Quarter 1
Q3 2026 Earnings Call — October 22, 2026
our first question comes from the line of Torres Vanberg with Stiefel. Please proceed with your question. Thank you, Kishore, Steve. Congrats on the strong results. I guess my first question is on the PAMFOR DSP side. You upped the number there for calendar 26. I mean, based on my rough math, I think that's now, it'll be running at about 100 million a quarter run rate. So as we think about 27, is 400 million plus a good number? And how should we think about the mix next year between 800 gig and 1.6T? Thank you. Yeah, hey, Tori, this is Steve. So I don't think we're planning to give guidance in the out year 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. Very good. Thank you for that. And then as far as customer diversification, I noticed you didn't have any 10% customers this quarter. I had a question specifically on your optical DSP business.
How should we think about the composition there by amount of customers, module makers, geography? you know, any color you could share with us on, you know, how diversified that business is becoming real time. Thank you. Thank you, Tory. I think, you know, when you go to the first order of diversification 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 have a strong call cycle on electrical products as well at the 1.6 terabit speeds. So that's the first layer of diversification. So we expect in the near-term, Rushmore to start picking up revenue in 2027. And if you look to 2028 and 2029, it's going to be a massive growth driver for us, in addition to Keystone at 800 gig still growing for us as well. So that's the first order of diversity. 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 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 terabits. I think the U.S. is in a more advanced phase of 1.6 terabit deployments. We naturally expect the U.S. to become an increasingly strong driver or value proposition in the optical module space as well. Great. I'll go back in line. Thank you.
Thank you.
Our next question comes from the line of Ananda Abura with Loop Capital Markets. Please proceed with your question. Hey, thanks. Thanks, guys, for taking the question, and congrats on the continued good progress. It's cool to see. I guess, too, if I could, Kishore, just sort of sticking there on the hyperscale of diversification, and maybe this is part of a clarification as well. How much You said in the past 1.6T production ships is really a mid-27 dynamic. How much of the business between now and then in 800G, if any, is from U.S.-based hyperscalers? And it's just even anecdotal. May I have a quick follow-up? Thanks. 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 revenues start ramping, the initial revenues actually in early 27 and a stronger ramp in the second half, the U.S. data centers will start becoming very important in both on a static snapshot basis and also from a trajectory basis.
So because the U.S. is the one that's going to adopt 1.6 terabit, 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 You know, an NVIDIA and a Google in that order, right? So, 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 1.16. That's good context. I appreciate it. That's helpful. And then the quick follow-up is you mentioned MPO, CPO. So is there a useful way for us to think about your 30s participation in MPO, CPO? You know, if even just kind of from like a paradigm approach, How involved do you expect to be? In what ways do you expect to be involved? The question's been coming up, and it'll be kind of relevant 12 months from now. Thanks. Okay.
If you look forward, you see a future where all the Alphabet POs will be in coexistence with the PAMFOR 30s-based optical pluggables, right? We have seen that the shoreline density and power consumption scenarios will drive a certain volume of the speed connections into the optical based What I call incarnations, right? Be it an NPO or an LRO, right? 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 the CPU has gotten delayed because the challenge of the optics in a hybridized co-package configuration is a very huge, huge problem. And therefore, I think NPO supplants what we were thinking about at 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 place are ideally suited for low-power applications versus an LPO in the future as the speeds increase. Okay? That's great context. Thank you.
Thank you.
Our next question comes from the line of Cody Acree with Stone X Financial. You may proceed with your question. Hey, guys. Congrats on the progress. It's been a great performance. Kishore, maybe can you talk about your visibility into 27? If you're not going to talk yet about the scale of your optical ramp, can you maybe just talk about your bookings or your lead time visibility for the next few quarters? Steve, you want to take a shot at it? 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. And Steve, maybe just continue with you. Can you just bridge your next gross margin thoughts between mix pricing, manufacturing costs and product transition over the next couple quarters? 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 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. Excellent. Thank you, guys. Congrats. Thanks, Cody.
Thank you.
Our next question comes from the line of Christopher Walden with Susquehanna. Please proceed with your question. Hey, guys. Thank you for the question. Regarding DSP, last cycle, maybe the 400, 800 cycle, DSP was much more widely available. Transceivers had shorter lead times, and people could wait for land power shell to be built before making what was kind of a last minute order on optical Do you guys view that as different now with longer lead times and does this kind of, you know, perhaps create an effect where people are ordering ahead more significantly, perhaps even over ordering, you know, they can't get their AI data center up without these transceivers. Does this become perhaps the golden screw that people are willing to purchase more of than they might need just for the initial deployment? 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's 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 on 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 plate ESP provider on 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 is not the case at all, number one. Number two is that even to place over-ordering, the data center 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 or 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's 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. Excellent. Maybe a follow-up there and a second question. I guess first of all, you know, obviously you guys have some unique four nanometer DSP capacity that others don't. Can you talk about how you see constraints in the optical market playing out? Is it DSP? Is it other parts, lasers, etc.? If you could talk about your place there. And then secondly, DSP in the world of CPO, some believe it's less meaningful, would like your take Kishore as a technologist. Okay, 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 fab 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 greenfield opportunity for us. But I do believe the NPO is going to be the more bigger success driver than a CPO. and in an NPU scenario too as well, as you go to higher speed longer term, there'd be a DSP required just like an LRO configuration on the what you call a 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've announced products along those various categories. So I feel we're very well positioned whichever way the industry goes and we'll have a full portfolio. Awesome. Thank you, Kishore. Yes.
