---
ticker: "MCHP"
company: "Microchip Technology Incorporated"
date: "2026-10-20"
view: "Avoid"
fair_value: 47.59
price: 75.85
price_source: "market data quote, regular-session close (official close $75.85, sip-list-exchange-close, 2026-10-20; previous close $74.43)"
price_time: "2026-10-20T20:00:01Z"
price_vs_fair_value: "+59.4%"
bear: 17.66
bull: 91.06
exit_price: 76.7
p_price_justified: "under 20%"
restated: "2026-10-26"
method: "case-spread-2026-10-24"
original_fair_value: 47.59
original_view: "Avoid"
page: "https://alpha.dming.si/research/2026-10-20-mchp"
---

# MCHP · Microchip Technology Incorporated · Avoid

Research report as of 2026-10-20, partly unblinded. Page: https://alpha.dming.si/research/2026-10-20-mchp

We value MCHP at $47.59 a share. The report's $75.85 price (Oct 20, 2026) was 59% above fair value: Avoid.

_Restated Oct 26, 2026 (method case-spread-2026-10-24); the report's original value was $47.59, Avoid._

| Lens | Range | Marks |
| --- | --- | --- |
| Our report | $17.66 to $91.06 | fair $47.59; original $47.59 |
| Our simulation | $20.14 to $86.32 | median $42.32 |
| Street targets (3) | $88 to $135 | average $110, median $114 |
| Price | | $75.85 |

Bands run from our bear to bull (the hollow mark is the original $47.59), our simulation's 10th to 90th percentile and the Street's low to high. Street targets forecast future prices, not value today. Market data, captured Oct 20, 2026.

| Figure | Value |
| --- | --- |
| Fair value | $47.59 |
| Price | $75.85 (market data, Oct 20, 1:00 PM PT) |
| Five-year return | 2.5% (a year, at the report's price) |
| Bear / bull | $17.66 / $91.06 |
| Exit price | $76.70 (on Mar 31, 2032) |
| Confidence | 30% |
| Price against our scenarios | The price is justified in under 20% of our scenarios (3,000 simulated outcomes, each drawing the uncertain drivers from ranges we chose: our judgement, not a measured chance) |

_This text argues the original call. The current figures are at the top._

**Original call, Oct 20, 2026 (before the Oct 26, 2026 restatement)**

```
MCHP — Microchip Technology, Inc. — research view: Avoid (we would not buy at $75.85)
As of 2026-10-20 · partly unblinded; revised 2026-10-21, unblinded. What "blind" means
is explained below the box.

Fair value today      $47.59 per diluted share, discounting at an 11.18% cost of equity (the
                      yearly return investors require); blind value $49.95
Price                 $75.85, market data quote, 2026-10-20T20:00:01Z
                      (regular-session close; official close $75.85, previous
                      close $74.43). Fair value is 37.3% below the price.
Five-year exit price  $76.70 on 2032-03-31: the mean of the long fade $54.70 and the outside
                      view $98.70 (18.9x EV over EBIT before acquired amortization). At
                      10/20-year fades: $76.18/$77.11. A value-driver formula gives 12.5x
                      year-six NOPAT (after-tax operating profit) against the fade's 12.0x.
Five-year return      +2.5% a year from today's price on our central case, including the
                      modeled free-cash payouts and today's claims on the business
                      (method.five_year_return, market.py); bear -8.1%, bull +10.7%
Purchase price        $45.58 to earn the 12% hurdle (the yearly return we require)
Bear / bull today     $23.34 / $73.93, each a single consistent business outcome
                      (case-weighted 25/50/25, our weights: $48.11)
Confidence            30% (subjective, not calibrated): the chance the 2032-03-31 value
                      lands within ±20% of the central exit price
Moat                  Narrow: catalog microcontroller, analog and FPGA parts designed into
                      industrial, defence and car programs that run for a decade, mostly
                      made in its own fabs; held back by a channel that overshipped in
                      fiscal 2022-24 and a price-sensitive Chinese market
Market expects        Far more than our central case: an outside view of 37.9x EV/EBIT on
                      fiscal 2032 EBIT before acquired amortization (our 18.9x; the
                      unrestated GAAP default is 29.0x), an exit price near $127 against
                      $76.70; or, at our 18.9x, growth 6.8 points a year above central
                      in fiscal 2028-32, fiscal 2032 EBIT of $4.7B (1.57x central)
                      (market.py)
Price needs           No single driver reaches the price within its range (`alpha
                      research odds`); the best ends are $72 on fiscal 2028 growth of
                      45%, $74 on fiscal 2030-32 growth of 15%, $72 on a 35x exit
                      multiple and $59 on a 72% gross margin
Odds in our scenarios Under 1% that fair value reaches the price (P(price justified),
                      1 of 3,000 simulated scenarios, odds.json; subjective, not
                      calibrated)
Key driver            Fiscal 2028 revenue growth: +3% / +22% instead of +13% is -$7.54 /
                      +$6.94 a share. The exit multiple moves value more in absolute terms:
                      each turn (1x) is about $1.5, and the unrestated 29.0x GAAP default
                      would add $15.39
Street                Consensus target $110.50, median $114.50, range $88-$135 (market data,
                      read 2026-10-21T02:18Z); 3 targets in the last quarter averaging
                      $103.33, 40 in the last year at $93.20, none in the last month.
                      Targets forecast a future price, so they show expectations, not
                      validation or value today. Fiscal 2027 revenue estimate $6,404M
                      against our $6,496M
```

**We rate Microchip Avoid: at $75.85 we would not buy.** Our central fair value
is $47.59, 37.3% below the price. Avoid means fair value is under 0.85 times
the price (the line between Avoid and Hold, $64.47); here it is 0.627 times.
A buyer would also need the 12% yearly hurdle, which takes a price of $45.58
or lower, and the price is $30.27 above that. Only the bull case ($73.93) is
near the price, 2.5% under it, and it earns +10.7% a year from here, under the
hurdle. The central case earns +2.5% a year and the case-weighted value
($48.11) is 37% below the price. The view does not depend on our exit-multiple
adjustment: on a GAAP-consistent basis the method's default 29.0x gives
$59.61-$61.60, and even the unrestated 29.0x on pre-amortization EBIT gives
$62.98 (section 3).

