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MT

MACOM Technology Solutions Holdings, Inc. (MTSI)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 FY25 delivered strong topline and profitability: revenue $235.9M (+30.2% y/y, +8.1% q/q) and adjusted EPS $0.85; GAAP gross margin 55.2% and adjusted margin 57.5% .
  • Results beat Wall Street: revenue beat by ~$5.8M* ($235.9M actual vs $230.0M consensus*) and adjusted EPS beat by ~$0.01* ($0.85 vs $0.8408*), supported by record bookings and end-market strength (Data Center and Industrial & Defense at record levels; book-to-bill 1.1) . Values retrieved from S&P Global.
  • Q3 FY25 guidance implies continued sequential growth: revenue $246–$254M, adjusted gross margin 56.5–58.5%, adjusted EPS $0.87–$0.91 (tax rate 3%; 76.5M diluted shares) .
  • Stock narrative catalysts: accelerating Data Center demand (100G-per-lane LPO ecosystem maturity; 800G and 1.6T ramps), SATCOM design wins and large program progress, and ongoing Wolfspeed RF fab transition momentum (potential conveyance before Dec-2025) .

What Went Well and What Went Wrong

What Went Well

  • Record revenues and bookings: “Industrial & Defense was $98.5M; Data Center $72.2M; Telecom $65.2M… I&D and Data Center quarterly revenues achieved record levels… Q2 book-to-bill was 1.1:1; fifth consecutive quarter of strong bookings; backlog at a record level.”
  • Technology leadership and product momentum: CEO highlighted Opto-Amp launch for free-space optical links and 17 demos at OFC showcasing LPO ecosystem maturity at 100G/lane; 200G photodetector stacking onto 800G TIA for 800G/1.6T applications .
  • Operational execution: Adjusted operating income $59.8M (25.4% margin), adjusted gross margin 57.5%, adjusted net interest income up sequentially; cash & ST investments $681.5M; net cash vs convertibles >$182M .

What Went Wrong

  • Lowell fab underutilization persisted, constraining gross margin: management sees mid-57% gross margin near-term and needs fuller Lowell load to return >60% longer-term .
  • Industrial demand “unremarkable” and weak in broader industrial markets; cable infrastructure still only slowly ticking up, though improving signs appear .
  • Wolfspeed RF fab still dilutive to gross margin pre-conveyance: goal remains neutral or positive upon transfer; gap remains, requiring yield/throughput improvements .

Financial Results

MetricQ2 FY24Q1 FY25Q2 FY25
Revenue ($USD Millions)$181.2 $218.1 $235.9
Gross Margin (%)52.5% 53.7% 55.2%
Operating Income ($USD Millions)$15.4 $17.5 $34.9
Operating Margin (%)8.5% 8.0% 14.8%
Net Income ($USD Millions) (GAAP)$15.0 $(167.5) (includes $193.1M extinguishment loss) $31.7
Diluted EPS (GAAP) ($)$0.20 $(2.30) $0.42
Adjusted Gross Margin (%)57.1% 57.5% 57.5%
Adjusted Operating Income ($USD Millions)$40.2 $55.4 $59.8
Adjusted Operating Margin (%)22.2% 25.4% 25.4%
Adjusted EPS ($)$0.59 $0.79 $0.85
Segment (End Market)Q2 FY25 Revenue ($USD Millions)Seq. Growth vs Q1 FY25
Industrial & Defense$98.5 +1%
Data Center$72.2 +11%
Telecom$65.2 +18%
KPIsQ2 FY25
Book-to-bill1.1x; fifth consecutive quarter ≥1; record backlog
Turns (orders shipped in-quarter)~20% of revenue
Cash & Short-term Investments$681.5M
Net cash vs convertible notes>$182M
Accounts Receivable; DSO$131.4M; 51 days
Inventory; Turns$209.3M; 1.9x
Cash Flow from Operations~$38.7M (sequentially down on WC); tracking >$210M FY25 CFO
Capex$8.2M; FY25 ~ $30M expected

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)Q3 FY25N/A$246–$254 Initiated
Adjusted Gross Margin (%)Q3 FY25N/A56.5–58.5 Initiated
Adjusted EPS ($)Q3 FY25N/A$0.87–$0.91 (3% tax rate; 76.5M diluted shares) Initiated
Revenue ($USD Millions)Q2 FY25$227–$233 Actual $235.9 Beat vs guide
Adjusted Gross Margin (%)Q2 FY2557–58 Actual 57.5 In-line
Adjusted EPS ($)Q2 FY25$0.82–$0.86 Actual $0.85 In-line/high end
Adjusted Tax RateFY253% 3% maintained Maintained
Capex ($USD Millions)FY25~ $30 ~ $30 Maintained

