MTSI: Future Revenue Milestones Will Rely On Execution Across Three End Markets

Analysts have nudged their price target for MACOM Technology Solutions Holdings slightly higher to approximately $185 from about $183, citing solid recent results, improving gross margins, and confidence in the company's long term growth potential across its three core end markets.

Analyst Commentary

Bullish analysts point to MACOM's consistent execution and improving gross margins as key supports for the higher price targets, arguing that the company now has clearer line of sight to surpassing $1B in annual sales over the medium term.

The recent quarters are characterized as solid both on results and outlook, with upside in gross profit margin helping to offset earlier headwinds from the integration of the recently acquired RTP fab.

Analysts also emphasize MACOM's exposure to secular growth drivers across defense, telecom, and data center markets, noting that its high performance RF, frequency, and data rate capabilities position the company as a beneficiary of long term infrastructure and AI related investments.

Bullish Takeaways

Recent quarters delivered above midpoint sales and encouraging guidance. This reinforces confidence in management's ability to execute against targets and support premium valuation multiples.
Gross margin improvement, particularly as integration issues from the RTP fab are worked through, is seen as a structural positive that can drive operating leverage and earnings upside.
Secular demand across defense, telecom, and data center end markets underpins a multi year growth narrative, with potential for MACOM to exceed $1B in annual revenue for the first time.
MACOM's positioning in high performance RF power, high frequency, and high data rate solutions is viewed as a competitive advantage that can sustain above market growth and justify elevated price targets.

Bearish Takeaways

Some bearish analysts highlight that the stock screens as nominally expensive on traditional valuation metrics. This leaves less room for error if growth or margins were to disappoint.
Execution risks around continued integration of acquired assets, including the RTP fab, could pressure gross margins again if cost synergies or yields do not materialize as expected.
MACOM's reliance on a few key secular themes, such as data center and defense spending cycles, introduces macro and budget related risk that could slow growth relative to bullish expectations.
Higher expectations embedded in raised price targets mean that any slowdown in order momentum across its three core end markets could prompt multiple compression even if the business remains fundamentally sound.

What's in the News

Issued fiscal first quarter 2026 guidance, projecting revenue between $265 million and $273 million, and signaling continued top line growth expectations (Corporate guidance)
Announced a new PCIe 6.0 and CXL optical chipset, which extends high speed, low latency connectivity up to 100 meters over multimode fiber for data center and HPC applications (Product release)
Set to demonstrate its PCIe 6.0 optical extension solution at CIOE 2025 in Shenzhen and ECOC 2025 in Copenhagen, with a focus on disaggregated computing and AI workloads (Trade show demonstrations)
Planning to showcase an expanded analog connectivity portfolio at ECOC 2025, including 3.2T and 1.6T optical solutions, PCIe 6.0 optical links and 100G LPO ecosystems for data center and telecom markets (Product demonstrations)
Preparing a broad RF, microwave and mmWave showcase at European Microwave Week 2025, highlighting SATCOM, radar, RF over fiber and space qualified components alongside GaAs and GaN foundry services (Product demonstrations)

Valuation Changes

Fair Value: Risen slightly from approximately $183.00 to about $184.79 per share, reflecting modestly stronger fundamentals.
Discount Rate: Fallen slightly from roughly 10.69 percent to about 10.61 percent, implying a marginally lower perceived risk profile.
Revenue Growth: Effectively unchanged at around 13.72 percent, signaling stable long term top line expectations.
Net Profit Margin: Effectively unchanged at roughly 32.68 percent, indicating no material shift in long term profitability assumptions.
Future P/E: Risen slightly from about 40.58x to approximately 40.89x, pointing to a small increase in the valuation multiple applied to forward earnings.

Expanding AI, 5G, and SATCOM markets are fueling growth in MACOM's optical, RF, and microwave solutions, driving sustained revenue and margin improvements.
Operational enhancements, strategic acquisitions, and R&D investments position MACOM for innovation, competitive gains, and resilient earnings across diversified end-markets.
Heavy dependence on volatile markets, fab execution, and scarce technical talent creates significant risks to sustained revenue growth, profitability, and future innovation.

