$MTSI KEY READ-THROUGHS FROM MACOM TECHNOLOGY SOLUTIONS Q2 2026 EARNINGS CALL
MACOM’s Q2 FY2026 call provided a broad, high-signal read-through across AI data center optical connectivity, defense electronics, LEO satellite communications, compound semiconductor supply chains, 5G infrastructure, cable access infrastructure, and select industrial end markets. The most important market message was that AI-related optical demand is accelerating materially and appears backlog-supported rather than purely speculative: MACOM raised its FY2026 data center growth outlook from 35% to 40% to over 60%, guided Q3 data center revenue to approximately 35% sequential growth, and described 1.6T demand as durable through calendar 2026 and into 2027. The second major signal was that defense electronics content growth is broadening in both the US and Europe, with MACOM’s I&D business growing 22% in the first half and management now expecting over 20% FY2026 growth. The negative read-throughs are equally important: copper interconnect adoption remains additive and TBD rather than a near-term displacement of optical; CW lasers should not yet be placed in FY2026 or FY2027 models; broad 5G RAN remains flat; and LEO satellite ramps are real but more CY2027-weighted than near-term. The call is most actionable for companies exposed to 800G/1.6T optical modules, photodetectors, transceiver manufacturing, compound semiconductor materials, defense RF/microwave content, and satellite payload/gateway electronics.
AI DATA CENTER OPTICAL AND NETWORKING
STRUCTURAL POSITIVE FOR 800G/1.6T OPTICAL MODULES, PHOTONICS AND TRANSCEIVER MANUFACTURING (READ-THROUGH 1)
Affected companies: Coherent Corp. (COHR: US), Lumentum Holdings (LITE: US), Fabrinet (FN: US), Zhongji Innolight (300308: China), Eoptolink Technology (300502: China), Accelink Technologies (002281: China), Broadex Technologies (300548: China).
Directional impact and magnitude: Positive, high magnitude. This is the highest-conviction cross-market read-through from the call.
Call support: MACOM stated that data center revenue was $98.2 million, up approximately 14.5% sequentially, and raised its FY2026 data center revenue growth base case from 35% to 40% to over 60%. Management also guided Q3 data center revenue to approximately 35% sequential growth. The key operational comment was: “Today, our revenue growth is primarily being driven by increased pluggable optical modules and optical cable production volumes using our 800 and 1.6T PAM4 products.” Management added that “demand for our 200 gig per lane photo detectors continues to grow, supporting 800G and 1.6T optical connectivity.”
Transmission mechanism: MACOM’s strength is direct evidence of accelerating production volumes in the AI optical module supply chain. MACOM is a component supplier rather than a module vendor, so its revenue acceleration implies higher unit demand and content intensity at optical module manufacturers and their assembly partners. This benefits optical transceiver manufacturers, photonic component suppliers, laser suppliers, and contract manufacturers exposed to 800G and 1.6T ramps. Fabrinet benefits through module assembly volumes. Coherent and Lumentum benefit through lasers, photonics, and optical components. Chinese module vendors benefit if they are participating in the same hyperscaler 800G/1.6T production ramps, though MACOM did not disclose specific customer names.
Near-term trading catalyst: Positive estimate and sentiment catalyst for optical module and component suppliers exposed to 800G/1.6T as investors re-underwrite the scale and duration of the AI optical cycle.
Longer-duration fundamental shift: AI cluster architecture is increasing optical connectivity intensity across scale-up, scale-out, and scale-across networks, expanding the served market for high-speed optical components beyond a normal data center transceiver refresh.
POSITIVE READ-THROUGH TO AI NETWORKING SILICON AND SYSTEMS, BUT THE SIGNAL IS STRONGER FOR OPTICAL THAN COMPUTE (READ-THROUGH 2)
Affected companies: Broadcom (AVGO: US), Marvell Technology (MRVL: US), Arista Networks (ANET: US), NVIDIA (NVDA: US), Cisco Systems (CSCO: US).
Directional impact and magnitude: Positive, medium to high magnitude for AI networking suppliers; positive but lower incremental magnitude for broad AI compute beneficiaries already priced for strong hyperscaler capex.