Thank you.
Our next question comes from the line of Carl Ackerman with BNP Paribas. Please proceed with your question. Hi, this is Sam Feldman. I'm for Carl Ackerman. So first, based on your extended visibility into calendar 28, can you provide any color on how we should think about the growth rate, the relative growth rate between 800 gig and 1.6T? And should we expect 400 gig to grow through calendar 27? 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 Kishore mentioned earlier, 1.6T starts in 27, but it'll 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 significant growth in 27 as well as 28 on both of those. Got it. Thank you.
Thank you.
Our next question comes from the line of Quinn Bolton with Needham & Company. Please proceed with your question. Hey guys, congratulations on the results and strong ESP outlook. I guess, Steve, for you, it looks like the prepaid assets on the balance sheet increased by about $50 million in the September quarter. I assume that that's probably the large majority of that are your prepayments that you talked about. Given that it sounds like you're fairly well booked for calendar 2027 now, in the DSP business. Do you feel that the prepayments and the wafers you secured support that 2027 backlog? Do you still have more work to do in the fourth quarter in terms of prepayments and securing wafers to meet the demand you're seeing for calendar 27? Hey, Quinn. Yeah, so, I mean, we talked about this a little bit before. Similar to others, I mean, the prepayments, mostly on the wafer side, I mean, there's Lots of other things going on out there. I mean, on the balance sheet isn't just TSMC. There's other things on prepayments as well that we don't break out. 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 prepaids to continue to go up from here. as our revenue projections continue to go up as well. So I think that's part of the reason why we increased the revolver itself, just to make sure that we can capture all of that upside capacity that's coming from increased market share that we've gained. Yeah, I think that's a follow-up. Steve, I think at some of the investor conferences over the past few months, you've estimated your DSP share currently maybe in the 5% to 7% range. Do you think you're at the high end of that or potentially above that by the end of 2026, just based on the strong backlog you're seeing and the increase in the DSP forecast this year? You know, hey, Kwe, this is Kishore. I think it's very hard to estimate share. Yeah, thank you. I think it's very hard to estimate share given the accelerating demand on units as well. So if I'm looking backward, then I think we are well above the number. If I'm looking forward, maybe we made more progress beyond that share percent, but I don't know at what level we are.
So Can I say what we will 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 minute 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. Excellent. Thank you, Kishore.
Thank you.
Our next question comes from the line of Tim Savageau with Northland Capital Markets. Please, you may proceed with your question. Hey, good afternoon. I'll add my congrats on the results and the outlook. And I wanted to go back to, you're welcome, to kind of market growth, market share type discussion. And Steven made a comment earlier in the call about outgrowing the market. And, you know, I think we may have a baseline there. You know, Marvell talked about kind of the AI interconnect unit for them growing, call it 65%. on a CAGR through 2030. It's coincidentally what MaxLinear is growing overall in 26. But as we look at the optical DSP business, is it fair to use something like that as a baseline? And when you say you want to outgrow the market, I mean, just based on your run rate, it seems like we should be thinking closer to a double here than anything else for 27. But I just kind of wanted to bounce that reasoning off you. 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't speak for Marvell's numbers.
Okay, well, I'll go on and ask this one anyway, then, which is, yeah, I think your market share is like 6% here. If you take those forecasts out to their conclusion, I mean, they're talking about, I don't know, A $15 billion optical DXC market in 2030. I mean, if you get into double digits before that, you should have a billion dollar business on your hand pretty quickly. I'm going to bounce that one off of you, and that'll be it for me. 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 teams 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, 28. Thanks very much.
Thank you.
Our next question comes from the line of Joe Quattrochi with Wells Fargo. You may proceed with your question. Hi guys, this is Travis Poulin on for Joe. Thanks for taking my question. So Steve, I just wanted to switch gears to broadband. You spoke of seeing some seasonal softness in 4Q 2026. Just curious how we should think about this moving forward into the first half of 2027, into the second half of 2027, and just the overall broadband recovery in general. Thanks. 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. Got it. Thank you. That's it for me.
