MACOM Technology Solutions
Designs and largely manufactures high-performance analog/RF/optical semiconductor components and ICs in owned III-V fabs (Massachusetts, North Carolina, France) supplemented by silicon foundry partners; sells chips, MMICs, and modules into Industrial & Defense, Data Center, and Telecom end markets. Component/IP-driven, high-margin, incremental-capex ('fab-lite in spirit, but owns its specialty fabs') model.
Earnings, margins, COGS & capex
MACOM is in an accelerating growth phase led by AI-datacenter optical demand layered on a durable Industrial & Defense base. FY2025 revenue grew 32.6% to $967.3M; TTM revenue is ~$1.07B and Q2 FY2026 hit a record $289.0M with a company-record 1.5:1 book-to-bill. Adjusted gross margin is climbing toward 60% (58.5% in Q2) and adjusted operating margin reached 27.8%. Balance sheet is net-cash (~$325M) and capex is unusually light for a fab-owning semi. The controversy is valuation, not fundamentals: the stock trades at a triple-digit trailing P/E (~138x) and ~23x EV/sales, pricing in sustained hypergrowth.
Income statement — where each revenue dollar goes
% of revenueOf every $1 of revenue, ~43¢ is cost of goods and ~39¢ operating expense, leaving ~18¢ of operating profit.
Revenue trend
Margins
rising; Q3 guide 59-60%
rising; TTM ~56%
expanding (FY2025 was 25.4%)
expanding; TTM ~16%
FY2025 FCF $193M (~20%); recent TTM run-rate lower as growth capex ramps
COGS structure
COGS is dominated by owned III-V wafer fabrication (GaAs, GaN, InP) plus silicon-photonics foundry wafers, assembly/test, and packaging. Vertical integration into specialty compound-semi fabs is the source of the ~58-60% adjusted gross margin; margin uplift is coming from fab utilization, yield/mix (higher-value data-center optical and defense parts), and capacity added at low incremental cost rather than from outsourcing.
Capex
Low relative to a fab owner: incremental de-bottlenecking rather than greenfield. Examples cited: North Carolina wafer capacity +~30% over 15 months for ~$15-16M capex; Massachusetts expanding GaN and indium-phosphide output; France transitioning to 6-inch lines with a new MOCVD reactor. No new fab construction planned. TTM capex roughly $65-70M (~6-7% of revenue).
Latest earnings
Beat: revenue $289.0M vs ~$285.2M consensus; adjusted EPS $1.09 vs ~$1.07 consensus; GAAP net income $46.3M ($0.60/diluted share) vs $31.7M ($0.42) a year ago; shares rose on the print (record revenue + raised guidance)
Q3 FY2026: revenue $331M-$339M, adjusted gross margin 59-60%, adjusted EPS $1.31-$1.37 (~78.5M diluted shares, ~3% non-GAAP tax). Full-year FY2026: data center >60%, Industrial & Defense >20%, Telecom low-double-digit; blended ~30%+.
- Revenue
- $289.0M (+22.5% YoY / +6.4% seq)
- Industrial & Defense
- $120.7M
- Data Center
- $98.2M (+14.5% seq, record)
- Telecom
- $70.1M
- Adjusted EPS
- $1.09
- GAAP EPS
- $0.60
- Adjusted gross margin
- 58.5%
- Adjusted operating margin
- 27.8%
- Book-to-bill
- 1.5:1 (record bookings)
- 6-mo operating cash flow
- $121.6M
Growth drivers
- AI/hyperscaler data-center optical — 800G and 1.6T deployments driving photodetectors (200G), lasers/EML, and silicon-photonics content; data-center full-year FY2026 growth target raised from 35-40% to over 60%
- Silicon photonics + laser portfolio diversification (EML, VCSEL, coherent modulation) increasing dollar content per optical module
- Industrial & Defense RF/microwave — radar, missile, electronic-warfare content growth; management targets >20% FY2026 growth
- GaN: new GaN-4 process for 5G base stations and broader GaN-on-SiC/RF power expansion
- Telecom recovery: low-double-digit FY2026 growth target as carrier and metro/optical demand normalizes
- Record 1.5:1 book-to-bill (highest quarterly bookings in company history), supporting the sharp Q3 sequential guide
Reported financials — SEC EDGAR
Audited GAAP figures pulled from SEC filings · latest filing 2025-11-14. The audited primary-source spine — not financial advice.
Revenue — annual (GAAP)
Margins & balance sheet — FY’25
Bull & bear
MACOM is a picks-and-shovels compound-semiconductor supplier to the AI-datacenter optical buildout and a rearming defense complex, with a record backlog, expanding margins toward 60%, a net-cash balance sheet, and capital-light capacity growth — a rare high-margin III-V manufacturer positioned in exactly the right end markets.
