MACOM (MTSI) Q4 2025: Data Center Revenue Jumps 50% as 1.6T Demand Drives Record Backlog
MACOM’s Q4 capped a transformative year, with data center revenue surging 50% and record backlog fueled by 1.6T optical demand. Strategic bets on advanced photonics, GaN-on-SiC, and defense are accelerating share gains and margin expansion. Management signals confidence in double-digit growth for FY26 as new design wins and capacity investments position MACOM for sustained outperformance.
Summary
- Data Center Acceleration: 1.6T and 800G optical ramp is fueling record growth and backlog.
- GaN-on-SiC Leadership: Exclusive T3L process deal and defense traction expand high-frequency market reach.
- FY26 Double-Digit Growth: Management targets mid-teens top-line gains, leveraging diversified end-market momentum.
Performance Analysis
MACOM delivered record Q4 and FY25 results, with full-year revenue up 32% and adjusted EPS climbing 35%. The data center segment was the standout, posting over 50% year-over-year revenue growth and setting both quarterly and annual records. Industrial and defense also hit new highs, while telecom stabilized after a slight sequential dip. The company’s book-to-bill ratio averaged 1.1 for the year, and backlog reached new peaks, reflecting strong demand visibility into FY26.
Gross margin improved to 57.1%, supported by higher fab utilization and a richer mix of new products. Operating leverage was evident as adjusted operating income rose 32% year-over-year, outpacing revenue growth. Cash flow from operations grew 45% to $235 million, and MACOM ended the year with $786 million in cash and a net cash position exceeding $285 million. CapEx increased as the company invested in fab upgrades and capacity expansion, notably at the RTP facility, positioning for further volume growth.
- Data Center Outperformance: 1.6T and 800G ramps drove segment records, with design wins at all major module makers.
- Industrial & Defense Resilience: Over 50% growth in GaN-based defense revenue and strong industrial demand offset telecom volatility.
- Capacity Investments: RTP fab upgrades and new design centers in Europe and California to support future growth and technology leadership.
Q4 saw a 3.6% sequential revenue increase, and management expects all end markets to grow in Q1 FY26, led by another 5% sequential data center gain. Gross margin is guided to improve further as higher-margin products ramp and fab utilization rises.
Executive Commentary
"A few years ago, we set a goal to achieve $1 billion 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. New products are the lifeblood of future growth. In FY25, we launched over 200 new products, which was a record."
Steve Daley, President and Chief Executive Officer
"Our annual adjusted operating margin grew by 140 basis points to 25.4%. Cash flow from operations continued to strengthen and increased by 45% to $235.4 million. 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."
Jack Kober, Chief Financial Officer
Strategic Positioning
1. Data Center and Photonics Surge
MACOM’s data center business is at an inflection point, fueled by the rapid adoption of 1.6T and 800G optical interconnects. The company’s proprietary indium phosphide (InP, high-performance photonic material) technology and high-volume manufacturing have secured design wins at all major module manufacturers. Management highlighted the transfer of 200G photodetector (PD, optical receiver component) production to its Massachusetts fab, ensuring capacity for surging demand. The company is also expanding its portfolio into continuous wave (CW, unmodulated laser) lasers and linear equalizers to capture next-gen connectivity opportunities.
2. GaN-on-SiC Technology and Defense Expansion
MACOM is strengthening its leadership in gallium nitride on silicon carbide (GaN-on-SiC, high-frequency, high-power semiconductor process), with an exclusive license to HRL’s T3L 40nm process. This move opens new high-frequency SATCOM and defense markets, where MACOM’s GaN-based products already saw 50% revenue growth. Upgrades to the RTP fab, including atomic layer deposition (ALD, advanced passivation technique), position the company for share gains in airborne radar and electronic warfare.
3. Capacity and R&D Investments
Strategic investments in capacity and talent are a clear priority. MACOM is opening new IC design centers in Southern California and Central Europe, targeting advanced silicon design expertise. RTP fab expansion, additional MOCVD reactors (for compound semiconductor growth), and a 17% increase in workforce—mostly in R&D—reflect a commitment to innovation and future-proofing the portfolio.
