JP Morgan analyst Harlan Sur maintained an Overweight rating on Microchip with a price forecast of $77.
Also Read: Microchip Technology Analysts Increase Their Forecasts After Better-Than-Expected Q1 Results
He explained that while customers continue to trim already-lean inventories and defer restocking until early 2026, Microchip's strong backlog provides visibility for sequential revenue growth in the March quarter and potential strength through mid-2026. The analyst expects gross margins to keep improving as the company increases fab utilization, removes temporary cost headwinds, and completes the sale of its Fab 2 facility by December 2025.
Sur highlighted that Microchip's product margins already exceed its long-term 65% target, supporting gradual profitability gains. The company's push into the data center market could provide another growth driver starting in 2027, though meaningful upside depends on customer adoption and market share expansion.
Microchip's September quarter revenue of $1.14 billion, up 6% sequentially, beat expectations, driven by 10% growth in microcontrollers, 2% in analog, and 3% in FPGA products.
Gross margin and EPS also came in slightly above forecasts. However, fourth-quarter guidance trailed consensus as customers delayed restocking despite strong order momentum.
The analyst expects this temporary pause to reverse in the first half of 2026 as distributors and direct customers begin rebuilding inventories.
Sur projected fourth-quarter revenue of $1.13 billion and adjusted EPS of $0.37.
Price Action: MCHP stock traded lower by 9.94% at $53.46 at last check on Friday.
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