Microchip Technology Inc Citi 2026 Global TMT Conference

Welcome, Eric. Yeah, thank you for having me.

Before I start, I will be making certain forward-looking statements as part of this discussion and refer you to our filings with the SEC that identify important risk factors about the company. We have been in a period of growth for quite some time. If you look at where we are guiding the September quarter 2 at the midpoint, it is up 40% year-over-year. Obviously, during that time period, margin profile has changed significantly and doing quite well. Customer order patterns have been very strong. Bookings activity, we mentioned that the June quarter was the strongest bookings quarter that we have seen in about four years, and that has continued here into the current quarter. Both July and August bookings were good. Backlog continues to grow. Lead times are staying pretty steady for us.

We've seen some push-outs on lead times for some of the outsourced capacity, and that always leads to the question of what are customers doing with inventory. From what we see, we don't see that there's any significant inventory that's being built at this point in time. Actually, distribution inventory is quite low for Microchip at 25 days. The order patterns continue to come in strong, sell-through distribution strong. Since lead times have stayed very competitive at this point in time, and we are delivering to customers when we say we're going to deliver, we don't think that there's really any significant stocking that has happened yet or restocking at customers.

Yeah. Bookings have been strong across the board. It's really all product lines, all business units, all geography. There's not really anything to point out as being unique or different or weak in any way. It's been across the board strength in bookings.

From our perspective, the industrial and automotive recovery was delayed compared to what we've seen in Data Center Solutions and aerospace and defense. But as it stands now, we think that those customers have corrected their inventories from the last cycle, are placing higher levels of orders on us. We produced information last quarter, on a quarterly basis for the first time. We used to just do it annually in terms of breaking out end markets. And we showed in that slide that's posted on our website what the growth has been by end market year-over-year. And automotive grew, like 29%, something like that. Industrial grew quite nicely. So really, all end markets are growing very good at this point in time, and industrial and automotive are really no different.

I think on most customers, it really doesn't have an impact, right? They're looking at their business outlook, and if oil prices impacts their business outlook, maybe they pump the brakes a little bit. But we haven't seen that as of yet. Like I said, the bookings activity has been really strong. Design win activity with customers continues to be very robust on some of the new products that we've been talking about publicly, which I'm sure we'll talk about in future questions that you have. So I am not seeing that impact from customers today in terms of what they're giving us in terms of orders and what they're giving us in terms of their outlook over the next year.