Fiscal Q4 2026 earnings call, November 5, 2026: record backlog, a 40% operating margin guide, and a more confident read on lasers and near-packaged optics
MACOM Technology Solutions reported fiscal fourth-quarter revenue of $424.8 million, up 24.1% sequentially and 62.7% year over year. Adjusted EPS was $2.09. The more consequential news came in the outlook. CEO Stephen Daly said the company's base case is now roughly 80% year-over-year data center growth in fiscal 2027, above the 74% achieved in fiscal 2026. He also said the company is "looking at that $2 billion target and trying to scratch our way there." That is a notable step up from a first-quarter guide of $450 million to $460 million, which annualizes to about $1.8 billion.
FY27 outlook: $2 billion is a stretch target, and the back half does the work
Management does not give full-year guidance, but its framing was more constructive than the numbers alone suggest. Daly said the company enters the year with record backlog and a Q4 book-to-bill of 1.4:1, after a full-year book-to-bill of 1.5:1 and the highest bookings year in company history. Orders were strong in all three end markets, with data center outperforming. Orders booked and shipped within the quarter were 7% of revenue, which Daly attributed to extended manufacturing lead times for certain products.
Daly addressed Stifel's observation that the segment commentary points toward $2 billion. Annualizing the midpoint of the Q1 guide gives about $1.8 billion, or 37% growth, and he said "we would expect to do better than that." He expects the second half of fiscal 2027 to be stronger than the first, citing new capacity coming online, programs ramping into production and new programs starting in all three markets. He was also careful to flag that it is early in the year and that there is "risk associated with execution and, of course, market risk."
Segment targets back up that framing. Industrial and Defense is aimed at growth above 30%, versus roughly 28% in fiscal 2026, and telecom at low double-digit growth, with a goal of exceeding $300 million. For the first quarter, MACOM guided data center up about 15% sequentially, I&D up in the single digits and telecom flat to slightly down. Telecom starts the year soft because of weakness in PON and some broadband business, and new 5G sockets are not expected to contribute until later in the year.
Margins: 40% operating margin and a gross margin path that continues to climb
Fourth-quarter adjusted gross margin was 61.3%, up 160 basis points sequentially. Adjusted operating margin reached 38.2%, and the Q1 guide implies about 40% at the midpoint, with CFO Jack Kober saying the company expects to exceed 40% as fiscal 2027 progresses. Q1 gross margin is guided to 62% to 63%. Kober attributed the gains to higher volume, better factory utilization, new products carrying higher margins and yield improvements. He said that the 100-plus basis point quarterly gains of 2026 are unlikely to persist, and that 25 to 50 basis points per quarter "feels appropriate" for fiscal 2027.
Daly was more expansive on the longer term, saying new products give MACOM "a path to having gross margins in the mid-60s in the not-too-distant future," up from the mid-50s a few years ago. On pricing, he said raw materials, energy and labor costs are all rising but have been managed well, and that MACOM studies whether cost increases can be passed through to customers. Adjusted tax rate rises from 3% to about 6% in fiscal 2027 as deferred tax assets are used up, a modest headwind to EPS growth.
Indium phosphide: a facet breakthrough puts CW lasers on a 2028 timeline
The most substantive technical disclosure concerned continuous-wave lasers, which the company is targeting for a 2028 entry into what Daly called a multibillion-dollar market. MACOM says its laser already meets customer optical performance requirements, and the work over the past two to three quarters has focused on reliability, which Daly said "is won or lost on the quality of the facet." The facet is the hottest point in the laser. MACOM forms it with ion beam technology in its own fab, which can leave the surface rougher than desired.
Recent process improvements have changed that. Daly said the facet has gone from looking "like it was cut by a chainsaw" to looking "like it was cut by a sushi knife," and he expects the improvement to translate into a far more reliable part. It also expands the addressable range from 75-milliwatt to 100-milliwatt power levels, with development under way for higher powers. MACOM intends to be a merchant supplier and one of the few U.S.-based manufacturers of such lasers. Daly was careful on this point: "We're not declaring success today."
Near-term indium phosphide demand is already tight. Daly said MACOM is seeing strong demand for 25G DFB lasers as other manufacturers exit that business, which is lifting 100G-per-lane volumes. The company currently makes 200G photodetectors and expects to produce 400G photodetectors in volume. At CIOE and ECOC it also introduced a full front-end chipset for 3.2T optical modules, comprising two 400G-per-lane quad linear TIAs, eight 400G photodetectors and two modulator drivers.
Near-packaged optics: in the fight, but not playing in fully integrated CMOS
Management described near-packaged optics as a multibillion-dollar opportunity and said it is sampling and developing products with multiple hyperscalers and their supply chains. Daly would not discuss specific wins or timing, saying the company keeps "our cards close to the chest." He said early NPO revenue could land in fiscal 2027 or fiscal 2028.
