MACOM's Perfect Quarter, Priced for a 2028 Pause

Record Q4 and a $2 billion FY27 target meet a 46% drawdown — the market is no longer debating 2027.

MTSI · Earnings Call · 2026-11-05

The quarter was flawless; the tape was not

MACOM delivered one of the cleanest quarters in semiconductor land. Fiscal Q4 revenue was $424.8 million, up 62.7% year over year and 24.1% sequentially, with adjusted EPS of $2.09. Full-year revenue crossed $1.3 billion, up 37%, and adjusted EPS rose 61% to $5.60. Book-to-bill was 1.4:1, backlog was a record, and Q1 guidance of $450 million to $460 million came with a 62%-63% gross margin and a 40% operating margin at the midpoint. “Revenue for the fourth quarter of fiscal 2026 was $424.8 million, and adjusted earnings per diluted share was $2.09.” — Stephen Daly, President and CEO · 2026-11-05 That is a fundamental breakout, not a relief rally. Yet the stock has been dismantled. MTSI is down 45.7% over the last 90 trading days, with a peak-to-trough drawdown of 45.7% from its October 6 high and 52.5% from its May peak. The report landed into a violent de-rating. That is the story: the company is executing better than ever, while the market is voting on something further out. The reason is visible in the end-market mix. Data center revenue was $188.1 million, up roughly 37% sequentially. Industrial and Defense was $164.6 million, up 23%. Telecom was $72.1 million, up just 1%. MACOM has become an AI optical infrastructure story, and the tape has been brutal for that cluster. The global price tape shows AI data centers down more than 30% over both 90-day and 30-day windows, while co-packaged optics is down more than 35% over 90 days. MTSI is not idiosyncratically broken; it is the high-beta optical semiconductor complex in a broad AI infrastructure selloff.

What changed: the growth bridge got wider and more specific

The most important change is the FY27 data center guide. On the August call, management framed data center growth as roughly 50% in its base case. On this call, the base case jumped to about 80% year-over-year, with I&D targeted above 30% and telecom guided to low double-digit growth. CEO Steve Daly then made the $2 billion bridge explicit. “If you just annualize the midpoint of our first quarter guide, you get to sort of that $1.8 billion level... And frankly, we would expect to do better than that.” — Stephen Daly, President and CEO · 2026-11-05 For a company that just crossed $1.3 billion, that is an aggressive but backlog-supported step-up. The phrase opportunity for MACOM tops the company's own keyword list this quarter for a reason. The second change is the CW laser story. A quarter ago, management was still telling investors not to model it. “I would, at this stage, not put your CW laser in your models, certainly not for fiscal '26 or I would say even '27.” — Stephen Daly, Chief Executive Officer · 2026-05-07 This quarter, the tone is different because the fab process changed. The company says it has materially improved the laser facet quality and now believes it can be a merchant supplier of CW Laser products, targeting 2028. The CEO's analogy is memorable:

we have made significant technology improvements, which effectively take a facet that looks like it was cut by a chainsaw and now it looks like it was cut by a sushi knife.
Stephen Daly, President and CEO · 2026-11-05

That does not add revenue in FY27. It does, however, widen the 2028 aperture and gives the bulls a second leg beyond pluggable optics. Management also called NPO a multibillion dollar opportunity, with multiple hyperscalers engaged. But when asked about concrete wins, Daly was careful: “we keep our cards close to the chest when it comes to customer engagement.” — Stephen Daly, President and CEO · 2026-11-05 That is the right posture competitively; it is also exactly the kind of language that leaves bears room to doubt the timing. The third change is capital intensity. FY27 CapEx is guided to $100 million to $110 million, up sharply from the prior $60 million-ish framing, with roughly 60% going into fabs. The RTP Fab and the Massachusetts indium phosphide fab are the centerpieces. “We are probably 1 or 2 quarters away from signing a DFA.” — Stephen Daly, President and CEO · 2026-11-05 That CHIPS money would help, but the step-up also raises the fixed-cost stakes if the 2028 demand curve bends. The capacity build is real: capital expenditures reached $21 million in the August quarter, up 135% year over year.

The market is voting on 2028, not 2027

The analyst debate on the call was not about Q4. It was about 2028. Harsh Kumar of BMO asked directly whether the midterm elections and data center buildout uncertainty threaten the out-year. Daly's answer was reassuring but not evidentiary: “the elections and the results aren't necessarily going to derail a lot of the work that will be done over the next 5 years inside this industry.” — Stephen Daly, President and CEO · 2026-11-05 That is a reasonable view. It is also not a backlog. The market is trying to discount a 2028 hyperscaler digestion risk, and MACOM's own disclosures give it space to do so: NPO awards are not disclosed, CW lasers are a 2028 product, telecom is flat to slightly down near term, and the LEO ramp is back-half weighted. Telecom is the clearest example of a real but slow-burn opportunity. MACOM is the top U.S. supplier of V-band analog linearizers for LEO ground stations and expects a new LEO contract to represent roughly $20 million of business beginning in early 2028. That is a nice franchise. It is not enough to offset PON and broadband softness in the near term. The company's telecom guide for Q1 is flat to slightly down, with growth expected to accelerate later in the year. Margins are the counterargument. Q4 adjusted gross margin was 61.3%, operating margin 38.2%, and Q1 guidance implies roughly 40% operating margin. Gross margin stood at 58.3% in the latest 10-Q quarter, and the trend has been upward for two years. Operating income reached $124 million in the August quarter, up 181% year over year. CEO Daly even suggested mid-60s gross margins are possible in the not-too-distant future. If that happens alongside $2 billion of revenue, the earnings power is substantial. But the valuation was priced for that outcome long before it arrived. Price to revenue was 24.9x, up 112% year over year. The stock is down 46% and still not statistically cheap. The market is compressing the multiple, not the earnings.

Bottom line

MACOM's fundamentals are excellent and getting better. The company has record backlog, a credible $2 billion FY27 bridge, a new CW laser option for 2028, and a net cash balance of $892 million. Yet the stock is in a 46% drawdown, and management is not using the dislocation to buy back stock. “we don't have any plans at this point to do buybacks or start a dividend program.” — Stephen Daly, President and CEO · 2026-11-05 That is defensible if the cash is funding a $5 billion revenue ambition, but it removes a near-term support. The next proof points are concrete: the CHIPS DFA, CW laser qualification, NPO awards, and whether 80% data center growth actually ships in FY27. If MACOM delivers $2 billion at 40%+ operating margins, the selloff will look overdone. If 2028 hyperscaler optics digest, the multiple still has room to compress. This is a name where the call is better than the tape — for now.