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MACOM Q1 Earnings Beat: Will Strong Outlook Lift MTSI Stock?

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MACOM Technology Solutions Holdings, Inc. (MTSI - Free Report) reported first-quarter fiscal 2025 earnings of 79 cents per share, which beat the Zacks Consensus Estimate of 78 cents by 1.3%. The figure increased 36.2% year over year.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

MACOM’s earnings beat the Zacks Consensus Estimate twice in the trailing four quarters while missing the same on the other two occasions, the average surprise being 0.75%.

MACOM’s revenues increased 38.8% year over year to $218.12 million and surpassed the Zacks Consensus Estimate by 1.4%.

MACOM’s better-than-expected results and upbeat guidance for second-quarter fiscal 2025 results are likely to drive the stock upward, which has already surged 60.2% in the past year, outperforming the Zacks Semiconductor - Analog and Mixed industry’s decline of 4.5%.

MTSI Top Line in Detail

Telecom Market: MTSI generated revenues of $55.4 million (25.4% of the total revenues) from the market, up 81% year over year. The telecom segment is growing on the back of high demand for its products to expand the 5G market in the United States. MACOM is also experiencing significant growth in market share in the satellite communication market especially the Low Earth Orbit satellite-based broadband networking.

Data Center Market: The market generated revenues of $65.3 million (29.9% of the total revenues), up 32% year over year. MACOM’s data center end market is growing on the back of strong demand for its products by Internet service providers. MACOM is experiencing strong traction in its 800G, 1.6T, Linear Pluggable Optics and Active Copper Cables offerings.

Industrial & Defense Market: MACOM generated revenues of $97.4 million (44.7% of the total revenues) from the market, up 26.5% year over year. MACOM is experiencing high demand for products, including electronic warfare, secure communications and integrated battlefield systems. MTSI’s Industrial & Defense segment is approaching $100 million each quarter with traction in radar, electronic warfare, secure communications and DoD’s satellite communication investments.

Operating Details

In the first quarter of fiscal 2025, MTSI’s non-GAAP gross margin was 57.5%, which contracted 170 basis points (bps) from the year-ago quarter.

In the reported quarter, non-GAAP operating expenses were $69.9 million, which increased 28.2% from the year-ago quarter. As a percentage of revenues, the figure contracted 260 bps to 32.1%.

Consequently, MTSI’s non-GAAP operating margin was 25.4%, which expanded 90 bps from the prior-year quarter’s figure.

Balance Sheet

As of Jan. 3, 2025, cash equivalents and short-term investments were $656.5 million, up from $581.9 million as of Sept. 27, 2024.

Inventories were $198.4 million, up from $194.5 million in the previously reported quarter.

Long-term debt obligations, excluding the current portion, were $338.8 million in the reported quarter compared with $448.3 million in the previous quarter.

Guidance

For second-quarter fiscal 2025, MACOM expects revenues between $227 million and $233 million. The Zacks Consensus Estimate for the same is pegged at $220.3 million.

The non-GAAP gross margin is expected to be in the range of 57-58%.

MTSI’s adjusted earnings per share are anticipated to be in the band of 82-86 cents. The Zacks Consensus Estimate for the same is pegged at 82 cents.

The company also expects a non-GAAP income tax rate of 3% and 76 million fully diluted shares outstanding.

Zacks Rank and Stocks to Consider

Currently, MTSI carries a Zacks Rank #3 (Hold).

Celestica (CLS - Free Report) , Bill Holdings (BILL - Free Report) and CrowdStrike (CRWD - Free Report) are some better-ranked stocks that investors can consider in the broader Zacks Computer & Technology sector. While CLS sports Zacks Rank #1 (Strong Buy), BILL and CRWD carry Zacks Rank #2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The consensus mark for CLS’ 2025 earnings has been revised upward by 33 cents to $4.75 per share over the past seven days, indicating a 22.4% year-over-year increase. CLS shares have risen 254.8% in the past year.

The consensus mark for BILL’s 2025 earnings has been revised upward by a penny to $1.77 per share over the past 60 days, indicating a 13% year-over-year increase. BILL shares have gained 27.1% in the past year.

The consensus mark for CRWD’s 2025 earnings has been revised upward by a penny to $3.74 per share over the past 30 days, indicating a 21% year-over-year increase. CRWD shares have gained 30.1% in the past year.

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