Thanks, Kate, and good afternoon, everyone. During the course of this conference call, we will be making projections and other forward-looking statements regarding future events or the future financial performance of the company.

We wish to caution you that such statements are predictions and that actual events or results may differ materially. We refer you to our press release of today as well as our recent filings with the SEC that identify important risk factors that may impact Microchip's business and results of operations.

In attendance with me today are Steve Sanghi, Microchip's President and CEO; Rich Simoncic, Microchip's COO; Brian McCarson, VP of Microchip's Data Center Solutions Business Unit; and Sajid Daudi, Microchip's Head of Investor Relations. I will comment on our fourth-quarter and full fiscal year 2026 financial performance, Brian will provide an update on our data center business, and then Steve will provide commentary on our results and discuss the current business environment as well as our guidance.

We will then be available to respond to specific investor and analyst questions. We are including information in our press release and this conference call on various GAAP and non-GAAP measures.

We have posted a full GAAP-to-non-GAAP reconciliation on the Investor Relations page of our website at www.microchip.com, and included reconciliation information in our earnings press release, which we believe you will find useful when comparing our GAAP and non-GAAP results. We have also posted a summary of our outstanding debt and our leverage metrics on our website.

I will now go through some of the operating results, including net sales, gross margin, and operating expenses. Other than net sales, I will be referring to these results on a non-GAAP basis, which is based on expenses prior to the effects of acquisition activities, share-based compensation, and certain other adjustments as described in our earnings press release and in the reconciliations on our website.

Net sales in the March quarter were $1.311 billion, which was up 10.6% sequentially and up 35.1% over the year-ago March quarter. Our revenue results were above the high end of the guidance range we provided on February 5th, 2026.

We have posted a summary of our net sales by product line and geography as well as our fiscal year 2026 revenue by end market on our website for your reference. Our end-market mix did not change materially in fiscal year 2026 compared to fiscal year 2025.

Industrial was 31% of sales, data center and compute was 18%, automotive was 17%, aerospace and defense was 16%, communication was 9%, and consumer was 9%. These percentages are our best estimates of the end-market splits, and there's probably a couple of percent error band due to the fact that almost 50% of our business and the long tail of customers are serviced through distribution, which makes it difficult to track the end markets.

On a non-GAAP basis, gross margins were 61.6% in the March quarter, including capacity underutilization charges of $46.6 million. Operating expenses were at 31% of sales, and operating income was 30.6% of sales.

Non-GAAP net income was $327.3 million, and non-GAAP earnings per diluted share was 57 cents, which was 7 cents above the midpoint of our guidance. On a GAAP basis in the March quarter, gross margins were 61%, total operating expenses were $582.2 million and included acquisition intangible amortization of $107.8 million, special charges of $6.4 million, which was primarily driven by costs associated with the closure of Fab 2, share-based compensation of $59.9 million, and $1 million of other expenses.

The GAAP net income attributable to common shareholders was $116.4 million or 21 cents per share. For fiscal year 2026, net sales were $4.713 billion and were up 7.1% from net sales in fiscal year 2025.

On a non-GAAP basis, gross margins were 58.5%, operating expenses were 32.2% of sales, and operating income was 26.3% of sales. Non-GAAP net income was $933.9 million and EPS was $1.64 per diluted share.

On a GAAP basis, gross margins were 57.7%, operating expenses were 47.3% of sales, and operating income was 10.4% of sales. The GAAP net income attributable to common shareholders was $118.8 million.

Our non-GAAP cash tax rate was 5.8% in the March quarter and 8.6% for fiscal year 2026. The cash taxes remitted in Q4 were lower than originally forecasted, while our pre-tax profit was much stronger than forecasted, driving the March-quarter rate down.

Our non-GAAP tax rate for fiscal year 2027 is expected to be about 10%, which is exclusive of any tax audit settlements related to taxes accrued in prior fiscal years. Our inventory balance at March 31st, 2026, was $1.035 billion and down $22.3 million from the balance at December 31st, 2025.

We had 185 days of inventory at the end of the March quarter, which was down 16 days from the prior quarter's level, driven by our inventory reduction actions and increased revenue. Included in our March ending inventory was 15 days of long-life cycle, high-margin products whose manufacturing capacity has been end-of-lifed by our supply chain partners.

Inventory at our distributors in the March quarter was at 26 days, which was down 2 days from the prior quarter's level and at the lower end of what we have experienced historically. We expect distribution restocking to occur in the near term as distributors will likely grow their inventory holdings above current levels to support growth.

Distribution sell-through increased by 11.4% during the quarter, and distribution sell-in was just modestly lower than distribution sell-through. Our cash flow from operating activities was $257 million, and our adjusted free cash flow was $228 million in the March quarter.

As of March 31st, our consolidated cash and total investment position was $240.3 million. Our total debt increased by $143 million in the March quarter.

The increase in debt was impacted by our refinancing activities in the quarter, which included issuing a 0%, 4-year convertible bond, for which we paid $68 million for a 100% capped call to provide some protection from future equity dilution from stock price appreciation. Our adjusted EBITDA in the March quarter was $466.8 million and 35.6% of net sales.

Our quarterly adjusted EBITDA was up 132.9% from the March 2025 quarter. Our trailing 12-month adjusted EBITDA was $1.496 billion.