- Data-center growth target raised to >60% for FY2026, with 800G/1.6T optical content ramping as hyperscalers scale AI networking
- Record 1.5:1 book-to-bill and highest bookings in company history validate the demand pull, supporting the ~15%+ sequential Q3 guide
- Adjusted gross margin already 58.5% and guided to 59-60%; operating leverage lifting adjusted operating margin to 27.8%
- Owns scarce III-V fabs (GaN, InP) and silicon photonics — differentiated supply Western defense and telecom customers want to friend-shore
- Diversified across Industrial & Defense (>20% growth target), Data Center (>60%), and Telecom (low-double-digit) — three legs, not one
- Net-cash balance sheet (~$325M) and low greenfield capex mean growth is largely self-funding with solid free cash flow
The fundamentals are strong but the stock discounts flawless AI-optical hypergrowth for years — a ~138x trailing P/E and ~23x EV/sales on a ~$1.07B-revenue chip company. Any AI-capex digestion, optical inventory unwind, or reversion toward peer semi multiples is a large, asymmetric downside, and MACOM is a small player competing with much larger optical/RF incumbents.
- Extreme valuation: ~138x trailing / ~52x forward P/E and ~23x EV/sales — priced for sustained 30%+ growth with no misstep
- Data-center demand is AI-capex- and hyperscaler-cycle-dependent and reaches MACOM indirectly through a few optical-module customers — high concentration and whip risk
- A 1.5:1 book-to-bill can signal double-ordering; optical component orders have historically unwound hard when the cycle turns
- Small scale versus ADI, Qorvo, Skyworks, Broadcom, Marvell, Coherent, Lumentum — less R&D and pricing leverage; hyperscalers/module makers could in-source
- Owning III-V fabs cuts both ways: high incremental margin on the way up, fixed-cost/utilization drag on the way down
- Telecom and industrial legs are cyclical and could offset data-center strength in a macro slowdown
What it is worth
Relative multiples cross-checked against growth (EV/sales, P/E vs. FY2026 growth trajectory); no formal DCF given cycle-dependent forward estimates.
AI-capex digestion or an optical inventory unwind cuts data-center growth sharply; the ~138x trailing / ~23x EV/sales multiple re-rates toward peer averages, producing large downside independent of still-solid absolute fundamentals.
Growth decelerates from hypergrowth toward the high-teens/20s as the optical cycle matures; multiple gradually de-rates toward premium-but-not-extreme semi levels, with EPS growth offsetting some multiple compression.
Sustained 30%+ revenue growth and ~60% adjusted gross margin justify a premium AI-optical multiple; continued beats-and-raises and backlog conversion keep the forward P/E compressing as earnings grow into the price.
At $322.26/share and ~$24.6B market cap (~$24.3B EV, net of ~$325M net cash) on ~$1.07B TTM revenue and $3.47 FY2025 adjusted EPS, MTSI trades at ~23x EV/sales, ~138x trailing GAAP P/E, and ~52x forward P/E. This is a hypergrowth/AI-optical multiple, well above analog/RF peer norms (ADI/Qorvo/Skyworks typically low-to-mid-20s forward P/E). The valuation is 'supported' only if the >60% data-center and 30%+ blended FY2026 growth persists and margins hold near 60%; it is not supported on peer-average multiples. This is context, not financial advice.
SWOT
Strengths
- Owned III-V fab platform (GaAs, GaN, InP) plus silicon photonics — a scarce, hard-to-replicate compound-semi manufacturing base with ~58-60% adjusted gross margin
- Three diversified end markets (Industrial & Defense, Data Center, Telecom) reduce single-market cyclicality
- Record 1.5:1 book-to-bill and accelerating data-center optical demand tied to the AI capex cycle
- Net-cash balance sheet (~$325M net cash) with capital-light incremental capacity expansion
- Long-cycle, sticky defense/aerospace design wins (radar, EW, missile) with high switching costs
Weaknesses
- Small absolute scale (~$1.07B revenue) versus analog/RF peers (ADI, Qorvo, Skyworks) — less pricing and R&D leverage
- High customer/end-demand concentration in a few hyperscaler-driven optical programs; content is indirect via module makers
- Owning specialty fabs adds fixed-cost/utilization risk if the optical cycle rolls over
- Rich valuation leaves no room for execution slips — a growth disappointment is amplified in the multiple
- Telecom has historically been the volatile, lower-margin leg
Opportunities
- 1.6T/3.2T optical and co-packaged optics roadmap deepening dollar content per AI switch/optical module
- GaN-on-SiC and GaN-4 expansion into 5G/6G base stations and defense power amplifiers
- Defense budget tailwinds for RF/microwave content in radar, EW, and missile systems
- Silicon-photonics laser/EML portfolio expansion to capture more of the transceiver BOM
- Share gains as Western/'friend-shored' III-V supply is favored for defense and telecom
Threats
- AI-capex digestion or optical over-ordering unwind — the data-center leg could decelerate sharply (inventory whip)
- Competition from larger optical/RF players (Coherent, Lumentum, Broadcom, Marvell, Qorvo) and in-housing by hyperscalers/module makers
- Cyclicality in telecom and industrial base if macro weakens
- Concentration of optical demand in a handful of programs/customers
- Valuation de-rating risk if growth normalizes toward peer semi multiples
Moats, dependencies & bottlenecks
Moats
InP, GaAs) + silicon photonics Building and yielding III-V fabs is capital- and know-how-intensive; few Western merchant suppliers exist, and defense/telecom customers value the domestic specialty supply.