**Terms.** Fair value is our estimate of what a share is worth today. We value
each company three ways. The central case is our best estimate, the bear case
is a severe but plausible bad outcome, and the bull case is the matching good
outcome; only the central case sets the call. A fiscal year ends in March, so
"fiscal 2028" is the year to March 2028, and "Q1 FY2027" is the quarter to
June 2026. EBIT is operating profit before interest and tax, and EV/EBIT
divides enterprise value (the whole business, debt included) by it. Acquired
amortization is the non-cash write-down of intangibles bought in past
acquisitions. Non-GAAP figures are the company's adjusted ones, which leave out
stock pay and special charges. Two estimates set the exit value in 2032. The
fade assumes Microchip's growth and its return on new investment drift over 15
years to long-run levels (here 3.7% growth and the peers' 37.8% return on new
capital). The outside view applies the EV/EBIT multiple that Microchip's own
history and its peers' show. "The method" is Capfolio's standard valuation
method, which model.py runs. The Street means the analysts who follow the
stock. A flag is a warning from our automated report check that a number looks
off or an argument is missing.

**How blind the report is.** We first value a company without seeing the price,
the Street's estimates or its targets (blind), so the market can't steer the
model. The model and assumptions were committed blind at `0a4b5f64e`, with a
central fair value of $49.95. The blind step was only partly blind: the
filings, masked to hide market information, still showed the
conversion prices of the three convertible notes, that the 2017 notes became
convertible because the stock traded above 130% of their conversion price, a
fair value of the 2017 notes that implies about $109 a share on 2026-06-30, and
a preferred share count that implies about $62. An analyst on the Q1 call said
the Street's December estimate was "up a little", and the analyst's recall from
training places the stock somewhere around $50-100 in 2024-25
(assumptions.md lists each). None is a model input except the
conversion prices, which set when convertible holders take shares. The market
pass (the later step in which we read the price, estimates and targets:
market.py, market.txt, odds.json) changed no model input.

The revision of 2026-10-21 is unblinded. It answers an adversarial review (an
outside reviewer asked to find what is wrong) and was made with the price, the
Street's estimates and the reviewer's findings in hand. It changes four central
inputs and one bull input; section 4 gives each change, its dated evidence and
its dollars, and the central moves from $49.95 to $47.59.

## 1. A normal year's revenue sets the value, not the speed of the recovery

Microchip sells catalog chips that customers design in once and buy for
years: mixed-signal microcontrollers (small programmable chips that run
machines; 50.0% of fiscal 2026), analog (28.2% of fiscal 2026) and "other"
(21.8%, mostly FPGAs, which customers program after buying, plus licensing,
memory and timing systems) (10-K FY2026). Sales go mostly through
distributors, which is what made the last cycle so violent: revenue went from
$8,439M in fiscal 2023 to $4,402M in fiscal 2025, a 48% fall, as distributors
and customers worked off inventory bought in the shortage (market data). Gross margin
followed how full the fabs ran, from a 67.5% GAAP peak to 56.1%, because
Microchip runs its own fabs and carries their fixed cost.

The value question is therefore where a normal year sits, not how fast the
recovery is. The fiscal 2023-26 mean revenue is $6,297M (two peak years and
two trough years, centred on March 2024); the fiscal 2019-21 mean is $5,354M
(centred September 2019). Between them revenue grew 3.7% a year (4.1% if the
gap is taken as four years rather than 4.5; market data). Our central path takes the
+13% restocking year of fiscal 2028, a +4% digestion year, and then that
measured 4% a year, which gives fiscal 2032 revenue of $8,587M, 1.6% above the
4% trend line of $8,450M because fiscal 2028-29 sit above it. The path lands on
management's long-term model (65% gross margin, 25% operating expenses, 40%
non-GAAP operating margin; Q4 FY2026 call, Citi conference September 2026):
65.0% gross and 40.2% non-GAAP operating in fiscal 2032, or 34.8% after stock
pay and special charges. That gives fiscal 2032 EBIT before acquired
amortization of $2,991M and NOPAT of $2,587M at a 13.5% tax rate.

## 2. Microchip has beaten its own revenue guidance six quarters running

Each quarter Microchip guides to a revenue range, and it has beaten the
midpoint in each of the last six quarters: +1.1%, +2.9%, +0.9%, +5.0%, +4.1%
and +2.0%, median +2.5% (releases; market data quarterly). Tags in brackets say where
a fact comes from: reported (in a filing or release), claim (management on a
call) and inference (ours). The June 2026 quarter (Q1 FY2027) brought:

- Revenue $1,484.7M, up 38.0% on the year and 13.2% on the quarter,
  against a $1,456M midpoint (reported).
- Non-GAAP gross margin 63.8%, above the guided range, still after $38.5M
  of underutilization charges (reported; charges from the call).
- Non-GAAP EPS (earnings per share) $0.76 against a $0.67-0.71 guide
  (reported).
- Inventory days down from 185 to 175, against a 130-150 target;
  distribution inventory 25 days, near the low end of its 17-43 history
  (reported; history from the call).
- Data centre: about $591M in calendar 2025 and about $1B expected in
  calendar 2026, with revenue from PCIe Gen 6 (the next data-centre
  connection standard) switch and retimer chips only from calendar 2027 and
  Gen 6 design wins up from 6 to 12 programs (claim).

