Microchip Technology’s (MCHP) third-quarter fiscal 2026 results and outlook demonstrated that the company’s recovery continues to gain traction, according to analysts.

However, shares were down 3% during early trading on Friday as investors were likely looking for more.

“There were not big surprises here, as the company had pre-announced after the quarter was over, but growth is well above seasonal for both December (-MSD) and March (flat to +LSD), though the growth in December was more from the ‘other’ category (licenses, FPGAs, and specialty memory) than we had expected,” said Morgan Stanley analysts, led by Joseph Moore, in a Friday investor note.

“Of course, the pace of the recovery is partly impressive because of the declines that preceded it, as revenues as of DecQ are still 47% below peak, but the turnaround seems to be going well, with inventories reigned in, and new growth drivers in evidence in areas such as automotive networking and data center,” he added.

Morgan Stanley maintained its Equal-weight rating and $69 price target.

Meanwhile, KeyBanc retained its Overweight rating and $85 price target on the stock.

“MCHP indicated inventory reserves are largely normalized at this point in time, while underutilizations were >$50M in F3Q, and will be modestly down in F4Q, and will continue as MCHP ramps factories over the next couple of years,” said KeyBanc analysts John Vinh and Ryan Rosumny in a note. “While mgmt did not give a timeline to return to the ~65% LT GM target, GMs are expected to steadily improve beyond the F4Q guide of 61%.” 

Finally, Truist Securities reiterated its Hold rating and $68 price target.

“We applaud MCHP for continuing to clean up, and perhaps even improve upon the company, in the post-PSP era,” said Truist analyst William Stein in a note. “MCHP’s results & guidance beat consensus modestly. As MCHP’s revenue recovers from the inventory overhang, and as total GPM (61%) continues to track towards product GPM (~66%), the landing spot is pretty clear—it’s 40% OPM at some normalized revenue level (we think ~$1.5b/qtr).”

Microchip’s competitors were mostly edging higher on Friday. Texas Instruments (TXN) and Renesas Electronics (RNECF) had inched up 1% and 0.5%, respectively. Analog Devices (ADI) had increased 1.5%, Onsemi (ON) was up 1.4%, and Monolithic Power Systems (MPWR) had gained 4%.