Maxlinear (MXL) Q3 2026 earnings call transcript

It is now my pleasure to introduce your host, Leslie Green of Investor Relations. Thank you. You may begin. Thank you, Shamali. Good afternoon, everyone, and thank you for joining us on today's conference call to discuss Max Lanier's third quarter 2026 financial results. Today's call is being hosted by Dr. Kishore Sindriput, CEO, and Steve Litchfield, Chief Financial Officer and Chief Corporate Strategy Officer. After our prepared comments, we will take your questions. Our comments today include forward-looking statements within the meaning of applicable securities laws, including statements regarding our guidance for the fourth quarter of 2026, including revenue, GAAP and non-GAAP gross margin, GAAP and non-GAAP operating expenses, GAAP and non-GAAP interest and other expense, GAAP and non-GAAP income taxes, and GAAP and non-GAAP diluted share count.

In addition, we will make forward-looking statements relating to trends, opportunities, execution of our business plan, and potential growth and uncertainties in various product and geographic markets, including, without limitation, statements concerning the future financial and operating results, opportunities for revenue and market share gains across our target markets, new products, including the timing of production and launches of such products, demand for the adoption of certain technologies, and our total addressable market.

These forward-looking statements involve substantial risks and uncertainties, including risks outlined in the risk factor section of our recent SEC filings, including our most recent annual report on Form 10-K and our Form 10-Q for the quarter ended September 30, 2026, which we filed today. Any forward-looking statements are made as of today, and MaxLinear has no obligation to update or revise any forward-looking statements. The third quarter 2026 earnings release is available in the Investor Relations section of our website at MaxLinear. com. In addition, we report certain historical financial metrics, including but not limited to gross margin, income or loss from operations, operating expenses, interest in other expense, and income tax on both a GAAP and non-GAAP basis.

We encourage investors to review the detailed reconciliation of our GAAP and non-GAAP presentations and the press release available on our website. We do not provide a reconciliation of non-GAAP guidance for future periods because of the inherent uncertainty associated with our ability to project certain future changes, including stock-based compensation and its related tax effects, as well as potential impairments.

Non-GAAP financial measures discussed today are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures. We are providing this information because management believes it is useful to investors as it reflects how management measures our business.

Lastly, this call is also being webcast, and the replay will be available on our website for two weeks. And now let me turn the call over to Kishore Sindripo, CEO of MaxLinear. Kishore.

Thank you, Leslie, and good afternoon, everyone. As the ongoing AI infrastructure build-out momentum continues, and as AI data center clusters continue to scale to unprecedented size and bandwidth requirements, we believe MaxLinear is emerging as a key enabler of next-generation connectivity technologies. Demand for our optical data center connectivity and infrastructure solutions continues to strengthen, and we believe MaxLinear is in the early innings of a multi-year AI-driven growth cycle.

Against this backdrop, our AI data center business continues to outperform our expectations. In Q3, overall revenue grew 72% year-on-year, driven by accelerating adoption of our optical PAM4 products, expanding customer engagements, and strong execution across our infrastructure portfolio. Infrastructure as a category grew 210% year-on-year, which is now larger than the rest of our revenue categories combined. Reflecting this momentum, we are raising our 2026 optical data center revenue outlook to $250 million to $270 million. With strong visibility and bookings extending beyond 2027, we expect another significant step up in revenue next year.

Keystone, our 5-nanometer CMOS, 100-gigabit per lane PAM430s family, continues to ramp rapidly in high-volume production across multiple hyperscalers. Its industry-leading power efficiency and performance position max linear at the center of today's 800-gig optical infrastructure deployments.

Looking ahead, we are seeing accelerating customer activity around Rushmore-based 200-gigabit per lane PAMP4 1.6-terabit architectures where qualification programs are advancing toward expected production deployments in 2027. Rushmore is building on Keystone's foundational success and is also expected to become a major multi-year growth driver. Big Sky, our family of next generation 400 gigabit per lane, 3.2 terabit optical and electrical PAMP4 interconnect technologies, will further catalyze growth as data center network speeds continue to accelerate beyond 200 gigabit per lane.