The competitive position is worth noting. Barclays pointed to rivals such as Astera Labs offering more integrated TIA and driver portfolios. Daly acknowledged those companies are and will remain competitors, and conceded that highly integrated, CMOS-based solutions are "not an area we play in." MACOM instead offers high-performance SiGe single-function and multifunction chips. He argued that this suits NPO's need for smaller footprints, more lanes and lower power, and that hyperscalers will split share across multiple vendors regardless of form factor. Daly declined to endorse a competitor's forecast of a 65% interconnect revenue CAGR through 2030, though he said scale-up volumes "look significant, larger than what we've seen in our past."
On copper, Daly said the refreshed linear equalizer line is gaining traction, with a hyperscaler and cable companies indicating the 200G parts meet system requirements. He expects revenue mostly in the back half of fiscal 2027 and said MACOM has "recovered our position in the market." Other contributors to data center growth include 200G-per-lane drivers and TIAs, LPO, coherent-lite and PCIe, where the company has been demonstrating a solution for six months.
Capacity: fabs are full, supply agreements stay private, and CHIPS funding is 1 to 2 quarters away
Fiscal 2027 CapEx is guided to $100 million to $110 million, up from $64.4 million in fiscal 2026, with roughly 60% going into fabs. The Massachusetts expansion is a two-phase program, with phase 1 about two-thirds complete and phase 2, aimed mainly at CW lasers, expected to start around mid-2027 depending on laser performance. The RTP fab is producing more wafers than ever, led by defense, and the French fab is migrating from 3-inch to 6-inch wafers. Daly stressed that all expansion will happen within existing buildings and that the company is not building new ones. He joked that the cafeteria may go before office space does, then clarified that "we'll leave the cafeteria alone."
MACOM also expects to sign a definitive funding agreement with the CHIPS program office in "1 or 2 quarters," following a preliminary memorandum signed in January 2025 covering its Lowell and RTP facilities. Daly said the funding would be significant.
On external SiGe supply, Daly did not offer the long-term agreements that several peers have publicly announced with GlobalFoundries, ST, Tower and TSMC. "That is not our style," he said. He did note that SiGe foundries are now seeking firm commitments rather than target-based ones, and that MACOM "won't be shy" about signing up to secure supply. He also said some of the CapEx supports back-end assembly and test, which is largely offshore, as volumes scale by what he described as orders of magnitude.
Defense and LEO: broad design wins, with sticky content
I&D revenue of $164.6 million rose 23% sequentially and 27.8% for the year. Daly cited recent development awards from both large primes and newer "neo primes" across microwave and optical electronic warfare, missile and drone electronics, and tactical radios, along with follow-on production orders for shipborne radar and air-to-air missile hardware. In France, roughly half of fab revenue is foundry work for European defense contractors. MACOM has also struck a special arrangement with a LiDAR company on indium phosphide work that could become meaningful volume.
In telecom, LEO satellite is the growth driver. One customer won a new constellation contract that MACOM expects to be worth about $20 million annually beginning in early 2028. Daly described MACOM as the only U.S. producer of the analog linearizers used with V-band traveling wave tube amplifiers in ground stations, and said it has won satellite-based linearizer business as well. In response to a question on a potential Starlink terrestrial network, he said MACOM is the only domestic 5G power amplifier supplier, which could matter to any operator wanting U.S. content.
Capital allocation: cash is being hoarded for a $5 billion ambition
Cash and short-term investments were $792.4 million against $340.7 million of convertible notes due December 2029, for net cash of $451.7 million. Operating cash flow was $155.5 million in the quarter and $357 million for the year. Daly said there are no plans for buybacks or a dividend. He argued that reaching $5 billion of revenue by 2030 will require new technologies, more engineers and entry into new markets, and that "more cash is better" if conditions turn. Fiscal 2026 revenue mix was 40% I&D, 38% data center and about 20% telecom, a diversification he said management values. M&A remains an option, though Daly described the approach as selective and disciplined.
R&D is rising to roughly $300 million in fiscal 2027 from about $130 million in 2023. Daly said MACOM has set up a dedicated group applying AI to chip design and has struck a deal with a CAD vendor for near-unlimited simulation capacity that would otherwise have cost tens of millions of dollars. He cautioned that "using AI is not free" and described the effort as early days.
On demand durability, BMO asked about 2028 data center visibility after the midterm elections. Daly offered no customer-specific data, saying only that he does not expect the results "to derail a lot of the work that will be done over the next 5 years inside this industry." That is an opinion rather than evidence, and 2028 visibility remains the open question for data center bulls.