Transcript: MACOM Technology Solns Q3 2026 Earnings Conference Call

MACOM Technology Solns (NASDAQ: MTSI ) reported third-quarter financial results on Thursday. The transcript from the company's third-quarter earnings call has been provided below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

View the webcast at Summary Full Transcript OPERATOR (Operator) Welcome to MACOM Technology Solns' third fiscal quarter 2026 conference call. This call is being recorded today, Thursday, August 6, 2026. At this time, all participants are in listen-only mode. I will now turn the call to Mr.

C. Ferranti, MACOM Technology Solns' Senior Vice President of Corporate Development and Investor Relations. Mr. Ferranti, please go ahead.

Stephen Ferranti, CFA — Senior Vice President, Corporate Development and Investor Relations Thank you. Good morning and welcome to our call to discuss MACOM Technology Solns' financial results for the third fiscal quarter of 2026. I would like to remind everyone that our discussion today will contain forward-looking statements which are subject to certain risks and uncertainties as defined in the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those discussed today.

For a more detailed discussion of the risks and uncertainties that could result in those differences, we refer you to MACOM Technology Solns' filings with the SEC. Management's statements during this call will also include a discussion of certain adjusted non-GAAP financial information. A reconciliation of GAAP to adjusted non-GAAP results is provided in the company's press release and related Form 8-K, which was filed with the SEC today. With that, I'll turn the call over to Steve Daly, President and CEO of MACOM Technology Solns.

Steve Daly, President and CEO Thank you and good morning. I will begin today's call with a general company update. After that, Jack Kober, our Chief Financial Officer, will review our Q3 results for fiscal year 2026. When Jack is finished, I will provide revenue and earnings guidance for the fourth quarter of FY26 and then we will be happy to take some questions.

40 per diluted share. Demand for our products is strong across our three end markets and our backlog continues to build. Our sequential financial performance improved across most key metrics in Q3 including gross and operating margins. 6 to 1 and orders booked and shipped within the quarter were 11% of total revenue.

All three end markets had exceptional bookings with notable outperformance in the data center. Our record backlog reflects market strength as well as our progress that we are making to expand our product portfolio and better address our customer needs. We are pleased with the customer order trends. Our strategy of strengthening our core technologies and expanding our product portfolio around three central themes — highest power, highest frequency and highest data rate — is proving to be effective.

We believe the breadth in our technology and product portfolio coupled with our unique manufacturing capabilities enable a strong and durable business model. MACOM Technology Solns is well positioned in three large markets, namely Data Center, Industrial and Defense, and Telecom. In total, these markets contain thousands of potential customers with a combined SAM that we now estimate to be in the range of 15 billion in 2027. To address the large SAM opportunity, we have been and will continue to invest in R&D and expand our engineering and manufacturing teams.

We continue to align and expand our engagements with customers that are industry leaders. Two years ago we had approximately eight customers with $10 million in revenue. Today we have over 20 customers above 10 million and a few in the range of 50 to 100 million. While we are growing revenue by over 30% per year, our year-to-date top 10 end customers still represent less than 40% of our total revenue.

Our customer base continues to grow and remain diversified. Now turning to recent market trends, Q3 revenue performance by end market was as expected with all end markets growing sequentially. 3 million. Data center increased approximately 40% sequentially, IND increased 11% sequentially and telecom increased 2% sequentially.

Both data center and IND revenues are at record levels. Next, I'll take a moment to review each of our three core markets in more detail, starting with the Data Center. 6T PAM4 products. As a reminder, our portfolio is highly diversified, supporting NRZ, PAM4 and coherent modulations across EML, silicon photonics and VCSEL-based architectures.

Our connectivity solutions include IC and photonic semiconductors, with the photonic products being produced in our internal fabs. We see multiple trends in the industry including the proliferation of optical links as hyperscalers are moving from passive copper to fiber connectivity in scale-up applications. This trend represents a large SAM expansion opportunity for MACOM Technology Solns as we currently do not promote passive copper solutions. Another contributor to our SAM expansion is the need for higher-density interconnects that support both fast and slow data rates.