Beyond PAMP430's optics, we continue to broaden our AI infrastructure footprint across optical and electrical interconnects, retimers, control plane connectivity, telemetry, and power management. This strong expansion of content inside the AI data center stack positions MaxLinear to participate across multiple layers of future AI data center architectures. Already, Annapurna, our 1.6 terabit electrical interconnects product family, addresses 1.6 terabit active electrical cable and onboard retimer applications for AI scale-up.

Washington, our 200 gigabit per lane TIA platform, not only supports PAM4 DSP-based optics, but also non-DSP-based linear pluggable optics consisting of LRO, LPO, NPO, and CPO solutions. We expect initial Washington and Annapurna revenues in 2027, followed by a stronger volume ramp in 2028.

We are also excited about our AI rack commander portfolio consisting of USB, PCIe, UART connectivity bridges used for telemetry, power management, and protection solutions for RAC-scale AI infrastructure. RAC Commander expands our role beyond data movement and into the control plane of the AI data center. Customers require advanced telemetry, monitoring, connectivity, and power control capabilities to maximize performance and efficiency, which is critical for infrastructure management. We believe this represents a significant long-term growth opportunity while expanding our strategic footprint.

Additionally, our XGS-PON hyperscale data center design win, which serves as the control plane connectivity network across multiple data centers, has completed qualification. Supported by Secure Backlog, we expect first deployments of this inter-data center control plane solution to start in 2027. Separately, Panther, our storage accelerator platform, continues to gain momentum as customers seek more efficient AI infrastructure. By significantly increasing effective storage utilization and unlocking KVCache capacity for agentic AI applications, Panther enables customers to support larger AI inference workloads without increasing storage infrastructure spending.

We expect Panther revenue to roughly double this year with potential for another meaningful increase in 2027. While AI data center remains our primary growth driver, we expect edge AI-driven upgrades to also drive growth in 27 and 28 for our wireless infrastructure and broadband access and connectivity solutions. These include Sierra single-chip 5G-ran remote radio unit solution, our millimeter-way and microwave backhaul RF and modem SOCs, and XGS PON fiber broadband home gateways.

Both broadband and connectivity categories delivered sequential revenue growth in Q3, driven by large-scale deployments of fiber PON and Wi-Fi 7 gateways at major Tier 1 service providers in North America and Europe.

In closing, accelerating hyperscale deployments, increasing optical connectivity content, new product ramps, and broader participation across the AI infrastructure stack give us confidence that MaxLinear is still in the early stages of a significant growth cycle. Our strategy is focused on strengthening our leadership in high-speed data center connectivity, expanding into adjacent infrastructure markets, and increasing our content share and strategic relevance with hyperscale customers.

With strong customer momentum, great backlog visibility, and a differentiated technology portfolio, we believe MaxLinear is well-positioned to deliver sustained growth and long-term shareholder value. With that, let me turn the call over to Steve Litchfield, our Chief Financial Officer and Chief Corporate Strategy Officer. Steve?

Thanks, Kishore. Total revenue for the third quarter was $218.1 million, up 29% from $168.8 million in the previous quarter, and up 72% from $126.5 million in the third quarter of 2025. Infrastructure revenue for the third quarter of 26 grew to approximately $125 million. Broadband revenue grew to approximately $53 million. Connectivity revenue was approximately $25 million. Our industrial multi-market revenue was approximately $15 million.

Gap and non-gap gross margin for the third quarter were 58.7% and 60% of revenue. The delta between gap and non-gap gross margin in the third quarter was primarily driven by $2.5 million of acquisition-related intangible asset amortization. Third quarter GAAP operating expenses were $97.8 million and non-GAAP operating expenses were $66.5 million. The delta between GAAP and non-GAAP operating expenses were primarily due to stock-based compensation and performance-based equity accruals of $28.8 million combined and acquisition-related costs and other costs of $2.3 million. With the strong growth in our business coupled with continued spending discipline, we have delivered significant improvement in our GAAP and non-GAAP operating margin over the past 12 months.