The September quarter guide is $1,589-1,618M with non-GAAP gross margin
66-67%. That margin includes one-off gains from an IP licensing sale and a
write-up of channel prices after the August price increase (claim), so we
carry 66.0% for the rest of fiscal 2027 and let it fall to 64.5% in fiscal
2029, the digestion year, and 65.0% after. Net debt is about $5.2B and
leverage 2.85x; there are no buybacks and the dividend is held at $0.455 a
quarter (reported).

## 3. Forecast and valuation: central fair value $47.59

The model is model.py, run on the method; it writes
output.txt, forecast.json and
valuation.json. The inputs and their sources are in
assumptions.md (the blind record; section 4 and
drivers.json carry the revised values); the drivers and their
ranges are in drivers.json.

| Fiscal year (March) | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 |
|---|---|---|---|---|---|---|
| Revenue ($M) | 6,496 | 7,340 | 7,634 | 7,939 | 8,257 | 8,587 |
| Growth | +37.8% | +13.0% | +4.0% | +4.0% | +4.0% | +4.0% |
| Non-GAAP gross margin | 65.5% | 65.5% | 64.5% | 65.0% | 65.0% | 65.0% |
| EBIT before amortization ($M) | 2,117 | 2,532 | 2,573 | 2,732 | 2,859 | 2,991 |
| Free cash flow ($M) | 2,038 | 2,069 | 2,060 | 2,124 | 2,240 | 2,359 |

Fiscal 2027 is Q1 as reported plus Q2 at the guide midpoint beaten by the
median +2.5% ($1,643M), Q3 at $1,659M (management says December will fall
less than the usual 3-5%) and Q4 at $1,709M. Fiscal 2028 at +13% is +7.4%
over the March 2027 run-rate. Fiscal 2029 at +4% is a digestion year,
because the upturn is already in its seventh above-seasonal quarter.

**Debt and other claims counted today.** From enterprise value we take
$5,398.9M of debt at face (commercial paper, senior notes and the convertible
notes), $580.2M of long-term tax payable, $333.9M of customer deposits under
supply agreements, 25% of the $480.2M Malaysian tax assessment, $159.4M of
preferred dividends to the March 2028 conversion, and the $1,485M mandatory
convertible preferred (preferred shares that must convert into common stock in
March 2028). Its settlement has three tiers (10-Q note 9, applicable market
value): above $62.48 each preferred converts into 16.006 shares (23.8M shares
in all); from $51.00 to $62.48 into $1,000 of shares at that value, so a
$1,485M claim; below $51.00 into a fixed 19.608 shares each (29.1M shares in
all, worth less than the preference). The bull takes the 23.8M shares and the
central and bear, both under $51, take the fixed 29.1M shares. Convertible
notes add shares only in a case whose exit price is above their conversion
price: only the bull's $116.87 exit clears the 2026 notes' $104.17, adding
0.93M shares. Not valued, named: the Hailo purchase (closing was due "later
this month" in September; price undisclosed), the capped call on the
preferred ($55.1M cost, cap price masked; it only reduces dilution), and
pension and lease liabilities inside other long-term liabilities. The share
count is today's 543.7M basic plus the 2017 notes; the Q1 FY2027 diluted
count is 550.5M because restricted stock units are in it. Using it costs
$0.56 a share, which would partly count stock pay twice (we charge it as a
cost), so we keep 543.7M. Before the preferred correction of 2026-10-21 the
central and bear counted a $1,485M claim; the fixed-share tier is worth +$0.05
to the blind central and +$1.48 to the bear.

**Cost of capital.** Beta (how strongly a stock moves with the market) of
1.403 is the Blume-adjusted (pulled toward 1) median of eight peers' market data betas
(raw 1.601); Microchip's own Blume beta is 1.509, worth -$1.88 a share. LSCC
is in the beta set but drops out of the exit multiple's peer set for too few
valid years; the beta without it is 1.349 and would add $1.01. The cost of
equity is 11.18%. The method gives debt no weight, so the WACC (weighted
average cost of capital) is 11.18% too. That discounts cash flows that are
already after interest at face (debt is counted today) at a cost of equity; a
WACC with 10% or 15% debt weight, discounting all flows at 10.61% or 10.32%,
would add $2.66 or $4.14. We did not adopt it because it changes the shared
method, not this report (proposal in process.md).

**The exit multiple: we restated the method's default 29.0x down to 18.9x.**
The method's default outside view is EV over GAAP operating income: 29.0x, the
mean of Microchip's own ten-year median of 39.3x and the peers' 18.8x.
Microchip's GAAP history carries $534M to $1,047M a year of Atmel and
Microsemi amortization (10-K XBRL), which falls to about $231M by fiscal 2031,
and our year-five EBIT is before it. So we restated every year of Microchip's
and each peer's history by adding back its amortization of intangibles:
Microchip's median falls to 19.6x, the peers' to 18.2x, and the mean to 18.9x,
which we use. That is 0.65x the default, a bigger gap than the 1.5x at which
our automated report check requires reviewers to challenge a change from the
default; the restatement is the reason, and
anchor_amortization.py reruns it. The reviewer
agreed the restatement is right in principle.

The unrestated 29.0x applied to EBIT before amortization mixes two bases, so
the honest counterfactual is the GAAP one: 29.0x on EBIT after the scheduled
acquired amortization. The 10-K FY2026 schedule runs $454.8M in fiscal 2027,
$344.0M, $270.2M, $258.1M and $231.3M in fiscal 2031; fiscal 2032 is our
assumption of $100-231M. That is 28.1x or 26.8x on EBIT before amortization
and gives fair value of **$61.60 or $59.61**, 0.81 or 0.79 of the price, still
Avoid (model.py "R2"; market.py). On the blind inputs the same calculation
gave $64.48 and $62.52 (the reviewer: $62.56-$64.42), the top of it a cent
above the $64.47 Avoid line, a Hold by a cent on that version. The unrestated
29.0x on pre-amortization EBIT would give $62.98. On the revised model every
version is under the line, so the restatement does not decide the view; it
moves the central by $12-14.

