Microchip's Data Center Revenue Grew 98% Last Quarter. Here's Why It's Guiding to $1 Billion for the Year.

Microchip's fiscal first-quarter net sales rose 38% year over year to $1.485 billion, above the high end of guidance.

Management expects its total data center portfolio to grow 69.3% to $1 billion in calendar 2026.

The company guided for September-quarter sales to rise 7% to 9% sequentially, or about 40.6% year over year at the midpoint.

Microchip Technology (NASDAQ: MCHP) built its business on microcontrollers (the small, inexpensive chips that run factory equipment and cars). So it may come as a surprise that the company's fastest-growing end market right now is the data center.

On the company's Aug. 6 earnings call management said data center revenue grew 97.8% year over year in the fiscal first quarter, after growing 77% in the quarter before. And the company now expects its total data center portfolio to reach about $1 billion in calendar 2026, up 69.3% from last year.

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Investors noticed. Shares of the microcontroller specialist jumped about 14% on Friday to about $85, capping a week in which it reported a quarter that was strong well beyond the data center.

Microchip is climbing out of one of the deepest downturns in its history, and the fiscal first quarter of 2027 (the period ended June 30, 2026) showed the recovery gaining speed. Net sales rose 38% year over year to $1.485 billion, up 13.2% sequentially and above the high end of management's guidance.