GAAP operating margin for Q3 2026 was 13.9%, and non-GAAP operating margin in Q3 was 29.5% of net revenue. GAAP and non-GAAP interest and other expense during the quarter was $2.1 million and $2 million. GAAP diluted EPS for Q3 2026 was $0.30 per share. Non-GAAP diluted EPS was $0.62 per share. In Q3 net cash flow was used in operating activities was approximately million We exited Q3 of 2026 with approximately million in cash cash equivalents and restricted cash This included a substantial prepayment for wafers supporting rising demand for our data center products, for which we have committed order backlog throughout 2027.

Our day sales outstanding in Q3 was approximately 31 days versus 28 days in the previous quarter. Our days of inventory was down in the quarter from 123 days to 111 days.

Finally, today we announced that we have amended our existing credit agreement to increase the amounts available under the revolving credit facility by $70 million to $200 million. With this facility, our total available liquidity is much improved, giving us additional flexibility to address further customer demand and other growth opportunities. This concludes the discussion for our Q3 financial results.

With that, let's turn to our guidance for Q4 of 2026. We currently expect revenue in the fourth quarter of 2026 to be between $240 and $260 million. Looking at Q4 by in-market, we expect strong growth in infrastructure driven by data center optical interconnects. We expect broadband and connectivity in-markets to be down seasonally, while industrial multi-market in-market is expected to be up.

We expect fourth quarter gap gross margin to be approximately 58% to 61% and non-gap gross margin to be in the range of 59% and 62% of revenue. We expect Q4 2026 GAAP operating expenses to be in the range of $96 million to $101 million. We expect Q4 2026 non-GAAP operating expenses to be in the range of $65 to $70 million. We expect both our Q4 GAAP and non-GAAP interest and other expense to be in the range of approximately $3.5 to $4.3 million. We expect a $1.3, I'm sorry, $1.5 million tax benefit on a GAAP basis and non-GAAP tax provision of approximately $1.5 million. We expect our Q4 GAAP and non-GAAP diluted share count to be approximately $99.7 million each.

In summary, our quarterly performance highlights the continued strength of our optical product portfolio and the accelerating momentum across several growth drivers within our infrastructure structure business. The progress and innovation we have achieved in this area have been transformative, and we believe we remain in the early innings of a multi-year growth cycle marked by expanding revenue and increasing operating leverage. We're excited about the opportunities ahead and remain confident in our ability to deliver sustainable long-term value for shareholders.

With that, I'd like to open up the call for questions. Operator?

Yeah. Hey, Tori. This is Steve. So I don't think we're planning to give guidance in the out here today, but certainly I do believe you've seen us with some very strong growth coming from our optical DSP business. I think we're actually doing a really great job on the market share standpoint. So I think as you look into 2027, you're starting to see the momentum pick up, and I would expect to see us outgrow the market in 2027.

Thank you, Tori. I think, you know, when you go to the first order of diversity, For us, it's really exciting that now we are transitioning from 800 gig, fully established as a growth vehicle and market share gains. And we are in strong qual cycles on 1.6 terabit or Rushmore products, not just only in optical products, but we are in a strong qual cycle on electrical products as well at the 1.6 terabit speeds. So that's the first layer of diversification that we will. So we expect in the near term, Rushmore to start picking up revenue in 2027.

And if you look to 2028 and 2029, you're going to be a massive growth driver for us, in addition to Keystone at 800 gig, you know, still growing for us as well. So that's the first order of diverse figures. The second part is that our revenues are quite broad-based. It's across all the major module makers. and we have a growing set of module makers who are also engaged in 1.6 terabit beyond our 800 gig product lines.

And the same applies on the data centers as well. Our penetration of, you know, geographically in Asia and the U. S. is increasingly now, the momentum on the designing cycles is starting to shift towards 1.6 terabit. I think the U. S. is in a more advanced phase of 1.6 derivative deployments. We naturally expect the U. S. to become an increasingly strong driver or value proposition in the optical module space as well.

