MACOM (MTSI) Q3 FY26 earnings call: guidance and Q&A

What specific products (TIAs, drivers, PDs) are driving Data Center strength and the increased book-to-bill, and where is the strength coming from?

Data Center growth is broad, primarily driven by 200G PAM4 products in pluggable optical modules, ZR/ZR-light, and other data rates. The book-to-bill is mainly driven by 1.6T and 800G platforms.

“If you pull back and look at our growth from, let's say, fiscal '25 to fiscal '26, the primary driver is 200-gig PAM4 products, primarily in pluggable optical modules.”

asked by Tom O'Malley · answered by Stephen Daly

Can management provide any color on the growth trajectory for the company and Data Center business into fiscal year '27?

Midpoint of Q4 guidance annualizes to mid-20s (27-28%) company growth for FY27, with Data Center trending to 50% YoY growth. Strong book-to-bill (Q1 1.3, Q2 1.5, Q3 1.6) suggests a strong start to FY27.

“If you drill down and look at our highest growth market, which is our Data Center business, that number then trends to 50% year-over-year growth.”

asked by Tom O'Malley · answered by Stephen Daly

When might the Telecom business accelerate, and how will the LEO opportunity contribute to this acceleration?

Telecom is forecasted for double-digit growth this year, with similar or better expected next year. Two to three major LEO programs start production late CY26/early CY27. A new optical product position with a large satellite OEM is expected to drive 2-3 years of growth.

“We do have, as we've talked about in the past, two or three major LEO programs that will start production at the end of this calendar year and at the beginning of next.”

asked by Blayne Curtis · answered by Stephen Daly

How should investors think about the incremental gross margins in the business, given the expectation for sequential increases?

Gross margin improvement is driven by volume increases and efficiency. Expect 130 bps increase in Q4. Going forward, expect 25-50 bps per quarter range, as it gets harder to achieve larger increases at higher gross margins.

“We think in the 25 basis points to 50 basis points per quarter range going forward.”

asked by Blayne Curtis · answered by John Kober

How would a proposed ban on Chinese module makers for pluggable transceivers impact MACOM, considering both potential restrictions and new opportunities?

MACOM's Data Center growth is driven by U.S. hyperscalers. If market share shifts among transceiver companies due to regulations, MACOM expects to follow that business to other manufacturers, resulting in a customer mix shift. MACOM has relationships with all transceiver companies and is a strategic supplier.

“If the hyperscalers have to shift the market share from their supply chain between different transceiver companies due to new regulations, then we would expect to follow that business to those other manufacturers.”

asked by Vivek Karia · answered by Stephen Daly

Can management elaborate on MACOM's position in NPO, what it's supplying, and if it plans to provide full optical engines?

MACOM will not build or supply full optical engines; it is a chip supplier. For NPO, it supplies drivers and TIAs, focusing on smaller parts, more channels, lower power, and various form factors. Engaged in 10-20 active NPO development projects, with revenue expected to kick in around 2028.

“I can tell you, we are not going to be building engines and supplying engines to the market. So we -- in the case of the Data Center, we are a chip supplier, not a multichip assembly or module supplier.”

asked by Quinn Bolton · answered by Stephen Daly

Is the laser and detector opportunity larger than TIA/driver ICs, and what kind of content is MACOM chasing in this area?

MACOM does not agree that laser/detector opportunity is necessarily larger than TIA/driver. Both are multibillion-dollar product areas with unique technology. MACOM is equally excited about both, with different teams working on them.

“I'm not sure I would agree that the laser and detector opportunity is larger than the driver and TIA. We've not made that statement, and I don't want you to think that's what we're thinking.”

asked by Timothy Savageaux · answered by Stephen Daly