Q4 2025 MACOM Technology Solutions Holdings Inc Earnings Call
Welcome to make Sports fiscal quarter 2025 conference call.
This call is being recorded today. Thursday, November 6th 2025. At this time. All participants are in listen-only mode. I will not send a call over to Mr. Auntie, May Come spice pressing up, corporate development and investigations Mr. Fante please, go ahead.
Thank you, Olivia. Good morning, and Welcome to our call today to discuss, make comm's fourth quarter and year-end Financial results for fiscal year 2025.
I would like to remind everyone that our discussion today will contain forward-looking statements which are subject to certain risks and uncertainties as defined in the safe harbor for forward-looking statements. Contained in the private Securities, litigation Reform, Act of 1995
Actual results May differ materially from those discussed today for a more detailed discussion of the risks and uncertainties that could result in those differences, we refer you to make comms filings with the SEC.
Management statements, during this call will also include discussion of certain adjusted non-death financial information. A Reconciliation of gaap to adjusted non-gaap results is provided in the company's press release and related Form 8K, which was filed with the S&P today.
With that, I'll turn over the call to Steve Daly. President and CEO of M.
Thank you and good morning.
I will begin today's call with the general company. Update after that. Jack cobber, our Chief Financial Officer will review our Q4 in full year results for fiscal 2025.
I will provide revenue and earnings guidance for the first quarter of fiscal 2026.
And then we will be happy to take some questions.
Revenue for the fourth quarter of fiscal 2025 was 261.2 million and adjusted EPS was 94 cents per diluted share.
For the full year FY. 25 Revenue was 967 million more than a 32% increase year-over-year and EPS was 3.47 more than a 35% increase year-over-year.
We generated 193 million in free cash flow and we finished the year with approximately 786 million in cash in short-term Investments on our balance sheet.
Q4 book to Bill ratio was just over 1.0 to 1.
And our turns business orders booked and shipped within the quarter was 14.5% of total revenue.
For the full fiscal year, 2025 are booked to bill was 1.1 to 1 and our current backlog remains at a record level.
Turning to our recent booking Trends, and then markets.
Q4 Revenue performance by End Market was, as expected with industrial and defense at 115.6 million. Telecom at 66 million and data center at 7. 9. 6, 9
For the quarter, IND was up approximately 7%. Sequentially data center was up. Approximately 5% sequentially in Telecom, was slightly down sequentially.
Both I and d and data center revenues were annual and quarterly records.
A few years ago we set a goal to achieve 1 billion dollars in annual revenues and I'm pleased to report that with our q1 26 guidance. We expect to achieve this goal based on trailing 12-month performance.
Congratulations to all our employees as we near this Milestone and more importantly for building Upon Our strong Foundation to enable continued growth and improved profitability.
New products are the lifeblood of future growth.
In fy2, we launched over 200 new products, which was a record.
In addition, we executed numerous Custom Design projects across our 3 core markets.
our ability to provide competitive new products in a timely manner, ultimately drives our financial performance,
Metrics show our new product introductions or products Less Than 3 years old. As a group have outpaced m's overall, Revenue growth and are a creative to make homes gross margins.
We continue to focus on technology and product differentiation across our portfolio, which often leads us to the development of IC products that operate at the highest frequency highest power or highest data rates.
The secular growth Trends across, our end markets coupled with our expertise in ic design, and Manufacturing are driving an increase, number of Revenue opportunities.
To capitalize on this, we have been increasing R&D. Spending hiring more engineers and acquiring companies that have specialized complimentary design capabilities.
In keeping with this trend over the next couple of months, we plan to open 2 additional IC design centers.
1 in Southern California and the other in Central Europe where we were able to secure specialized talent and teams.
Hiring best-in-class Engineers with complimentary skills will help enable us to increase our Sam and execute on the growth opportunities ahead.
I'll note that we prioritize recruiting designers with advanced silicon design expertise and experience.
On Tuesday, we announced an agreement with hrl or Hughes Research Laboratories to transfer their 40. Nanometer Gan on silicon carbide, process known as t3l to make home.
As part of this agreement may come will be an exclusive licensee with rights to manufacture the t3l process.
t3l is an industry-leading high-frequency Gan on silicon carbide process and it was developed with DARPA DOD and hrl funding
T3l was engineered to achieve. Exceptional, high power performance at very high frequencies.
Hrl, recently, completed long-term reliability studies and qualified the process and it is now ready to transition to production.
The t3l 40, nanometer process, perfectly complements, our existing Gan portfolio because it allows us to address applications at higher frequencies than our 140, nanometer Gan process.
We anticipate that licensing. This technology will also accelerate our ability to launch other sub. 100 nanometer, Gan processes, including 90 nanometer.
We believe this transaction is a win-win because hrl, primarily a research organization will be able to commercialize the process technology. They spent years developing and macom can industrialize and ramp the process into production.
Many of our mutual customers in the Defence and space markets. Want to see t3l process in production in a production wafer Fab in order to address their volume needs.
This strategic transaction supports 1 of our core tenants, which is to produce the industry's highest frequency semiconductors.
We believe this part of the Gan mimic Market is growing and we are seeing new requirements at q v e and w band driven by both commercial and defense applications.
We believe the t3l process will help us capture significant market share over time.
