, our estimates of adjustments to contract price due to variable consideration under our contracts with distributor customers, based on our assumptions, have been materially consistent with our actual results. However, these estimates are subject to management’s judgment and actual provisions could be different from our estimates, resulting in future adjustments to our revenue and operating results. A 100-basis point increase in the blended price concession rate would have changed the measurement of our refund liability recorded within accrued liabilities by approximately $4.0 million as of March 31, 2026.
Previous wording
Inventories are valued at the lower of cost or net realizable value using the first-in, first-out method. We record a charge to cost of sales to write down our inventory for estimated excess, obsolete or unmarketable inventory in an amount equal to the difference between the cost of inventory and the estimated net realizable value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those we projected, additional inventory write-downs may be required. Inventory impairment charges establish a new cost basis for inventory and charges are not subsequently reversed to income even if circumstances later suggest that increased carrying amounts are recoverable. In determining whether there is a risk of excess or obsolete inventory, we evaluate projected demand over periods that align with demand forecasts used to develop manufacturing plans and inventory build decisions and write down inventory on hand that is in excess of estimated demand. Management reviews and adjusts the estimates as appropriate based on specific situations. For example, demand can be adjusted up for new products for which historic sales are not representative of future demand. Alternatively, demand can be adjusted down to the extent any existing products are being replaced or discontinued. A 1% variance in the estimated demand for our products would have changed the estimated net realizable value of our inventory by approximately $3.8 million as of March 31, 2025.
Current wording
Inventories are valued at the lower of cost or net realizable value using the first-in, first-out method. We record a charge to cost of sales to write down our inventory for estimated excess, obsolete or unmarketable inventory in an amount equal to the difference between the cost of inventory and the estimated net realizable value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those we projected, additional inventory write-downs may be required. Inventory impairment charges establish a new cost basis for inventory and charges are not subsequently reversed to income even if circumstances later suggest that increased carrying amounts are recoverable. In determining whether there is a risk of excess or obsolete inventory, we evaluate projected demand over periods that align with demand forecasts used to develop manufacturing plans and inventory build decisions and write down inventory on hand that is in excess of estimated demand. Management reviews and adjusts the estimates as appropriate based on specific situations. For example, demand can be adjusted up for new products for which historic sales are not representative of future demand. Alternatively, demand can be adjusted down to the extent any existing products are being replaced or discontinued. A 1% variance in the estimated demand for our products would have changed the estimated net realizable value of our inventory by approximately $1.6 million as of March 31, 2026.
Previous wording
The decrease in net sales in fiscal 2025 compared to fiscal 2024 was primarily due to adverse economic conditions, including slowing economic activity, increasing business uncertainty, persistent inflation, high interest rates, and shorter product lead times, which factors resulted in many customers having higher levels of inventory and delaying or reducing orders. Due to the size, complexity and diversity of our customer base, we are not able to quantify any material factor contributing to the changes in net sales. See our "Business and Macroeconomic Environment" discussion above for further information on our business outlook.
Current wording
The increase in net sales in fiscal 2026 compared to fiscal 2025 was primarily due to increased demand after customers reduced excess inventory levels as well as new customer design win activity entering production. Due to the size, complexity and diversity of our customer base, we are not able to quantify any material factor contributing to the changes in net sales. See our "Business and Macroeconomic Environment" discussion above for further information on our business outlook.
Previous wording
Other factors that we believe contributed to the decrease in our reported net sales for fiscal 2025 compared to fiscal 2024 and which are drivers of long-term trends in our net sales but which factors we are not able to quantify include:
Current wording
Other factors that we believe contributed to the changes in our reported net sales for fiscal 2026 compared to fiscal 2025 and which are drivers of long-term trends in our net sales but which factors we are not able to quantify include:
Previous wording
We sell a large number of products to a large and diverse customer base and there was not any single product or customer that accounted for a material portion of the change in our net sales in fiscal 2025 or fiscal 2024.
Current wording
We sell a large number of products to a large and diverse customer base and there was not any single product or customer that accounted for a material portion of the changes in our net sales in fiscal 2026 or fiscal 2025.
