MACOM’s 2026 Earnings Call: Laser Timelines and IP Growth Projections Clash With Prior Guidance

Date of Call: Aug 6, 2026

Financials Results

• Revenue: $342.2 million, up 35.8% year-over-year, up 18.4% sequentially
• EPS: $1.40 per diluted share, up 30.2% sequentially from $1.09
• Gross Margin: 59.7% of revenue, over 59.4% in the prior quarter, up 130 basis points sequentially
• Operating Margin: 31.5%, over 25.2% in the prior year, up 69.6% year-over-year

Guidance:

• Revenue for fiscal Q4 expected to be in the range of $415 to $420 million.
• Adjusted gross margin expected to be 60 to 61%.
• Adjusted EPS expected to be between $1.97 and $2.03 per diluted share.
• Expect approximately 35% sequential growth in data center, 20% in industrial/defense, and low single-digit growth in telecom.
• Full-year fiscal 2026 adjusted income tax rate expected to remain at 3%, increasing to mid-single digits in fiscal 2027.
• Capital expenditures for fiscal 2026 estimated at $60 to $65 million.

Business Commentary:

Revenue Growth and Record Financial Performance:

• MACOM reported revenue of $342.2 million for Q3, up 18.4% sequentially and 35.8% year-on-year.
• This growth was driven by strong demand across all three end markets, particularly in the data center segment, and improvements in operational efficiencies.

Data Center Business Expansion:

• The company's data center revenue reached $137.6 million, with approximately 40% sequential growth.
• The increase was attributed to the growing demand for high-speed connectivity solutions, particularly in 800G and 1.6T PAM4 products, and the diversification of its product portfolio.

Industrial and Defense Market Growth:

• MACOM's IND revenue increased by 2% sequentially, with expectations of approximately 25% growth this year.
• This was driven by increased demand for radar systems, missile defense systems, and electronic warfare systems, along with significant spending in the U.S. and European defense sectors.

Telecom Segment and LEO Network Opportunities:

• The telecom segment, although currently the smallest, is forecasted to grow significantly, with plans to double revenue next year.
• Growth is driven by the increasing number of Low Earth Orbit (LEO) networks in development, requiring components for satellite-based broadband access and direct-to-device communications.

Gross Margin Improvement:

• MACOM achieved an adjusted gross margin of 59.7% of revenue, marking a 120 basis point improvement sequentially.
• The increase in margins was due to higher operational efficiencies, enhanced utilization of fabrication facilities, and strategic investments in capacity expansion.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted 'record backlog,' 'strong sequential demand,' and 'financial performance improved across most key metrics.' The tone was optimistic regarding growth drivers: 'data center business is growing due to increased demand,' 'IND business...growing quite rapidly,' and 'telecom end market...remains robust.' They noted 'record book-to-bill ratio of 1.6 to 1' and are 'well-positioned' with a 'strong and durable business model.'

Q&A:

• Question from Tom O'Malley (Barclays): Within data center, what's driving the strength and the increase book-to-bill?
  Response: Primary driver is 200G PAM4 portfolio; growth is broad-based across data rates and product lines, with book-to-bill driven by 1.6T and 800G platforms.

• Question from Tom O'Malley (Barclays): Any color on growth trajectory into fiscal year 27?
  Response: Base case suggests fiscal 2027 starts strong with mid-20s to 27% year-over-year growth, data center trending towards 50% growth, supported by high book-to-bill.

• Question from Blaine Curtis (Jefferies): How is the telecom business expected to accelerate next year, particularly from LEO?
  Response: Telecom segment forecasted to double next year; LEO programs starting production end of this calendar year, with multiple new programs expected to drive growth over 2-3 years.

• Question from Blaine Curtis (Jefferies): What are the expectations for incremental gross margins?
  Response: Expect sequential improvements of 25 to 50 basis points per quarter, similar to 2026, due to volume increases and operational efficiencies.

• Question from Vivek Arya (Bank of America Securities): How would a proposed ban on Chinese module makers impact MACOM?
  Response: Expects customer mix shift but business as usual, as hyperscalers select based on performance; MACOM has minimal manufacturing in China, with exposure primarily through sales to Chinese customers.

• Question from Vivek Arya (Bank of America Securities): What is the SAM for 2027 and do you expect to gain share?
  Response: SAM expanded to ~$15B in 2027, up 20-30% from 2026; multiple growth accelerators identified across data center, defense, and telecom; expect to gain share through new product ramps and market opportunities.

• Question from Quinn Bolton (Needham & Company): What is MACOM's position in NPO and what are you supplying?
  Response: Act as a chip supplier for NPO platforms, providing drivers and TIAs; engaged with multiple hyperscaler-driven projects, with revenue expected to start production between 2027-2028.

• Question from Quinn Bolton (Needham & Company): What would accelerate data center growth in fiscal 2027?
  Response: Acceleration driven by R&D investments, new product ramps (e.g., 200G PDs), and market share gains; will provide detailed outlook next quarter.