So, Anand, we have never broken down that revenue in that sort of we never do that. However, it's pretty broad-based. Suffice it to say, as 1.6 terabit revenue start ramping, with initial revenues actually in early 27 and a stronger ramp in the second half. The U. S. data centers will start becoming very important both on a static snapshot basis and also on a trajectory basis.

So because the U. S. is the one that's going to adopt 1.6 terabytes, a much earlier cycle than their Chinese counterparts, right? So I think that what we take extreme satisfaction and join is that 1.6 terabit traction is quite across the board substantially. And the U. S. data centers are just beginning to start ramping 1.6 terabit outside of an NVIDIA and a Google in that order. And our supply diversity across the various speed nodes, across 800 gig and 1.6 terabit on the supply lines, including the fabrication process, really puts us in a unique position where within our company, we're not competing across product lines for the same technology node. So in a sense, we should be able to win this race in terms of making a major provider in 1.6.

Steve.

So if you look at the LRO, our DSP naturally lends itself into a full-blown participation, and we believe that in the U. S. , LRO is a real option at the 200 gig per lane, and I believe it will be a major option in the 400 gig per lane as well. That's my particular view. And then if you look at, CPO has gotten delayed because the challenge of the optics in a hybridized co-package configuration is a very huge problem. And therefore, I think NPO supplies what we were thinking about as CPO. NPO, the advantages of maintenance, modularity, diversity of suppliers for the product as against being locked to the AC players on the switch side or the GPU side.

So I think it's a natural place where the ecosystem goes. So I think the NPO will be big. How big? I cannot speak. But I would say on a snapshot basis in 2030, you should expect 60% to 70% pluggable, 20% NPO, and 10% all various forms of it. That's my personal view, not a market view. But I think we'll be a major player in NPO and LROs, which will be the natural, ideally suited for low-power applications versus an LPO in the future as the speeds increase.

Okay?

Sure, yeah, Cody. Look, we have great visibility, as I'm sure you've heard from others in the industry. You know, we're booking products throughout 27 into 2028. You know, lead times for optical product are, you know, 26, 28 weeks. but customers are certainly coming in and placing orders out much further than that, just kind of given they want a secure supply. You've seen a lot of our, you know, upsides that we've delivered. I think you'll continue to see more of that growth in 27.

Yeah, sure. So gross margin, as you know, we've been making some nice progress, kind of moved up from 58. We delivered on 60% this quarter, our guidance at 60.5. So I think we're really seeing some nice progress, kind of despite some of the cost increases that, you know, we're seeing across our entire ecosystem here, I guess. Some of that we've been able to pass along to the customer.

And I think our cost structure is actually just very good. So as the mix continues toward more infrastructure products, I think you will see our gross margin continue to trend up.

Thanks, Cody.

So, Chris, I don't think so at all. Not at all, actually. and you have to keep this in mind that even in the supply chain, nobody is signing real long-term agreements. So you have strict discipline on lead time. There's a lot of manufacturing shortage. So it is really naturally organizing the entire supply chain into very disciplined.

You'll only get what you need now sort of behavior. So I don't think there's any double ordering. And then you get back to our DSP world. You know, we are the only pure play DSP provider in the optical pluggable. Wafer capacities are allocated by companies, by the major foundry. And, you know, if you are in 5 nanometer, for example, you're welcome to choose how you distribute your silicon between switch pluggables, GPUs, TPUs, and so on and so forth, right? So every company gets to prioritize what is in their best value interest. So I would say that that is not the case at all, number one. Number two is that, you know, even to place overordering, the data system guys are very, very disciplined about creating pure supply chains.

That means what I mean by that is the optics, the DSP, for a particular qualification at a data center is very unique. so that they don't cross corrupt the supply chain. So I think it's golden. It's not a screw, but it's a bolt. So there is a bolt there that is really, really fastening the cantilever bridge quite well here. So that's for those in the San Francisco Bay Area. But, yeah, it's looking pretty good.

