MACOM Technology MTSI is a stock that has risen in confidence since I started a position about a month and half ago. They are a photonics semiconductor supplier that uses specialized silicon processes. The company has expertise in compound semiconductors working with gallium and indium phosphide. Their newest products are designed for next generation architectures like near packaged optics. Additionally, the company has extensive product offerings in free space optics FSO, or photonics which communicate in space.
Top end markets for the business are industrial, aerospace & defense, data center and telecom. The CEO Stephen Daly and CFO John Kober have both been at the role for 7+ years after a 2019 restructuring.
The company owns three US fabs and one international fab, with locations in Massachusetts, North Carolina, Michigan and France. MACOM is expanding production capacity in the Massachusetts and North Carolina fabs. Their fabs have the “Trusted Foundry” status from the US Department of Defense, allowing for fast tracked sales in that end market. The company has strong customer diversification with over 20 customers having greater than 10M revenue. Additionally, the top 10 customers make up less than 40% of revenue.
The strong revenue numbers and exceptional guidance the company gave has impressed me. The current quarter was 342M revenue growing +36% yoy, and +18% qoq. However next quarter the company is guiding for 415 - 425M of revenue which is growing by +61% yoy and +23% qoq at the midpoint. It is worth mentioning the company has never posted a revenue growth number above 50% yoy, which is why I see the guidance as an inflection point for the business.
Financials over the last year show the type of acceleration I am looking for,
Revenue: 252M → 261 → 272 → 289 → 342 → (425M projected)
Corresponding yoy revenue growth rates: 32% → 30% → 25% → 23% → 36% → (63% projected at top end)
EBITDA: 54M → 57 → 59 → 67 → 96
Net income: 37M → 45 → 49 → 46 → 101
Gross margin: 55.3% → 54.5% → 55.9% → 56.9% → 58.3%
Additionally standout financials include adjusted operating income at a record 108M growing +34% qoq and +70% yoy. Adjusted net income in the quarter grew +30% qoq.
Regarding pricing and margins, the management has mentioned they can pass most material price increases onto the customer. The data center market makes up 29% of sales currently, but grew 40% qoq. With their defense customer base they said it is “large and very broad”. The company is also working in the low earth orbit LEO satellite space. Their products are building next generation satellite optical communications. Management has also talked about how they are a strategic supplier to hyperscalers. They’ve talked about a “game changer” opportunity in drones and anti-drone tech. More recently they are working on 3.2T optical tech, and RF over Fiber RFoF which is radio frequency signals over optical fiber.
Management has projected strong data center growth for fiscal 2027 as their upcoming earnings is for fiscal Q4 2026. They said they are in a “very strong position” for the next fiscal year. However, analysts have forecast little revenue growth. They expect MACOM to report 420M of revenue coming up, but then see the following quarters going to 431M → 441 → 453 → 467. Based on the management commentary I would expect the revenue numbers to land much higher than these estimates.
The stock price is well down from an ATH in June of $418 per share. The current share price is around $250 with a market cap of 19B. The market has historically given this name a high valuation and I never really understood why. However, I view the prospects for MACOM being the strongest they have ever been. The company reports earnings on November 5th in the pre-market. I’m interested to see if the growth is continuing to accelerate like the management indicated on the last earnings report.