Our net debt to adjusted EBITDA was 3.54 at March 31st, 2026, and down from 4.18 at December 31st, 2025. We expect the June 2026 quarter to be an excellent cash generation quarter for us, resulting in meaningful debt reduction, and also expect our net debt to adjusted EBITDA to drop below 3.

Capital expenditures were $14.2 million in the March quarter and $91.1 million for fiscal year 2026. Our expectation for capital expenditures for fiscal year 2027 is to be approximately $100 million.

Depreciation expense in the March quarter was $38.7 million. I will now turn it over to Brian, who will provide some exciting insights into our Data Center Solutions Business Unit.

Brian?

Thank you, Eric, and good afternoon, everyone. We are seeing significant momentum across all three major product families within our Data Center Solutions business, and I'll summarize the progress we're making in each of them.

Importantly, these wins are translating into higher content per system and a longer runway of production ramps, which we expect to support durable growth as the data center architectures continue to scale. First, our storage controller products have supported some of the world's most reliable SAS, SATA, NVMe, and RAID infrastructure over the past decade as a leading provider of data center storage control solutions.

As AI inference and agentic AI workloads increase demand for persistent data access, demand for our products continues to grow. We've been strengthening our product roadmap, and customers are responding positively.

Most recently, our Adaptec SmartRAID NVMe storage accelerator received the Nimbus Innovation Award with benchmark results showing up to a 3x improvement in read and write performance versus a leading competitor's offering. This can translate into better XPU utilization in real-world data center workloads.

Second, our memory controller product family has been reinvigorated by the recent launch of our next-generation devices. We brought three new CXL and PCIe-based devices into production in calendar year 2025, and our next-gen Gen 5 dual-port device is scheduled to enter production this quarter.

We've already secured meaningful design wins that have begun ramping and that we expect will continue to grow through fiscal '28. These next-generation devices have been externally benchmarked, and our customers are reporting industry-leading performance in jitter tolerance, which is a key measure of storage controller performance.

Third, our Switchtec business has continued to build momentum since the announcement of our latest PCIe Gen 6 switch just two quarters ago. Since that time, we've secured a total of six significant design wins, with customers citing our product quality, our signal integrity, differentiated features, and our strong performance per watt as industry-leading.

This is helping Microchip maintain its position as a leading PCIe data center switch provider, while gaining share in both scale-up and scale-out market segments. Our Gen 6 switch is scheduled to begin production ramp at the end of this quarter, and many additional design wins are expected over the next year.

In addition, we're very excited to announce we've entered the PCIe retimer market this quarter. This retimer is architected as a companion die for our PCIe Gen 6 switches, and is also designed to support the rapid growth of the active electrical cable market, with compatibility spanning Gen 1 through Gen 6 speeds.

Customer feedback has been encouraging, and we have already secured a major OEM design win on an upcoming Gen 6 platform, displacing one of our competitors. Customers have been explicitly requesting that Microchip offer a companion retimer because sourcing both the switch and the retimer from a single vendor reduces implementation complexity and risk.

This is helping drive these wins and strengthening our competitive position in new designs with an even more complete PCIe connectivity platform. The wins I described across all three data center product families reflect several competitive advantages.

First, power efficiency: our Gen 6 switches and retimers deliver strong power efficiency relative to alternatives, which directly benefits operating costs in data center environments. Second is feature completeness: by offering both the switch and the companion retimer, we provide customers with a more complete scale-up and scale-out PCIe solution, reducing the need to integrate products from multiple vendors.

Third is quality and tools: we deliver the reliability, the performance, and stability data center customers demand, while offering world-class diagnostic and configuration tools with ChipLink. Finally, support through the entire customer journey: from initial design through production ramp and beyond, customers value a partner that is invested in their success at every stage.

That combination of power efficiency, feature depth, quality, and long-term partnership is helping drive these wins. We believe these factors position us well as design wins continue to convert into production ramps.

I'll pause here and turn the call over to Steve to provide an update on our business and the guidance going forward. Steve?

Thank you, Brian, and good afternoon, everyone. I will start by providing you a brief update on our nine-point recovery plan.

The first item was to right-size our manufacturing footprint. This was completed.

The remaining item left is selling our Tempe fab. We have several interested parties, but the deal has not closed yet.

The second was to bring the inventory down. We have brought the inventory down from 266 days at the end of December 2024 to 185 days at the end of March 2026.

Our overall dollar value of inventory has decreased by $319 million from the December 2024 peak inventory of $1,356 million to March 2026 ending inventory of $1,037 million. We're now in a significant revenue growth mode.

We expect our inventory will come down naturally towards our goal of 130 to 150 days as revenue grows and we appropriately manage our manufacturing and foundry resources. Third was the megatrend alignment.

This goal was completed by creating a megatrend for AI, replacing 5G, and creating another for network and connectivity, replacing ADAS, which stands for advanced driver assist systems. The fourth item was business unit alignment.

This goal was completed by realigning business units. We used to have essentially two pillars: microcontrollers and analog.

We have now created five pillars, which are microcontrollers, analog, networking and connectivity, high-performance compute, and artificial intelligence on the edge. We know of a few requests for us to break out the revenue for some of these growth segments.