Known limits of the restatement, from the review. (Finding 3) The XBRL add-back is
total intangible amortization, which includes purchased software: the 10-K
FY2026 income statement shows acquired amortization of $431.1M, $490.9M and
$605.4M in fiscal 2026, 2025 and 2024 against totals of $534.3M, $584.3M and
$689.1M, so software was $103.2M, $93.4M and $83.7M. Earlier years' split is
not in the filings we saved. Taking the known split for fiscal 2024-26 and
$83.7M or $103.2M earlier lifts Microchip's restated median, the multiple to
19.4x-19.5x and fair value by $0.73-$0.88. We did not change the headline
because the peers' add-backs may carry the same mix and cannot be split from
the XBRL facts. (Finding 4) STM has no 10-K facts and stays unrestated, and MPWR (3
of 12 years) and NXPI (8 of 12) have gaps left unrestated; the peers with 8 or
more restated years alone give 18.7x and -$0.29.

**The outside view is four-fifths higher than the fade** ($98.70 against
$54.70). The fade discounts at 11.18% with no debt in the WACC, and at that
rate 12.0x year-six NOPAT is what a 3.7% long-run growth rate at a 37.8%
return on new capital is worth. The history multiples were set by markets
that priced semiconductor companies at lower blended costs of capital and,
for Microchip, often at cyclical troughs when EBIT was depressed. We take
the mean, as the method says, and show both: on the fade alone fair value is
$35.24, on the outside view alone $59.94.

**What moves value.** Each change below is from the central $47.59.

| Change | Fair value | Effect |
|---|---|---|
| Fiscal 2028 growth +3% / +22% | $40.04 / $54.53 | -$7.54 / +$6.94 |
| Fiscal 2030-32 growth 2% / 7% a year | $43.49 / $54.18 | -$4.09 / +$6.59 |
| Gross margin 62.0% / 67.0% (fiscal 2030-32) | $42.69 / $50.85 | -$4.90 / +$3.27 |
| Exit multiple 14x / 24x | $40.40 / $55.28 | -$7.18 / +$7.69 |
| Stock pay 7% of revenue | $44.22 | -$3.36 |
| Opex takes 50% of growth | $45.40 | -$2.18 |
| Beta 1.2 / 1.6 | $51.67 / $44.20 | +$4.08 / -$3.39 |
| Normal tax 18% | $46.19 | -$1.39 |
| Malaysian assessment at 100% | $46.96 | -$0.63 |

**The cases.** The bear ($23.34, exit $45.18) is a second correction (a
repeat of the inventory-driven downturn): flat fiscal 2028, -18% in fiscal
2029 with gross margin back to 58%, then a recovery to $7,037M of revenue by
fiscal 2032 at 62% gross margin, with the mature return on new capital cut to
0.7x the peers'. It uses the same 18.9x exit multiple as the central; at 14x
it would be $19.04 (-$4.30). The bull ($73.93, exit $116.87) is restocking
plus the data-centre ramp: +20% in fiscal 2028, 7-8% a year after, and gross
margin held at 66-67%, reaching $10,600M of revenue and a 44.9% non-GAAP
operating margin, above management's own model.

## 4. Revision after the adversarial review: the central falls $2.36 to $47.59

The review (the reviewer's 15 numbered findings, answered in the table below)
found the central and the Avoid view sound, put a central near $50 in a range
of $46-$56, and asked for changes where an input did not match Microchip's own
history. The rule for a change made after the market pass is dated evidence
that does not depend on the price. The two findings whose changes qualify are
6 (revenue trend) and 8 (margin), both on Microchip's own filings and
management's dated model. Findings 10, 11 and 12 are sensitivities, not
inputs. The largest change is the revenue trend (-$4.67), which rests on market data
statements and no claim or Street figure. The net move is -$2.36, away from
the price; two of the four changes raise value. A separate correction, the
preferred's fixed-share tier below $51, adds $0.05 to the central and $1.48 to
the bear.

**Dollar bridge, central, from the blind $49.95** (model.py "Revision after the
adversarial review", output.txt; each step added to the one before):

| Step | Fair value | Change | The step alone on the blind inputs |
|---|---|---|---|
| Blind central, `0a4b5f64e` inputs | $49.95 | | |
| Preferred settles at fixed 19.608 shares below $51 per 10-Q note 9 | $50.00 | +$0.05 | +$0.05 |
| Fiscal 2030-32 growth 6.5/6/6% to 4/4/4% (finding 6) | $45.33 | -$4.67 | -$4.67 |
| Growth after fiscal 2032 5.5% to 4.0% (follows finding 6) | $44.14 | -$1.18 | -$1.32 |
| Non-GAAP gross margin, fiscal 2030-32, 64.3% to 65.0% (finding 8) | $45.19 | +$1.05 | +$1.15 |
| Operating cost growth 3.5% to 2.2% a year (finding 8) | $47.59 | +$2.40 | +$2.57 |
| Revised central | $47.59 | -$2.36 in all | -$2.22 summed alone |

The steps interact by $0.14 in all. The bull moves from $72.33 to $73.93
(+$1.60) because its operating cost growth falls from 3.0% to the central's
2.2% (a bull cannot carry a higher cost base than the central); the bear moves
from $21.86 to $23.34 on the preferred alone. The case-weighted value moves from
$48.52 to $48.11, the exit price from $85.74 to $76.70, the purchase price from
$47.72 to $45.58 and the five-year return from +3.7% to +2.5% a year.

