MACOM Surpasses Expectations on 1.6T Optical Demand Surge

Date of Call: Feb 5, 2026

Financials Results

• Revenue: $271.6M, up 4% sequentially and up 24.5% year-over-year
• EPS: $1.02 per diluted share, up 9.6% sequentially from $0.94
• Gross Margin: 57.6%, adjusted, with expectations for 25-50 bps sequential quarterly improvements
• Operating Margin: Record $74M adjusted operating income, up 10.4% sequentially and up 33.5% year-over-year

Guidance:

• Revenue for Q2 FY26 expected to be $281M to $289M.
• Adjusted gross margin expected to be 57% to 59%.
• Adjusted EPS expected to be $1.05 to $1.09.
• Data Center revenue expected low to mid-teens sequential growth.
• Telecom and Industrial & Defense expected low single-digit sequential growth.
• Expect incremental gross margin improvements of 25-50 bps each quarter.
• Expect Q2 cash flow from operations to exceed $60M.

Business Commentary:

Revenue Growth and Data Center Expansion:

• MACOM Technology Solutions reported revenue of $271.6 million for Q1 2026, up 4% sequentially and 24.5% year-over-year.
• The growth was driven by strong demand across all three end markets, particularly in the Data Center segment, which saw an 8% sequential increase.

Data Center Revenue and 1.6T Technology:

• The company's Data Center revenue reached $85.8 million, with a strong sequential growth of 8%.
• The growth is attributed to the increasing demand for 800 and 1.6T optical and high-speed analog products, particularly in pluggable optical modules and optical cables.

Industrial and Defense Segment Performance:

• The Industrial and Defense segment reported $117.7 million in revenue, marking a 2% sequential increase.
• The growth is driven by increased demand for advanced radar systems, electronic warfare, and communication systems, showcasing MACOM's strengths in high-frequency and high RF/microwave power levels.

Telecom Segment and SATCOM Opportunities:

• The Telecom segment reported $68.1 million in revenue, with a 3% sequential increase.
• Growth is supported by the expansion of LEO constellations for direct-to-device applications and the increasing demand for 5G infrastructure, with significant opportunities in SATCOM.

Gross Margin Improvement:

• The company achieved an adjusted gross margin of 57.6%, with expectations of sequential quarterly improvements of 25 to 50 basis points.
• Improvements are driven by increased capacity, improved yields, and effective cost management across all fab operations.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted 'record results,' 'strong bookings,' and 'record backlog.' Raised Data Center growth outlook to 35-40% YOY. Expressed confidence in 1.6T optical ramp and competitive positioning. Noted 'solid' results and 'ongoing incremental progress' in profitability.

Q&A:

• Question from Quinn Bolton (Needham & Company): What gives you the confidence to raise the Data Center annual outlook from 20% to 35-40%?
  Response: Confidence driven by strong 1.6T design wins and production ramps, healthy backlog, and expectation for stronger second half.

• Question from Vivek Arya (BofA Securities): What are growth prospects for Telecom, particularly given NXP's exit?
  Response: Expect Telecom growth around high single digits to low double digits; competitor exit may take 1-2 years to impact share.

• Question from Thomas O'Malley (Barclays): Update on RTP fab integration and gross margin upside?
  Response: RTP fab profitability improving; North Carolina fab prioritized for cycle time reduction; in-sourced components to benefit in 2027+.

• Question from Karl Ackerman (BNP Paribas): Impact of satellite system changes on program size and breadth of engagement?
  Response: System changes add functionality, positive for long-term platform; engaged with multiple LEO constellations across microwave, optics, and ground stations.

• Question from David Williams (The Benchmark Company): Regional demand trends and supply/pricing environment?
  Response: Demand spread by data rate, with 1.6T fastest growing; pricing rational; supply chain stress in ramp mode, focusing on InP and exotic materials.

• Question from Harsh Kumar (Piper Sandler): Drivers of strong 1.3 book-to-bill and Data Center margins?
  Response: Book-to-bill strength led by Data Center; Data Center margins vary across portfolio, not specifically below corporate goal.

• Question from Blayne Curtis (Jefferies): Is 1.6T growth driven by share gains or market growth?
  Response: Growth driven by market expansion, design wins, and new products (e.g., photodetectors, CW lasers) rather than explicit share gains.

• Question from Tore Svanberg (Stifel): Is Telecom growth guidance conservative?
  Response: Conservative given flat RAN market, but share gains and SATCOM offer upside; growth likely below 10% for FY26.

