Earnings Call Highlights: MACOM (MTSI) | FY26 Q1

Oct 5

3 min read

MACOM delivered a strong first quarter: revenue of $271.6M beat expectations, and both gross margin and EPS hit milestones. Management sharply raised its full-year Data Center growth target from 20% to 35%–40%, driven mainly by surging demand for 1.6T optical modules and High-speed Analog products. Its current “three growth arrows” are: 1. cementing leadership in 1.6T/200G per lane technology; 2. cutting AI infrastructure power through LPO/LRO; and 3. a large satellite communications (SATCOM) contract expected to enter production in 2H 2026. The company is in a phase of rapid expansion driven by both AI infrastructure and defense demand.

2. Financials (non-GAAP)

Revenue: $271.6M (YoY +24.5%, QoQ +4%).
Gross margin: 57.6% (flat QoQ), expected to keep rising by 25–50 bps per quarter.
Operating margin: 27.2% (strong QoQ; record operating income of $74M).
EPS: $1.02 (above $1 for the first time).
Opex: $82.5M (mainly R&D).
Cash position: cash and short-term investments of $768M.
CapEx: $12.9M (full year expected at $50M–$55M).

Segment revenue

Market segment	Revenue (M)	QoQ change	Highlights
Industrial & Defense	$117.7	+2%	All-time high; steady demand for advanced radar and electronic warfare
Data Center	$85.8	+8%	Core growth engine, with strong 1.6T and 800G demand
Telecom	$68.1	+3%	5G flat, but rising contributions from SATCOM and DOCSIS 4.0

3. Outlook (FY26 Q2)

Revenue guidance: $281M–$289M (midpoint $285M).
Gross margin guidance: 57%–59%.
EPS guidance: $1.05–$1.09.
Growth drivers: Data Center is expected to grow low to mid-teens sequentially, with Defense and Telecom expected to grow in the low single digits.

4. Product updates

Data Center (Optical & Connectivity)

1.6T / 800G: currently the main growth driver. Yield and shipments of 200G-per-lane Photodetectors (PD) keep ramping, with demand visibility out to 2027.
LPO / LRO: three Hyperscalers have adopted MACOM's LPO solutions and are actively evaluating LRO at the 1.6T node to balance power.
CW Laser: a key technical milestone. Two customers have confirmed that MACOM's 75mW CW Laser meets electrical specifications, and it has entered a multi-month reliability qualification phase, with the aim of entering the SiPh (silicon photonics) supply chain.

Industrial & Defense

GaN power amplifiers: high-performance GaN MMICs for counter-drone defense systems.
RF over Fiber: used in phased-array radar, with a clear competitive advantage.

Telecom

RF Power: competitor NXP has exited the 5G RF GaN market, and MACOM has hired the related engineering team, expecting a market-share shift dividend within 1–2 years.
SATCOM: a $55M LEO satellite contract has been pushed to 2H 2026 production because the customer changed specifications, but the added functionality will widen future applications.

5. Looking ahead

Technology node transition: MACOM has successfully shifted its focus from 400G to 800G/1.6T, and has already begun positioning for 3.2T technology.
Capacity and cost optimization:
- RTP fab: capacity expected to rise 30%, with a focus on shortening production cycle times.
- France fab: the upgrade from 3-inch to 6-inch wafer processing is expected to complete in June 2026, significantly lowering costs.
Product mix optimization: as utilization of its own fabs rises and products move from purchased components to in-house IP (e.g., capacitors, IPDs), gross margin is trending toward a long-term 60% target.

6. Q&A highlights

Key question: what is the competitive landscape at 1.6T?
- Management: 1.6T demand is very healthy. MACOM has a full lineup in both Analog/DSP-less and Optical chips (PD/Laser), so it is not relying on a single product, and the second half will be stronger than the first.
Key question: what are the odds for LPO vs. LRO at 1.6T?
- Management: LRO has a higher likelihood of adoption at 1.6T because the DSP provides stronger compensation; but LPO's low latency and low power still attract specific customers (such as AI clusters), and MACOM is positioned in both.
Key question: what drives gross margin expansion?
- Management: not a single factor, but the combined effect of higher utilization at its internal fabs (Lowell, RTP, France) and process transitions (such as the move to 6-inch).

7. Risks and watchpoints

Customer concentration: growth depends mainly on a small number of U.S. and international Hyperscalers.
Technology path: if LPO/LRO adoption is slower than expected, related chip shipments could be affected.
Contract delays: the satellite communications contract has already slipped; watch the customer's subsequent launch schedule.
Supply chain pressure: InP (indium phosphide) and other specialty materials may face supply bottlenecks during the capacity ramp.

8. Bottom line

In one sentence: MACOM is at the sweet spot of a re-rating as it transforms from a traditional RF powerhouse into a core supplier for high-speed AI optical communications.
Core moat: its own compound semiconductor fabs (GaN, InP, GaAs) let it vertically integrate design and manufacturing and offer complete solutions from optics (PD/Laser) to electronics (TIA/Driver).
Investment takeaway: riding the 1.6T upgrade cycle and the LPO trend, MACOM has strong upward-revision momentum. With EPS holding above $1 and still rising, operating scale effects should keep building over the next 6–8 quarters, leaving room for further valuation expansion.