Microchip Technology targets $500m data centre unit revenue in 2026
Microchip Technology has disclosed that its Data Center Solutions Business Unit generated $302.7 million in revenue during calendar year 2025, and the NASDAQ-listed chipmaker now expects that figure to grow roughly 65% in 2026 to approximately $500 million. The disclosure came in a standalone investor communication rather than a scheduled earnings release, reflecting sustained pressure from shareholders for greater granularity on the company's data centre exposure.
President and chief executive Steve Sanghi noted that the business unit's revenue was already up 62.9% year-on-year in the March 2026 quarter, suggesting the full-year trajectory is being supported by broad-based demand acceleration rather than a single large order.
What the business unit covers
The Data Center Solutions Business Unit is distinct from Microchip's wider "Datacenter and Compute" end market, which the company says accounts for around 18% of total group revenue and includes general-purpose catalogue microcontrollers, analogue components, power management, timing and security products sold across many sectors. The dedicated unit, by contrast, focuses exclusively on three data centre product families: storage controllers, expanders and accelerators; PCIe and CXL memory controllers; and the Switchtec PCIe switch and retimer range.
Sanghi highlighted the recently introduced 3nm Gen 6 PCIe Switch as well as a new G6 retimer product line with backward-generation compatibility. The company describes the 3nm PCIe switch as an industry first, though Microchip did not provide independent benchmark data to support that characterisation in its release.
Separately, Sanghi flagged that input cost pressures from suppliers and internal operations are now broad enough that Microchip intends to implement selective price increases across its wider product portfolio. The company said pricing decisions are still being finalised and will be communicated to customers in due course, but stressed the increases will have no effect on guidance for the fiscal quarter ending 30 June 2026.
Market context and competitive landscape
Microchip's PCIe switch and CXL controller product lines place the company in direct competition with Broadcom, which holds a commanding share of the PCIe switch market through its PEX and Switchtec-adjacent lines, as well as with a growing cohort of fabless startups targeting CXL-based memory pooling. The transition from PCIe Gen 5 to Gen 6 is still in early stages at most hyperscaler deployments, meaning vendors who can demonstrate Gen 6 silicon at production scale in 2026 stand to capture meaningful design wins ahead of the broader upgrade cycle.
The broader data centre semiconductor market is expanding rapidly as AI training and inference workloads drive demand for high-bandwidth interconnect, disaggregated memory and accelerated storage. Analysts across the sector have repeatedly revised their total addressable market estimates upward; buyers evaluating silicon vendors are placing increasing weight on multi-generational product roadmaps and supply assurance, both areas where Microchip's scale as a broadline supplier offers some advantage over smaller specialists.
Regulatory and macro considerations
Microchip's cautionary statement explicitly names tariff exposure, trade policy uncertainty under the current US administration, and geopolitical risk as material variables for its forward-looking revenue targets. Price increases downstream of input cost pressures may also face pushback from hyperscaler customers, which typically negotiate aggressively on component pricing given their purchasing volumes.
The company is scheduled to present at the Bank of America Global Technology Conference on 2 June and the Evercore Global TMT Conference on 3 June 2026, where investors are likely to probe the pricing strategy and the durability of data centre demand beyond the current AI infrastructure buildout cycle.