In many cases, our newest products are designed for highly integrated architectures like NPO and XPO. These applications typically require smaller chips, more lanes of data and lower power consumption compared to pluggable modules. These architectures often include LPO and LRO using single-mode or multimode modulation. We practice the be first, be fast approach.

We also strive to provide options including lower power, smaller chip size and multiple channels using flip chip, bump chip or through-silicon via technologies — all to ensure our customers meet their size, manufacturability and performance goals. Additionally, we are constantly innovating and improving our products to achieve better performance. As an example, today we are sampling our latest generation of 200G and 400G per-lane TIAs and driver products for various advanced interconnect applications. Interest in our indium phosphide products is growing as optical connectivity expands inside the data center.

Our near-term and long-term growth strategy is to gain market share with new lasers and in higher-speed photodetector products and to install necessary manufacturing capacity to meet demand. Our team is having strong results with our 200G photodetectors which are ramping in volume production and becoming a meaningful contributor to our overall data center growth. In addition, our 400G photodetectors are receiving very positive customer feedback. Our 75 milliwatt CW laser qualification efforts continue.

Our laser team is actively working to lock down a production process and while we cannot declare success yet, we are gaining confidence in our ability to meet our customers' reliability and performance requirements. Customers have been providing us with positive feedback on our product's performance and there is intense interest and customer pull to get us into production. We are developing plans to support a potential start to production in late calendar 2027. This includes scoping modest capex investments and fab space requirements to support a rapid high-volume ramp for a few strategic customers.

I will provide an update on the CW laser activities in the coming quarters. On a related note, we are seeing increased demand for our 25G DFB laser products which serve the 100G QSFP, CWDM4 and LR4 applications. These products launched a few years ago and in some cases were previously qualified by customers. Customers are coming to us with urgency due to the general supply shortage of indium phosphide DFB lasers.

We believe our indium phosphide photonics product lines represent a large growth opportunity for MACOM Technology Solns and we expect to gain meaningful market share over the next three years. 6T and beyond. We are working closely with customers to address their program-specific requirements and various use cases. This includes copper cables and on-board equalizers.

6T. In summary, we see many new large opportunities in the data center. 6T. Our strategy is to collaborate with the leaders in the industry and support their connectivity needs, whether it's scale up, scale out or scale across.

Turning to our IND business, we see many growth opportunities across the industrial and defense markets, primarily in the defense segment. Our defense customer base is large and very broad and we typically support radar systems, missile and missile defense systems, drone and drone defense systems, communication systems and wideband electronic warfare systems. Last year our defense business grew by 19% and this year we expect it to grow by approximately 25%. S.

defense electronics market is projected to grow significantly over the next few years and we are in a great position to benefit. In addition, we believe European countries will spend more on existing and new defense systems. We have a growing team of application and design engineers that can support our defense customers and offer the full scope of MACOM Technology Solns' capabilities. Our primary focus is providing unique solutions that improve overall system performance to give our customers an advantage.

As an example of the type of products we developed, at this year's International Microwave Symposium, also known as IMS, in June, we showcased an X-band front-end module which utilized a combination of MACOM Technology Solns' GaN ICs in a highly integrated multi-chip module assembly. The X-band frequency is ideal for precise target detection and discrimination and is often used for defense radar applications. Our product can deliver 16 watts of transmit power and over 40% power-added efficiency. The receive side features industry-leading recovery time and exceptional linearity and noise.

This product's small footprint can support compact, high-volume radar systems. Our R&D team works to push the limits of our semiconductor technology, and in recognition of our efforts this past quarter we received incremental funding from the Air Force Research Lab, or AFRL, to support millimeter-wave GaN on silicon carbide production maturation. This effort is directly in line with our high-frequency and high-power strategy and further aligns MACOM Technology Solns with the needs of the defense industry.

Over the past few quarters, we have also seen an increase in demand from our industrial market segments, including test and measurement, medical, automotive, and general multi-market products. We believe our test and measurement customers are seeing increased demand from the market, primarily driven by expanding microwave, SATCOM, and AI-related engineering and production facilitization. Notably, our automotive business, which is one of our smaller submarkets, is expected to double its revenue this year, primarily driven by market penetration and increased design wins. Now, moving to telecom.