**Finding 6, revenue trend, -$4.67.** The blind central grew 6.5%, 6% and 6% in
fiscal 2030-32 and called it a 5% trend. Microchip's own measured trend is
3.7% (4.1% over a four-year gap): fiscal 2019-21 mean $5,354M to fiscal 2023-26
mean $6,297M (market data statements, read 2026-10-21). The data-centre ramp (about
$591M in calendar 2025 to about $1B in calendar 2026, a management claim, Q1
FY2027 call 2026-08-06) is already in the +13% of fiscal 2028; PCIe Gen 6
revenue from calendar 2027 and the August 2026 price increase are claims about
a step, not a rate of growth, so they do not support a higher trend for a
decade. We stepped down to 4% a year and moved the growth after fiscal 2032
(the start of the 15-year fade) from 5.5% to 4.0% so the fade does not start
above the trend (-$1.18). Keeping the 5% would be worth $2.10 and 6% $4.29.
The upside stays in the bull (7-8%) and in the top of the range (9%).

**Finding 8, margin, +$1.05 and +$2.40.** The blind central reached a 39.1%
non-GAAP operating margin in fiscal 2032, under management's 40% model and
far under fiscal 2022-24 (GAAP operating income plus amortization, before
stock pay, was 43.9%, 47.9% and 45.0% of revenue in fiscal 2022-24; the company
reported 43.9% non-GAAP for fiscal 2024, release of 2025-05). Two inputs now
rest on dated evidence. Gross margin is 65.0% in fiscal 2030-32 (fiscal 2029
stays 64.5%): management's model is 65% (Q4 FY2026 call 2026-05-07, Citi
conference September 2026, claims); fiscal 2024 was 65.8% non-GAAP; the June
2026 quarter was 63.8% after $38.5M (2.6 points) of underutilization charges;
and non-GAAP gross margin runs 0.4-0.9 point above GAAP (65.8% against 65.4%,
57.0% against 56.1%, 58.5% against 57.7% in fiscal 2024-26), so the blind
64.3% had been placed against a GAAP mean of 62.2%, a mixed basis. Operating
cost now grows 2.2% a year plus a quarter of revenue growth, not 3.5%:
research plus selling and administrative cost grew 2.2% a year from fiscal 2019
($1,509M) to fiscal 2026 ($1,760M) while revenue fell from $5,350M to $4,713M,
and non-GAAP operating cost was $1,676M in fiscal 2024, $1,432M in fiscal 2025
and about $1,706M on the Q1 FY2027 run-rate (market data; releases). The result is a
40.2% non-GAAP operating margin in fiscal 2032 (opex 24.8% of revenue against
management's 25%).

Evidence against, disclosed. After stock pay and special charges the central
margin is 34.8%. Microchip's pooled history (GAAP operating income plus 10-K
intangible amortization, revenue-weighted) is 35.2% over fiscal 2019-26, 36.3%
over fiscal 2020-26 and 38.5% over fiscal 2019-24; the reviewer quoted 35.2%
and 36.9%, and we reproduce the first only. That history includes about
$84-103M a year of purchased-software amortization in the add-back, which
overstates it by roughly 1-2 points in recent years. Moving the fiscal 2032
margin to those pooled values is worth +$0.57, +$2.37 and +$6.17. Stock pay is
5% of revenue (5.4% in fiscal 2026, 5.1% in Q1 FY2027) against 3.2% pooled
over fiscal 2019-26 and 2.0-3.8% in fiscal 2022-24; at 4.4%, 4.0% and 3.5%
(finding 9) value would be +$1.01, +$1.68 and +$2.52. We kept 5% because it is the
current reported rate and the history is at peak revenue.

**Answers to each finding** (the reviewer's dollars were reproduced where
noted; the saved working is in output.txt under "Review checks" and
market.txt):

| # | Finding | Answer | Dollars |
|---|---|---|---|
| 1 | Restatement right in principle | Kept 18.9x | none |
| 2 | The "unrestated 29.0x" counterfactual mixes bases; the restatement was said to decide the view | Fixed: GAAP-consistent 29.0x on EBIT after scheduled acquired amortization, fiscal 2032 amortization $100-231M assumed; section 3 and section 9 reworded | $61.60-$59.61 on the revised model, Avoid; $64.48-$62.52 on the blind inputs (reviewer $64.42-$62.56), where the top is a cent above the $64.47 line, a Hold by a cent |
| 3 | XBRL add-back includes about $103M of software | Disclosed; fix not cheap (earlier 10-Ks needed, peers have the same mix) | +$0.73 to +$0.88 (reviewer +$0.48 to +$0.96) |
| 4 | STM unrestated, null peer years | Disclosed | -$0.29 with covered peers only (reviewer +/-$0.6, not reproduced) |
| 5 | Acquired-amortization step is a rule for every acquirer-heavy semi | Method proposal in process.md, no method change | none |
| 6 | Trend 5% against the measured 3.7-4.1% | Fixed, section 4 | -$4.67 (-$1.18 growth after) |
| 7 | Cycle evidence fine | No change | none |
| 8 | Margin 39.1% under the 40% model and FY2022-24 actuals | Fixed, section 4; pooled range and stock pay disclosed | +$1.05 gross margin, +$2.40 cost growth |
| 9 | Stock pay 5% against 2-3% history | Disclosed, kept | +$1.01 at 4.4%, +$1.68 at 4.0%, +$2.52 at 3.5% (reviewer +$1.15, +$1.91, +$2.87) |
| 10, 11 | Street path through the model, replacing "revenue explains $7 of $49" | Done in section 9; sensitivities, not inputs | bridge to $92.33 |
| 12 | Unlevered flows discounted at the cost of equity | Method proposal in process.md, not adopted | +$2.66 / +$4.14 at 10% / 15% debt (blind inputs +$3.00 / +$4.66 with the fixed-share preferred, +$3.05 / +$4.71 before it, as the reviewer) |
| 13 | LSCC in the beta set, not in the exit multiple's peer set | Disclosed | beta 1.349, +$1.01 (reviewer +$1.16 on blind inputs, not rerun) |
| 14 | Balance sheet checks against the 10-Q; RSU dilution, Hailo, bear multiple, preferred cap | Disclosed in section 3 | -$0.56 shares, bear -$4.30 at 14x; the reviewer's preferred check (below $51 holders get a fixed 19.608 shares, not $1,000 of stock) is fixed: bear +$1.48, central +$0.05 (reviewer: bear 23.34, central 47.59; RSU about -$0.7) |
| 15 | SiTime section | Passes, no change | none |