4. Diversified End-Market Strategy
Management continues to execute a balanced growth plan across data center, defense, telecom, and industrial markets. The company’s flexibility in offering merchant chips, modules, or subsystems at multiple points in the supply chain allows it to capture value from ground terminals to satellite payloads. The upcoming DOCSIS 4.0 cable upgrade cycle and direct-to-device LEO satellite ramp are incremental growth vectors.
5. Operating Leverage and Financial Discipline
MACOM’s focus on operating leverage and disciplined capital allocation is translating into higher margins and cash flow. Management expects gross margin to improve 25 to 50 basis points sequentially through FY26, supported by product mix, fab efficiency, and cost control—even as R&D investments continue to rise.
Key Considerations
FY25 marked a structural shift for MACOM, with secular demand drivers and operational execution positioning the company for sustained outperformance. Investors should weigh the following:
Key Considerations:
- Optical Demand Tidal Wave: 1.6T and 800G ramps are driving unprecedented demand visibility, with major hyperscale customers and module makers locked in.
- Defense and SATCOM Upside: Exclusive GaN-on-SiC processes and new defense contracts expand addressable market and margin profile.
- Capacity Tightness and Execution: Rapid growth is creating operational pinch points, but proactive fab expansions and supply chain moves are mitigating bottlenecks.
- Rising R&D and CapEx: Investments are scaling, but management signals discipline and prioritization of high-return projects.
- End-Market Diversification: Balanced exposure across data center, defense, telecom, and industrial reduces cyclicality risk.
Risks
Key risks include potential supply chain constraints as data center and defense demand ramps, execution risk in scaling new fabs and processes, and competitive pressure in high-speed optical and GaN markets. MACOM’s exposure to defense and telecom program cycles introduces some lumpiness, and aggressive CapEx could pressure near-term free cash flow if demand falters. Management’s confidence in backlog and customer visibility partially mitigates these risks, but investors should monitor order trends and fab utilization closely.
Forward Outlook
For Q1 FY26, MACOM guided to:
- Revenue of $265 to $273 million
- Adjusted gross margin of 56.5% to 58.5%
- Adjusted EPS of $0.98 to $1.02
For full-year FY26, management expects:
- At least mid-teens top-line growth, led by data center and defense
- Sequential quarterly gross margin improvements of 25 to 50 basis points
Management cited record October bookings, strong backlog, and robust design win momentum as drivers of confidence, with all end markets expected to grow sequentially in Q1 and data center leading the way.
- Continued investment in R&D and capacity to support new product ramps
- Operating discipline to balance growth and margin expansion
Takeaways
MACOM’s Q4 and FY25 results confirm a decisive inflection in its growth trajectory, with secular data center and defense trends driving outperformance and backlog strength.
- Data Center and Defense Are the Core Growth Engines: 1.6T optical and GaN-based defense applications are expanding addressable markets and margins, while telecom and industrial provide diversification.
- Execution on Capacity and Technology Is Critical: Proactive fab investments, exclusive process deals, and design center expansions are key to sustaining share gains and meeting customer demand.
- FY26 Outlook Is Robust, but Execution Risk Remains: Investors should monitor order visibility, fab ramp efficiency, and competitive dynamics as MACOM pursues double-digit growth and higher margins.
Conclusion
MACOM exits FY25 with record momentum, underpinned by surging data center demand, strategic technology bets, and operational leverage. The outlook for FY26 is strong, with management targeting continued double-digit growth and incremental margin gains. Investors should watch for execution on capacity, new product ramps, and further design win traction as key drivers of sustained outperformance.
Industry Read-Through
MACOM’s results reinforce the secular acceleration in optical connectivity for AI and cloud data centers, with 1.6T and 800G deployments driving a new wave of demand for photonics and high-speed analog components. The company’s success in GaN-on-SiC and defense markets signals robust tailwinds for compound semiconductors and next-gen SATCOM infrastructure. Rising backlog and capacity investments across the sector suggest supply chain tightness and pricing power for differentiated suppliers. Competitors and ecosystem players should anticipate ongoing technology transitions and increased end-customer engagement as hyperscale and defense requirements evolve.