Call support: Management said, “Based on customer engagements and general market trends, we expect 1.6T deployments inside the data center to continue to be strong throughout calendar 2026.” In Q&A, MACOM said 1.6T is “the main event today” and is expected to continue through fiscal/calendar 2026 “and even into ’27.” Management also stated that revenue is now present across “scale-up, scale-out and scale across,” and later said, “The data center, we’re not expecting a slowdown. The hyperscalers continue to invest. That’s clear.”
Transmission mechanism: The read-through is that hyperscaler AI capex is continuing to move from compute-only spend into network fabric densification. Faster optical links require higher-radix switches, custom networking silicon, retimers, optical DSPs, NICs, cables, and switching systems. Broadcom and Marvell are exposed through switching silicon, custom silicon, and optical/electro-optical content. Arista benefits from higher AI networking system demand. NVIDIA benefits indirectly through continued hyperscaler AI infrastructure intensity, but MACOM’s data point is more specific to networking than GPUs. Cisco benefits to the extent AI Ethernet and high-speed data center networking demand broadens beyond the most concentrated hyperscaler deployments.
Near-term trading catalyst: Positive for AI networking estimate durability and for the view that networking bottlenecks remain an investable theme through 2026.
Longer-duration fundamental shift: Network bandwidth per accelerator and per rack is structurally rising, creating a multi-year content tailwind for high-speed switching, optical interconnect, and data center networking systems.
COPPER INTERCONNECT EXPECTATIONS SHOULD BE TEMPERED NEAR TERM; OPTICAL REMAINS THE DOMINANT REVENUE DRIVER (READ-THROUGH 3)
Affected companies: Credo Technology Group (CRDO: US), Astera Labs (ALAB: US), Amphenol (APH: US), TE Connectivity (TEL: US), Broadcom (AVGO: US), Marvell Technology (MRVL: US).
Directional impact and magnitude: Mixed. Near-term negative, medium magnitude for copper-centric trading narratives; longer-duration positive, low to medium magnitude for companies with credible active copper cable, linear equalizer, retimer, and electrical interconnect exposure.
Call support: MACOM said it is “very active with our equalizer portfolio” and is pursuing equalizers for 1.6T, PCIe, and other applications closer to compute. However, when asked whether copper is “the next big thing,” management responded: “I would put it in the category of a TBD,” adding that MACOM is seeing “real demand, real hardware, real production ramps on the optical side and that is certainly the vast majority of our revenue today.” Management described electrified cable as “a great opportunity” that “will be additive in the future.”
Transmission mechanism: The call validates copper as a future opportunity but rejects a near-term thesis that active copper or linear equalization is displacing optical at scale today. This matters for Credo and Astera because both are exposed to high-speed electrical connectivity narratives, though their revenue bases and product mixes differ. It also matters for Amphenol and TE Connectivity because cable and connector investors may be extrapolating faster active/electrical cable adoption. The transmission is through timing and mix: optical production is already scaling materially, while copper remains in engagement and use-case development.
Near-term trading catalyst: Negative for stocks whose near-term multiple expansion depends on imminent large-scale copper displacement of optical links.
Longer-duration fundamental shift: Still positive for electrical interconnect content over time, particularly around rack-scale architectures, active copper cables, PCIe connectivity, and compute-adjacent links, but adoption cadence remains uncertain.
CW LASER DEMAND IS REAL, BUT QUALIFICATION RISK PUSHES MATERIAL REVENUE OUTSIDE NEAR-TERM MODELS (READ-THROUGH 4)
Affected companies: Lumentum Holdings (LITE: US), Coherent Corp. (COHR: US), Applied Optoelectronics (AAOI: US).
Directional impact and magnitude: Mixed. Positive, medium magnitude for established qualified laser suppliers; negative, medium magnitude for late entrants or investors assuming broad new CW laser revenue in FY2026 or FY2027.
Call support: MACOM said customers have tested and validated optical performance of its CW lasers, but the company is still “dialing-in a process of record” and optimizing reliability. Management was explicit: “I would at this stage, not put your CW laser in your models, certainly not for fiscal ’26 or I would say even ’27.” Management also described the laser as “the weakest link” in these systems and noted that internal reliability work, module qualification, and hyperscaler qualification still have to occur.
