MACOM Technology Solutions Holdings, Inc. (MTSI) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary indicates strong financial performance with increased revenue, operating income, and net income. The Q&A section reveals optimism in data center growth, telecom opportunities, and new product developments. Despite concerns about cash flow and some management ambiguity, the overall sentiment is positive due to raised guidance and strategic growth in key markets, supported by strong product demand and technological advancements.
Key Financial Performance
Revenue $271.6 million, up 24.5% year-over-year, driven by growth across all three end markets.
Adjusted EPS $1.02 per diluted share, a milestone for the company, up from $0.94 in the previous quarter.
Cash and Short-term Investments $768 million at quarter end, reflecting a strong financial position.
Book-to-Bill Ratio 1.3:1, the highest since Q3 2021, indicating strong demand and bookings.
Revenue by End Market Industrial and Defense: $117.7 million (up 2% sequentially), Data Center: $85.8 million (up 8% sequentially), Telecom: $68.1 million (up 3% sequentially).
Adjusted Gross Profit $156.5 million or 57.6% of revenue, reflecting improved capacity and yields.
Adjusted Operating Income $74 million, up 33.5% year-over-year, driven by increased revenue and profitability.
Adjusted Net Income $78.2 million, up 9.6% sequentially, reflecting strong operational performance.
Cash Flow from Operations $42.9 million, down $26.7 million sequentially due to timing of payments and working capital changes.
Capital Expenditures $12.9 million, part of an estimated $50-$55 million for fiscal year 2026 to enhance production and capacity.
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Operating Highlights
Data Center Product Portfolio Expansion: MACOM is expanding its Data Center product portfolio to support NRZ, PAM4, and coherent modulations, as well as VCSEL, EML, and silicon photonic-based optical transmission technologies. New products include 800G and 1.6T PAM4 products, PCIe 6 optical chipset, and PCIe 7 equalizer.
Advanced Photonics Portfolio: MACOM is developing higher-speed photodetectors and new CW lasers to support next-generation optical receiver platforms beyond 200 gig per lane.
Linear Equalizer Products: Renewed interest in linear equalizer products to enhance signal integrity for 800G and 1.6T copper interconnects.
Data Center Market Growth: Data Center revenue is expected to grow 35%-40% year-over-year, driven by hyperscalers' capital investments and demand for 800G and 1.6T optical products.
Defense Market Expansion: MACOM is expanding its presence in the U.S. and Europe, focusing on advanced radars, electronic warfare, and new communication systems. The company is a key supplier to U.S. defense OEMs.
Telecom Market Opportunities: MACOM is targeting satellite-based broadband and 5G markets, including LEO networks and 5G base stations. The company is also addressing the transition to DOCSIS 4.0 in cable infrastructure.
Financial Performance: Revenue for Q1 FY 2026 was $271.6 million, up 24.5% year-over-year. Adjusted EPS was $1.02, and the book-to-bill ratio was 1.3:1. Cash and short-term investments totaled $768 million.
Manufacturing Capacity Expansion: MACOM is adding manufacturing capacity to meet demand for 200-gig per lane photodetectors and other products.
Operational Efficiency: Improved gross margins due to better utilization and yield improvements in internal fabs. Sequential gross margin improvements of 25-50 basis points expected through FY 2026.
5G Market Strategy: MACOM is sampling next-generation GaN 4 products and hiring experienced engineers to strengthen its RF power team. The company aims to capitalize on a competitor's exit from the 5G RF power GaN market.
Defense Market Leadership: MACOM is leveraging its proprietary technologies and systems engineering capabilities to secure large IC module and subsystem programs in the defense sector.
Capital Management: MACOM is focused on managing investments to achieve superior returns, with a return on invested capital showing improvement.
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Risk or Challenges
Satellite Contract Delay: Production for a $55 million satellite contract is delayed to the second half of 2026 due to system changes from the customer, which could impact revenue timing and operational planning.
5G Market Competition: The global RAN market is expected to be flat in 2026, and while there is potential upside from the EU's high-risk vendor replacement initiative, competition remains intense.
Supply Chain and Manufacturing Capacity: The company is adding manufacturing capacity to meet forecasted demand for photonics and optical products, but any delays or inefficiencies in scaling could impact delivery timelines and customer satisfaction.