Chris, there's a lot of questions out there that you proposed here to me. I will take the first one, which is basically related to supply. I think the optic supply is easy. We are really constrained by foundries on the DSP supply. And the data center build out is really accelerating. So if you sit here and talk, if the demand, you know, people talked about TAM units for optical pluggables, no matter what flavors, is in the order of 120 million units. Now they talk about 27, 28, maybe 200 million units. So I'm not keeping count anymore, right? So, however, the FAP capacity is not coming online.

These are huge multi-year efforts. And so there's really, really a FAP capacity shortage, I would say. And so the DSP supply is a pretty strong supply constraint. And we are really being, you know, and the opportunity on the CPO stuff really is a scale-up side, which is a green field opportunity for us. But I do believe the NPO is going to be the more bigger success driver than a CPO.

And in an NPO scenario too as well, as you go to higher speed, longer term, there will be a DSP required just like an LRO configuration on the vertical half DSP because we can all agree now that the LPOs are really, really a very small fraction, point technology and they don't have legs for the future.

Right? So we have product portfolio that spans TIAs. We have drivers and also we have announced products along those various categories. So I feel we are very well positioned whichever way the industry goes and we'll have a full portfolio.

So, I'll take that. I mean, with regard – so, this year, our optical growth is almost all 800, you know, in the first half. As we've stated and Keishor mentioned earlier, 1.60 starts in 27, but it will have a much bigger growth year in 2028. You know, what is the mix in 28? I mean, I think it's substantially 1.6. Maybe you'll see 800 kind of trailing off, but potentially it can sustain as well up until probably 2029.

So, I mean, we see, you know, significant growth in 27 as well as 28 on both of those.

Hey, Quinn. Yeah, so, I mean, we talked about this a little bit before. Similar to others, I mean, the prepayments, mostly on the waiver side. I mean, there's lots of other things going on out there. I mean, on the balance sheet, it isn't just TSMC. There's other things on prepayments as well that we don't break up.

As far as, I mean, I talked earlier about visibility in 27. Yeah, I mean, backlog, as you would imagine, is very, very good in 27 and into 2028. prepaid. I mean, look, I expect prepaid to continue to go up from here as, you know, our revenue projections continue to go up as well. So, you know, I think that's part of the reason why we increased the revolver itself, you know, just to make sure that we can capture that all of that upside capacity that's coming from increased market share that we've gained.

you know uh hey quiz is kishore i i think it's very hard to estimate share uh yeah thank you i think it's very hard to estimate share given the accelerating demand on units as well so uh if i'm looking backward then i think we are well about the number if i'm looking forward uh maybe we made more progress beyond that share percent but i don't know at what level we are so So can I say what we would look like two years from now?

Sure. It should be in the teens for sure, right? And, you know, so I think that's a very backward-looking number. On a share percentage basis, on a backward-looking TAM basis, it should be larger. But on a forward-looking basis, it's very hard to estimate because the numbers are moving all around. But suffice to say we are gaining share every day I think in a 12 to 24 window we could be neck and neck with one of our two competitors That's the hope, that's the goal, and that's the momentum.

No, Tim, I feel very confident we're outgrowing the market, which I think is supportive of what you're asking, yes. And we can speak for Marvell's numbers.

Tim, we can't comment on that, right?

Yeah, but the numbers you're talking about, I mean, look, there's a lot of growth here. I mean, Kishore commented earlier about the transceiver growth. I mean, people are talking 200 million units next year. I mean, so these numbers make a lot of sense, as Kishore stated. Being up in the teens over the next couple of years, very achievable. I think we are doing a great job. I think you've seen that from us in 2026, but I would say it's just getting going. You're going to continue to see through that in 27 and 28.

Yeah, thanks, Travis. Yeah, I mean, we actually feel pretty good. I mean, we do see some seasonality in Q4, certainly, but as far as 27 goes, I mean, you know, just as we had talked about previously with the telco spending, but then also our market share gains on the pond side, we do expect to see growth in 2027. So, feel very good about that.

So, Tori, obviously it's been three months, and we do not know where it would be, but I think there's an initial design win that will start shipping in the first half. The exact amount of quantity is not clear, but it's meaningful in the sense that it sets up the second half very nicely. And also, second part also is correct, what you asked.