We are thinking through this as some of the revenue is intertwined and challenging to break out. We will provide more visibility as we complete our analysis.

The fifth was to look at our distribution programs. This goal was completed by realigning our distribution program and how we compensate our distributors for various levels of demand creation and fulfillment.

We also consolidated our network by terminating several small, underperforming distributors. Number six was customer relationship improvement.

We undertook a major effort to improve our relationships with a large number of customers where the relationship had deteriorated during the COVID cycle. We now consider our relationship with our customers to be good, but it is still an ongoing process.

Number seven was the new business model. We unveiled a new business model in March of last year.

The model contained a long-term non-GAAP targets of 65% gross margin, 25% operating expense, and 40% operating margin. At the bottom of this last downcycle in March of 2025, we had a non-GAAP gross margin of 52%, which has now improved to 61.6%.

At the bottom of the cycle, we had a non-GAAP operating expense of 38%, which has now improved to 31%. At the bottom of the cycle, we had a non-GAAP operating profit of 14%, which has now more than doubled to 30.6%.

The improvements are ongoing towards our long-term business model. Number eight was the operating expense percentage.

This was simply putting a plan together to achieve our long-term non-GAAP operating expense target of 25%. We have come down from 38% to 31%.

We believe that revenue growth and productivity improvements will get us the rest of the way. The ninth, final one was CHIPS Act.

We are essentially on hold given we are still growing into our current capacity. This was a comprehensive update on our nine-point plan.

The only main items that remain are further reduction of inventory and making further improvements in our gross margin, operating expense percentage, and operating profit percentage. The nine-point plan has been an extremely successful program that was very well executed.

Next, I will talk about our business environment. We are seeing recovery in all of our end markets.

Automotive, industrial, communication, data center, aerospace and defense, and consumer are all looking better. The strongest sales performance last quarter was in aerospace and defense sector.

From a business unit perspective, the strongest performance was in FPGA products. We believe that we have completed the distribution inventory correction.

Our overall distribution inventory is now somewhat lower than normal. The distribution sell-in and sell-through was close to even last quarter.

We are starting to see large orders from distribution, which shows some restocking happening in the distribution channel. The distributors' customers' inventory has also come down significantly.

After using up the excess inventory, we are seeing thousands of customers re-engage in buying our products. Our customer count has started to go up.

We are also seeing customers from new designs and from our improved relationships start buying our products, adding to our bookings, revenue, and customer count. Now let's get into guidance for the June quarter.

In the June quarter, we expect strong growth from data center, A&D sector, industrial, and automotive end markets. From a business unit perspective, we expect nearly all business units to participate in the growth, thus broadening out this recovery.

Our bookings for the March quarter were significantly higher than those for the December quarter. The book-to-bill ratio for the March quarter was well above 1, resulting in a much higher backlog entering the June quarter compared to when we entered the March quarter.

April was the largest booking month in almost 4 years. A comment about lead times: while lead times for our products have been 4 to 8 weeks for some time, we are continuing to see lead times increase on many of our products.

We're running into challenges on certain kinds of substrates and subcontracting capacity, and also foundry constraints on multiple nodes. These challenges previously were isolated to very specific areas, but are now starting to spread more broadly.

Our customer requests for expedited shipments have increased significantly from a couple of quarters ago, pointing to some customers' inventories running very low. Taking all of these factors into account, we expect our net sales for the June quarter to be up 11% sequentially, plus or minus 1%.

This at the midpoint would be up 35.3% from the year-ago quarter. We expect our non-GAAP gross margin to be between 62.25% and 63.25% of sales.

We expect our non-GAAP operating expenses to be between 28.75% and 29.25% of sales. We expect our non-GAAP operating profit to be between 33% and 34.5% of sales, and we expect our non-GAAP diluted earnings per share to be between 67 cents and 71 cents per share.

With that, Kate, will you please poll for questions?

Thanks a lot. Steve, thanks for the update on the nine-point plan.

Another thing you were going to try to give us was you were thinking about what the pro forma growth rate was for the company. I know if you pro forma everything, the growth rate is not as high as it truly is because you got out of a lot of businesses.

I know that's something you've been looking at. Do you have any update on that?

What do you think the pro forma growth rate is for Microchip?

Timothy, thanks for your question. I think we're just going through a phenomenal growth right now, and trying to put a longer-term growth rate in this environment, I think is challenging.

Any number I give you, the growth rate in fiscal '27, which started on April 1 here, would be substantially higher than that growth rate, I think we'll push that out further.

Okay. Then, Eric, did you give us inventory charges?

I didn't hear that.

We didn't. As we went through the quarter, we kind of implied that as we got through the March quarter that our inventory reserve charges would normalize, and that is essentially what has happened in the March quarter.

When you look at the new reserve charges that we've taken, the benefit that we're getting from previously written-off inventory are kind of netting to a number that is in a range of what we would expect on a go-forward basis. I think we're in a good position there.

When you look at our gross margins, the biggest thing keeping us away from our 65% target at this point in time is our underutilization charges, which were $46.6 million last quarter. If you divide that by the revenue and kind of add that future benefit back to gross margin, we're essentially at the 65% target.

We're in good shape. Inventory reserve charges have normalized.

It's not really a headwind to gross margin at this point in time, and we're glad to have that behind us.