And finally related to Gan on silicon carbide over the past few quarters, we were awarded several new and add-on development programs for advanced scan on silicon carbide, process techn Technologies.
Across the dod agencies may come as recognized as a leader in developing Advanced compound semiconductors and our pipeline of funded technology development. Contracts is growing.
I'll note in the defense radar and electronic warfare markets, our GaN-based components and products experienced over 50% year-over-year revenue growth.
This growth, leverages our high power, Gan portfolio, where we maintain a competitive position and low and mid-band applications.
our goal is to expand into the higher frequency Airborne radar Market, where we believe Cher gain opportunities exist,
To support this strategy. We recently upgraded the RTP Fabs g28, V5, 150, nanometer Ganon silicon carbide, process to include Atomic layer, deposition, passivation, or ald.
alt is a hermetic coding process, that enables mimic products to pass moisture and hash tests,
This process is 1 of the most reliable and rugged processes in the market and it is ideal for ground-based radar systems, and satcom links and is now ready for Airborne radars.
Across the defense Market. The trend for new systems is toward higher frequencies, higher power levels, wider bandwidths and higher levels of Integrations, factors that all play to make cam strengths.
We collaborate with most major US defense contractors across a wide range of applications.
For example, we have been collaborating with the customer that produces a drone defense system, and we look forward to their expected production, ramped up in 2026, utilizing our high-power GaN technology.
We also continue to build new relationships with major European Defense contractors, who are increasingly focused on securing a European supply of critical semiconductors for their systems.
We believe our manufacturing facility in France. Can play an important role in enabling macom to win market share with these customers.
Generally speaking, the industrial markets are stable in beginning to improve although we do not expect significant growth in the near term compared to the data center, defense 5G and satcom sectors.
Within the Telecom and Market satellite-based Broadband, access and direct toell opportunities, remain robust with numerous Leo networks in the planning or development stages.
These networks typically use microwave or millimeter wave frequencies and free space Optics or fso Communications for satellite to satellite or satellite to ground. Uh, communication links.
In some cases the satellite transmitters require analog microwave linearization to boost the transmitted signal and improve link margin.
I'll note the number of Leo constellations continues to grow in. More companies compete to provide commercial data, voice and video Communications by satellite or defense intelligence and functionality.
Or direct to device Communications.
Again, these Leo constellations have many areas where MACOM can contribute, including...
Direct to device links operating at UHF or sband?
that call links operating a Ka, Cuvee and e-band
High-speed Optical links transferring data within the satellite.
In free space, optics for satellite to satellite Communications and Gateway linearization for high power. Transmitters
Depending on the customer preferences and capabilities, we position ourselves to support them at any level in the supply chain from Foundry, Services, customized see design standard product products, and even full module and subsystem design and Manufacturing.
Demand from our cable TV infrastructure Market is also improving.
Cable networks are in the early days of a transition from Doc's 3.1 to docs is 4.0.
We've spent the last 2 years. Releasing new products and working with customers on designed winds to support this upgrade.
We are beginning to see new orders on our DOCSIS 4.0 products.
Our portfolio today, includes amplifiers balance, couplers and filters for line. Amplifiers and nodes in these new deployments.
We expect the cable TV Market to be 1 of the contributors to our Telecom Revenue growth and fiscal year 26.
We continue to see strong demand from our data center portfolio, particularly within 800g and 1.6t applications.
We expect the ramp of 1.6t optical solutions, to continue to support both scale up and scale out interconnects. And we believe demand is growing rapidly.
Within These Solutions macom provides drivers and toss that support EML and silicon photonic architectures,
In addition over the course of FY 26, we expect year-on-year demand for our photonic semiconductor products to significantly increase.
As an example, we are pleased with the growing traction of our 200 gig per Lane Photo detector products that support Advanced 8001.6 T Optical connectivity.
Make coms, 200 gig PD has industry-leading sensitivity and dark current performance. Enabling our customers to achieve better manufacturing margin and Optical receive receiver sensitivity performance.
We believe We have had a breakthrough where our Cloud customers and their supply chain. Recognize the Strategic value of M's, proprietary Indian phosphite, technology and high volume manufacturing capabilities to produce photonic products.
We are pleased to have PD design wins at all. Major module manufacturers, supporting 800g Andor 1.6t applications.
A few quarters ago, we initiated a transfer of the 200 gig PD process from our smaller Michigan Fab to our larger Massachusetts Fab to ensure we could support the forecasted demand.
Today, our Ann Arbor Fab is approaching maximum capacity and our Massachusetts Fab is qualified and ramping volume production.
In, in addition to our focus on ramping PDS, we have intensified our CW laser development efforts as customers and the industry look for strategic suppliers that have CW Laser Technology and high volume, manufacturing capabilities.
We also see a steady adoption of single mode lpo. 100 Gig per Lane Solutions.
Today we have multiple customers in production and we expect to transition more customers into production in fiscal 26.
additionally, we continue to support new architectures, including near packaged, Optics, or NPO utilizing non-reloadable
as data centers, continue to disagreed, memory and compute, we believe the adoption of pcie 6 Solutions will create an opportunity for mcom
at this year's Eco trade show in September, we demonstrated our latest linear Optical pcie chipset, consisting of a vixel driver and tia that support sideband. Data streams over fiber
We also continue to expand our portfolio and the area of electrical highspeed connectivity.