Previous wording
Our mixed-signal microcontroller product line represents the largest component of our total net sales. Mixed-signal microcontrollers and associated application development systems accounted for approximately 51.1% and 56.0% of our net sales in fiscal 2025 and fiscal 2024, respectively.
Current wording
Our mixed-signal microcontroller product line represents the largest component of our total net sales. Mixed-signal microcontrollers and associated application development systems accounted for approximately 50.0% and 51.1% of our net sales in fiscal 2026 and fiscal 2025, respectively.
Previous wording
Our analog product line includes analog, interface, mixed-signal and timing products. Our analog product line accounted for approximately 26.3% and 26.4% of our net sales in fiscal 2025 and fiscal 2024, respectively.
Current wording
Our analog product line includes analog, interface, mixed-signal and timing products. Our analog product line accounted for approximately 28.2% and 26.3% of our net sales in fiscal 2026 and fiscal 2025, respectively.
Previous wording
Our other product line includes FPGA products, royalties associated with licenses for the use of our SuperFlash and other technologies, sales of our intellectual property, fees for engineering services, memory products, timing systems, manufacturing services (wafer foundry and assembly and test subcontracting), legacy application specific integrated circuits, and certain products for aerospace applications. Revenue from these services and products accounted for approximately 22.6% and 17.6% of our net sales in fiscal 2025 and fiscal 2024, respectively.
Current wording
Our other product line includes FPGA products, royalties associated with licenses for the use of our SuperFlash and other technologies, sales of our intellectual property, fees for engineering services, memory products, timing systems, manufacturing services (wafer foundry and assembly and test subcontracting), legacy application specific integrated circuits, and certain products for aerospace applications. Revenue from these services and products accounted for approximately 21.8% and 22.6% of our net sales in fiscal 2026 and fiscal 2025, respectively.
Previous wording
Net sales related to these products and services decreased approximately 26.1% in fiscal 2025 compared to fiscal 2024. This decrease in net sales was primarily due to adverse economic conditions, including slowing economic activity, increasing business uncertainty, persistent inflation, high interest rates, and shorter product lead times, which factors resulted in many customers having higher levels of inventory and delaying or reducing orders. In fiscal 2025, we settled an ongoing legal matter with one of our licensees which resulted in the release of an accrual, which increased both our revenue and profits by $13.3 million in such fiscal period. Net sales of our other product line can fluctuate over time based on general economic and semiconductor industry conditions as well as changes in demand for our FPGA products, licenses, engineering services, memory products, timing systems, and manufacturing services (wafer foundry and assembly and test subcontracting).
Current wording
Net sales related to these products and services increased approximately 3.4% in fiscal 2026 compared to fiscal 2025. The increase in net sales was primarily due to sales of certain of our intellectual property rights and also due to a portion of our customer base having worked through their previous high inventory balances and needing to purchase products at a higher level to support demand. Net sales of our other product line can fluctuate over time based on general economic and semiconductor industry conditions as well as changes in demand for our FPGA products, licenses, engineering services, memory products, timing systems, and manufacturing services (wafer foundry and assembly and test subcontracting).
Previous wording
Distributors accounted for approximately 45% and 47% of our net sales in fiscal 2025 and fiscal 2024, respectively. With the exception of Arrow Electronics, our largest distributor, which accounted for 10% and 12% of our net sales in fiscal 2025 and in fiscal 2024, respectively, no other distributor or direct customer accounted for more than 10% of our net sales in fiscal 2025 or in fiscal 2024. Our distributors focus primarily on servicing the product requirements of a broad base of diverse customers. We believe that distributors provide an effective means of reaching this broad and diverse customer base and that customers recognize Microchip for its products and brand name and use distributors as an effective supply channel.
Current wording
Distributors accounted for approximately 47% and 45% of our net sales in fiscal 2026 and fiscal 2025, respectively. With the exception of Arrow Electronics, our largest distributor, which accounted for 12% and 10% of our net sales in fiscal 2026 and in fiscal 2025, respectively, no other distributor or direct customer accounted for more than 10% of our net sales during these periods. Our distributors focus primarily on servicing the product requirements of a broad base of diverse customers. We believe that distributors provide an effective means of reaching this broad and diverse customer base and that customers recognize Microchip for its products and brand name and use distributors as an effective supply channel.
