Network chips maker MACOM Technology Solutions (NASDAQ: MTSI) beat Wall Street’s revenue expectations in Q1 CY2025, with sales up 30.2% year on year to $235.9 million. On top of that, next quarter’s revenue guidance ($250 million at the midpoint) was surprisingly good and 5.7% above what analysts were expecting. Its non-GAAP profit of $0.85 per share was in line with analysts’ consensus estimates.
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MACOM (MTSI) Q1 CY2025 Highlights:
- Revenue: $235.9 million vs analyst estimates of $230 million (30.2% year-on-year growth, 2.6% beat)
- Adjusted EPS: $0.85 vs analyst estimates of $0.84 (in line)
- Revenue Guidance for Q2 CY2025 is $250 million at the midpoint, above analyst estimates of $236.6 million
- Adjusted EPS guidance for Q2 CY2025 is $0.89 at the midpoint, above analyst estimates of $0.87
- Operating Margin: 14.8%, up from 8.5% in the same quarter last year
- Inventory Days Outstanding: 181, up from 179 in the previous quarter
- Market Capitalization: $9.3 billion
StockStory’s Take
MACOM’s second quarter results were shaped by expansion in its three core end markets: Industrial & Defense, Data Center, and Telecom. Management attributed much of the year-over-year growth to increased demand for higher-frequency and higher-power solutions, particularly in defense radar, satellite communication, and data center upgrades. CEO Stephen Daly highlighted that, “Our I&D and Data Center quarterly revenues achieved record levels,” and pointed to the company’s ability to win new design opportunities as a key factor. The ramp of new products, including 200G photodetectors and high-power optical amplifiers, contributed meaningfully to these outcomes, while telecom saw a rebound as inventory levels normalized and new platform deployments advanced.
Looking ahead, MACOM’s management expects continued sequential revenue growth across all end markets, with Industrial & Defense projected to lead. Daly noted, “We anticipate that Industrial & Defense will lead with approximately 10% sequential growth followed by Data Center at 5% sequential growth and telecom slightly up sequentially.” The company’s outlook is supported by a record backlog and ongoing customer demand for data center upgrades and next-generation satellite systems. However, leadership remains cautious about forecasting beyond the upcoming quarter, emphasizing market volatility in the data center segment and the importance of ongoing innovation and execution. The upcoming transfer of the Wolfspeed RF fab is also positioned as a potential driver for future margin improvements, though some uncertainty remains around the pace of gross margin recovery.
Key Insights from Management’s Remarks
Management attributed strong quarterly growth to market share gains from new products, robust defense and data center demand, and improved order trends in telecom. Product innovation and strategic investments in R&D were highlighted as central to these results.
- Defense and radar demand: The Industrial & Defense segment benefited from ongoing upgrades in U.S. and international defense systems, including radar, electronic warfare, and communications. MACOM’s expertise in high-frequency, high-power semiconductors positioned it well for new program wins and increased market share.
- Data center technology upgrades: The Data Center business saw sustained expansion, driven by adoption of higher-speed data rates (such as 100G per lane and 800G platforms) and the ratification of linear pluggable optics (LPO) standards. Management noted early customer adoption and highlighted the introduction of 200G photodetectors as key contributors.
- Telecom rebound aided by SATCOM: Improved telecom results were linked to recovering demand in 5G infrastructure, broadband access, and satellite communications (SATCOM). Management cited new design wins in both ground and space-based satellite systems, and significant progress on a large multi-phase SATCOM contract.
- Product and process innovation: MACOM launched the Opto-Amp optical amplifier for satellite links and continued developing advanced RF and photonics processes, such as the next-generation GaN on Silicon Carbide. Ongoing investment in proprietary semiconductor technologies and collaborations with research labs were emphasized as core to the company’s competitive strategy.
- Wolfspeed RF fab integration: The transition of the Wolfspeed RF business and associated fabrication facility is ahead of schedule. Management expects this to enhance capacity and support growth, though achieving gross margin targets will depend on further improvements in yields and throughput after the transfer.
Drivers of Future Performance
MACOM’s outlook centers on continued demand for defense and data center solutions, ongoing product innovation, and operational execution as the Wolfspeed fab integration progresses.
- Industrial & Defense momentum: Management anticipates double-digit sequential growth in Industrial & Defense, underpinned by expanding European defense exposure and new radar program wins. The company’s recent acquisition of a European wafer fab is enabling deeper customer relationships and technology transfers, broadening its opportunity set in this segment.
- Data center volatility and opportunity: While expecting near-term growth in data center demand, management flagged volatility as a risk, citing rapid ramps and declines across platforms and customers. The company is focused on maintaining a broad product portfolio and is closely monitoring adoption of new standards like LPO to capture emerging opportunities.
- Wolfspeed fab transition impact: The ongoing Wolfspeed RF fab integration is expected to support higher capacity and long-term margin improvement. Management noted that achieving targeted gross margins will require further operational improvements post-transfer, with the financial benefits expected to materialize over several quarters.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be monitoring (1) the execution of the Wolfspeed RF fab transfer and its impact on gross margins, (2) momentum in Industrial & Defense as new radar and European defense contracts progress, and (3) continued adoption of MACOM’s data center solutions amid ongoing market volatility. Progress on new product ramps and visibility into major customer wins will also serve as key signposts for the company’s trajectory.
MACOM currently trades at a forward P/E ratio of 33.3×. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free).
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