As data speeds move to 200 gig per Lane and Beyond copper-based Solutions, such as direct attached, cables. Begin to reach their functional limits.
Over the course of FY 26, as 1.6t deployments expand. We believe these Solutions will be of interest to some of the major Cloud vendors who are deploying Next Generation Solutions.
Additionally, we are seeing opportunities for these products and backplane applications to enhance onboard signal integrity.
As we turn our attention to FY26, our priorities include first taking full advantage of the data center growth opportunity and servicing our customers with differentiated solutions. This includes expanding our portfolio into new product areas such as PDS and lasers, where we can add value.
In the near term, we will seek to increase market share in 800 G and 1.6 T highspeed analog Solutions, expand our customer base for linear equalizers and pcie solutions, ramp photonic products and support customer lpo launches.
We will also continue the design work to establish. A leadership position in 300 and 400 gig per Lane connectivity, ic's for future 1.6t and 3.2t systems.
Second. We will seek to expand our market share in 5G applications by leveraging our new and improved Dan 4 process.
Our next Generation base station products will be updated with in-sourced ipd and matching circuits to 1 improved performance and 2 lower our manufacturing costs.
Third, extending our leadership and a, and d in winning market, share in microwave and Optical RF over fiber applications across all major accounts in the US in working to expand our business across Europe and support new defense and space programs like Iris squared.
Fourth, continue to develop Advanced semiconductor Technologies for high-frequency mimics, high power diodes and high-speed Optical semiconductors our goal in FY. 26 is to make meaningful progress on Hut Via flip chip. Bump Technologies, like copper, pillar to enable mm to lead the industry in advanced chip scale package Solutions.
Fifth carefully managing our Capital expenses and prioritizing Investments That 1. Expand our existing manufacturing capabilities and 2. Support new technology developments.
As an example, we intend to purchase and install a modern mocvd Epi reactor in our European semiconductor Center or MEC.
This reactor will support our 6-inch production transition and the growing volumes of Ganon silicon and other gas processes.
in summary, our strategy is to build a a diversified semiconductor portfolio that enables mcom to capture a larger share of the markets we serve
Our strong organizational Foundation along with our Speed and Agility, help us win opportunities. And ultimately beat our competitors that are often larger and have more resources.
Jack will now provide a more detailed review of our financial results.
Thank you, Steve and good morning everyone.
before getting into our fourth quarter results, I would like to summarize a few items regarding our whole fiscal year which ended on October 3rd 2025
We achieved record revenue of 967 million which grew more than 32% over fiscal 2024.
Our annual adjusted operating margin grew by 140 basis points to 25.4%.
Adjusted earnings per share. Grew by more than 35% to $3.47.
Cash flow from operations, continue to strengthen and increase by 45% to 235.4 million.
We refinanced and extended the maturity of the majority of our convertible note debt at favorable rates.
Our Workforce which now totals approximately 2,000 employees grew by 17% over the past year. As we have expanded, our research and development, and production employees to support our growing business.
Now, on to fourth quarter results, as well as some additional commentary on the full fiscal year 2025 and outlook on fiscal year 2026.
Q4 Revenue again, reached record levels with strong financial performance, across all 3, end markets and record Revenue across Data, Center and Industrial and defense.
This sustains a trend of consistent revenue growth, improving operating income, and ongoing cash generation.
And up 30.1%. Year-over-year driven by growth. Across all 3 of our end markets.
Our overall book to bill for Q4 was 1 to 1.
On a geographic basis revenue from us domestic customers represented approximately 43% of our fiscal Q4 results.
Our full fiscal year, 2025 us-based Revenue was approximately 44%.
Adjusted gross profit for fiscal Q4, was 10049.1 million or 57.1% of Revenue.
To the hard work and our dedicated operations team. We have continued to increase capacity and improve yields. And we expect to see ongoing incremental progress across all 4 of our Fab operations.
I'll note we are seeing an improvement in product, demand across our internal Fabs which is driving higher production volumes and Associated utilization.
As a result, we expect sequential quarterly gross margin improvements of between 25 to 50 basis points as we move through fiscal 2026.
These gross margin improvements include any offsets to cost increases such as gold and other precious metals depreciation and labor costs.
Total adjusted operating expense.
A fourth quarter, was 82.1 Million, consisting of research and development, expense of 55.6 million, and selling General and administrative expenses of 26.6 million.
the sequential increase in adjusted operating expenses compared to Q3 was primarily driven by ongoing R&D Investments and employee related costs,
as we continue to grow our Revenue, we will remain very focused on managing our Opex.
Depreciation expense for fiscal Q4, 2025 with 8.7 million compared to 6.9 million Q3 2025.
The increase was primarily due to taking control of the RTP Fab during the quarter.
As a reminder, since we have taken control of the RTP Fab, we have shifted from purchasing Wafers from a third party to manufacturing Wafers, resulting in macom. Now incurring, all of the associated manufacturing costs including labor facilities and depreciation to mention a few
Adjusted operating income in fiscal Q4 was 67 million. Up 5.5% sequentially from 63.5 million in fiscal Q3 2025 and up 32.1% year-over-year.
For fiscal Q4, we had adjusted net interest income of 6.6 million. A net decrease of 200,000 sequentially from 6.8 million in Q3 primarily driven by lower interest rates and interest expense associated with new leases.