Previous wording
At March 31, 2025, our distributors maintained 33 days of inventory of our products compared to 41 days at March 31, 2024. Over the past ten fiscal years, the days of inventory maintained by our distributors have fluctuated between approximately 17 days and 43 days. Inventory holding patterns at our distributors have had a material adverse impact on our net sales in recent periods. Due to the relatively high level of inventory days, we have accommodated efforts by our distributors to manage their inventory levels by allowing them to push-out or cancel orders.
Current wording
At March 31, 2026, our distributors maintained 26 days of inventory of our products compared to 33 days at March 31, 2025. Over the past ten fiscal years, the days of inventory maintained by our distributors have fluctuated between approximately 17 days and 43 days. Inventory holding patterns at our distributors had a material adverse impact on our net sales in fiscal 2025 and the first half of 2026, as our distributors held relatively high levels of inventory and purchased fewer products from us.
Previous wording
Americas sales include sales to customers in the U.S., Canada, Central America and South America. Sales to foreign customers accounted for approximately 75% of our total net sales in each of fiscal 2025 and fiscal 2024. The decrease in net sales in the European market in fiscal 2025 compared to fiscal 2024 was due to general weakness in the European economy, and decreases in our net sales in the European industrial and automotive markets, which were particularly weak. Our net sales in the Americas and Asia market decreased in fiscal 2025 compared to fiscal 2024, primarily due to adverse economic conditions, including slowing economic activity, persistent inflation, high interest rates, and shorter product lead times which resulted in delayed or reduced orders. Substantially all of our foreign sales are U.S. dollar denominated. Our sales force in the Americas and Europe supports a significant portion of the design activity for products which are ultimately shipped to Asia.
Current wording
Americas sales include sales to customers in the U.S., Canada, Central America and South America. Sales to foreign customers accounted for approximately 75% of our total net sales in each of fiscal 2026 and fiscal 2025. Net sales increased in all geographies in fiscal 2026 compared to fiscal 2025 primarily due to increased demand after customers reduced excess inventory levels as well as new customer design win activity entering production. Substantially all of our foreign sales are U.S. dollar denominated. Our sales force in the Americas and Europe supports a significant portion of the design activity for products which are ultimately shipped to Asia.
Previous wording
Our gross profit in fiscal 2025 was $2.47 billion, or 56.1% of net sales, compared to $5.00 billion, or 65.4% of net sales, in fiscal 2024.
Current wording
Our gross profit in fiscal 2026 was $2.72 billion, or 57.7% of net sales, compared to $2.47 billion, or 56.1% of net sales, in fiscal 2025.
Previous wording
The primary reason for the decrease in gross profit of $2.34 billion in fiscal 2025 compared to fiscal 2024 was an unfavorable net impact of sales volume, product mix, geographic mix, and average gross profit per unit in fiscal 2025. The net impact of product mix and average gross profit per unit may fluctuate over time due to the mix of sales volumes of lower or higher margin products, changes in selling prices, and fluctuations in product costs. We are not able to separately quantify these impacts on our gross profit. The impact of unabsorbed capacity charges was an adverse impact of $132.3 million in fiscal 2025 compared to fiscal 2024. Unabsorbed capacity charges are expensed as incurred when we operate our manufacturing facilities below normal levels. The net impact to our gross profit from inventory reserve charges was an adverse impact of $87.7 million in fiscal 2025 compared to fiscal 2024. The gross margin impact of changes in licensing revenue, which has no associated cost of sales, was a favorable impact of $27.7 million in fiscal 2025 compared to fiscal 2024.
Current wording
The primary reasons for the increase in gross profit of $253.2 million in fiscal 2026 compared to fiscal 2025 were due to changes in product mix, higher licensing revenue and lower inventory reserves. The net impact of product mix may fluctuate over time due to the mix of sales volumes of lower or higher margin products, changes in selling prices, and fluctuations in product costs. We are not able to separately quantify these impacts on our gross profit. The impact of unabsorbed capacity charges was an unfavorable impact of $27.8 million in fiscal 2026 compared to fiscal 2025. Unabsorbed capacity charges are expensed as incurred when we operate our manufacturing facilities below normal levels. The net impact to our gross profit from inventory reserve charges was a favorable impact of $115.3 million in fiscal 2026, compared to fiscal 2025. The gross margin impact of changes in licensing revenue, which has no associated cost of sales, was a favorable impact of $32.7 million in fiscal 2026 compared to fiscal 2025.
