MACOM Technology Solutions Holdings, Inc. (MTSI) | The Buildout — AI Infrastructure
The Verdict
MACOM designs, develops, and manufactures differentiated semiconductor products for Industrial & Defense, Data Center, and Telecommunications. It combines analog/mixed-signal circuit design with compound semiconductor fabrication in GaAs, GaN, InP, and specialized silicon, plus advanced packaging and back-end assembly and test. In the AI infrastructure buildout, MACOM supplies the chip and photonic component layer of the optical interconnect stack—drivers, TIAs, photodetectors, lasers, and equalizers—rather than full modules or engines.
| Market Cap | — |
| Revenue (TTM) | $1.1B |
| Revenue Growth | +27.1% |
| EBITDA Margin (TTM) | 22.2% |
| Net Cash | $288M |
| Earnings Beats | 6 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Data Center revenue grew 35% in FY24, 48% in FY25, and is trending toward 74% in FY26; it became the largest end market in Q3 FY26.
- Book-to-bill rose from 1.3 in Q1 to 1.5 in Q2 to a record 1.6 in Q3, while orders booked and shipped in-quarter fell from 18% to 11%.
- Adjusted operating income and adjusted EPS have increased sequentially for 12 straight quarters; Q3 adjusted operating income reached $107.7M, up 69.6% year over year.
- Adjusted gross margin improved from 57.6% in Q1 to 59.7% in Q3, with Q4 guided to 60–61% and a FY27 target to breach 40% operating margin.
- FY26 capex is $60–65M and FY27 is expected around $60M; management says it can reach $2 billion in revenue without buying or building a new fab.
What We’re Watching
- CW laser remains unqualified; potential production start is late calendar 2027, and management has not included it in FY26 or FY27 models.
- Customer A was 18% of Q2 FY26 revenue and the top ten direct customers were 57%, so a hyperscaler or module pause would be felt quickly.
- Formal FY27 guidance is expected on the next earnings call; the mid-20s to 27–28% company growth and ~50% Data Center growth are still informal base-case figures.
- China transceiver restrictions are a live policy variable; management views it as a share shift, not volume loss, but that is not yet proven.
The thesis is strengthening: Data Center is now the largest end market and accelerating, book-to-bill keeps rising, and margins are tracking ahead of plan. The main open question is whether hyperscaler demand durability and CW laser qualification can support formal FY27 guidance at or above the informal base case.
Earnings Beat
MACOM reported fiscal Q3 FY2026 revenue of $342.2 million, up 18.4% sequentially and 35.8% year over year. Adjusted gross margin was 59.7%, up 120 basis points from the prior quarter. The standout metric was book-to-bill, which reached a record 1.6:1, up from 1.5:1 in Q2 and 1.3:1 in Q1.
| Metric | Q2 FY2026 | Q1 FY2026 | Q2 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $289M | $272M | $236M | +22.5% |
| Gross margin | 56.9% | 55.9% | 53.5% | +340bps |
| EBITDA | $66M | $55M | $50M | +33.8% |
| EPS | $0.60 | $0.64 | $0.42 | +43.4% |
| Book-to-bill | 1.6:1 | 1.5:1 | n/a | — |
While we cannot declare success yet, we are gaining confidence in our ability to meet our customers’ reliability and performance requirements.— Steve Daly, President and CEO, August 6, 2026
Management tone: Management sounded confident, energized, and increasingly ambitious on the Q3 call, while still not declaring success on long-horizon programs. The clearest shift was on the CW laser: Daly said the company is gaining confidence and described HTOL data as exceptional. The call also emphasized record bookings, a record backlog, and a sharply higher Q4 guide.
Management Guidance
Management guided fiscal Q4 FY26 revenue to $415M–$425M, adjusted gross margin to 60%–61%, adjusted EPS to $1.97–$2.03 on 78.9 million diluted shares, and adjusted operating margin of approximately 37%. By segment, Data Center is expected to grow roughly 35% sequentially, I&D roughly 20%, and Telecom low single digits. FY26 capital expenditures were narrowed to $60M–$65M, and full-year cash flow from operations is expected to exceed $300M, with Q4 cash flow above $100M. Management also gave an informal FY27 base case of mid-20s to 27–28% company growth, Data Center growth around 50%, and an operating-margin target to breach 40%.
Trajectory
The most recent company-reported quarter shows a sharp sequential step-up: revenue rose from $289.0M in Q2 to $342.2M in Q3, an 18.4% sequential increase, led by Data Center up roughly 40% sequentially. Adjusted gross margin expanded 120 basis points to 59.7%, and adjusted operating margin reached 31.5%, up from 25.2% a year earlier. The audited through-Q2 trajectory had been decelerating sequentially, but the Q3 report and Q4 revenue guide suggest the expansion is re-accelerating.
The Model
The model projects fiscal FY+1 revenue of $1,276 million and EBITDA of $323 million, a 25.3% margin, and fiscal FY+2 revenue of $1,650 million and EBITDA of $515 million, a 31.2% margin. Near-term, the model is anchored by Data Center optical-connectivity growth and the step-up in Q4 guidance; FY+2 reflects continued scaling of photonics, I&D strength, and operating leverage against a relatively fixed ~$60 million capex base.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $967M | $1.3B | $1.6B |
| YoY Growth | — | +31.9% | +29.3% |
| EBITDA | $207M | $323M | $515M |
| EBITDA Margin | 21.4% | 25.3% | 31.2% |
Projections are the median of 5 independent model runs. The model’s revenue sits 3.9% above analyst consensus.