• Question from Sean O'Loughlin (TD Cowen): Are CW laser customers module makers or hyperscalers?
  Response: Engaging with module customers first; early in reliability data collection and hyperscaler qualification process.

• Question from Christopher Rolland (Susquehanna): Potential of linear equalizers vs. ACCs?
  Response: Linear equalizers important for backplane and compute applications, but ACCs represent a larger growth opportunity due to volume.

• Question from Timothy Savageaux (Northland Capital Markets): Magnitude/timing of capacity addition and optical device materiality?
  Response: Not disclosing capacity specifics; focusing on scaling indium phosphide PDs; Data Center business diversified across optical and electrical components.

• Question from William Stein (Truist Securities): Revenue recognition timing relative to satellite launches?
  Response: Revenue recognized at shipment, not launch; content per satellite varies widely based on customer and application.

Contradiction Point 1

Growth Outlook for the Data Center Business

Inconsistent guidance on the driver for strong growth in the Data Center business.

What factors support the increased annual outlook for the Data Center business to 35-40%? - Quinn Bolton (Needham & Company)

2026Q1: The primary driver is the strong activity and ramp of 1.6T products, with a healthy backlog supporting stronger second-half revenue. - Stephen Daly(CEO)

What are the key drivers of the growth acceleration? - Harsh Kumar (Piper Sandler & Co.)

2025Q4: The step-up in growth for the December quarter is driven by the continued rollout of 1.6T and 800G platforms across various customers. - Stephen Daly(CEO)

Contradiction Point 2

Growth Outlook for the Telecom Segment

Contradiction on whether the Telecom growth outlook is conservative or cautious.

Does the Telecom growth outlook of high single-digit to low double-digit underestimate SATCOM and 5G potential? - Tore Svanberg (Stifel)

2026Q1: The outlook is cautious considering the 40% growth base from last year... Expecting below 10% growth is a reasonable base case. - Stephen Daly(CEO)

How will growth in the three segments evolve next year, considering over 40% growth in Data Center and Telecom this year? - Tore Svanberg (Stifel, Nicolaus & Company, Incorporated)

2025Q4: For fiscal 2026 (base case), MACOM expects double-digit top-line growth with no less than mid-teens growth. Growth will be driven by the Data Center business (strongest), followed by Industrial & Defense, then Telecom. - Stephen Daly(CEO)

Contradiction Point 3

Gross Margin Trajectory and Timing

Timeline for achieving 60%+ gross margin is pushed further out.

How does the shift in mix to Data Center affect gross margins, and what are the overall growth prospects for I&D this year? - Vivek Arya (Bank of America Securities)

2026Q1: Gross margin improvements (25-50 bps sequentially) are driven by a combination of factors... The company does not give full-year guidance. - John Kober(CFO)

What growth should we expect for the Data Center segment next year, given 48% growth in fiscal 2025? - William Stein (Truist Securities, Inc.)

2025Q3: Reaching 60% gross margin is more likely by fiscal 2027 rather than fiscal 2026, with an exit target for fiscal 2026 around 59%. - Stephen Daly(CEO)

Contradiction Point 4

RTP Fab Utilization and Margin Impact

Timeline for RTP fab margin improvement is extended, and focus shifts from mix change to utilization.

What's the status of the RTP fab integration and its potential for future gross margin upside? - Thomas O'Malley (Barclays)

2026Q1: Future gross margin improvements will primarily come from increasing utilization at the Massachusetts and French fabs... A major capacity increase plan is underway for the North Carolina fab. - Stephen Daly(CEO)

For the RTP fab conveyance, which has a 60 bps headwind, when could improvements turn it into a margin tailwind? - Nathaniel Quinn Bolton (Needham & Company)

2025Q3: Improvements are modeled to be 25-50 basis points over the next few quarters, with a tailwind likely in 2-3 quarters. - Stephen Daly(CEO)

Contradiction Point 5

Data Center Business Outlook and Growth Guidance

Guidance for data center growth becomes more specific and optimistic in 2026Q1 compared to cautious 2025Q2.

What is driving the confidence to raise the Data Center business's annual outlook to 35-40% this year—rising demand, better visibility, or share gains? - Quinn Bolton (Needham & Company)

2026Q1: The business is positioned to hit the 35-40% YoY growth base case, with potential upside. - Stephen Daly(CEO)

Is your data center business on track to grow near or above 50% this fiscal year, and do you believe this growth momentum can sustain into fiscal 2026 despite market volatility? - Tore Svanberg (Stifel Nicolaus)

2025Q2: While strong growth is anticipated in the near term, the market is volatile, and long-term growth is expected to settle into a more rational rate. - Stephen Daly(CEO)