Previous wording
Our overall inventory levels were $1.29 billion at March 31, 2025, compared to $1.32 billion at March 31, 2024. We maintained 251 days of inventory on our balance sheet at March 31, 2025 compared to 224 days of inventory at March 31, 2024. Our overall inventory level in dollars was generally flat as a result of our efforts to balance manufacturing production, customer demand and inventory levels. However, our days of inventory increased significantly due to lower net sales. Our inventory amounts are impacted by timing of shipment activity in the quarter, the timing of receipt of raw materials, foundry wafers, and strategic last time buy materials and completion of finished goods. We believe that our current inventory and production capacity are adequate to fulfill the projected requirements of our customers.
Current wording
Our overall inventory levels were $1.04 billion at March 31, 2026, compared to $1.29 billion at March 31, 2025. We maintained 185 days of inventory on our balance sheet at March 31, 2026 compared to 251 days of inventory at March 31, 2025. Our overall inventory level in dollars and days decreased as a result of our efforts to balance manufacturing production, customer demand and inventory levels. Our inventory amounts are impacted by timing of shipment activity in the quarter, the timing of receipt of raw materials, foundry wafers, and strategic last time buy materials and completion of finished goods.
Previous wording
We operate assembly and test facilities in Thailand, the Philippines, and other locations throughout the world. During fiscal 2025, approximately 67% of our assembly requirements were performed in our internal assembly facilities, compared to approximately 59% during fiscal 2024. During fiscal 2025, approximately 67% of our test requirements were performed in our internal facilities, compared to approximately 71% during fiscal 2024. The percentage of our assembly and test operations that are performed internally fluctuates over time based on supply and demand conditions in the semiconductor industry, our internal capacity capabilities and our acquisition activities. We believe that the assembly and test operations performed at our internal facilities provide us with significant cost savings compared to third-party contractor assembly and test costs, as well as increased control over these portions of the manufacturing process. We plan to continue to selectively invest in assembly and test equipment to increase our internal capacity capabilities and transition certain outsourced assembly and test capacity to our internal facilities.
Current wording
We operate assembly and test facilities in Thailand and the Philippines. Approximately 67% of our assembly requirements were performed in our internal assembly facilities during each of fiscal 2026 and fiscal 2025. During fiscal 2026, approximately 69% of our test requirements were performed in our internal facilities, compared to approximately 67% during fiscal 2025. The percentage of our assembly and test operations that are performed internally fluctuates over time based on supply and demand conditions in the semiconductor industry, our internal capacity capabilities and our acquisition activities. We believe that the assembly and test operations performed at our internal facilities provide us with significant cost savings compared to third-party contractor assembly and test costs, as well as increased control over these portions of the manufacturing process. In addition, we have specialized assembly and test facilities dedicated to our aerospace and defense products in Germany, France, Ireland, the United Kingdom, the Philippines, Thailand, and the United States. These facilities are designed to support the unique requirements of these sectors, helping to accelerate time to market and ensure consistent, high-quality products. We plan to continue to selectively invest in assembly and test equipment to increase our internal capacity capabilities and transition certain outsourced assembly and test capacity to our internal facilities.
Previous wording
We rely on outside wafer foundries for a significant portion of our wafer fabrication requirements. Approximately 64% of our net sales came from products that were produced at outside wafer foundries in each of fiscal 2025 and fiscal 2024. This percentage may vary based on supply and demand conditions in the market.
Current wording
We rely on outside wafer foundries for a significant portion of our wafer fabrication requirements. During fiscal 2026, approximately 65% of our net sales came from products that were produced at outside wafer foundries, compared to approximately 64% during fiscal 2025. This percentage may vary based on supply and demand conditions in the market.