Transmission mechanism: The read-through is that CW laser demand for silicon photonics and future optical architectures is structurally attractive, but qualification cycles remain long and reliability-gated. Incumbents with qualified manufacturing platforms and customer approvals should retain a near-term advantage. Lumentum and Coherent benefit if hyperscalers need reliable, qualified CW/high-power laser sources before newer entrants reach scale. Applied Optoelectronics benefits only where it has relevant qualified laser or module exposure; otherwise, the call is a reminder that optical performance alone does not create revenue without reliability and qualification.
Near-term trading catalyst: Negative for speculative CW laser revenue assumptions at non-incumbent suppliers.
Longer-duration fundamental shift: Positive for the CW laser market if coherent light, silicon photonics, CPO/NPO, and higher-speed data center architectures scale, but revenue timing should be modeled conservatively.
LEGACY 100G DFB LASER DEMAND IS MORE RESILIENT THAN EXPECTED BECAUSE COMPETITORS ARE PIVOTING CAPACITY TO HIGHER-POWER LASERS (READ-THROUGH 5)
Affected companies: Applied Optoelectronics (AAOI: US), Coherent Corp. (COHR: US), Lumentum Holdings (LITE: US).
Directional impact and magnitude: Positive, medium magnitude for suppliers retaining DFB capacity and legacy 100G optical product support; potentially negative, low to medium magnitude for suppliers that have over-rotated away from legacy laser portfolios.
Call support: MACOM said lower data-rate 100G single-mode and multimode products are still showing modest growth. In Q&A, management said that as “customers and competitors are pivoting to more, let’s say, the higher-power or CW lasers to support silicon photonics, that’s creating a little bit of a gap in DFB lasers,” adding that MACOM has a “strong broad DFB laser portfolio” to support “legacy data center 100-gig modules” and that this “could be a great business for us over the next one to two years.”
Transmission mechanism: AI bandwidth growth is not eliminating legacy optical demand as quickly as some investors assume. Long-tail 100G demand persists in parts of the data center and network infrastructure market. If competitors move capacity and engineering focus toward CW/high-power lasers, DFB supply tightens and pricing/margins can improve for suppliers that remain committed. Applied Optoelectronics, Coherent, and Lumentum are affected through the legacy optical component and module supply chain, though the specific benefit depends on each company’s capacity allocation and customer exposure.
Near-term trading catalyst: Positive for suppliers with near-term DFB availability and 100G module exposure.
Longer-duration fundamental shift: Limited duration. Management framed the opportunity as 1 to 2 years, not a new secular growth market.
COMPOUND SEMICONDUCTOR MATERIALS, SUBSTRATES AND EQUIPMENT
INP AND SIC SUPPLY SECURITY IS BECOMING STRATEGIC; DIRECT POSITIVE FOR IQE AND BROADER POSITIVE FOR COMPOUND SEMICONDUCTOR MATERIALS (READ-THROUGH 6)
Affected companies: IQE plc (IQE: UK), AXT Inc. (AXTI: US), Coherent Corp. (COHR: US), Aixtron SE (AIXA: Germany), Veeco Instruments (VECO: US).
Directional impact and magnitude: Positive, high magnitude for IQE; positive, medium magnitude for broader InP, SiC, epitaxy, and compound semiconductor equipment exposure.
Call support: MACOM discussed its investment in IQE, stating that IQE raised GBP80 million and that MACOM participated with a GBP45 million investment, including GBP30 million in equity for approximately 11% ownership and a GBP15 million convertible note. Management said the transaction included a “long-term supply agreement” to ensure “adequate supply” of technologies MACOM is acquiring from IQE and others. Management described the rationale as “supply-chain security and resiliency” and said it would “backstop our expected growth, not only as it relates to indium phosphide based products, but also silicon carbide-based products and some other technologies as well.”