Within the telecom end market, satellite-based broadband access and direct-to-device, or D2D, opportunities remain robust, with numerous LEO networks in the planning or production stages. These systems support consumer, enterprise, government, and defense requirements. Today, we are supporting a variety of these LEO networks, and we expect our revenue in this market segment to continue to grow. I'll note that our commercial RF power team, which is traditionally focused on 5G base station opportunities, is now targeting the LEO market.

Given the significant similarities and requirements, our 5G technology is directly applicable to LEO D2D systems. LEO networks typically use microwave or millimeter-wave frequencies and free-space optics, or FSO, communications for satellite-to-satellite or satellite-to-ground communications. Notably, on the business development side this quarter, our team was selected to support a next-generation satellite optical communication platform. This new award establishes MACOM Technology Solns as a strategic partner and will contribute to our growing LEO business.

Why did this customer select MACOM Technology Solns? Because we are capable of solving their technical and production problems and because all the critical ICs for the system could be sourced from MACOM Technology Solns. This win exemplifies how we continue to penetrate the LEO market with our unique technology. Ground stations are a key part of LEO networks.

In many cases, ground-to-satellite links prefer linearization of SSPAs or TWTs to boost the linear power efficiency of the link. At this year's IMS exhibition, we demonstrated how to linearize a high-power V-band TWT. The demonstration showcased how to improve linear power and efficiency for microwave transmitters used in satellite communications, defense, and other ground- and space-based applications. At IMS, MACOM Technology Solns also demonstrated a complete W-band transmit and receive signal chain.

LEO satellites are increasingly turning to W-band frequencies, which is approximately 75 GHz, as this spectrum enables multi-gigabit communication links, higher-resolution imaging, more precise sensing, and improved spectrum reuse. A few more highlights to share. First, in Q3 we began installing our new G10 epitaxial reactor at MACOM Technology Solns' European Semiconductor Center, or MESC, to support future growth in technology development. MESC, being located in France, is well-positioned to support the European continent's commercial and defense markets.

Second, recently our engineering teams demonstrated how AI can be used to support the chip design process. We are aggressively developing AI capabilities to accelerate our time to market and to make MACOM Technology Solns a more formidable competitor. Third, last week over 50 summer interns presented the results of their summer projects. S.

and Europe. Special thanks to our HR team and everyone who has been involved to support another successful internship session. We view this program as a core activity directly tied to growing our talented workforce. And last, in mid-July, the management team published its 2026—2030 growth strategy plan to our Board of Directors.

Like prior years, we refined and updated our plans based on lessons learned, market dynamics, and evolving business priorities and opportunities. In summary, we continue to build a best-in-class and diversified company. Jack will now provide a more detailed review of our financial results. Jack Kober — Senior Vice President and Chief Financial Officer Thank you, Steve, and good morning.

MACOM again achieved multiple new quarterly records associated with our financial performance during our fiscal third quarter. Benefits from ongoing customer demand and operational improvements across the organization have again increased revenue, profitability, and cash flow. 8% year over year, driven by growth across all three of our end markets, with Data Center leading, followed by IND and Telecom. 6 to 1.

As a result, we continue to have strong visibility across the business, and Q3 marks our highest quarterly bookings ever. 7% of revenue. This represents a gross margin increase of 120 basis points over the prior quarter. We have and continue to expand our manufacturing capacity to meet growing customer demand.

We expect to add new capacity across our operations during the remainder of fiscal 2026 and into fiscal 2027. These expansion actions will help ensure that we meet our operational and financial growth plans. The product demand increases across the business have resulted in enhanced utilization of our fabs, helping to drive higher gross margins as we move forward. We expect ongoing quarterly sequential gross margin improvements through the remainder of fiscal 2026 and fiscal 2027.

2 million. As anticipated, the sequential increase in adjusted operating expense compared to Q2 was primarily driven by ongoing R&D investments and employee-related costs. As our business expands, we expect to continue to leverage our existing OPEX functions. We will efficiently manage our SG&A and prioritize future R&D investments to support our growth objectives.

Adjusted depreciation expense for fiscal Q3 2026 remained relatively stable at $9 million, in line with the prior quarter. 6% year on year. This increase in adjusted operating income further reflects the leverage in our operating model as the business continues to scale.