Okay. Thank you.

Thanks for taking my questions. First one is kind of more near term.

March and June are both well above seasonal. What is driving that upside?

Is it a specific end market? Is it more distribution?

Is it more direct? I think on the last call, you had mentioned that some direct customers or some served through distribution were still burning through inventory.

Are they done? As we look to September, that also is usually a seasonally stronger quarter.

Consensus has your September up 5% to 6%. I don't know whether you would describe your September quarter visibility at this point.

Vivek, the way I would describe is I think there are three things happening. One is we have been telling you for a long time that the distributors are burning their inventory, direct customers are burning their inventory, and distributors' customers are burning inventory, and they were all in various innings, but everybody was pretty much in the ninth inning.

We have seen the distribution inventory now fully corrected, actually to be below normal, and are seeing some restocking orders from distribution as they prepare for the huge growth. Distributors are also seeing their customers come back in droves because they have completed their inventory.

Distributors are placing large orders to serve their customers who have not been buying a lot of product in the last year because of inventory. The other factor is, as I talked about, we have improved our relationship with thousands of customers, and in many, many of those cases, we had designs wins with the customers, but we were not getting our share of the revenue.

In some cases, they had duplicate designs and they were buying somebody else's product for a different model. As we look at our overall customer count, it has increased by several thousand customers, we are seeing that customers re-engage as we have improved our relationship.

Finally, I think we're seeing a meaningful improvement in end markets. A&D is very strong.

Data center is very strong. Industrial is very strong.

Automotive is coming back. A lot of the automotive designs we have incubated in the last couple of years are going to production.

We're seeing the end-market strengthening effect also. Combination of all those has been really well above seasonal growth for June quarter, which we hope will continue for some time.

I think the last question that Vivek asked was related to September and visibility, and I'll just comment on it real quickly. Our backlog is growing nicely.

At this point in time, our September-quarter backlog is higher than the June-quarter backlog was at the same point in time. Steve spoke to the booking strengths that we saw in April.

Things look good, but we're not willing to make a call yet on kind of percentage of revenue growth in September, but things look good at this time.

Understood. For my follow-up, I think you described aerospace, defense, and data center, and what is interesting, though, is that when I look at your change in end-market mix year on year, it actually showed that aerospace and defense actually came down somewhat, and so did data center.

I appreciate that these are kind of approximate numbers, but I would have thought that mix would grow. Could you help us understand, right, are we doing the right apples-to-apples comparison?

Are there certain traditional or older things in the data center that we should not be focusing as much on? Why did that mix come down in fiscal '26, and how do you see that mix evolving in fiscal '27?

Thank you.

I think if you look at the A&D sector, there was a huge increase in A&D sector percentage from 2024 to 2025. I think it used to be about 10% of our business, and it went up to about 18%.

A&D did not drop during the post-COVID cycle as much, and that's why its percentage had increased. Now some of the others did better as they caught up, percentage kind of plays games because it's a whole-year number.

Data center and A&D has seen very significant growth and improvement in the last 6 months or so. When you look at the overall numbers, that's where the math is.

They're still the stronger sectors if you look at the last couple of quarters, and especially A&D had grown huge the year before.

Maybe the other point on data center is our data center business really kind of bottomed out in the June quarter of last year, and we've seen significant growth since then. We've been speaking about that each quarter, but each of these end markets had a bottoming at a different point in time.

Thanks.

Hey, guys. Thanks for taking the question.

I guess first on the data center side, can you help breaking down the sizing of that market today and perhaps the exposure across those three buckets that you talked about? Then you talked about the six new customer wins now for the PCIe Gen 6.

Can you help kind of size that opportunity in any particular wins in? I think you talked about 100 $100 million win last time.

Any other sizing you could offer?

Yeah. Thank you for the question, Matt.

A few things around your queries. One is we don't readily comment on the specific customers that we design with.

We are, however, disrupting our competitors in this space, and we're seeing our design wins displace some of the other incumbents, especially in the Gen 6 area. Typically, in a product life cycle, it's uncommon to see a lot of design wins prior to production ramp, yet our six design wins that we've already secured are prior to us doing our production volume release at the end of this quarter.

Given that fact and that once we're in production, we expect to see a steady increase in design wins, we should see a ramp in revenue and then hitting our stride from a volume perspective in production in the next fiscal year.

All right. Thank you.

Then on the gross margin side, you guys had talked about kind of ramping utilizations in the front end and back end. Can you maybe help us understand where these levels stand today versus more optimal levels?

Then given the seemingly accelerated utilization push, how should we be thinking about underutilization charges declining from here? Thank you.

Okay. We are ramping all of our large factories at this time.

We've been in serious inventory reduction mode over the last five quarters, and have made great progress there. Now we're ramping our fabs as an example, and there's some limitations on what we can do there, and we don't want inventory to get too low.

We're maxing that out, and so underutilization charges are going to come down nicely is our expectation in the June quarter, but they don't go away. That's going to take multiple quarters for that to happen.

Each quarter, they will be reducing, and we're also ramping our back-end operations in Thailand and Philippines to support what we needed from a finished goods perspective. We actually do about 70% of our volume in-house there, where in wafer foundry or in the fabs, we only do about 35% of that volume internally.

They're all ramping. We are fortunate that in the last cycle, we put a lot of capacity in place.