Our adjusted income tax rate in fiscal Q4 was 3% and resulted in an expense of approximately 2.2 million.
As of October 3rd, 2025 our deferred tax asset balances which includes R&D. Tax credits were 208 million as compared to 212 million at the end of fiscal 2024.
We anticipate further utilizing our deferred tax asset balances through fiscal 2026 and Beyond helping to keep our cash tax payments, relatively low, over these periods.
we expect our adjusted income tax rate to remain at 3% as we enter fiscal 2026,
Depending on the jurisdictional mix of our income. We expect the US government's recent tax legislation to support a low to mid single-digit, adjusted tax rate for the next few fiscal years.
Fiscal Q4 adjusted net income increased approximately 4.7% to 71.4 million compared to 68.2 million in fiscal Q3 2025.
Adjusted earnings per fully diluted. Share was 94 cents utilizing a share count of 76.2 million shares compared to 90 cents of adjusted earnings per share in fiscal Q3 2025.
Our team continues to optimize the business's performance which has resulted in sequential increases in our adjusted operating income and EPS over the past 9 quarters
Before moving on to balance sheet items, I would like to note that during the fourth fiscal quarter in connection with the RTP Fab transfer. We recorded a 10.1 million gain on acquired assets, which is recorded below operating income on our income statement.
5th 2025 as compared to the estimated value, we established in December 2023 at the time of the RF business acquisition.
Now on to operational, balance sheet and cash flow items.
Our Q4 accounts, receivable balance was 148.6 Million up from 129.5 million in fiscal Q3 2025.
The increase in our accounts, receivable balance was driven by Revenue growth as well as the timing of customer shipments and payments.
Our days sales outstanding average is 52 days, compared to our previous quarter at 47 days.
Inventories were 237.8 million at quarter, end of sequentially, from 215.4 million.
Largely driven by additional work in process inventory. At the RTP Fab as well as higher balances to support anticipated future demands the business.
Inventory. Turns, decreased to 1.9 times from 2.0 times in the preceding quarter.
Our fiscal Q4 cash flow from operations was approximately $69.6 million, up $9.2 million sequentially and an increase of more than $7.3 million over fiscal Q4 2024.
The sequential increase was primarily due to increased net, income combined with fluctuations in working capital.
Capital expenditures total 20.2 million for fiscal Q4 up. 11.5 million sequentially.
The major driver of this inquiries was the anticipated purchase of 12 million of surplus equipment. At the RTP Fab from the previous owner.
We anticipate that the installation of this and other equipment will allow us to expand our RTP fab capacity and capabilities by up to 30% over the next 12 to 18 months.
our fiscal year 2025 capex, was 42.6 million and we estimate fiscal year, 2026 capex to be 50 to 55 million as we upgrade and enhance our production equipment facilities and expand capacity where needed
Next moving on, to other balance sheet items.
Cash, cash equivalents, and short-term investments for the fourth fiscal quarter were $786 million, up $50.7 million from Q3.
we are in a net cash position of more than 285 million as of October 3rd, 2025, When comparing our cash,
Term investments to the book value of our convertible notes.
Over the next couple of quarters, we anticipate paying off the 161 million of principal value of our remaining March 2026 notes, as they become due under the terms of the original agreement from 2021.
And finally, I'd like to recognize that the results we have achieved during fiscal year 2025 would not have been possible without the contributions from the entire macom team.
We remain committed to investing in our employees, through annual, Merit, increases promotions bonuses and stock awards, as well as offering competitive Health Care, retirement and other benefits.
I will now turn the conversation back over to Steve.
Thank you. Jack macom expects Revenue in fiscal, q1, ending January 2nd, 2026 to be in the range of 265 to 273 million.
Adjusted gross margin is expected to be in the range of 56.5 to 58.5.
And adjusted earnings per share is expected to be between 98 cents and a Dollar too based on 76.6 million fully diluted shares.
We expect sequential Revenue growth in all our end markets data center will lead with approximately 5% sequential growth followed by Telecom and Industrial and defense with low single digit. Sequential growth.
As Jack mentioned, we expect to see increased operating leverage over the course of fiscal 2026, through a combination of topline growth and improving gross margins due to increased fab utilization and launching more profitable products.
We will maintain operating discipline, even as we continue to invest in the growth of the business.
Given our talented and experienced team, our core Technologies, and the secular growth Trends in our Market. We are confident, we will achieve our goals.
I would now like to ask the operator to take any questions.
Our first question coming from the lineup, Tom Ali with Berkeley. See you let us know often.
Hey guys, this is Kyle Blue seen on for Tom Ali, thank you for taking our questions. I just wanted to start off with the Telecom business. I think through earnings, you've seen a couple companies point to traditional Telecom being better. So I just wanted to try to get your sense of how you think about that business through the fiscal year and kind of the biggest pull factors you're seeing there.
Thank you for the question. Uh, the 2 main pull factors, uh, for Bank, call this year will be 5G, uh, continuing to grow. And that, that's a core business for mecom, and second would be the, uh, satellite Communications in Leo business. If you're referring to the RF related Telecom, uh, part of the market, if you're, if you're talking about the Metro Long Haul piece, uh, we are seeing continued growth and that business and we expect that Trend to continue during the year.
