Strong Financial Performance: Microchip reported net sales of $1.075 billion in Q1 FY2026, achieving a sequential growth of 10.8%, exceeding guidance by $5.5 million. The growth was broad-based across all geographies and product lines, driven by increased demand for microcontrollers and analog devices.

Improving Gross Margins: Non-GAAP gross margin improved to 54.3%, up from the previous quarter. This improvement was attributed to reduced inventory write-offs ($77.1 million down from $90.6 million) and lower underutilization charges ($51.5 million down from $54.2 million). The company anticipates gross margins to continue improving as inventory levels normalize and factory utilization increases.

Positive Outlook for Q2 FY2026: The company expects Q2 net sales to be between $1.13 billion (+/- $20 million), which is indicating strong demand continuity, with non-GAAP gross margins projected between 55% and 57%. This implies that the demand trend will likely remain above seasonal levels, supported by a robust backlog and increasing bookings.