It's just a matter of adding people, having the raw materials to start in the factory, and we're in a really good position to be able to respond to upside demand.

Makes sense.

Yes, thank you. Good evening.

Steve, based on your earlier comments, do you expect that now we're fully through customers and distributors taking inventory down and we're now shipping in line with end demand? I recognize that may not be the same answer for every market segment, just interested in your view overall and by particular segments.

There is nothing really ever absolute. If you have 110,000 customers, you can never say every customer's inventory is corrected.

Both distribution, distribution customers, and our OEM customers' inventory is broadly corrected, and lots and lots of customers are coming back and buying the product based on their run rate because they no longer can reduce the inventory further. Are there some customers where they may be still high on a SKU here and there?

Yes, and that will continue to correct as we go. The strength of the business you see coming back is because of thousands of customers are returning, and distributor is buying product for their customers as well as restocking because their inventory has gone too low.

Understood. The next question is with regard to pricing, and we've heard from some others in the space from distributors and such that at least in some areas, we're starting to see some signs that pricing is moving higher.

In some cases, it's about the tight supply you spoke about. In some cases, it's about input costs coming up.

Can you talk about what Microchip is seeing and what you are planning on doing with pricing as we go into the second half of the year?

First, I'll talk about our philosophy and then what we're going to do this time. Our normal philosophy is that we engage with customers at the design location at the time of design, and give customer a price which he can count on almost through the life of the design, and then comfortably design with us, and then be able to buy the parts at that kind of price.

That sort of has been the philosophy probably for 30 years. The post-COVID cycle was very unique where there were a lot of input cost increases, and Microchip as well as everybody else raised prices.

I think we've also talked about during that time we hurt our relationship with many of our customers, and we have worked very hard in the last year to re-establish good relationships with thousands of customers. How we're dealing with it right now is I think our gross margins are doing very well and heading very well towards our longer-term target as this underutilization goes away in the coming quarters as we are ramping the factories.

We are trying very hard to really stay on the good side of the customers and not do a indiscriminate broad-based price increase, at least to our partners, strong partner customers. Beyond that, it will be a customer-by-customer.

We're looking at our input costs, we're looking at pricing. In many cases, pricing is adequate.

In certain cases, if the price that we got was very aggressive and input costs have gone up, then we may adjust it. As we speak right now, we have not increased our prices.

Understood. Thank you.

Thanks for taking the questions. I was wondering if you could give us any color on just you previously talked about kind of revenue contributions from the megatrends, but it's kind of difficult to break each one down.

Any sort of help on the growth of just the megatrends in general in fiscal '26?

As a percentage of overall revenue, megatrends have increased, but we've broken them down and changed them, we didn't release a breakdown of that this year. In line with we stopped with our market review, but we've left the megatrends outside of that purview.

Overall, megatrends have been increased. Data center has increased.

Our communications business has increased. ADAS business and our connectivity and networking business continues to grow because we lead in 10BASE-T1S and a number of ethernet products.

All of those businesses continue to grow very well.

Thanks. As a follow-up, I think in the prepared remarks, you had talked about actively expanding capital equipment in selected capacities.

Any sort of color you could provide on just where those areas are that you're increasing capacity?

Actually, we didn't say we were increasing capacity. That was not in the prepared remarks.

I think we said we expect our CapEx this year to be about $100 million, and large part of that is going to be just a maintenance kind of capital. We have sufficient in-house capacity.

The areas where we would be adding capacity would be testing capacity for our data center business for Gen 6 switch as it starts to ramp, and retimers and all that. There could be some capacity increase for FPGA, where we see significant growth.

It could also be some in the Ethernet T1S area. Really capital needs are going to be modest because we have a lot of capacity.

Right. We're really mostly just growing back into capacity that was put in place in prior years in the last upcycle.

Thanks.

Hi, Steve and Eric. Just going back on that aerospace defense side, as you look out, you are one of the biggest suppliers there, and all the geopolitical tension, wouldn't you expect that business to start to accelerate into fiscal '27, '28 here?

A follow-up.

Aerospace and defense business is doing very well. We're getting large orders, and it's a good business, and it will grow.

You

also think about for that business to grow significantly, our primes have to grow their capacity. We can provide more parts for a missile, but the missile production capacity needs to increase.

We're right now talking to every major prime who are trying to build new facilities to grow their production. It's going to take some time from that standpoint.

Secondly, the cycle time to produce parts for that sector are very long. Sometime it can be as long as 9 months of cycle time, because you build parts and then you park the lot and take a sample, burn them in for many months, and if there are no failures, then you can ship the lot.

The cycle time in that sector are very long. That's why it did very well in the last year, it's doing well now, but it doesn't really go up like a hockey stick that can happen in a cell phone market or data center market.

It's a very steady growth.

Got it. Back on the data center side, when you look at that portfolio of PCIe Gen 6 switches and CXL, which is probably starting to pick up here, and storage controllers, how does that data center portfolio grow, obviously a lot of focus on data center and spend there?

Anyway to size the growth of the pickup there? Thanks.

There's a few important factors that are happening right now in the overall data center ecosystem. We've been experiencing a significant supercycle with respect to AI-based data centers in recent years, but that's been primarily for AI training workloads.

