Microchip Technology Reports 42.3% Decline in Net Sales for Fiscal Year 2025

Microchip Technology Incorporated reported a significant decline in its financial performance for the fiscal year ending March 31, 2025, with net sales of $4.4 billion, a decrease of 42.3% from $7.6 billion in the previous fiscal year. The company's gross profit also fell sharply to $2.47 billion, representing 56.1% of net sales, down from 65.4% in fiscal 2024. This downturn was attributed to adverse economic conditions, including persistent inflation, high interest rates, and a general slowdown in economic activity, which led to customers reducing orders and holding higher inventory levels.

In response to these challenges, Microchip announced strategic restructuring actions, including the closure of its Fab 2 manufacturing facility in Tempe, Arizona, which is expected to generate annual cash savings of approximately $90 million. The closure was completed in May 2025, and the company anticipates that it will help moderate inventory levels. Additionally, a 10% reduction in workforce across the company is expected to yield further annual savings of $90 million to $100 million. These measures come as the company navigates a large inventory correction and pauses most of its factory expansion activities.

Operationally, Microchip serves approximately 109,000 unique customers, with 45% of net sales derived from distributors. The company reported that its mixed-signal microcontroller product line, which constitutes a significant portion of its sales, experienced a 47.3% decline in revenue, reflecting the broader economic pressures. Sales in the Americas and Asia also decreased, with foreign customers accounting for 75% of total net sales. The company noted that its inventory levels remained relatively stable at $1.29 billion, but the days of inventory increased significantly due to lower net sales.

Looking ahead, Microchip's management expressed cautious optimism about potential improvements in business conditions, although uncertainties remain regarding global economic factors and geopolitical tensions. The company is focused on reducing inventory levels and managing operating expenses while continuing to invest in research and development to maintain its competitive position. The outlook for fiscal 2026 remains uncertain, with expectations of ongoing fluctuations in operating results and market conditions.