Economic and Material Cost Pressures: Potential cost increases in materials like gold and other precious metals, as well as labor costs, could offset gross margin improvements.
Defense Market Risks: The pace of innovation in the defense market is accelerating, requiring MACOM to keep up with rapid design and manufacturing timelines, which could strain resources.
Debt Obligations: The company has $340 million in convertible notes maturing in December 2029, and upcoming cash outflows of $161 million in March 2026 to retire 2021 convertible notes, which could impact liquidity.
Customer Dependency and Market Demand: Strong demand in Data Center and Defense markets is driving growth, but any slowdown in customer investments or market demand could adversely affect revenue.
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Guidance & Outlook
Data Center Revenue Growth: MACOM expects Data Center revenue to achieve 35% to 40% year-over-year growth, driven by robust hyperscaler capital investments and demand for 800G and 1.6T optical and high-speed analog products. The company is expanding its Data Center product portfolio to capitalize on this opportunity.
Revenue Guidance for Q2 FY 2026: Revenue is expected to be in the range of $281 million to $289 million, with sequential revenue growth anticipated across all three end markets.
Adjusted Gross Margin for Q2 FY 2026: Adjusted gross margin is expected to be in the range of 57% to 59%.
Adjusted EPS for Q2 FY 2026: Adjusted earnings per share is expected to be between $1.05 and $1.09, based on 77.7 million fully diluted shares.
Sequential Revenue Growth by Segment for Q2 FY 2026: Data Center is expected to achieve low to mid-teens sequential growth, while Telecom and Industrial and Defense are expected to achieve low single-digit sequential growth.
Long-Term Demand for Photonics Products: Demand for 200-gig per lane photodetectors is expected to remain strong into calendar 2027, with MACOM positioning itself to support next-generation optical receiver platforms at speeds beyond 200 gig per lane.
Satellite Contract Production Timeline: Production for the $55 million satellite contract is planned to start in the second half of calendar 2026, with system changes potentially broadening the application space for the constellation.
5G Market Outlook: Global RAN market is expected to be flat in 2026 with regional variations, but potential upside exists from the EU's high-risk vendor replacement initiative. MACOM is sampling next-generation GaN 4 products and expects additional 5G rollouts and AI-driven connectivity needs to support future demand.
Capital Expenditures for FY 2026: Capital expenditures are estimated to be in the range of $50 million to $55 million, aimed at upgrading production and engineering equipment, facilities, and expanding capacity.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:What gives MACOM the confidence to raise its annual outlook for the Data Center business from 20% to 35%-40%?
A:The key driver is the 1.6T trend, which is seeing the most activity and design wins transitioning into production. MACOM has a healthy backlog and expects the second half of the year to be stronger than the first half in terms of revenue. Programs ramping up provide confidence to hit the 35%-40% target, with potential upside.
Q:How could MACOM benefit from a shift towards near packaged or co-packaged optics (NPO/CPO)?
A:MACOM's product set for CPO/NPO platforms is similar to what it sells into pluggable modules, including TIAs, photodetectors, and possibly lasers. The shift to silicon photonic-based solutions increases demand for CW lasers and photodetector optical chips. MACOM has competitive photodetectors and is progressing on CW lasers, with two customers confirming compliance. The transition to CPO/NPO is seen as beneficial due to increased complexity and channels per chip, as well as the move towards coherent modulation.
Q:What are the growth prospects for MACOM's Telecom segment, especially in light of NXP's RF power exit?
A:MACOM sees an opportunity to gain market share due to NXP's exit, but it may take 1-2 years to materialize. The 5G market is relatively slow-moving, and MACOM aims to strengthen its design team and accelerate product development. The Telecom market is flat overall, but MACOM expects growth through share gains and opportunities in SATCOM, particularly with LEO programs moving into production in 2026 and beyond.
Q:What is the expected growth for MACOM's I&D segment this year?
A:The I&D segment grew close to 20% last year. This year, growth is expected to be between 15%-20%, based on backlog and market conditions.
Q:What is the impact of the RTP fab acquisition on MACOM's gross margins?
A:The RTP fab acquisition has led to incremental profitability improvements through better manufacturing efficiency, yield improvements, and cost reductions. The focus is on increasing output by 30% and reducing cycle times. Benefits from in-sourcing components will likely materialize in 2027 and beyond.
