Microchip Tech Upgrades Q3 Revenue Outlook Due to Strong Bookings

• New revenue guidance of $1.19 billion exceeds the previous range by roughly 3-7%, with CEO noting December quarter bookings were 'very strong' and March quarter backlog started 'much better' than December
• Recovery driven by customers finishing work through excess chip stockpiles accumulated during the pandemic that had previously pressured demand
• Company has significantly reduced internal inventory to lower write-offs and plans to ramp up factory production in March quarter to reduce under-utilization charges

Summary

Key Development: Microchip Technology upgraded its fiscal Q3 2026 revenue guidance on January 5, citing strong bookings and recovering end markets. The announcement boosted the company's stock.

Financial Figures:

• New Q3 net sales forecast: approximately $1.19 billion
• Original guidance range: $1.11 billion to $1.15 billion
• Previous expectation (early December): high end of original range

Market Context: The chipmaker is benefiting from a sector recovery as customers complete inventory drawdowns of excess chip stockpiles accumulated during the pandemic, which had previously suppressed demand.

Management Commentary: CEO Steve Sanghi reported "very strong" bookings activity during the December quarter despite the holiday period. He noted that March quarter starting backlog significantly exceeded December levels, signaling continued momentum.

Operational Improvements:

• Microchip has substantially reduced internal inventory levels, which will lower future write-offs
• The company plans to increase factory production in the March quarter to reduce under-utilization charges

Timeline: Full fiscal third-quarter results will be reported on February 5.

Market Implications: The upgraded guidance suggests the semiconductor industry's inventory correction may be nearing completion, with demand normalization underway. This recovery pattern could indicate broader improvement across the chip sector, particularly for companies serving diverse end markets. The strong bookings trend and improved backlog point to sustainable demand recovery beyond the current quarter.