Good day, everyone, and welcome to the Microchip Technology Third Quarter and Fiscal Year 2018 Financial Results Conference Call. As a reminder, today's call is being recorded. At this time, I would like to turn the call over to Microchip's President -- Microchip's CFO, Eric Bjornholt. Please go ahead.
Good afternoon, everyone.
(Forward-Looking Cautionary Statements)
We refer you to our press releases of today as well as our recent filings with the SEC that identify important risk factors that may impact Microchip's business and results of operations.
In attendance with me today are Steve Sanghi, Microchip's Chairman and CEO; and Ganesh Moorthy, Microchip's President and COO. I will comment on our third quarter fiscal year 2018 financial performance, and Steve and Ganesh will then give their comments on the results and discuss the current business environment as well as our guidance. We will then be available to respond to specific investor and analysts' questions.
I want to remind you that we are including information in our press release on this conference call on various GAAP and non-GAAP measures. We have posted a full GAAP to non-GAAP reconciliation on the Investor Relations page of our website at www.microchip.com, which we believe you will find useful when comparing GAAP and non-GAAP results. I will now go through some of the operating results, including net sales, gross margin and operating expenses. I will be referring to these results on a non-GAAP basis prior to the effects of our acquisition activities and share-based compensation.
Net sales in the December quarter were $994.2 million, modestly higher than the midpoint of our guidance and down 1.8% sequentially from net sales of $1.012 billion in the immediately preceding quarter. We have posted a summary of our revenue by product line and geography on our website for your reference.
On a non-GAAP basis, gross margins were at the high end of our guidance range of 61.4% in the December quarter. Non-GAAP operating expenses were at 22% of sales, which was a record low and below the low end of our guidance range, which was 22.2%. Non-GAAP operating income was a record $391.7 million at 39.4%, above the high end of our guidance of 39.2%. Non-GAAP net income was $341.2 million and was up 38.4% as compared to the same quarter last year. Non-GAAP earnings per diluted share was $1.36, which was above the midpoint of our guidance.
On a GAAP basis, gross margins, including share-based compensation and acquisition-related expenses, were a record 61.1% in the December quarter. GAAP gross margins include the impact of $3.5 million of share-based compensation. Total operating expenses were $361.8 million and include acquisition intangible amortization of $121 million, share-based compensation of $20.5 million, $1.2 million of acquisition-related and other costs and special charges of $0.2 million.
GAAP net income was impacted by a $439.8 million discrete tax event in the quarter, primarily associated with the Tax Cuts and Jobs Act and we also incurred a loss of $2.1 million on the retirement of our