• Question from Tori Sandberg (Stifel): Which new projects are you most excited about over the next couple of years?
  Response: Excited about 200G PD ramp and potential for CW laser production in 2028; lasers represent a multi-billion dollar opportunity. Also excited about defense business growth in Europe.

• Question from Tori Sandberg (Stifel): When will you have capacity in Europe to support material revenue?
  Response: European capacity expected in 2028, with fab conversion ongoing; defense orders already growing, including a large order from a UK defense company.

• Question from Christopher Whelan (Citi): What is the opportunity for linear equalizers?
  Response: Seeing opportunities in copper cable (ACC) and PCB environments; part of a large hyperscaler program with significant volume expected.

• Question from Christopher Whelan (Citi): What are plans for the growing cash pile?
  Response: Philosophy is to never have too much cash; will continue strategic investments (e.g., IQE), consider tuck-in acquisitions, and use for business growth.

• Question from Carl Ackerman (BNP Paribas): Could datacom become the largest revenue segment?
  Response: Data center SAM is ~$6B, similar to industrial/defense; near-term revenue could outgrow due to faster market moves and design wins, but long-term depends on competitive positioning.

• Question from Tim Savage (Northland Capital): How does optical content compare to TIA/driver content?
  Response: Both laser/detector and TIA/driver are multi-billion dollar product areas; internal numbers exist but not publicly disclosed which is larger.

• Question from Tim Savage (Northland Capital): Are PDs making a material impact on growth?
  Response: PDs are a meaningful contributor and will grow significantly; 200G PDs are ramping, and 400G PDs are in customer hands, but specific material impact not quantified.

Contradiction Point 1

Timeline and Contribution Outlook for 75mW CW Indium Phosphide Lasers

Conflicting timelines for when the 75mW CW laser will materially contribute to revenue.

Tori Sandberg (Stifel) - Tori Sandberg (Stifel)

2026Q3: Indium Phosphide lasers (e.g., 75mW CW laser) are in qualification and could be a watershed moment for billions of dollars in revenue. - Steve Daly(CEO)

Which new projects, such as new lasers or high-speed PDs, are you most excited about over the next couple of years? - Quinn Bolton (Needham & Company)

2026Q2: The timeline for customer module qualification and hyperscaler qualification suggests potential contribution in FY2027 or FY2028, but it is not being modeled for FY2026/2027. - Steve Daly(CEO)

Contradiction Point 2

Growth Outlook for the Indium Phosphide (IP) Product Portfolio

Inconsistent characterization of the revenue scale and growth potential for the IP business.

Vivek Arya (Bank of America Securities) - Vivek Arya (Bank of America Securities)

2026Q3: The SAM for 2027 is estimated at $15 billion. Growth is expected from multiple accelerators: ... growth in NPO, coherent light, PCIE-6, and defense applications. - Steve Daly(CEO)

What is your SAM for 2027, and do you expect to gain market share? - Karl Ackerman (BNP Paribas)

2026Q2: The benefit [from competitor exit in IP lasers] has not been realized... Any revenue benefit will likely shine through in 2027, with best-case contribution in the second half of that year. - Steve Daly(CEO)

Contradiction Point 3

Data Center Growth Outlook and Drivers

The driver for data center growth shifted from 1.6T to 200G PAM4, and growth targets increased significantly.

Tom O'Malley (Barclays) - Tom O'Malley (Barclays)

2026Q3: The primary driver is the 200G PAM4 product portfolio... The book-to-bill ratio is driven by 1.6T and 800G platforms. - Steve Daly(CEO)

What is driving the strength in the data center, specifically TIAs, drivers, or PDs, and what is driving the increase in book-to-bill in that portfolio? - Quinn Bolton (Needham & Company)

2026Q1: The primary driver is 1.6T technology... The base case is now 35–40% year-over-year growth. - Steve Daly(CEO)

Contradiction Point 4

LEO Program Production Timeline

The expected start of LEO production shifted from late 2026 to calendar H2 2026.

Blaine Curtis (Jefferies) - Blaine Curtis (Jefferies)

2026Q3: The telecom segment... is forecasted to double in growth next year. LEO programs are driving this, with production expected to start by end of calendar 2026. - Steve Daly(CEO)

How is the LEO opportunity impacting the telecom business and its potential acceleration into next year? - Vivek Arya (BofA Securities)

2026Q1: A key growth area is SATCOM/LEO, with a $55M contract starting production in calendar H2 2026 and potential for additional orders. - Steve Daly(CEO)

Contradiction Point 5

Near-Packaged Optics (NPO) Engagement and Timeline

The timeline for NPO revenue contribution shifted from near-term to 2028.

Quinn Bolton (Needham & Company) - Quinn Bolton (Needham & Company)

2026Q3: MACOM supplies chips (TIAs, drivers) for NPO platforms... Revenue from these programs is expected to ramp in 2028. - Steve Daly(CEO)

What is MACOM's position in NPO (Near-Packaged Optics)? - Quinn Bolton (Needham & Company)

2026Q1: Demand for silicon photonics is driving heavy demand for CW lasers and photodetectors... systems are moving toward coherent modulation, an area where MACOM has design strength. - Steve Daly(CEO)