We're now starting to see increases in agentic AI and inference-based workloads, and those require a significantly larger amount of access to components that are traditionally PCIe-based. CPU utilization, NVMe, and storage access is heavily impacted by inference and agentic AI workloads.

We believe we're positioned to grow well with the market in the coming years as we see that become more of the predominant growth area in the data center market in the future. That's across our customer base, which includes hyperscalers, it includes OEMs, and traditional enterprise server manufacturers as well.

All right. Thank you.

Hey, guys. Thank you for taking my question and congratulations on the very solid results.

Maybe following up on Chris's question on pricing from earlier, your message was very clear on rebuilding relationships with customers and not raising pricing. I guess how aggressive are you observing your competitors on pricing right now?

Is it at the point where you're able to lean in and gain share as a result? I guess is there a certain level of input cost rising where you'd have to change this philosophy a little bit in the near to medium term and raise pricing as well?

Thank you.

I think you're partially answering the question in your question. We are repairing our relationship with our customers, and many of those are repaired, and we don't want to stress them.

Number two, we are watching very carefully what every competitor is doing to the extent we have information from the market. Number three, we have strong partners, and we have people that have a tactical relationship, they just buy parts, and so we're separating those two in a way.

Partners mean one thing, and the people who have just a casual relationship mean another thing. If we see any stress on our input costs in a specific area, then we will be willing to adjust prices.

Thank you for the color there.

Mostly on non-partners.

Got it. Okay.

You mentioned some growing areas of tightness in the supply chain. You made the decision a couple of years ago to not invest in a 300-millimeter fab, and you're investing in a more targeted way now.

Given we're still not that far away in the grand scheme of things from the shortages a few years ago, I was hoping you could maybe reflect on your confidence that there's enough foundry capacity and investment going on right now that you and I guess the industry as a whole have enough room to run in what seems like a growing upcycle. Thank you.

When we were willing to invest in 300-millimeter capacity, it was going to be under a license from a major partner. Without that license, we don't really have 300-millimeter IP, and starting standalone, building a fab, developing a process, and then developing thousands of mask sets on it is really just not a very cost-effective exercise.

We were doing it when a major foundry partner had told us that they will grow capacity largely on the bleeding edge, and therefore, their trailing edge or medium-edge capacity will not grow, and they were willing to give us a license. That thing is really no longer true.

In the post-cycle, there was plenty of capacity, and until very recently, there was plenty of capacity. It's becoming a little tight now, but the partners are adding capacity, and we believe we'll have sufficient capacity available in the coming years.

The major tightness would be really on the bleeding edge, like 3-nanometer. The rest of it, we are getting what we need.

Is it tight? It's really not horribly bad.

Very interesting color. Thank you.

Good afternoon. Thanks for taking my question.

Memory pricing continues to increase fairly meaningfully, and we do see some pullbacks in production of low-end, mid-end smartphones, PCs, consumer electronics segments of the market. I know this is a smaller part of Microchip's revenue mix, but even some of the big-ticket items like consumer appliances, industrial applications are being somewhat impacted by this dynamic, right?

For example, we've heard of some of the industrial customers having to scramble for memory not because of pricing, but because of end-of-life of older DDR4 memory, and now they're having to kind of requalify their systems. Is the team seeing some of this memory pricing dynamic reflected across your customer base?

You're right. I think it fits into specific areas.

Driven by AI, the DRAM capacity is very tight. What some of the NAND flash manufacturers have done is shifted some of that capacity to DRAM.

Then the lower end of the NAND flash capacity, some of the NOR flash manufacturers have moved into NAND flash, the NOR flash got constrained. Some of the E-squared manufacturers in Asia shifted their E-squared capacity to build NOR flash.

Everybody has moved upstream, and the bottom of that pile is E-squared, which is what we make, serial E-squared. Number of people have really basically abandoned that, doubled the price, which really means they have abandoned it because they converted the capacity to something else.

We're seeing significant opportunity in that business. It's not a very large business for us, but it's up significantly.

That's very, very specific, memory-related. Our run-of-the-mill microcontrollers, 8, 16, 32-bit microcontroller, analog, power management, A-to-D converters, D-to-A converters, our BiCMOS, DMOS, other products, they're all fine.

Can we double any of those short-term? No.

Capacity is tight, but we have sufficient capacity to meet the numbers we're giving you, even create the upside if the demand and backlog were to come in, and that capacity will continue to increase in the coming quarters. The business really remains looking for turns.

It's not like we're turning business away because we don't have capacity.

Thanks for that, Steve. As Aerospace and Defense continues strong, a big part of that is the leadership that you guys have in FPGA.

I think the market share rankings for last year out, your FPGA business continues to be a strong franchise, number three global market share leader. This business outperformed your overall business in calendar '25.

Obviously, PolarFire is a leader in aerospace and defense applications. Outside of aerospace and defense, we're seeing that there's strong pickup for just general-purpose mid-range FPGA applications across a wide variety of end markets.

It's a highly gross margin accretive product family, PolarFire, PolarFire 2. How is the team doing on expanding your leadership in mid-range to broader market applications?

We are. We actually are.

The PolarFire 2 is in the fab and shortly coming out, and we are very excited to be launching the PolarFire 2 later this year. It's software ecosystem is already out, and we got customers waiting for those parts.

