MAXLINEAR, INC (MXL)·Q1 2025 Earnings Summary

Executive Summary

• Q1 revenue of $95.9M grew 4% q/q and 1% y/y, with GAAP gross margin expanding to 56.1% and non-GAAP gross margin steady at 59.1%; non-GAAP EPS was -$0.05, essentially in line with consensus, while revenue modestly beat Street expectations . Q2 guidance calls for $95–$115M revenue and all end-markets up sequentially .
• Management expects a return to non-GAAP profitability and positive free cash flow in Q2, citing stronger bookings and backlog, and traction in optical interconnect, PON, Wi-Fi and Ethernet .
• Optical DSP momentum continued: Keystone (800G/400G) qualifications broadened; Rushmore 1.6T (200G/lane) DSP was demonstrated at OFC; management reiterated 2025 optical revenue of ~$60–$70M with greater growth into 2026 .
• Near-term catalysts: confirmation of Q2 non-GAAP profitability/positive FCF, broad-based sequential growth across segments, and sustained optical/PON design-win ramp; key watch item is tariff policy uncertainty potentially impacting customer demand (not direct chip tariffs) .

What Went Well and What Went Wrong

• What Went Well

  • “We exceeded the midpoint of our guidance with $95.9 million in revenue, non-GAAP gross margin of 59.1% and a meaningful reduction in operating expenses… we not only expect to be profitable on a non-GAAP basis in Q2, but also… generate positive free cash flow in Q2.”
  • Optical interconnect trajectory: additional Keystone demo activity and Rushmore 1.6T DSP live demonstration; reiterated 2025 optical DSP revenue of ~$60–$70M, aligning with expected 800G ramps in 2H25 and broader revenue in 2026 .
  • Broadband recovery outperformed seasonal norms; bookings strengthened, and a second major Tier-1 North American PON gateway platform is set to begin ramping late 2025 (with more material impact in 2026) .

• What Went Wrong

  • GAAP profitability remains negative: GAAP diluted LPS of -$0.58 (vs -$0.68 in Q4), with GAAP operating loss at 48% of revenue despite improved margins; operating cash outflow of $11.4M in Q1 .
  • Industrial/multimarket softness persisted, tied to China end-demand; management expects improvement in Q2 but volatility remains a concern .
  • Tariff overhang creates customer planning uncertainty; while semis are not directly tariffed and CPE box manufacturing has largely shifted out of China, management is monitoring downstream demand risks and working with customers/ODMs .

Financial Results

• Quarterly financials vs prior periods

• Q1 2025 vs S&P Global consensus

• Segment revenue

• KPIs and balance sheet

Non-GAAP adjustments: total non-GAAP operating adjustments were $44.4M in Q1 (stock-based compensation, performance-based equity, amortization of intangibles, acquisition/integration costs, and restructuring), reducing GAAP operating loss from -$46.1M to a non-GAAP operating loss of -$1.7M .

Guidance Changes

Note: Management also reaffirmed that all end-markets (infrastructure, broadband, connectivity, industrial MM) are expected up q/q in Q2 .

Earnings Call Themes & Trends

Management Commentary

• “We exceeded the midpoint of our guidance with $95.9 million in revenue… We not only expect to be profitable on a non-GAAP basis in Q2, but also… generate positive free cash flow in Q2.” — Kishore Seendripu, CEO
• “We anticipate additional qualification and rollout for 800 gigabit and 1.6 terabit data center applications throughout ’25 with exciting revenue growth in 2026.” — CEO
• “Looking at Q2 by end market, we expect all end markets… to be up in the quarter.” — CFO
• On PON: “Begin the ramp… with a second major Tier 1 North American carrier later this year… drive meaningful growth for our fiber revenues in 2026.” — CEO
• On tariffs: “Semiconductors are not included here, so we’re not seeing direct tariffs… most [CPE boxes] have moved out of China… watching how tariffs transfer to the consumer and impact demand.” — CFO

Q&A Highlights

• Tariffs/supply chain: Minimal direct impact to chips; CPE manufacturing largely outside China now; working with customers amid evolving guidelines; risk is potential demand elasticity rather than supply .
• Optical DSP ramp: Company reiterated ~$60–$70M for 2025; expects 800G ramps mostly in 2H; customer concentration typical early, broadening over time (2/3 of revenue from 2–3 module makers initially) .
• PON outlook: Second Tier‑1 NA win; CEO indicated current PON revenue “~$50M” and potential to “double” next year as ramps begin (late 2025, more in 2026) .
• Wireless: Expect to double overall wireless exposure vs last year; Sierra O-RAN platform and E‑band backhaul drive content and units .
• Working capital: DSO ~94 days; inventory turns ~1.3; inventories down ~$4.3M q/q; aiming for positive operating cash flow from Q2 and ongoing inventory normalization .

Estimates Context

• Q1 2025: Revenue modestly beat Street ($95.933M vs $94.927M*), EPS (non-GAAP -$0.05) was essentially in line with consensus (-$0.049*) .
• Q2 2025: Revenue guidance midpoint ($105M) aligns with consensus ($104.935M*); management guided to non-GAAP profitability and positive FCF but did not provide EPS guidance (consensus EPS ~+$0.018*) .
• Implication: Modest upward estimate bias possible for broadband and wireless segments given “all segments up” guide, while tariff uncertainty likely caps aggressive revisions until visibility improves .

Key Takeaways for Investors

• Near-term inflection: Management targets non-GAAP profitability and positive FCF in Q2 with all segments up q/q, a constructive setup for sequential improvement through 2H25 .
• Optical DSP remains core growth driver: ~$60–$70M revenue in 2025 reiterated; multiple Keystone qualifications plus Rushmore 1.6T demo support a larger 2026 ramp; monitor hyperscaler 800G deployment timing .
• Broadband recovery exceeded seasonality; PON/Wi‑Fi7 Tier‑1 NA gateway platform ramps late 2025 and into 2026—management sees potential to double PON off ~$50M base next year if ramps proceed as planned .
• Wireless exposure poised to double vs last year on Sierra macro RU and E‑band backhaul, adding a second growth vector beyond optical and PON .
• Execution on OpEx reductions continues; non-GAAP OpEx stepped down to $58.4M with further improvement targeted in 2H25, supporting operating leverage as revenue recovers .
• Watch tariff policy path: While chips aren’t directly tariffed and CPE assembly largely moved out of China, downstream demand elasticity remains a risk; management is engaging customers/ODMs to navigate .
• Trading setup: Confirmation of Q2 non-GAAP profit/FCF and any upside color on optical bookings/800G timing or PON Tier‑1 ramp cadence would be positive stock catalysts; tariff headlines are the principal overhang.

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Additional press releases of note in Q1: MaxLinear unveiled Rushmore, a low-power 1.6T (200G/lane) PAM4 DSP optimized for next-gen 1.6T optics and ACCs; live demos at OFC highlighted <25W module enablement and co-optimized solutions with partners (e.g., Nokia, OpenLight) .

Footnote: * Values retrieved from S&P Global.