Previous wording
R&D expenses for fiscal 2025 were $983.8 million, or 22.4% of net sales, compared to $1.10 billion, or 14.4% of net sales, for fiscal 2024. We are committed to investing in new and enhanced products, including development systems software, and in our design and manufacturing process technologies. We believe these investments are significant factors in maintaining our competitive position. R&D costs are expensed as incurred. Assets purchased to support our ongoing research and development activities are capitalized when related to products which have achieved technological feasibility or that have alternative future uses and are amortized over their expected useful lives. R&D expenses include labor, depreciation, masks, prototype wafers, and expenses for the development of process technologies, new packages, and software to support new products and design environments.
Current wording
R&D expenses for fiscal 2026 were $1.09 billion, or 23.0% of net sales, compared to $983.8 million, or 22.4% of net sales, for fiscal 2025. We are committed to investing in new and enhanced products, including development systems software, and in our design and manufacturing process technologies. We believe these investments are significant factors in maintaining our competitive position. R&D costs are expensed as incurred. Assets purchased to support our ongoing research and development activities are capitalized when related to products which have achieved technological feasibility or that have alternative future uses and are amortized over their expected useful lives. R&D expenses include labor, depreciation, masks, prototype wafers, and expenses for the development of process technologies, new packages, and software to support new products and design environments.
Previous wording
R&D expenses decreased $113.6 million, or 10.4%, for fiscal 2025 compared to fiscal 2024. The primary reasons for the decrease in R&D expenses in fiscal 2025 compared to fiscal 2024 was lower employee compensation costs.
Current wording
R&D expenses increased $102.1 million, or 10.4%, for fiscal 2026 compared to fiscal 2025. The primary reasons for the increase in R&D expenses in fiscal 2026 compared to fiscal 2025 were higher employee compensation costs, including higher share-based compensation partially offset by our restructuring efforts.
Previous wording
Selling, general and administrative expenses for fiscal 2025 were $617.7 million, or 14.0% of net sales, compared to $734.2 million, or 9.6% of net sales, for fiscal 2024. Our goal is to continue to be more efficient with our selling, general and administrative expenses. Selling, general and administrative expenses include salary expenses related to field sales, marketing and administrative personnel, advertising and promotional expenditures and legal expenses as well as costs related to our direct sales force, CEMs and ESEs who work remotely from sales offices worldwide to stimulate demand by assisting customers in the selection and use of our products.
Current wording
Selling, general and administrative expenses for fiscal 2026 were $674.3 million, or 14.3% of net sales, compared to $617.7 million, or 14.0% of net sales, for fiscal 2025. Our goal is to continue to be more efficient with our selling, general and administrative expenses. Selling, general and administrative expenses include salary expenses related to field sales, marketing and administrative personnel, advertising and promotional expenditures and legal expenses as well as costs related to our direct sales force, CEMs and FAEs who work to stimulate demand from sales offices worldwide by assisting customers in the selection and use of our products.
Previous wording
Selling, general and administrative expenses decreased $116.5 million, or 15.9%, for fiscal 2025 compared to fiscal 2024. The primary reason for the decrease in selling, general and administrative expenses was lower employee compensation costs.
Current wording
Selling, general and administrative expenses increased $56.6 million, or 9.2%, for fiscal 2026 compared to fiscal 2025. The primary reasons for the increase in selling, general and administrative expenses were higher employee compensation costs, including higher share-based compensation partially offset by our restructuring efforts.
Previous wording
Amortization of acquired intangible assets in fiscal 2025 was $490.9 million compared to $605.4 million in fiscal 2024. The primary reason for the decrease in acquired intangible asset amortization was due to the use of accelerated amortization methods for assets placed in service in previous fiscal years.
Current wording
Amortization of acquired intangible assets in fiscal 2026 was $431.1 million compared to $490.9 million in fiscal 2025. The primary reason for the decrease in acquired intangible asset amortization was due to the use of accelerated amortization methods for assets placed in service in previous fiscal years.
Previous wording
During fiscal 2025, we incurred special charges and other, net of $79.2 million primarily due to restructuring expenses, including $45.7 million related to contract exit costs and $27.1 million related to employee separation costs. During fiscal 2024, we earned special income and other, net of $12.3 million primarily related to a favorable resolution of a previously accrued legal matter partially offset by restructuring costs of acquired and existing wafer fabrication operations to increase operational efficiency. Restructuring expenses incurred during fiscal 2024 include $6.2 million related to the restructuring of our wafer fabrication operations.
