MACOM Technology Solutions Holdings, Inc. (MTSI Quick QuoteMTSI - Free Report) reported fourth-quarter fiscal 2026 adjusted earnings of $2.09 per share, beating the Zacks Consensus Estimate by 4.5%. The bottom line surged 122.3% year over year.

Revenues totaled $424.8 million, which beat the Zacks Consensus Estimate by 1.1%. The top line increased 62.7% year over year, driven by broad-based growth across all three end markets, particularly data center. MACOM reported a book-to-bill ratio of 1.4, indicating strong order momentum, and exited fiscal 2026 with record backlog.

MTSI's Data Center Revenues Surge

Data center revenues reached a record $188.1 million, up approximately 37% sequentially. Growth was supported by demand for high-speed optical connectivity solutions, including products targeting 800G and 1.6T applications.

Management expects fiscal 2027 data center revenue growth to exceed the 74% recorded in fiscal 2026, with approximately 80% growth forming its current base case. Increasing adoption of 1.6T platforms and higher semiconductor content per system are expected to support growth.

MACOM's Industrial and Defense Business Gains

Industrial and Defense revenues totaled a record $164.6 million, up approximately 23% sequentially. Demand remained strong across radar, missile systems, counter-drone technologies, electronic warfare and military communications.

The business recorded 27.8% year-over-year revenue growth in fiscal 2026. Management is targeting growth exceeding 30% in fiscal 2027, supported by expanding defense budgets and new development programs.

Telecom revenues reached $72.1 million, up approximately 1% sequentially. Fiscal 2026 telecom revenues grew approximately 11% year over year, primarily benefiting from 5G and satellite communications demand.

MACOM expects similar growth in fiscal 2027, with revenues potentially exceeding $300 million. However, softness in passive optical networks and broadband applications could constrain near-term performance. Management expects improving contributions from low-Earth-orbit satellite networks and new 5G programs during the second half.

MTSI's Operating Margins Expand

Adjusted gross margin expanded to 61.3% from 57.1% in the year-ago quarter and 59.7% in the preceding quarter. Higher production volumes, favorable product mix, improved manufacturing utilization and operational efficiencies supported profitability.

Adjusted operating income surged 142.2% year over year to $162.3 million. Adjusted operating margin improved to 38.2% from 25.6% in the prior-year quarter, reflecting operating leverage as revenues increased.

Non-GAAP operating expenses totaled $98.1 million, comprising research and development expenses of $67.5 million and selling, general and administrative expenses of $30.6 million. Adjusted operating expenses represented 23.1% of revenues compared with 31.5% in the year-ago quarter.

Management expects adjusted operating margins to exceed 40% during fiscal 2027, supported by continued revenue expansion and operational improvements.

MACOM's Cash Flow and Financial Position

MACOM generated approximately $155.5 million in operating cash flow during the fourth quarter. Capital expenditures totaled $17.5 million compared with $20.8 million in the preceding quarter.

Cash, cash equivalents and short-term investments totaled $792.4 million at fiscal year-end.

MACOM expects fiscal 2027 capital expenditures between $100 million and $110 million, with roughly 60% directed toward expanding and modernizing wafer fabrication facilities.

MTSI Provides Upbeat Q1 Fiscal 2027 Guidance

For the first quarter of fiscal 2027, MACOM expects revenues between $450 million and $460 million. Adjusted earnings per share are projected between $2.21 and $2.29, while adjusted gross margin is anticipated between 62% and 63%.

Management expects approximately 15% sequential revenue growth in data center and single-digit growth in Industrial and Defense. Telecom revenues are projected to remain flat or decline slightly sequentially.

The company anticipates stronger performance in the second half of fiscal 2027 as manufacturing capacity expands and new production programs ramp up. Management also expects adjusted gross margins to improve approximately 25-50 basis points quarterly.

Zacks Rank & Other Stocks to Consider

Currently, MTSI sports a Zacks Rank #1 (Strong Buy).

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