Thank you. And then just for my follow-up last quarter, I think you talked about a broadening of some of the ACC engagements. Can we kind of get an update on how that's been progressing over the past, 90 days. Have you seen any of those engagements during the customers and just how we should kind of think about that business through the next fiscal year?
Yeah, we continue to be engaged across the industry, uh, with all different product lines. Including uh, the chipset we put inside the ACC, uh, product line, uh, I would say, generally speaking, we have great, uh, engagements with the major hyperscalers. And we're certainly excited about some of the potential uh, within that that, uh, product set and um, you know, we'll see how that plays out as we move into the the course of the year. We don't generally comment on you know let's say uh pre-revenue uh topics. We would we would always talk about our successes retrospectively and that would be our approach here as well.
Thank you. Our next question, coming from the lineup, David Williams with the Benchmark company. Yolen is now open.
Good morning and uh, congrats on the the billion dollar run rate.
Um, Let me let me first.
Just kind of the the transition in the, the man pool between the 100 G and 200, g of moves, that that next game, kind of solution. How are you seeing that? And maybe our demand trans developing is you would expect it or maybe accelerated the bit.
Thank you for the question. So I, our Core 100g Business last year was very stable, and actually group, grew quite nicely. And, as we look out into our fiscal, 26, we we would expect the 100g growth Trend to continue. However, the massive growth is really at the higher data rates, so that would be 200, gig per Lane servicing, uh, primarily 1.6t and we are very early in the the uh, cycle of the rollout of those interconnects. And so that is 1 of the fastest growing parts of our data center business. Uh, it was last year and we we believe it will be as well again, in, uh, fiscal 26.
Great, thanks for the color there. Um, and then just maybe on on some of the new capabilities, you talked about uh the acquisition in the quarter, just any color, there around the magnitude of that and really the the capabilities you can get that brings and you you talked about some of the, just the additional color. I think would be helpful. Thank you.
Yes, you you were referring to the hrl. Uh, IP license agreement. Is that right?
Yes, yes, I'm sorry, that's correct.
Yeah, so uh, you know, thank you for the question. Uh, very interesting technology as I highlighted in, in the, in the script, it very much compliments. Uh, what we're doing with our, what we call, our GC, 140 process, which we launched a couple of years ago, uh, and we're continuing to improve that process even today. Um, the hrl technology was a combination of US, government and hrl, uh, funding to really develop a technology that would uh be able to operate at higher power levels at the highest frequencies. So this is a, this is a technology that really begins to shine above 40 gigahertz and why we felt this transaction would be important is it allows us to service the higher frequency.com bands which are becoming more and more critical for the Leo constellations. And there will be a, there will be a transition from what I would consider PMP gas technology.
Is again, amplifier. On this process will have a higher power density. Almost 2x what PMP can do and you'll also get 10 points of higher efficiency on that particular amplifier. So there's a there's a compelling reasons why we believe the Leo constellations will, uh, in our customers, will want to adopt this technology as soon as it's ready, uh, in our Fab.
Thank you. Our next question, coming from the line of harsh Kumar with Piper Sandler yolan.
Yeah, hey guys, thank you for letting me ask a question. Congratulations on some great results. Um, Steve if if I look at your guidance I think there's a little bit of a step up in growth, just at a broad level. I mean, you talked about multiple drivers but if I had to be specifically ask ask you about what is driving the step up and growth? How would you characterize that? And I have a follow-up.
Uh, are you referring to, uh, q1 specifically or in general? Yeah, yeah, yeah yeah. The the, this number for it,
Well, I think it's, uh, first and foremost, uh, driven by the continued rollout of 1.6t, and 800 gig platforms across, various customers with various products, that is absolutely driving the growth. Um, and then I would say the other, uh, factors we're seeing a little bit of a, a bounce back in, Telecom, uh, as you know, uh, going Q3 to Q4,
Sequentially down a little bit, really due to the timing of orders and also just continued strengthening in our defense business. Um, and then the other thing I'll add as we really are at the beginning of our fiscal 26. Our October bookings, were 1 of the best best months we've had in years. And so we're really excited to start the year, uh, with a strong backlog in a lot of momentum.
Right now. Um, and Steve, you, you talked a lot about satellite on this call. Something you have done, you've talked about you mentioned satellite but not to this extent. Uh, and you talked a lot about Leo satellites, I guess, could you help us understand the timing of some, of these new products? The scale where does the business at today? And and how big could it be? And also, I was wondering part 2, um, you know, um, the standard question to help you or you started shipping seems, like, could you help us size that market for 2026?
Yes, thanks harsh. So, uh, I would say that the current Leo businesses is included in the Telecom numbers that we're currently reporting.
We don't particularly want to break out uh, that that particular, submarket within Telecom. Uh, so I would say the timing is now and it's we're ramping and the Leo business that we have is expected to grow over the next 12 to 18 months. How big could it be? It can be hundreds of millions of dollars in size. This is not a small Market, it's a large Market. As I mentioned, we support this business, at the chip level, the module level, and, and even the subsystem level. And when we talk about Leo constellations, I also have to highlight it includes. Not only the payload on the satellite, but it also includes the ground gateways, and the terminals which also have very high value added products.