In fact, all the initial runs that we're doing even for samples are already spoken for. There's a strong demand for that part, even outside the A&D sector as well as in the A&D sector.

I think we're already doing that. We're already selling lots and lots of those devices in the markets outside of A&D.

Appreciate that. Thanks, Steve.

Yes, thank you, and congrats on the results. Steve, you talked about lead times starting to extend.

I was hoping maybe you could give us a bit more color there. Is it more broad-based?

Is it specific products? Just based on the current demand environment, do you expect lead times to continue to extend as we go into the second half of the year?

I think, in general, lead times are broadly expanding, and I think in another quarter or so, there could be nothing available in 4 to 6 weeks. I think it's entirely possible.

Today, we still have, when we say we have 185 days of inventory, even though a lot of that inventory we keep it in the die form, but if the demand comes up in the exact mix where we have the die, we can still assemble, test, and ship it in 4, 5 weeks. That's not going to last very long.

I think over the next two quarters, definitely our inventory goes down significantly into the range of our long-term model. I think many, many products' die inventory would really be fairly low.

The lead times could see a broad-based expansion in the coming quarters.

Understood. As my follow-up, you talked about the two pillars moving to five pillars.

I appreciate you're still doing all the work there. I just want to make sure I understand some of the compositions.

Obviously, networking is straightforward. You mentioned HPC and edge AI.

Edge AI is pretty clear, but HPC, would that primarily be then storage for infrastructure or is there anything else that goes into that pillar? Thank you.

The high-performance compute has really our microprocessor business, our FPGA business, our timing business. Those are most of the products in there.

Great. Thank you.

Thanks for taking my question. I guess I wanted to ask you, you mentioned a couple of times in the script that you're starting to see the disties come back with larger orders.

I guess in the guidance for the June quarter, are you assuming some level of restocking or do you think that restocking happens later in the calendar year? Then I've got a follow-up.

We are expecting some level of restocking, but you should think about that that doesn't necessarily mean that the months of inventory or days of inventory in distribution will go up. We're guiding 11% up in revenue.

If you take a distributor and say they've got $50 million of Microchip product and they are growing at that rate of we'll call it 10%, they have to grow their inventory by $5 million just to keep their MOI flat if their sell-through is increasing at that rate. We are expecting some restocking.

The level of that, I think, is hard to predict, but I think it's needed. Distribution inventory is really low at this point in time, and in a growth environment, they got to position themselves to be able to support their customers.

Got it. A quick follow-up for Steve.

It sounds like, Steve, you feel pretty comfortable you can get the external foundry wafers, but any tightness on either OSAT, substrates, especially as you think about the PCIe and the memory and storage controller business, is there any tightness there?

Of course. Like I said, there is tightness in everywhere.

Our foundries, all major foundries we do business with, probably 70%, 80% of the process technology nodes are constrained. When I say constrained, I would say they're very tight.

If I need a couple hundred more wafers, can I work the system and be able to get it? The answer is yes.

It isn't like they're sitting at an 80% utilization, and if I wanted more wafers, I had them right away. You kind of got to work the system and make the calls high up, and escalate it, and request it, and somebody else in the system has a downside, then you get it.

May not get it today, but may get it 3 weeks from now. Everything is basically full, and I think that's the system we're looking at it.

We have a higher allocation as the future quarters come in because foundries are adding capacity, we have increased allocation from them. With that, the business will continue to grow.

Like I said earlier, can I grow a business 50% in one quarter? No.

Can I grow at the rate we're talking about? Yes, and there's even room for upside.

Now when you come to the most advanced capacity, like 3-nanometer node, that's totally different equation. There, the capacity is less than half of what the world requires.

Substrates?

In wafers. Oh,

sorry. You just said advanced packaging, substrates, any impact on the data center business?

Yeah. We are constrained on substrates.

We're qualifying additional substrate suppliers. We are working with the existing suppliers to get more allocation.

It's just like the wafers; substrates are very tight. One problem with the substrates is they have a shelf life, right?

12 months.

They have a shelf life, and therefore, you can't build a whole bunch in the downcycle thinking you can use them year, year and a half from now. They have a shelf life, you have to really buy it in time.

Are substrates constrained? Constrained, yes.

Is it impacting our data center business? Yes.

Is it impacting our connectivity and networking and automotive business? Yes.

We have, our delinquency or non-supported dollar volume has gone up significantly, but it's not at a crisis level. It's not like it was, post-COVID.

We're working through it, and there are no real screaming customers so far. I think we're working through them.

Thank you, Steve.

Thank you. I wonder, you talked about your discussions with customers and kind of rebuilding relationships that had been frayed during COVID.

Can you give us some color on what those conversations are like and guess, some of the strain was enforcement of LTAs, price increases, things like that? How does that inform how you're going to deal with those sort of same considerations in the next upturn?

I think our conversations in the last year have been very good, and we visited a lot of customers, a lot of customers visited us, and we met them at events around the world from CES to MASTERs Conference to other industry conferences. We owned up to some of the mistakes we made in the past, and customers' engineers always liked us.

We had a very good product, we had high-quality product, we were reliable suppliers, but we just used some policies that turned off purchasing managers and manufacturing people and other. We made commitments to really work with them better, and I think that has gone well.