They are accelerating design qual momentum going on. And somewhat we are bottlenecked by our own ability to support multiple quals simultaneously, and we're all going through resource bottlenecks from that angle. So that narrative is also about also accelerating on the qual windows across the module space into the data center cycles, right? So I think that's what gives me a little more – and then we also have commitments both for DSP and TIA in these design wins. So it's not just our DSP alone.

Obviously, we live in a world where we want to attach our own TIA to our own DSP for selfish reasons beyond just a great performance advantage and cost saving for our own customers. in terms of power efficiency and the total bomb efficiency, right? So I think all the three questions you answered are a strong affirmative response.

You're absolutely right. So if you just take this proverbial 2x, historically it never stuck when it changed speeds, right? But this time it's sticking, right? So the ASP on the DSP is more or less doubling, and then we have TIA that we did not add before. So all in all, we'll be growing more than a 2x on the ASP number. So, and the TIA is not just a TIA, right? It's got smarts that really has what I call trajectory guide to our NPO strategy and our CPO strategy and our LPO strategy and LRO strategy. So, it's an all-in-one deal in the max leader TIA world.

Oh, so, you know, the quals has got nothing to do with wafer supply, right? It's all the, you know, you have to line up. Let's say you have 10 module makers, and that's not unrealistic. And then all of the 10 want to go simultaneously, get their modules ready to go to the data center quals. We'll have to pick and choose, right? Because at the end point, multiple module makers are targeting the same data centers as well. So that constrains us in terms of how we prioritize our own internal resources to get quality.

So that was a contest I talked about, right? These are pretty complicated. Even though people simplify it and call it a pluggable, it sounds so trivial, but these are one of the most complex technologies that chip people have ever developed over the last 20 to 30 years. and you ought to think about this not just in terms of pluggable alone, you also ought to think about interoperability with the switch, the other two vendors of silicon and pre-existing 800 gig silicon as well. So not just 1.6 terabits. So it's pretty complicated. So we're constrained in how many we can activate at the same time. So you, of course, sequence and prioritize them. That's the constraint I was referring to.

Okay, good question. I would say, you know, if you take the short-term window versus, let's say, a year-out window, the TIA attached rate answers will be quite different, right? In the short term, let's say it's an 80% attached rate. And in a year and a half from now, I know it's around the corner. It'll be 100%. And we hope it to be more than 100%, right? It's a TIA that works with other DSPs as well. and there's only one other real TIA vendor that meets the performance benchmarks that you need for a 1.6-terd-bit type of product with the power envelope that you need to meet. That is the truth, despite what anybody can tell. So we hope to be the other guy outside of the one guy, and we have validation to show that.

So we expect the attach rate to be 100% at least and more in a year and a half from now. That's the number one answer. The next question you had was related to, could you repeat that for me, please? I just forgot. Anapurna. Just Anapurna. Anapurna, look. Yeah, it's an active electrical cable, right? There's one large leader, which everybody knows is Credo. They're 93% or maybe 99% of the entire AEC cable market. But I think the market is diversifying now because the problem is getting a lot more complicated. and there are going to be multiple AEC vendors and our solution would be a pure silicon plate to selling it to a cable maker or somebody who makes what they call the paddle cart for the AEC.

So our revenues for the AEC will not be as large as selling a whole cable, but it will correspond to what an AEC market would dictate in terms of silicon price inside it. So I would think that it would be a similar pricing as our RAM 4 DSP for optical. And we expect not to get a big share, let's assume. But, you know, we are planning around one or two big data centers and then a share of those guys through intermediaries.

And so I think we should be able to get to 20 to 30 percent in the 1.6 terabit cycle someday in the next couple of years. But we won't expand it to multiple data centers, right? We're only one or two data centers in the U. S. Excellent.

Thank you, Shamali, and thank you all for joining. This quarter, we will be presenting at a number of financial conferences and virtual events. Details will be posted on our Investor Relations page.

Thank you all for joining today, and we look forward to speaking with you again soon.