Management guided fiscal Q4 FY26 revenue to $415M–$425M, adjusted gross margin to 60%–61%, adjusted EPS to $1.97–$2.03 on 78.9 million diluted shares, and adjusted operating margin of approximately 37%. By segment, Data Center is expected to grow roughly 35% sequentially, I&D roughly 20%, and Telecom low single digits. FY26 capital expenditures were narrowed to $60M–$65M, and full-year cash flow from operations is expected to exceed $300M, with Q4 cash flow above $100M. Management also gave an informal FY27 base case of mid-20s to 27–28% company growth, Data Center growth around 50%, and an operating-margin target to breach 40%.
What Could Go Right — and Wrong
- CW laser qualifies and production starts by late calendar 2027, opening the silicon-photonics opportunity management calls a watershed moment.
- Formal FY27 guidance confirms 27–28% company growth and operating margin above 40%.
- Book-to-bill stays above 1.0 through Q4 and into FY27, indicating backlog continues building rather than same-quarter turns.
- 200G PDs continue ramping and 400G PDs convert from sampling to volume, broadening Data Center beyond TIAs/drivers.
- MESC U.K. defense order lands in the next 1–2 months and the 6-inch conversion completes, accelerating European defense revenue.
- Hyperscaler or module maker pause or architecture shift concentrates impact through Customer A at 18% of Q2 revenue and top ten direct customers at 57%.
- CW laser slips beyond late calendar 2027 or fails qualification; the effort remains conditional and is not included in FY26 or FY27 models.
- NPO/XPO revenue is not expected until around 2028 and some programs will not reach production.
- Single-source foundry dependence and exotic-material shortages such as InP, SiC, gases, and precious metals constrain supply.
- 5G market is flat and the competitor-exit share gain is not expected until back-half FY27.
Looking Ahead
Over the next 12 months, the main business milestones are Q4 FY26 delivery, formal FY27 guidance, the MESC U.K. defense order, the MESC 6-inch conversion, the RTP fab expansion, and LEO satellite production transitions. Management also expects continued CW laser updates, advanced GaN MMIC launches, and a resolution or prolonged standoff on CHIPS Office terms.
- Next 1–2 monthsMESC U.K. defense order — One of largest in MESC history; airborne defense systems
- Next 4–6 monthsMESC 6-inch conversion — Two remaining process sets; European defense revenue builds
- End CY2026RTP fab +30% capacity — ~$15–16M expansion complete; adds wafer capacity
- Late CY2026 / early CY2027LEO production transitions — Major programs move to full-rate production; Telecom reaccelerates
- Next 12–18 monthsAdvanced GaN MMIC launches — W-band/E-band/D-band products
- Late CY2027CW laser production potential — Reliability quals and customer module quals continue
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $730M | $967M | $1.1B | +32.6% |
| Gross Margin | 51.6% | 53.2% | 55.3% | +162bps |
| EBITDA | $139M | $207M | $1.2B | +48.6% |
| EBITDA Margin | 19.1% | 21.4% | 22.2% | +230bps |
| Net Income | $77M | −$54M | $177M | -170.6% |
| Free Cash Flow | $140M | $153M | $986M | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)55.3%
- EBITDA Margin (TTM)22.2%
- Net Margin (TTM)16.5%
- ROIC12.0%
- FCF Conversion64.0%
- SBC / Revenue7.4%
The Company
MACOM designs, develops, and manufactures differentiated semiconductor products for three end markets: Industrial & Defense, Data Center, and Telecommunications. It combines analog/mixed-signal circuit design with compound semiconductor fabrication in GaAs, GaN, InP, and specialized silicon, plus advanced packaging and back-end assembly and test. The company has more than 70 years of application expertise and thousands of products across amplifiers, ICs, diodes, switches and switch limiters, passive and active components, and multi-chip modules.
Operationally, MACOM owns wafer fabs in Lowell, Massachusetts; Research Triangle Park, North Carolina; Ann Arbor, Michigan; and Limeil-Brévannes, France. Assembly and test sites span those locations plus Nashua, New Hampshire; Hamilton, New Jersey; Morgan Hill, California; and Hsinchu, Taiwan. It has no manufacturing in China, where roughly 85 employees focus on applications, sales, and logistics. The company reports one GAAP segment, with the President and CEO as chief operating decision maker.
Business Segments
Competitive Landscape
MACOM describes itself as a differentiated strategic supplier in analog/mixed-signal and compound semiconductor markets. The 10-K names competitors including ADI, Broadcom, Credo, Marvell, MaxLinear, Microchip, NXP, Qorvo, Semtech, Skyworks, and Sumitomo Electric Device Innovations. In Data Center, MACOM competes at the chip/photonic component layer, not full modules.
- SemtechNamed in the 10-K competitor list; no company-specific financials are provided in the source material.
- MarvellNamed in the 10-K competitor list; no company-specific financials are provided in the source material.
- BroadcomNamed in the 10-K competitor list; no company-specific financials are provided in the source material.
- CredoNamed in the 10-K competitor list; no company-specific financials are provided in the source material.
- ADINamed in the 10-K competitor list; no company-specific financials are provided in the source material.
Supply Chain
MACOM sits at the chip/photonic component layer of the optical interconnect stack, supplying drivers, TIAs, photodetectors, lasers, and equalizers to module makers and hyperscaler programs. None of the verified-neighbor read-throughs in the source name MACOM directly.
More on MTSI: Earnings recap