Catalysts

About MACOM Technology Solutions Holdings

Provides analog semiconductor solutions for use in wireless and wireline applications across the radio frequency (RF), microwave, millimeter wave, and lightwave spectrum.What are the underlying business or industry changes driving this perspective?

MACOM is set to benefit from accelerating demand in AI-driven cloud computing and hyperscale data center buildouts, as evidenced by strong revenue growth from high-speed optical interconnects, photodetectors, LPO chipsets, and upcoming PCIe equalizer solutions; this positions the company for sustained top-line growth as AI workloads proliferate.
The global rollout of 5G and expansion of satellite communications (SATCOM) are driving significant demand for MACOM's advanced RF, microwave, and GaN-on-SiC solutions, with new product portfolios (e.g., GaN 4 process, high-frequency amplifiers) enabling market share gains and better pricing-supporting both near-term revenue and high-margin, longer-term earnings.
Full operational control of the RTP fab enables increased capacity (up to 30% boost within 12-15 months), improved yields, and cost efficiencies; this is expected to shift the fab from a short-term gross margin headwind to a meaningful margin tailwind by late 2026, leading to expansion of company-wide gross and operating margins.
Continued strong secular growth in defense, industrial, and space electronics-amplified by Western onshoring and government incentives-aligns with MACOM's trusted foundry status and deepened European footprint (MESC), supporting persistent revenue backlog, diversified end-market exposure, and improved earnings resilience.
Ongoing investments in proprietary, high-value R&D and targeted M&A (with $735M in cash and a net cash position) enhance MACOM's ability to rapidly innovate for future optical, RF, and mixed-signal applications, which should further accelerate EPS and free cash flow growth as emerging standards and systems ramp up in coming years.

MACOM Technology Solutions Holdings Earnings and Revenue Growth

MACOM Technology Solutions Holdings Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming MACOM Technology Solutions Holdings's revenue will grow by 11.2% annually over the next 3 years.
Analysts assume that profit margins will increase from -7.7% today to 47.0% in 3 years time.
Analysts expect earnings to reach $586.5 million (and earnings per share of $7.5) by about September 2028, up from $-69.9 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 27.6x on those 2028 earnings, up from -138.2x today. This future PE is lower than the current PE for the US Semiconductor industry at 33.5x.
Analysts expect the number of shares outstanding to grow by 2.86% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 10.21%, as per the Simply Wall St company report.

MACOM Technology Solutions Holdings Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Management signaled that gross margins are not expected to reach the targeted 60%+ level at the $1 billion revenue run rate until at least 2027, reflecting ongoing margin headwinds from the newly acquired RTP fab and underutilization in Lowell, putting pressure on long-term profitability and potentially limiting earnings growth.
Data center and telecom revenue growth is acknowledged as volatile with difficult year-over-year comparables and uncertain growth rates for FY26 and beyond; this cyclicality and reliance on strong, but lumpy secular trends in these markets could result in significant top-line growth risk and earnings variability.
A large portion of near-term and planned growth, especially in defense and 5G-related telecom, hinges on successful execution of capacity expansion and yield/cost improvement projects at the RTP fab; any delays, operational setbacks, or inability to deliver on projected performance improvements could erode both revenue and net margins.
The increasing reliance on a few core secular growth verticals-namely defense, data center, and high-speed communications-could expose MACOM to industry maturation risks (e.g., 5G buildout saturation or slowing defense spending), and margin compression as new competitors narrow technological gaps, pressuring future revenue and earnings streams.
MACOM's strategy depends heavily on attracting and retaining highly skilled technical talent and ramping new product introductions; ongoing industry-wide semiconductor talent shortages and the challenges of integrating multiple global fabs (with recent management retirements) could constrain R&D productivity, slow innovation, and undermine long-term revenue and margin expansion.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $149.286 for MACOM Technology Solutions Holdings based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $165.0, and the most bearish reporting a price target of just $107.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.2 billion, earnings will come to $586.5 million, and it would be trading on a PE ratio of 27.6x, assuming you use a discount rate of 10.2%.
Given the current share price of $129.79, the analyst price target of $149.29 is 13.1% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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