## 5. Microchip's timing business shows almost nothing about SiTime

Short answer: almost nothing quantitative. SiTime is a timing-chip maker we
also cover ([report](https://alpha.dming.si/research/2026-10-20-sitm)). Microchip is SiTime's best
documented US-listed competitor, but it does not report timing as a line,
so it cannot confirm or refute SiTime's share, pricing or MEMS (silicon-based
oscillator) claims. Evidence is tagged as in section 2: **reported**,
**claim** and **inference**.

- **Reported.** Timing products sit inside the analog line (28.2% of fiscal
  2026 revenue, $1,329M) and "timing systems" inside "other" (21.8%,
  $1,029M) (10-K FY2026). Research and development covers timing systems.
  The 10-K does not use the words MEMS or oscillator, gives no timing
  revenue, and gives no product-line margins.
- **Claim.** Timing and synchronization is one of five areas Microchip
  sells into data centres outside its Data Center Solutions unit; that
  catalog data-centre revenue was about $288M in calendar 2025, and timing
  is named among eight or so product families inside it (Q1 FY2027 call).
  The CEO called timing hard to break out because business units mix
  analog and microcontroller parts (Q4 FY2026 call). An analyst on the Q1
  call listed timing among Microchip's leading defence positions.
- **Inference: size.** If timing were material, a company that breaks out
  data centre, end markets and the Data Center Solutions unit would have
  shown it. Timing is probably a few percent of Microchip's revenue, and
  Microchip's valuation turns on microcontrollers and the cycle, as our
  timing-sector note warned (sector note, section 6; linked in section 10).
- **Inference: MEMS against quartz.** Microchip sells both: MEMS
  oscillators (the DSC families) and quartz OCXOs (oven-controlled quartz oscillators) and time systems from
  Vectron and Symmetricom (sector note, section 4). It is hedged on the
  technology rather than betting on MEMS, which fits SiTime's claim that
  no rival sells MEMS oscillators at scale into AI optics, but does not
  prove it. Our memory, not checked in a source this run, is that the DSC
  line came from Discera through Micrel.
- **Inference: pricing.** Microchip's August 2026 price increase and
  channel price write-up are company-wide; nothing ties them to timing.
  Microchip's long-term 65% gross margin target for the whole company is
  about SiTime's own level, so a broad-line seller can price timing parts
  near SiTime's margins without that showing in its reported numbers.
- **Not found.** Microchip's timing revenue, its share of any timing
  segment, its timing prices, and its MEMS revenue. A web search found no
  disclosed figure.

## 6. The other side: why the value could be too low, and too high

**Why the value could be too low.** The restated 18.9x exit is our judgment
on top of the method's default, and it cuts $15.39 a share against the
unrestated 29.0x (the GAAP-consistent version cuts $12-14). Markets have
paid Microchip far more than 19x pre-amortization EBIT in good years, and
our own pre-amortization return on capital median is 65%, well above the
37.8% peer return we fade toward. Management has hit or beaten its guide
six quarters running, says bookings are the strongest in about four years,
and expects data-centre revenue to grow sharply from calendar 2027. The 4%
trend is Microchip's measured history; a data-centre and defence mix that
lasts would justify 5-6%, worth $2.10-$4.29. A bull who holds 66-67% gross
margin and 7% growth gets $74; one who also takes the unrestated 29.0x default gets
well above that.

**Why the value could be too high.** The upturn is seven quarters old, and
the last one ended in a 48% revenue fall. Inventory days are still 175
against a 130-150 target, so Microchip is still running fabs below capacity
while selling from stock; a demand stall would hit gross margin twice. The
balance sheet carries $5.4B of debt, a $1.5B preferred and up to $480M of
Malaysian tax, all counted ahead of common holders. The pessimistic case is worth $23.34. The
central margin of 40.2% non-GAAP is management's own model, which a stock pay
rate of 5% of revenue (against 3.2% pooled history) and the pooled
35.2%-38.5% margin history after stock pay make neither easy nor
unreasonable.

## 7. Next results preview: Q2 FY2027, early November 2026

Q2 FY2027 (September 2026 quarter). Date not confirmed; last year's Q2
call was on 2025-11-06, so early November 2026 is likely.

| Metric | Forecast | Range (about 80%) | Reason from the model |
|---|---|---|---|
| Revenue ($B) | 1.643 | 1.600-1.680 | Guide midpoint 1.6035 plus the six-quarter median beat of +2.5% |
| Non-GAAP gross margin | 66.5% | 65.8%-67.2% | Guide 66-67% with one-off licensing and channel-price gains |
| Non-GAAP operating income ($M) | 648 | 615-680 | Opex held near the guide's $441M in dollars as revenue beats |
| Non-GAAP diluted EPS ($) | 0.96 | 0.91-1.01 | Other expense $49M, 7.5% cash tax, 575M non-GAAP diluted shares (guide table) |
| Q3 FY2027 revenue guide midpoint ($B) | 1.620 | 1.560-1.690 | Our Q3 of 1.659 less the typical beat; December seasonally down |
| Inventory days | 165 | 155-175 | Revenue up 10% on the quarter with capex low |
| Distribution inventory days | 25 | 22-30 | Price increase and restocking against sell-through |

Each $100M of quarterly revenue above ours that lasts into fiscal 2028
(about 5 points of fiscal 2028 growth) is worth about $4.3 a share
(model.fair_value with fiscal 2028 growth at 18.4%).