Q:What are the prospects for SATCOM and ACCs as growth drivers for MACOM?
A:SATCOM is a growth market for both commercial and military applications, with multiple LEO programs in the design phase. ACCs are expected to grow significantly, with no ACC revenue in Q1 but strong potential as customers adopt the technology. MACOM is also exploring LRO at 1.6T using 200-gig per lane chips.
Q:What is the regional demand and transition pace for data center speeds?
A:MACOM supports all major hyperscalers globally, with significant revenue from 400 gig and above data rates. The fastest-growing segment is 1.6T applications. Older data rates like 25-gig NRZ and 50-gig PAM4 are flat, while 100-gig PAM4 is solid. The focus is on 200-gig PAM4 and next-generation coherent systems.
Q:What is the status of MACOM's CW laser development?
A:MACOM has two customers confirming compliance of its CW lasers for silicon photonics solutions. The lasers are in the qualification phase, with production readiness being assessed. The company is also working on higher power lasers for future applications.
Q:What is the outlook for MACOM's LPO business?
A:MACOM is bullish on LPO, with three hyperscalers embracing the technology. The market is currently small but has potential for growth over the next 1-2 years. MACOM is also exploring LRO at 1.6T using 200-gig per lane chips.
Q:What are the key growth drivers for MACOM over the next few years?
A:Key growth drivers include high power, high frequency, and high data rate products. MACOM aims to double its size by focusing on diversified markets like Data Center, Telecom, and SATCOM. New product introductions, such as CW lasers, EML lasers, and PCIe 6 solutions, are expected to contribute significantly.
Q:Review of Unclear Management Responses
A:Management avoided providing specific dollar values or detailed growth projections for certain segments, such as the Telecom market share gains from NXP's exit, the exact size of the SATCOM market, and the revenue contribution from indium phosphide components. They also did not disclose the magnitude of capacity additions for indium phosphide or the specific dollar content per satellite in the LEO market.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Band
Center opportunity
Defense market
Demand
FY
ID
LEO network
LRO
OEMs
PAM
RD
RF microwave
RF power
ZR
antenna
asset
booking
calendar
capital investment
communication satellite
communication system
competitiveness base
constellation
equalizer
hardware
implementation
interconnects
investment return
linearization
missile
network product
payment
photodetectors
presence
product design
progress
return capital
road map
satellite communication
space optic
system change
system engineering
MTSI Transcript
Carrier Global Corporation (CARR) Q4 2025 Earnings Call Transcript
Unknown2-5
The earnings call presents a mixed picture. While there is optimism in data center growth and strategic partnerships like with NVIDIA, concerns over industry declines in Europe and China, conservative guidance, and lack of clear responses to certain risks create uncertainty. The positive aspects balance out the negatives, resulting in a neutral sentiment.
MACOM Technology Solutions Holdings, Inc. (MTSI) Q1 2026 Earnings Call Transcript
Positive2-5
The earnings call summary indicates strong financial performance with increased revenue, operating income, and net income. The Q&A section reveals optimism in data center growth, telecom opportunities, and new product developments. Despite concerns about cash flow and some management ambiguity, the overall sentiment is positive due to raised guidance and strategic growth in key markets, supported by strong product demand and technological advancements.
MACOM Technology Solutions Holdings, Inc. (MTSI) Q4 2025 Earnings Call Transcript
Positive11-6
The earnings call summary highlights several positive aspects, such as expected revenue growth, capacity expansion, new product lines, and optimistic guidance for future quarters. The Q&A section further supports this with positive insights on data center growth, LEO satellite business potential, and AI market trends. While there are some uncertainties, like the lack of specific market size estimates, overall sentiment is positive. The absence of a market cap suggests a smaller company, likely resulting in a stronger stock price reaction, leading to a positive prediction.
MACOM Technology Solutions Holdings, Inc. (MTSI) Q3 2025 Earnings Call Transcript
Positive8-8
The earnings call summary reflects strong financial performance, optimistic guidance, and strategic market expansion efforts, particularly in defense and data centers. The Q&A reveals management's confidence in overcoming temporary margin headwinds and expanding capacity. While some revenue specifics were undisclosed, the overall sentiment remains positive due to robust growth projections and strategic initiatives.
MTSI Report
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