RF/microwave content designed into multi-decade radar/EW/missile programs; qualification barriers and switching costs are steep.
VCSEL, coherent, photodetectors, lasers) Moderate-Strong Broad optical portfolio raises dollar content per module, but faces well-capitalized competition (Coherent, Lumentum, Broadcom).
~58-60% adjusted gross margin from vertical integration, but subscale versus large analog/RF peers.
Dependencies
Data-center leg (>60% FY26 growth target) is the swing factor; a capex pause or optical inventory correction would hit growth and the multiple hardest.
MACOM's optical content reaches hyperscalers indirectly through module makers (e.g. Coherent, Lumentum, InnoLight/Eoptolink) — concentration and design-win dependency.
Industrial & Defense (>20% growth target) rides procurement of radar, EW, and missile systems.
InP, GaAs wafers) Fab expansion depends on MOCVD reactors (e.g. Aixtron/Veeco) and III-V substrate availability.
Some photonics/silicon content is foundry-sourced to complement in-house III-V fabs.
Advantages
- One of few Western merchant III-V (GaN/InP) + silicon-photonics manufacturers — friend-shoring beneficiary
- High adjusted gross margin (~58-60%) with capital-light incremental capacity growth
- Diversified across three secularly growing end markets (AI optical, defense RF, telecom)
- Net-cash balance sheet (~$325M) funding growth largely internally with solid free cash flow
- Record backlog / 1.5:1 book-to-bill providing near-term revenue visibility
Weaknesses
- Subscale (~$1.07B revenue) versus analog/RF/optical incumbents
- Data-center growth is concentrated and AI-capex-cycle-dependent (whip risk)
- Owning specialty fabs adds fixed-cost/utilization downside in a downturn
- Valuation leaves no margin for execution error
- Telecom leg historically volatile and lower-margin
Bottlenecks
- III-V fab capacity and yield ramp pace (GaN, InP) as data-center demand accelerates
- MOCVD reactor and specialty-substrate lead times constraining how fast capacity expands
- Dependence on a small number of optical-module customers/programs for the data-center ramp
- Skilled compound-semi process/packaging engineering talent
Top signals & trends
Top signals
Strong near-term demand pull; watch for whether it reflects genuine demand vs. double-ordering.
Management confidence in the AI-optical ramp; also raises the bar for what's already priced in.
Accelerating growth and margin expansion into the print.
High-multiple stock trading on sentiment/rotation; valuation sensitivity is high.
Priced for years of hypergrowth; de-rating risk if growth normalizes.
Trends
Primary demand driver; more photonic/III-V content per switch and optical module.
GaN-4 process and GaN-on-SiC expansion.
Radar, missile, electronic-warfare demand supporting >20% I&D growth target.
Western III-V supply favored for defense and telecom.
History of sharp corrections when the optical cycle turns — the key risk to the data-center leg.
Ecosystem & competitor graph
Suppliers feed the company; customers pull from it. Line thickness shows the strength of each tie (supply-chain dependency, customer earnings contribution). Hover to isolate a tie.
MOCVD/epitaxy reactor supplier for III-V fab expansion (foreign-listed on Deutsche Boerse; context only).
MOCVD/deposition and process equipment for compound-semi fabs.
Potential SiC substrate/GaN-on-SiC material source (also a competitor).
III-V substrate & silicon-photonics foundry partners InP/GaAs wafer suppliers and complementary silicon-photonics foundry capacity.
Optical transceiver/module maker consuming photodetectors, lasers, drivers (also competitor).
Datacom/telecom optical module maker channel to hyperscalers (also competitor).
Amazon/AWS (AMZN), Microsoft (MSFT), Google/Alphabet (GOOGL), Meta (META) drive AI-optical demand consumed through module makers.
Lockheed Martin (LMT), RTX (RTX), Northrop Grumman (NOC) — RF/microwave content in radar/EW/missile programs.
Ericsson (ERIC), Nokia (NOK) — base-station GaN and optical/telecom components.
Much larger analog/RF/microwave incumbent overlapping in RF, defense, and high-performance analog.
RF/GaN and defense/aerospace RF competitor.
RF front-end and infrastructure competitor; more handset-weighted.
Optical/photonics and lasers — both a large customer (module maker) and a competitor in optical components.
Datacom/telecom lasers and optical components for AI optical — competitor and channel.
Optical/PHY and datacenter connectivity; scale competitor in AI networking silicon and optics.
Optical DSP/PHY and datacenter interconnect; adjacent competition in the AI-optical stack.
Optical/analog and datacenter connectivity (TIAs, drivers).
Merchant SiC/GaN materials and RF; competes on compound-semi supply.
RF power (GaN/LDMOS) for base stations and defense/industrial.