## 8. What settles it

- **Q2 FY2027 results, early November 2026.** Falsifies the central case
  if revenue lands below the $1.589B guide low or the Q3 guide midpoint is
  below $1.55B; supports the bull if non-GAAP gross margin holds above 66%
  without the one-offs.
- **Inventory and channel, each quarter.** Distribution inventory above 35
  days with falling sell-through, or inventory days rising again, is the
  bear's first sign.
- **Data-centre ramp, calendar 2027.** PCIe Gen 6 revenue arriving in
  calendar 2027 is management's claim; a slip of a year moves fiscal 2028
  growth toward the bear.
- **Malaysian tax ruling, by about late 2027.** The 10-K says the matter
  could be decided within 18 months; losing in full costs $0.63 a share
  over our 25%.
- **Preferred conversion, March 2028.** It settles the share count (10-Q note 9):
  above $62.48 the holders take 23.8M shares, from $51 to $62.48 shares worth
  the $1,485M preference, below $51 a fixed 29.1M shares.

## 9. The price needs far more than our model gives, and the Street is far higher

All figures from market.txt and odds.json unless named.
Our automated report check raised several flags on this report: warnings
that a number looks off or an argument is missing. Each is answered below.

The stock closed at $75.85 on 2026-10-20, up 1.9% on the day, 28% under its
52-week high of $105.91 and 56% over the low of $48.52 (market data quote). The vendor's
official close is the same $75.85 (sip-list-exchange-close). The price sits 2.6%
above the bull case ($73.93) and 59% above our central. On
Microchip's own market data beta (1.759, Blume 1.509, cost of equity 11.63%) fair value is
$45.71 and the purchase price $44.82; the view does not change.

**What the price needs** (market.py, everything else central):

- **A higher exit.** An outside view of 37.9x EV over EBIT before acquired
  amortization on central fiscal 2032 EBIT of $2,991M, which is an exit price
  near $127 as the mean of the fade ($55) and the outside view ($199); put
  another way an exit price of about $127 on 2032-03-31 against our $76.70. Our
  18.9x is the restated peer and own history; the unrestated GAAP default is
  29.0x, which gives $62.98, still $13 under the price, and the GAAP-consistent
  version gives $59.61-$61.60. The price therefore needs more than the method's
  own default multiple.
- **A bigger business at our multiple.** Growth every year of fiscal 2028-32
  6.8 points above central: fiscal 2032 revenue $11.7B (central $8.6B) and EBIT
  $4.7B (1.57x), margins held. That is above our bull ($10.6B revenue, 44.9%
  non-GAAP operating margin), which is why even the bull is below the price.
- **No single driver does it** (`alpha research odds`): none reaches the price
  within its range. The best ends give $72 (fiscal 2028 growth 45%), $74
  (fiscal 2030-32 growth 15%), $72 (exit multiple 35x), $59 (gross margin 72%),
  $56 (growth after 2032 of 12%).
- **The odds** in our scenarios are under 1% (1 of 3,000 draws; odds.json range
  0.0% to 3.9%; a mixture of two simulated worlds, the base world at 75% and the bust
  world at 25%).
  Simulated median $42, 10th percentile $29, 90th percentile $55. P is our
  distributions, not a calibrated probability, and the distributions centre on
  our view, so P measures how far the price sits outside our ranges, not the
  chance the market is wrong.

**The simulated median is 11% under the central** ($42 against $47.59; odds.json
flags a gap over 15%, so this one is not flagged). Inference: the bust world, 25%
of draws with a median near $30, pulls the mixture down; the base world alone has
a median of $46, 3% under the central.

**Why we may be wrong.** The case for the price is the one in section 6: a
higher multiple for a recovering cyclical with a 65% median pre-amortization
return on capital, and a data-centre ramp from calendar 2027. We do not widen
the ranges toward the price.

**Why we are far below the Street.** Our report check flags any value under
0.6x the Street's target discounted one year. The average target of $110.50,
discounted one year at 11.18%, is $99.39; our $47.59 is 0.48x it, under the
0.6x band. The Street's revenue is close to ours (fiscal 2027 $6,404M against
$6,496M, fiscal 2028 $7,460M against $7,340M, fiscal 2029 $8,229M against
$7,634M, 9 analysts for 2029), so the gap is not revenue. The vendor's own EBIT
estimates (fiscal 2028 $4,334M, a 58.1% margin) have no stated basis and cannot
be a company operating margin: management guides Q2 FY2027 non-GAAP operating
margin of 38.5-39.5% and its long-term model is 40%. We instead worked the
Street's non-GAAP operating margin from its EPS: EPS times 575M non-GAAP
diluted shares (the Q2 guide's 574.5-575.5M), divided by one less our tax rate
(7.5%, 11%, 13.5%), plus $196M of other expense (four times the $48.5-49.5M Q2
guide), over Street revenue. That gives 38.5% in fiscal 2027 (16 analysts on
EPS), 42.3% in fiscal 2028 (16) and 44.6% in fiscal 2029 (5), against our 38.1%,
40.0% and 39.2% on the same before-stock-pay basis (market.py).