Current wording
During fiscal 2026, we incurred special charges and other, net of $39.7 million primarily due to restructuring expenses, including $21.8 million related to the closure of our Tempe, Arizona wafer fabrication facility and $14.5 million related to contract exit costs. During fiscal 2025, we incurred special charges and other, net of $79.2 million primarily due to restructuring expenses, including $45.7 million related to contract exit costs and $27.1 million related to employee separation costs.
Previous wording
Interest income in fiscal 2025 was $9.2 million compared to $7.6 million in fiscal 2024.
Current wording
Interest income in fiscal 2026 was $11.4 million compared to $9.2 million in fiscal 2025.
Previous wording
Interest expense in fiscal 2025 was $259.2 million compared to $198.3 million in fiscal 2024. The primary reasons for the increase in interest expense in fiscal 2025 compared to fiscal 2024 were higher interest rates on our outstanding variable rate debt and higher outstanding debt balances, offset in part by lower interest expense on our revolving credit facility.
Current wording
Interest expense in fiscal 2026 was $221.3 million compared to $259.2 million in fiscal 2025. The primary reasons for the decrease in interest expense in fiscal 2026 compared to fiscal 2025 were lower debt balances and lower interest rates.
Previous wording
Other loss, net, in fiscal 2025 was $5.7 million compared to other loss, net of $2.2 million in fiscal 2024. The primary reason for the change in other loss during fiscal 2025 compared to fiscal 2024 relates to foreign currency exchange rate fluctuations.
Current wording
Other loss, net, in fiscal 2026 was $6.7 million compared to other loss, net of $5.7 million in fiscal 2025. The primary reason for the change in other loss during fiscal 2026 compared to fiscal 2025 relates to foreign currency exchange rate fluctuations.
Previous wording
Our provision for income taxes is attributable to U.S. federal, state, and foreign income taxes. Our effective tax rate for the fiscal year ended March 31, 2025, increased over the same period last year as a result of changes in the amount of pre-tax income earned, R&D credits, foreign operations and various tax reserves.
Current wording
Our provision for income taxes is attributable to U.S. federal, state, and foreign income taxes. Our effective tax rate for the fiscal year ended March 31, 2026, decreased over the same period last year as a result of changes in the amount of pre-tax income earned, R&D credits, and the effects of foreign operations.
Previous wording
Our effective tax rate in fiscal 2024 includes a $69.8 million tax benefit received from R&D credits, which reduced our effective tax rate by 3.0%; and a $62.9 million tax expense for the effects of foreign operations, which increased our effective tax rate by 2.7%.
Current wording
Our effective tax rate in fiscal 2026 includes a $55.6 million tax benefit received from current year generated R&D credits, which reduced our effective tax rate by 20.3%; an $83.0 million tax benefit for the notional interest deduction, which reduced our effective tax rate by 30.4%; and a $119.6 million tax expense for the effects of foreign operations, which increased our effective tax rate by 43.7%.
Previous wording
In September 2021, we received a Statutory Notice of Deficiency (2007 to 2012 Notice) from the United States Internal Revenue Service (IRS) for fiscal 2007 through fiscal 2012. The disputed amounts largely relate to transfer pricing matters. In December 2021, we filed a petition in the U.S. Tax Court challenging the 2007 to 2012 Notice. In September 2023, we received a Revenue Agent Report (RAR) from the IRS for fiscal 2013 and fiscal 2016. In October 2023, we received a Statutory Notice of Deficiency (2014 to 2015 Notice) from the IRS for fiscal 2014 and fiscal 2015. The disputed amounts for fiscal 2013 to fiscal 2016 largely relate to transfer pricing matters. In December 2023, we filed a petition in the U.S. Tax Court challenging the 2014 to 2015 Notice.