Transmission mechanism: This is a direct validation of strategic scarcity in compound semiconductor materials and epitaxy. IQE benefits most directly from capital injection, long-term supply agreement, and customer validation. AXT and Coherent are affected through broader InP substrate and compound materials demand. Aixtron and Veeco benefit through MOCVD and epitaxy equipment demand if photonics, GaN, InP, and SiC capacity additions continue across the industry. The key point is that AI optical and defense GaN demand are pulling on upstream materials in a way that is important enough for MACOM to use balance sheet capital to secure supply.
Near-term trading catalyst: Direct positive for IQE because the transaction is company-specific and linked to MACOM’s growth.
Longer-duration fundamental shift: Positive for strategic value of qualified InP, SiC, and epitaxial supply chains as AI photonics, defense GaN, and satellite high-frequency links scale.
COMPOUND SEMICONDUCTOR CAPEX IS SELECTIVE AND HIGH-ROI, NOT A BROAD GREENFIELD FAB CYCLE (READ-THROUGH 7)
Affected companies: Aixtron SE (AIXA: Germany), Veeco Instruments (VECO: US), Applied Materials (AMAT: US), Lam Research (LRCX: US), KLA Corp. (KLAC: US).
Directional impact and magnitude: Mixed. Positive, low to medium magnitude for specialty compound semiconductor equipment suppliers; neutral to slightly negative, low magnitude for broad semicap names expecting a large greenfield compound semiconductor buildout.
Call support: MACOM guided FY2026 capex to $55 million to $65 million and said capital should remain in the 4% to 5% of revenue range. Management said North Carolina wafer production capacity is being increased by 30% with less than $20 million of investment, Massachusetts is adding advanced GaN and InP equipment, and France is moving a product line from 3-inch to 6-inch and installing a new MOCVD reactor. Management was explicit: “You will not see us greenfielding a building a new fab, building a new factory.”
Transmission mechanism: The call supports demand for targeted bottleneck tools, MOCVD reactors, process upgrades, yield tools, and capacity expansions within existing fabs. It does not support a broad-based greenfield fab equipment cycle. Aixtron and Veeco are better positioned for this type of targeted compound semiconductor capex than broad wafer-fab equipment suppliers whose revenue sensitivity depends on large-scale fab builds. AMAT, Lam, and KLA may see only limited read-through because MACOM’s strategy emphasizes incremental capacity, used equipment, and fab utilization rather than large new fab construction.
Near-term trading catalyst: Mild positive for specialty compound semiconductor tool vendors; limited impact for broad semicap.
Longer-duration fundamental shift: Specialty semiconductor suppliers are likely to prioritize capital-light capacity debottlenecking and supply-chain control rather than aggressive new capacity, which supports margin discipline but limits semicap upside.
DEFENSE ELECTRONICS, RF, MICROWAVE AND GALLIUM NITRIDE
DEFENSE RF, MICROWAVE, MMWAVE, GAN AND OPTICAL CONTENT IS ACCELERATING ACROSS RADAR, MISSILE DEFENSE, EW AND COUNTER-DRONE SYSTEMS (READ-THROUGH 8)
Affected companies: Analog Devices (ADI: US), Qorvo (QRVO: US), Teledyne Technologies (TDY: US), Mercury Systems (MRCY: US), RTX Corp. (RTX: US), Lockheed Martin (LMT: US), Northrop Grumman (NOC: US), L3Harris Technologies (LHX: US).
Directional impact and magnitude: Positive, high magnitude for defense electronics and RF/microwave suppliers; positive, medium magnitude for large defense primes.
Call support: MACOM’s industrial and defense revenue was $120.7 million, a record level, and first-half FY2026 I&D revenue grew 22% versus the prior year. Management expects I&D growth above 20% for FY2026 and said revenue from the top 25 defense customers should “significantly increase” from FY2025 to FY2026. Management cited radar systems, missile and missile defense systems, drone and drone defense systems, communications systems, wideband EW, space-based sensors, secure communications, and RF-over-fiber. The key content statement was that these systems are using “higher frequencies, higher RF or microwave power levels and higher levels of integration,” creating “incremental semiconductor content growth opportunities.”