Running the Street's path through our model, one sensitivity at a time, each
added to the one before (none is an input; market.py):

| Step | Fair value | Change |
|---|---|---|
| Our central | $47.59 | |
| Street revenue, fiscal 2028-29 (our margins and cost rules) | $54.08 | +$6.50 |
| plus the Street's fiscal 2028 operating margin, 42.3% | $57.78 | +$3.70 |
| plus the unrestated 29.0x exit, on pre-amortization EBIT | $75.43 | +$17.65 |
| plus beta 1.0 (cost of equity 9.49%) | $87.27 | +$11.84 |
| plus the Street's fiscal 2029 operating margin, 44.6% | $92.33 | +$5.06 |

The target discounted one year is $99.39 at our 11.18% and $100.92 at beta 1.0.
Revenue is $6.50 of the gap, the two margins $8.76, the multiple $17.65 and the
discount rate $11.84. Even with every step, the model gives $92.33, 0.91x the
target discounted at beta 1.0; the remaining $8.59 is what the Street's three
years do not show, mostly growth and margin after fiscal 2029 (inference). The
margin steps lower opex in the year named and let it grow from there on our
cost rule, so a Street margin that lasted to fiscal 2032 would add more. On the
blind inputs the same steps give $57.08, $61.69, $79.77, $92.77 and $98.91, where
the reviewer's reconstruction of the margin steps reached $62.81, $81.11,
$94.31 and $103.63; the first step matches exactly and the margin steps depend
on how a year's margin is carried forward, which we could not recover. This
replaces the earlier statement that revenue explains $7 of the gap and the rest
is the margin and the multiple: the multiple and the discount rate carry most
of it.

**What Capfolio's ranking model says (read 2026-10-21, `alpha rank MCHP`).**
Alpha, our stock-ranking model, ranks MCHP #97 with a core score of 86.5, in the top 20%, with a data warning
(net_income_source_review). That is a rank against other
stocks, not a fair value, so it does not by itself conflict with an Avoid for
new money at this price. We did not run a chart (technical) analysis.

**The world in which $75.85 is right.** Our report check asks for this
whenever the odds are under 1%. We built it as hard as we can from the cases: the upturn does not stop at seven quarters, fiscal 2028
grows 20% and 7-8% after, gross margin holds the guide's 66-67%, and the
market pays a multiple above our 18.9x (up to the unrestated 29.0x). That is our
bull with a higher multiple; at the bull's own $116.87 exit it earns +10.7% a year
from this price, not the 12% hurdle. We keep
the central: the bookings and the data-centre ramp are management claims, the
last upturn ended in a 48% revenue fall, and the multiple is the method's own
history restated for amortization, not our taste.

**The price sits outside our 10th-90th percentile range of $29-$55** (the
range holding the middle 80% of simulated fair values). The drivers'
ranges come from the history and peers each driver's source cites (drivers.json), not
from the price; the price is reached by no single driver, and only by several at
their ends together (a 35x exit multiple or fiscal 2028 growth of 45% each give $72).
We do not widen toward the price.

**Street EPS.** Street EPS is $3.65 (fiscal 2027), $4.59 (2028) and $5.23
(2029). Our model is run to EBIT and free cash, not to non-GAAP EPS, so we did
not compare EPS by year beyond the margin worked above; the Q2 FY2027 preview
carries our $0.96 against a Street $0.935 (earnings calendar).

**The move from the blind value.** $49.95 to $47.59, -$2.36 (-4.7%).
The largest change is the revenue trend, -$4.67, on Microchip's own market data
revenue history; none of the four changes rests on a management claim or a
Street figure alone, and the gross-margin target of 65% is a management claim
backed by the fiscal 2024 actual.

**The gap between the fade and the outside view, and the 18.9x multiple.**
The outside view ($98.70) against the fade ($54.70) is one input, the 18.9x
exit multiple, and the fade's 3.7% implied growth (section 3). The 0.65x gap
to the method's default 29.0x is the amortization restatement in section 3,
reproducible with anchor_amortization.py. On a GAAP-consistent 29.0x fair value
is $59.61-$61.60, 0.79-0.81 of the price, and on the unrestated 29.0x on
pre-amortization EBIT it is $62.98, 0.83 of the price: all under the 0.85 line,
so the view is Avoid on each version and the restatement does not decide it.

## 10. Sources

All read 2026-10-20 or 2026-10-21 UTC, pinned in
data-manifest.json.

- Market data statement endpoints only (income, balance sheet, cash flow, annual
  and quarterly; product and geographic revenue segmentation) for MCHP and
  the peers TXN, ADI, NXPI, ON, STM, SWKS, MPWR, LSCC; market data profile beta
  field only for the betas.
- SEC EDGAR: 10-K for fiscal 2026 (year to 2026-03-31); 10-Qs for Q3 FY2026
  and Q1 FY2027; 8-Ks of 2026-05-28, 2026-07-23 and 2026-08-18; earnings
  releases Q3 FY2025 through Q1 FY2027 and 2026-01-05; companyfacts for the
  amortization add-back. Masked to hide market information with scripts/research-mask.py. The revision
  uses the 10-K FY2026 acquired-amortization lines and schedule, and the
  non-GAAP history in the fiscal 2025 and 2026 fourth-quarter releases.
- Earnings call transcripts: Q4 FY2026 (2026-05-07) and Q1 FY2027
  (2026-08-06), Quartr through market data.
- Citi conference, about 2026-09-09: read through market data for the
  margin target and the upturn length; not saved, so its claims rest on
  this report's quotations of it.
- Market pass and revision: market data quote, price targets and analyst estimates
  read 2026-10-21T02:18Z (market.py); official close.
- Sector note: docs/research/sectors/timing/note.md;
  SiTime report: [docs/research/2026-10-20-sitm/](https://alpha.dming.si/research/2026-10-20-sitm).