Current wording
In September 2021, we received a Statutory Notice of Deficiency (2007 to 2012 Notice) from the United States Internal Revenue Service (IRS) for fiscal 2007 through fiscal 2012. The disputed amounts largely relate to transfer pricing matters. In December 2021, we filed a petition in the U.S. Tax Court challenging the 2007 to 2012 Notice. In September 2023, we received a Revenue Agent Report (RAR) from the IRS for fiscal 2013 and fiscal 2016. In October 2023, we received a Statutory Notice of Deficiency (2014 to 2015 Notice) from the IRS for fiscal 2014 and fiscal 2015. The disputed amounts for fiscal 2013 to fiscal 2016 largely relate to transfer pricing matters. In December 2023, we filed a petition in the U.S. Tax Court challenging the 2014 to 2015 Notice. In September 2025, we reached a settlement with the IRS for fiscal 2007 through fiscal 2015.
Previous wording
In May 2023, we received a proposed income adjustment from the Malaysian Inland Revenue Board (IRB) for fiscal 2020. In December 2023, we received a Notice of Assessment from the IRB asserting the same proposed income adjustment. In March 2025, we entered into a Consent Judgment before the High Court, agreeing that the dispute will be heard before the Special Commissioners of Income Tax (SCIT). It was also agreed that the payment on the taxes assessed is stayed and the IRB will pause all enforcement and proceedings against the collection of the taxes assessed until the appeal before the SCIT is concluded. If the adjustment is upheld by the highest court that has jurisdiction over this matter in Malaysia, it could result in income taxes and penalties up to $410.0 million. The disputed amounts largely relate to the characterization of certain assets. The timing of adjudicating this matter is uncertain but could occur in the next 12 months.
Current wording
In May 2023, we received a proposed income adjustment from the Malaysian Inland Revenue Board (IRB) for fiscal 2020. In December 2023, we received a Notice of Assessment from the IRB asserting the same proposed income adjustment. In March 2025, we entered into a Consent Judgment before the High Court, agreeing that the dispute will be heard before the Special Commissioners of Income Tax (SCIT). It was also agreed that the payment on the taxes assessed is stayed and the IRB will pause all enforcement and proceedings against the collection of the taxes assessed until the appeal before the SCIT is concluded. If the adjustment is upheld by the highest court that has jurisdiction over this matter in Malaysia, it could result in income taxes and penalties up to MYR 1.9 billion (approximately $480.2 million based on the exchange rate as of March 31, 2026). The disputed amounts largely relate to the characterization of certain assets. The timing of adjudicating this matter is uncertain but could occur in the next 18 months.
Previous wording
We firmly believe that the assessments described above are without merit and we plan to pursue all available administrative and judicial remedies necessary to resolve this matter. We intend to vigorously defend our position, and we are confident in our ability to prevail on the merits. We regularly assess the likelihood of adverse outcomes resulting from examinations such as these to determine the adequacy of our tax reserves. The ultimate outcome of disputes of this nature is uncertain, and if the IRS, IRB and GTA were to prevail on their assertions, the assessed tax, penalties, and deficiency interest could have a material adverse impact on our financial position, results of operations or cash flows.
Current wording
We firmly believe that the IRB assessment is without merit and we plan to pursue all available administrative and judicial remedies necessary to resolve the matter. We intend to vigorously defend our position, and we are confident in our ability to prevail on the merits. We regularly assess the likelihood of adverse outcomes resulting from examinations such as these to determine the adequacy of our tax reserves. The ultimate outcome of disputes of this nature is uncertain, and if the IRB were to prevail on its assertions, the assessed tax, penalties, and deficiency interest could have a material adverse impact on our financial position, results of operations or cash flows.
Previous wording
We had $771.7 million in cash and cash equivalents at March 31, 2025, an increase of $452.0 million from the March 31, 2024 balance.
Current wording
We had $240.3 million in cash and cash equivalents at March 31, 2026, a decrease of $531.4 million from the March 31, 2025 balance.
Showing the first 40 of 52 pairs. Open the source sections for the rest.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
•in fiscal 2026, we paid cash dividends to our preferred stockholders of $108.5 million, and
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Guarantor through intercompany arrangements. The summarized financial information does not eliminate the effects of these intercompany arrangements and separately presents the net effect of all of the Subsidiary Obligors’ transactions with Non-Guarantor for the financial measures presented below.