In terms of the lpo, uh, question you mentioned, you asked, uh, we we talked about having 1 customer in production on our last conference call. I can tell you that number is tripled. So now we have uh uh 3 and uh growing and so we we would expect that number to continue to increase as the industry adopts lpo. We don't necessarily want to size the market, it really depends on.
What the customers do in in terms of their deployments. And that's a very difficult, uh, number to put out there. We have our own internal models, but we would rather we, we're sure that there's error associated with those estimates. I will say that our competitive Advantage with lpo shines, very, uh, you know, very well because there's no DSP. So the, the landscape and the competitive Dynamics,
Change quite quite dramatically when you remove the DSP and then the other thing, I'll just highlight the lpo solutions today are running at 100 Gig per Lane.
Thank you. Our next question. Coming from the lineup.
Call Aman with BNP 3A.
give me quantify the level of order visibility with your customers, uh, props in terms of quarters, as you seek to add capacity to fulfill, uh, this customer demand
Yes, thank you. We don't really break the backlog out by product line or Market Per Se, uh, but you can imagine that coming off of a year where we had 50% year-over-year growth in the data center and there's a lot of momentum that the the data center backlog is is growing nicely. Uh, some of our other end markets like defense, they typically have longer, uh, lead times and, and Manufacturing cycle time. So we typically would build backlog with our defense customers at the beginning of the year. Um, so overall, uh, healthy backlog and we really can't break it out any further than that.
Got it, that's fair. Um Jack perhaps 1 for you if I may um just in the arc business, any updated thoughts on the timing of yield enhancements and operational performance? Um, you know, would you anticipate this business can be margin, uh neutral once these uh yield enhancements are complete perhaps before you add the plan 30% of wafer capacity. Thank you.
Yeah, I think what you're referring to Carl is some of the uh, the gross margin improvements. And we we talked about in our prepared remarks. The uh sequential improvements that we expect to see on a quarterly basis of anywhere from 25 to 50 basis points. Um, as as we've also discussed, we've completed the RTP Fab um, uh, conveyance. So that's, that's part of the Mayo and, uh, you know, through a combination of uh, of enhancements.
Uh, to our gross profits and cost reductions in yield improvements of all of May, including, uh, facilities like LOL and our other two, uh, fab manufacturing locations, are going to be helping to contribute to some of those gross margin improvements that, um, that we had talked about earlier. So it's more of a global effort that we have, as opposed to being focused on any one area of the business.
Our next question.
coming from the
work with stifel your line is Nelson.
Yes, thank you. And, um, let me add my congrats on the record results. Uh, Steve, I know you typically don't guide more than a quarter out, uh, but, you know, just just so many arms in the fire here across all 3 segments. So, uh, directionally, how should we think about growth in the in the 3 segments next year, uh, especially also in in light of the, you know, more than 40% growth in both Data Center and Telecom this year.
Thank you for the question Tori. Uh, as as you know, we don't typically give fully your guidance. Uh, but I'd be happy to make some
General comments on our expectations for 2026 and maybe before I do. So, I think there's some important Trends, uh, to highlight in, I think you mentioned a few number 1, we had very strong growth year-over-year, 32% growth on the top line.
and that really represented, um,
The fourth 4 out of 6 years in a row. We've had double digit growth and we're excited about that. Our kager over the last uh, 6 years has been in the mid teens.
And we're pleased with that type of performance.
as we think about 26,
We have various scenarios. We have our base case scenarios and our improved. Uh,
Or best case scenarios. Um, but if I just focus on the base case for a minute, we would certainly expect double digit growth, uh, with no less than mid teens, uh, on the top line, we believe the growth will be driven, uh, by the data center business. It will have, it will be our strongest Market Then, followed by industrial, and defense and Telecom. And it'll be a year where you begin to see leverage on of our business model and improved operating income and earnings growth. So we're very excited about that as well.
Great, thank you for that. Uh, Stephen and that's my follow-up. Uh, sounds like you turned about 1415 percent, uh, of the revenue this quarter, uh, I'm I'm just curious, you know, given the strong momentum, uh, the order rates are, are you starting to see some some tightness, uh, you know, whether that's with your own Fabs? Uh, you know, or lead time starting to stretch, uh, you know, because because obviously the the growth momentum seems to be accelerating. So just want to make sure that everything is on track as far as capacity is concerned.
And have the capacity available. I, I highlighted as an example of what our 200 gig per Lane Photo detector. We recognized last year that we were going to have some very strong growth in the next 24 months. And so, we took actions to move that, uh, product to our large LOL facility here, where we have really unlimited, uh, manufacturing capability to produce, uh, PDS to support, uh, the industry. So, we're we're taking those steps, a lot of those things you see behind the scenes where we're, uh, making sure we have a front-end back-end test capacity in place. There's always areas where we need to do more and, and pinch points. And the team is managing those on a on a very, uh, you know, very well. So,
yes, it's always a challenge and a high growth environment but I think we have an under control
Thank you.
Our next question, coming from the line of Flynn Curtis with Jeffrey your line is now open.