Transmission mechanism: Modern defense systems are becoming more RF-, microwave-, millimeter-wave-, photonics-, and GaN-intensive. This expands dollar content per platform for suppliers of high-performance analog, RF, microwave, ADC/DAC, GaN power, phased-array, and embedded defense electronics. Analog Devices benefits through high-performance analog/RF content. Qorvo benefits through GaN and RF power exposure. Teledyne and Mercury benefit through defense electronics and mission systems content. RTX, Lockheed, Northrop, and L3Harris benefit through stronger demand for systems that integrate this content, though primes may also face supply-chain and cost pressures.
Near-term trading catalyst: Positive for defense electronics suppliers with exposure to radar, EW, missile defense, and counter-drone upgrades.
Longer-duration fundamental shift: Defense modernization is increasing semiconductor content per system, making defense electronics a secular growth vertical rather than a purely budget-driven prime contractor story.
EUROPEAN DEFENSE ELECTRONICS DEMAND IS BROADENING AND SHOULD NOT BE TREATED AS ONLY A US PROCUREMENT CYCLE (READ-THROUGH 9)
Affected companies: BAE Systems (BA.: UK), Thales (HO: France), Leonardo (LDO: Italy), Rheinmetall (RHM: Germany), Saab AB (SAAB B: Sweden), Hensoldt (HAG: Germany), QinetiQ (QQ.: UK).
Directional impact and magnitude: Positive, medium to high magnitude for European defense electronics and sensor suppliers.
Call support: Management said the defense market is “very active, not only here in the US, but also overseas,” and added: “We have a growing customer-base in Europe. When we were looking at our recent growth rates of between North American and European defense customers, they’re both growing at the same rate. We were very pleased to see that. So the Europeans are spending more money on electronics and defense systems and we’re participating in that.”
Transmission mechanism: The call supports the view that European defense spend is increasingly electronics-content-rich, not limited to munitions, vehicles, or platforms. This benefits companies with radar, sensors, EW, secure communications, missile defense, and phased-array exposure. Hensoldt, Thales, Leonardo, Saab, BAE, Rheinmetall, and QinetiQ all have varying degrees of exposure to European defense electronics modernization. The key transmission is higher electronics content and faster upgrade cycles as European customers modernize systems against new threats.
Near-term trading catalyst: Positive for European defense electronics sentiment and backlog confidence.
Longer-duration fundamental shift: European defense budgets are increasingly likely to flow into RF, sensors, EW, and secure communications, supporting higher-margin electronics exposure within the European defense complex.
RF POWER GAN SHARE SHIFTS ARE REAL BUT LONG-DATED; 2026 ESTIMATES SHOULD NOT CAPITALIZE COMPETITOR EXIT BENEFITS (READ-THROUGH 10)
Affected companies: Qorvo (QRVO: US), NXP Semiconductors (NXPI: Netherlands), Sumitomo Electric Industries (5802: Japan), Mitsubishi Electric (6503: Japan), MACOM Technology Solutions (MTSI: US).
Directional impact and magnitude: Positive, medium magnitude for potential share gainers over 2027 and beyond; neutral to negative, low to medium magnitude for 2026 estimates that assume immediate displacement.
Call support: Asked about a competitor exiting the RF power GaN market, management said: “The benefit has not been realized and it won’t happen in ’26. The revenue will start to shine through in ’27.” Management added that the opportunity is “best-case, a back-half of ’27 contribution” because customers need time to pivot, qualify MACOM on new platforms, and convert design wins into revenue. The exiting competitor also put last-time buys and inventory in place, reducing near-term disruption.
Transmission mechanism: RF power GaN share shifts require platform qualification, new design wins, and customer redesign cycles. That creates opportunity for surviving RF power suppliers but delays revenue recognition. Qorvo, NXP, Sumitomo Electric, Mitsubishi Electric, and MACOM are affected through competitive positioning in RF power and base station/defense GaN applications. The read-through is positive for long-duration share capture, but negative for near-term investor expectations of immediate revenue transfer.
Near-term trading catalyst: Limited. The call explicitly rejects FY2026 upside from competitor exit.
Longer-duration fundamental shift: Positive for remaining qualified RF power GaN suppliers as new programs are redesigned around alternative sources.
