Microchip Technology said on Thursday that its forecast for adjusted profit in the fourth quarter falls short of Wall Street expectations, underscoring concerns about how a global memory supply shortage is rippling across the broader semiconductor sector.
The Chandler, Arizona-based chipmaker projected adjusted earnings of about $0.40 per share for the fourth quarter, below analysts' average estimate of $0.48 per share, according to data compiled by LSEG. Microchip also disclosed an expected net sales range of $1.24 billion to $1.28 billion for the quarter, versus an external estimate of $1.23 billion.
Market reaction was brisk: shares of the company dropped by more than 5% in after-hours trading following the announcement.
Microchip highlighted the wider supply pressure on memory as a key headwind. The company said a global shortage of memory supply has disrupted the personal electronics industry, forcing smartphone manufacturers and personal computer vendors to curtail orders as they cope with challenges in shipping finished units. Those pullbacks in demand are affecting suppliers throughout the supply chain, Microchip included.
Despite the weaker forward guidance, Microchip reported stronger-than-expected results for the third quarter. The company recorded net sales of $1.19 billion for the period, beating the $1.18 billion estimate. On an adjusted basis, third-quarter earnings per share were $0.44, above the $0.41 analysts had forecast.
The contrast between recent quarterly performance and the outlook highlights the disconnect between near-term operational results and evolving demand signals driven by component shortages. Microchip's guidance reflects how constraints in one segment of semiconductor supply - memory - can cascade to affect order patterns for a broad set of chip suppliers.
Investors and market participants will likely watch upcoming reports and order trends closely to assess whether the memory supply situation stabilizes and how quickly personal electronics manufacturers resume normal ordering patterns.
Summary: Microchip forecasted adjusted Q4 EPS of about $0.40 versus a $0.48 consensus, expects Q4 sales of $1.24 billion to $1.28 billion, and reported Q3 sales of $1.19 billion with adjusted EPS of $0.44. A global memory shortage has led smartphone and PC makers to reduce orders, hurting suppliers like Microchip. Shares fell more than 5% in extended trading.