Hey morning guys, thanks for taking my question. I want to ask you, I mean, obviously very strong comments about growth. Uh in fiscal 26, the the books, the bill, just over 1 I guess, you know, I think you said maybe there's some function with the defense business but I'm just kind of curious.
um, you know, is that the case across all 3 segments, is there something that's down or is that just timing wise and, and it that should improve
Yeah, we, we track the book to bill for each of our markets and submarkets and customers on a very granular level and every quarter, it's a different setup. And so, over the long term is really what matters and over the over fiscal year 25. Our book to Bill ratio was 1.1 to be clear and that's a very strong number and we started fiscal 26 on October, uh, with 1 of our best October. And as long as I can remember. So, uh, we're not, you know, you have to read through the noise. I wouldn't get too fixated on, uh, any particular quarters book to bill, and if you remember a few years ago, we had a book. We had a quarter where we had a 0.5 book to Bill, uh, and we survived that quite nicely. But so that's the nature of the business. Some of our markets are a little volatile, some of them have different timing of orders and customers, uh, you know, have different schedules and we just try to blend it all together and and Report the results.
Thanks. And then I wanted to ask on the gross margin the the 25 to 50 basis, points Improvement, obviously, you took over the wool seed Fab and there was some uh some lifting to do there. Uh maybe you could just talk about the contribution from those improvements versus just what it looks like. Overall volumes are going up as well.
Yeah. Thanks for that and I'll just, uh, highlight on a go forward basis. We don't really want to talk about the gross margins by Fab. I think that it our business is too complicated than that. I know, uh, before the closing of the Fab and during the transition, uh, we were very transparent about the puts and the takes on the RTP site specifically. But now that it's in the macom tent and we're changing so many things, including the mix, the customer base the focus as I highlighted. As an example, we took 1 of the RTP uh uh 150 nanometer Gan on silicon carbide, processes and we upgraded it uh by adding an ald covering and now that's going to open up a new market segments and that'll lead to great things. So there's just a lot of moving parts that each 1 of the Fabs and to get fixated on any particulars. Fabs
Near-term performance is is um, I could could be limiting. So I think we we take a broader approach and we're we're not really going to be discussing gross margins by Fab because that could be a tell on
The profitability of those Associated products, which we don't want to disclose. Now, the other thing, I'll highlight is, uh, a big part of our business uses external Fabs. And we are working with the leading, Fabs across the US, Europe and Asia, to support a lot of our high-speed. Uh, uh, business primarily data center, uh, Centric as well as, um, various tests very high performance test chips, uh, or, uh, products for broadcast video or other high-speed trading type chips that are you, you know, very high speed matrices that are used in highspeed trading. So we have a lot of high-end chips that we externally Source from 4 to 5 different. Fabs, depending on the technology and that those product lines also contribute quite nicely to our business and and can also, um,
Last quarter, we had only had it for 2 weeks. So it came in in line with our our expectations, it allowed us to also de-risk the business in terms of being able to take control of of that business. So, the teams don't have a fantastic job with, uh, with everything that's going on there.
Thank you.
our next question coming from the lineup, Sean of Blackman, with TD Cohen is Nathan
Hey guys, uh, thanks for letting me hop on, uh, and ask a question and and like my peers, I'll congratulate you on the excellent results. I I wanted to ask, uh, 2 of your, I guess I'll call the call them sort of competitors. Announced a merger last week, a, a question that we've gotten from investors is whether you anticipate much changing on the competitive landscape based, uh, you know, following that merger. Obviously, you don't compete in the handset Market, but maybe as you think about, uh, those companies respective broad markets businesses, coming together, does that change much or is it it too early to say, with any certainty?
Yeah, thank you for the question and congratulations to uh, the the both companies. Um, and you're right, um, we're not in the handset business, so it shouldn't affect us. Um, neither companies are customers or suppliers to us, so there's no sort of impact there. Um, so we we don't really see a direct impact. We, we have noticed that each of those companies is closing down their Fabs. And I
Over the course of time, there'll be some restructuring. And so uh, it's possible that that could create an opportunity for us, um, to maybe win some more sockets or hire some great talent. So um,
We'll see how it goes and and we can again. Congratulate uh both companies on on that deal.
Great, thanks. And and then as a follow-up, I I wanted to ask an AI question that is actually not about the data center Market. If if you can believe that. But in in Telecom 1 of the themes that are colleagues on the common infrastructure side of the house have been exploring is the potential impact of of some of these deployments and the data center Builds on access and Long Haul networks as bandwidth. You know, increases either due to distributed training or more 2-way. Uh, inference traffic. Uh, are you, are you? I guess the, the put simply are you seeing that at all? Or do you anticipate that in, in the future and then maybe how should we be thinking about the puts and takes of those Trends as it relates to make them?
well, we have very good relations with the major uh, uh,
Uh, ran manufacturers that are deploying, you know, 5G and working on 6G. Uh, we also have a very strong understanding of the front hall. Network it itself because that's a big part of our business. And we're very, very strong with RF, over fiber and in some future Generations. Uh, there may be more RF over fiber directly to the radio. And so, all of these things can would contribute to moving uh, high speed data or or large, uh, blocks of data faster. And so we are definitely working, uh, with customers and trying to keep up with their, uh, investigations of different architectures. Like the ones you mentioned. So, uh, we do have again. I think the key Point here is that Trend would most likely be a long-term Trend and we think we have the right technology given the highest speed highest data rate. Highest frequency a lot of these. Um, applications might also deploy very high frequencies and so we think we're in a good spot to
Take advantage of that.