Earnings Call Themes & Trends

TopicQ4 FY24 (Prev-2)Q1 FY25 (Prev-1)Q2 FY25 (Current)Trend
Data Center optical ramps (800G→1.6T)Strong adjusted EPS $0.73; pipeline building 800G strength; early 1.6T; ACC interest; guide Q2 growth led by DC (+~10%) Record DC revenue; 200G PD stacking; 1.6T ramps; LPO standard ratified; mid-40% y/y DC growth expected Improving; broadening customer base
LPO (linear pluggable optics) maturityN/ALate CY25/CY26 contribution anticipated Full 100G/lane ecosystem demo at OFC; use cases server-to-switch short reach Accelerating validation
SATCOM opportunityN/ADoD satellite programs; $55M program development phase; revenues H2 FY25/FY26 Design wins; Opto-Amp launch; SATCOM driving Telecom growth; timeline ~6 months to production ramp Expanding SAM; execution progressing
Wolfspeed RF fab conveyanceN/ACHIPS plan and RF capacity expansion (NC) On/ahead of schedule; possible conveyance before Dec-2025; capacity +30% plan; margins still below target pre-transfer Operational progress; margin work ongoing
Lowell fab utilization/marginsN/AUnderload due to industrial/cable softness; mid-57% GM expected FY25 Continued underload; industrial unremarkable; GM guide midpoint ~57.5% Stabilizing; recovery needs mix/load
Tariffs/macroN/AN/ANo noticeable impact to date; >95% direct sales; US-centric footprint Manageable
European presence (MESC)N/AFrance 2030 MMIC award; EU foundry ambition MESC adoption increasing; 3”→6” transfers; EU III-V foundry goals Strengthening regional platform

Management Commentary

  • “Exceptional teamwork across the entire MACOM organization enabled our solid Q2 performance.” — Stephen G. Daly, CEO .
  • “Our I&D and Data Center quarterly revenues achieved record levels… Q2 book-to-bill was 1.1:1… backlog is at a record level.” — CEO prepared remarks .
  • “We introduced our new Opto-Amp product line… capable of producing up to 40 watts of optical power… leverages… optical amplification and RF over fiber photonics… advanced materials like erbium and ytterbium.” — CEO .
  • Strategy pillars: “highest power” (GaN4 development for cellular infrastructure), “highest frequency” (sub-100nm GaN with AFRL CRADA, new MBE reactor), and “high-performance connectivity” (800G/1.6T/3.2T PAM4; NRZ/PAM4/coherent; Ethernet, InfiniBand, PCIe) — CEO .

Q&A Highlights

  • Data Center growth sustainability: mid-40% y/y for FY25; volatility persists; LPO adoption tailwind post-MSA specification; ACC and optical ramps across 800G/1.6T, with no inventory overhang observed (expedites across platforms) .
  • Wolfspeed RF fab margin path: still a gap pre-conveyance; target neutral/positive gross margin post-transfer; capacity expansion initiatives underway .
  • Telecom drivers: SATCOM strength; cable inventories largely burned down; early PON sequential growth; metro long-haul coherent (1.2T modules) building backlog .
  • Gross margin outlook: mid-57% through Q3; Lowell underutilization from industrial softness; mix effects from RF Power growth .
  • OpEx trajectory: increased with R&D/IT investments; expected leveling into Q4 and FY26 .

Estimates Context

MetricQ4 FY24Q1 FY25Q2 FY25
Revenue Consensus Mean ($USD Millions)200.5*214.9*230.0*
Actual Revenue ($USD Millions)$200.7 $218.1 $235.9
Surprise ($USD Millions)+$0.2*+$3.2*+$5.8*
EPS Consensus Mean ($) (Adjusted/Primary)$0.7327*$0.7844*$0.8408*
Actual Adjusted EPS ($)$0.73 $0.79 $0.85
Surprise ($)~$0.00*+$0.01*+$0.01*
# Revenue Estimates——13*
# EPS Estimates——14*

Values retrieved from S&P Global.

Key Takeaways for Investors

  • Q2 beat on revenue and adjusted EPS versus consensus, supported by record bookings and end-market breadth; trend supports continued sequential growth into Q3 guidance (Values retrieved from S&P Global).
  • Data Center remains the growth engine, with 800G transitioning to 1.6T and LPO ecosystem validation; management cautions on volatility but sees sustained demand and no inventory overhang .
  • Telecom momentum is improving, led by SATCOM and metro long-haul coherent; early signs of recovery in cable and PON .
  • Gross margin near-term anchored in mid-57% given Lowell fab underload; upside as Lowell load/mix improves and Wolfspeed fab transfer enables margin gains post-conveyance .
  • Strategic initiatives (GaN4, MBE reactor, MESC expansion, Opto-Amp, 200G PD+TIA stacking) reinforce competitive edge and broaden SAM across defense, SATCOM, and high-speed connectivity .
  • Balance sheet strength (cash & ST investments $681.5M; net cash >$182M) and disciplined OpEx support sustained cash generation; FY25 CFO tracking >$210M, capex ~ $30M .
  • Near-term trading: positive setup into Q3 with guide implying sequential growth; watch for DC order cadence (800G→1.6T), SATCOM program milestones, and any updates on RF fab conveyance timing .