People have given us a chance. Now what's happening is we are seeing our competitors hurt them with large price increases and all that.

They're even coming more to us, and since we haven't increased the prices, we're gaining share. I think all that is kind of working well.

Our competitors are actually helping us right now.

That's very helpful. Thank you.

Hi, guys. Steve, thanks for the update on the nine-point plan.

My question about substrates has already been asked, but just one on the business unit realignment: if you look at the three markets that you've added to the basic business, microcontrollers and analog, those businesses have pretty large TAMs, and given what's going on with AI and data center growth, those markets would present significantly larger opportunities. At what point do you think that you might have to revisit your margin targets?

Or am I being too optimistic about the growth prospects of these three new areas?

When you say, Janet, first of all, thanks for asking the question. When you say we have to revisit our margin targets, are you concerned our margin targets are too low or too high?

Too low.

That'll be high-class problem. When I came back a year and a half ago, our gross margin was 52%.

When we gave a target of 65%, I've been fending the blows for a year and a half, why a target, how will we get there, and we were so low, and this and that, and competitors are doing this and competitors are doing that. Now it is in the striking range.

If you take our underutilization and add it back, I think we get there. Let's get there and then if you're

I'll just want to add this. We look at a company like Anthropic.

They went from a billion dollars in revenues, and now they're talking about potentially exiting the year at 45 billion. This whole AI business has just taken off like a rocket, and we've never seen growth in any market like this ever.

If you look at AI on the edge You're talking about Anthropic or OpenAI? No, Anthropic.

No, they're one of the large language model providers. Look at the growth there and you look at the growth at OpenAI, it just seems to me that you might need to be preparing to keep up with a higher level of growth rate than you have been used to historically.

That just being a long-term shareholder, I just thought I'll throw that out there.

We'll welcome that opportunity. Yeah.

We are working on it, we're developing the products, we see the market, we see the opportunity. That's what you have heard from Brian now in two out of the three last meetings, and last meeting we talked about T1S.

We're engaged, but I think it's premature for us to sign up to anything different than what we're signing up for.

Okay. I wasn't asking you to sign up.

I was just trying to sort of think outside the box to try to figure out where your head might be. Thanks so much, Steve.

Great job. Appreciate it.

Appreciate that, Janet.

Hey, thanks for squeezing me in. I actually wanted to go back to a couple of the prior data center comments.

I think you broke out at one point that within data center and compute, data center was about 80%. I wanted to make sure that's the right way to think about it for the fiscal year.

Then if you look at a lot of the peers with exposure, analog peers with exposure to data center, that business is growing substantial double digits for the last couple of quarters. Just kind of curious, I know you probably don't want to give the exact numbers, but is that the kind of growth you're seeing, and is there any headwinds still in that segment that are going down?

I'll start by saying I don't think we've given a percentage of our data center and compute, what data center makes up. It is the larger piece, for sure.

Then within that, there's various different areas that make that up. Brian's business unit, Data Center Solutions, is one of those, which we have high expectations for.

I'll let Brian speak to the rest.

We're also seeing high growth in our digital power control for many of the power supplies that exist within data centers within our power group.

If you look at our data center business unit, Brian business unit, year over year has just huge growth. We're not quite willing to break it out unless we do that as part of the overall breakout that we have talked to you about and we're analyzing it.

The problem is the data center one is not as much of a challenge. Some of the others are a significant challenge, like connectivity and networking and timing business and others, because some business units have some parts which are analog, some have a microcontroller core, the portion goes into microcontroller.

Is something IoT, or is something networking? What is the difference?

They look very close. Is it a data center business unit, or is it a part that goes into data center, but it's a power management part that comes from analog business unit.

We have content in data center market or data center servers, which are microcontrollers, which are power management parts, which are Ethernet, USB, there are various business units, probably seven or eight business units contributing to our content inside the data center. Brian is just one part of it, with the storage controllers, PCI Express, and the third one was memory, CXL, and those.

It's a complicated breakout, and we are somewhat concerned about confusing you and not really helping the cause. We're trying to figure that out and put it all together so we can share with you.

Thanks, and then just quick one for Eric. I know you have a big piece of variable in your OpEx.

I'm just kind of curious how to think about OpEx for the fiscal year.

You're right on that. When the business is doing well, we have quarterly bonus programs for our employees, which were very low in the downcycle, and now that we're coming back, those programs are coming back nicely.

Guiding 11% up, we're expecting it to be another good quarter for our employees from a bonus perspective. That's why you're seeing that along with other compensation elements that were kind of pent up that we're bringing back to employees drive our OpEx dollars up in the current quarter.

I think at the midpoint of guidance, it's about a $15 million growth quarter on quarter in OpEx. The nice thing about these plans is they are quarterly and we can modulate them in good times and bad times, high-growth quarters, lower-growth quarters to keep the operating expenses in check.

Showing good progress there, but are making investments that we think are important to reward and incentivize our employees to stay with us, continue to produce great work.

Thanks, Eric.

Thank you all for joining us today and hanging in there with us. We'll be attending several conferences coming up this quarter, I think starting in early June, we'll see you on that circuit.

The first one, I think, is the J.P. Morgan conference in 2 weeks and then a number after that.

Look forward to seeing everybody.

Thank you.