Chen coming from the line of William stinewood through a security CL and is now open
Great. Thanks for taking my question and uh, also congratulations on the um strong results and Outlook, and perhaps, especially on the uh, fiscal 26 commentary. Uh, which sounds good. Um, Steve, I was hoping um, that you might reflect on the, on the 1 hand, uh, relatively light comments about the industrial and market performance uh while on the other hand, gross margins sound like they're going to be tracking. Uh,
Better consistently uh, over the coming year, I've historically, sort of associated, these 2 things together. That that that a um, a lull in the industrial and Market has been
Sort of a, a weight on Gross margins. Is that still the case is that part of the um, thinking behind expanding gross margins next year or recovery in that market. And if um any other details, you could provide around that thinking would be helpful. Thank you.
I think you're thinking about it the right way. And historically, we've had a lot of our uh, a lot of our industrial revenue was internal fabric.
And that's because it would be servicing markets like test and measurement or the medical markets, where they use a non-magnetic high voltage diodes, which we have a very strong position in, in the market on, as well as Factory Automation and other Wireless uh platforms. And so as that market improves, uh that you know benefits um the loading and and can have a benefit on the gross margins.
generally speaking, I would with that said, generally speaking as we look into 26,
We think there will be some positive Trends in industrial, but more importantly, a stronger Trends in defense.
And that will also be a Tailwind on our gross margins.
Uh, that's helpful. Thank you. Maybe as a follow-up. Um, could you maybe help us? Um, understand the diversification in the data center and market and um, maybe explore a little bit where the design wins come from. Are they more from module makers? From semiconductor suppliers from the, uh, cloud service providers. Maybe give us an idea of the diversification and the types of customers that you're actually.
Getting design was from and transacting with. Thank you.
Thank you for the question.
We we address, uh, to the back half of your question all 3 of those customer categories. So, that would be the module manufacturers, or, or cable manufacturers semiconductor companies, uh, and the cloud, uh, or the hyperscalers directly. So we we engage it all in all of those categories.
and so, when you
you know, when you take that in and you know,
Add that all up. You'll see that there's a lot of mix of what those different companies would want in terms of product from m.
As we look at the market, we we break it up into really 3.
Segments. It would be the multi mode Market itself which is generally short, reach single mode which is medium long reach and then uh you know Metro Long Haul and coherent. And so as we look down in service these different companies and those different categories you mentioned uh depending on what they're focused on. We'll try to be a merchant supplier and sell them chips. It might be a driver, it might be a laser, it might be a photo detector, uh, or a TIA. And so that is, you know, there's there's about a half a dozen primary,
Product lines, let's say that we service the data center with, uh, and and that's how we go to market.
Jen, coming from the line of Peter Pang with JP Morgan, Yolen is now open.
Peter, please check your mute button.
All right, I will go on to the next person in queue.
Next person that can you coming from the line of Tim s show with Norland Capital markets Nelson?
Okay, just made it. Um, good morning and congrats on the results and
indeed, we've seen some pretty positive results across this AI Optical landscape thus far this week, even
with a lot of references to step function, accelerations and demands. And I think both inside and outside the data center,
and I, I think maybe that's
Mary's up well with your very strong, October, bookings commentary, I think, but I guess the question is in that environment, so you're guiding data center to, you know, high 20s growth, maybe 28% growth in q1 and
I guess given this environment that we're seeing and which seems to be you know, a bit of a tidal wave of demand.
Is that type of growth rate sustainable for the year in fiscal 26 or can it even increase? Thanks.
Actually really outperform and have very strong performance similar to last year but we're not, we're not forecasting that. Now we know a lot of things have to happen, including, you know, various
Uh, ramps have to occur in, you know, things of that nature. So we're not, we're not forecasting that sort of, uh, super strong growth. We're going to start the year and look at our backlog and plan accordingly, uh, but but you're correct in those Trends are there and it's primarily around 1.6t that's where the volume is, that's where the demand is. That's where the shortage of Supply in some key Technologies is and quite frankly, that's where mcom can be a strategic partner.
Great. Thanks very much and congrats. Once again.
Thank you.
Thank you. Our next question, coming from the line of Quinn, Boston, with t and Company. Your line is now open.
Thanks for taking my question, I guess maybe Steve just coming out of the Eco Optical show a few weeks back. There was some chatter about uh market share shifts uh in the Tia and the driver's side at 800 gig and 1.6t modules. And I just wonder if you could address
You know, how do you feel about your relative share position across diyas drivers? Have you seen any shifts? Do you feel like you're still pretty well? Holding share, maybe even taking share but any any commentary, just how you're doing in the pmds for optical modules at 8001.60?
Thank you for the question. Uh, I think we're doing well. I think we have differentiated product, and it's a very competitive landscape. So you have to earn every socket based on performance timing price, and I think we're bringing our best game to the market.
So, holding share.
I'm not going to comment on particular product lines, whether we're gaining or losing market share.
Okay, thank you.
And there are no further questions at this time, I will not send a call back over to Mr. Steve Daly for any closing remarks
Thank you in closing, Jack. And I would like to thank the entire macom team for their continued dedication, which made our FY. 25 results possible.
We will continue to work as a team to meet our customers' needs and execute our strategic plan as we start fiscal year 2026. Thank you very much, and have a nice day.
today's conference call, thank you for your participation and you may now disconnect