Thank you. Our next question in queue is from the line of Torres Vanberg with Stifel. Please proceed with your question. Yeah, thank you. Now that the basic questions are out of the way, I just had a few more specific follow-ups. So, Kishore, I think you said you expect 1.6T revenue already first half of next year. I think I think in the last quarter, I think you talked about maybe middle of the year. So what changed there? Is it the market that's accelerating earlier? Is it based on some new design wins? Any clarification there? And by the way, does that include DSP and TIA? Or is it just DSP? So, Tori, obviously, it's been three months and we did not know where we would be. But I think there's an initial design win that will start shipping in the first half. The exact amount of quantities 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 is also about also accelerating on the qual windows across the module space into the data center cycles. 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 TAA 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 BOM efficiency, right? So I think all the three questions you answered are a strong, affirmative response. Very good. And last one is on pricing or content. So we're hearing as you go from 800 gig to 1.6T that maybe prices could be 2X. You're obviously going to be shipping more than the DSP with the TIA. So in your case, I guess you could potentially have more than 2X as the market goes from 800 gig to 1.6. You're absolutely right. So if you just take this proverbial 2x, historically never stuck when you change 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. 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 MaxLinear TIA world. Great, caller. Thank you. Yep. Thank you. And
our last question comes from the line of Cody Agri with StoneX Financial. Please proceed with your question. Hey guys, just a couple follow-ups as well. Maybe Kishore, can we go back to that comment you made about constrained ability to support more than one qual? Is this just wafers out of Samsung that you're talking about? And what's the ability to address that so that you can get quals lined up a little faster? 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 qual. 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 QUAL ready. 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. Gotcha. Thank you for that clarification. And then just lastly, with Washington, can you talk about your expected attach rates to Rushmore and the opportunity for standalone as you get into 27 and maybe looking into 28? And then maybe the same thing with your AECs. Can you talk about a mix of onboard versus cables? for Annapurna. Okay, good question.
I would say, you know, if you take the short-term window versus, let's say, a year-round window, the TIA attach rate answers will be quite different, right? In the short-term, let's say it's an 80% attach 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 of the real TIA vendor that meets the performance benchmarks that you need for a 1.6 terabit 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 The next question you had was related to, could you repeat that for me, please? I just forgot. Annapurna. 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 they're going to be multiple AEC vendors and our solution will be a pure silicon plate to selling it to a cable maker or somebody who makes the what I 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 So I would think that it'd be a similar pricing as our time for DSP for optical. And we expect not to get a big share, let's assume, but 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% in the 1.6 terabit cycle somewhere in the next couple of years. But we won't expand it to, Multiple data centers, right? We only have one or two data centers in the U.S. Excellent. Thanks for the help, guys. Thank you. Thank you. And we have reached the end of the question and answer session, and therefore I would like to turn the call back over to Leslie Green for closing remarks. 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. Thank you. This concludes today's conference, and you may disconnect your lines
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Quarter 2
Q2 2026 Earnings Call — July 23, 2026
Tori Svander (Seafull): Yes, thank you and congratulations on the strong results. Kishore or Steve, you know, you raised the optical transceiver revenue by more than $50 million for this year. Could you talk a little bit about what's driving that? You know, maybe talk a little bit about the, you know, regional nature of that and also if you could give us a sense for the mix between 400 gig and 800 gig. Thank you.
Kishore (Executive): We're obviously very excited about the growing infrastructure business and especially about our success with our RAMs per phone and 800 gigabit optical PAM4 business. So, you know, as we entered the year, we were more constantly reporting gigabit revenues, but all the revenue growth we are seeing now is driven by 800 gigabit PAM4 success for us. This will continue to 2027. And as we move later into 2027, our 1.6 terabit Rushmore will start to generate revenue and will drive growth beyond 27 to 28 and 29. So yes, 800 gigabit is now substantially going to be a bigger portion of our run rate revenues moving forward. With regard to our end customers, we do not share a particular customer name. We have not done that. However, our customers span both U.S. and Asia, hyperscalers and Tier 1 data center customers and OEMs. And at this point in time, we are beginning to see more and more traction and revenue growth that will span both the regions, including the United States.
Tori Svander (Seafull): Very good. And as my follow-up, just thinking about some of the, you know, extension of products that, you know, you're now sampling, you know, whether it's, you know, Washington and Aperna, you talked about 27 contribution. But I'm just curious, you know, should the ramp be mainly in 28? Or could you potentially start to see some ramps with TIAs and re-timers already in 2027?
Kishore (Executive): So, you know, we, our Rushmore product line, our Annapurna and even our TIAs for the 1.6 terabit or 200 gigabit per lane speed has been sampling now. It's customer, it's in the customer call phases and designing process. So we expect revenue to start generating in 2027. We expect the ramps at one or two opportunities to start somewhere in the second half of the year and then layer on top of that through 28 to 29. So yes, we do have some expectations of 1.6 trillion revenues and for the TIAs as a companion and for Annapurna active electrical cables in 2027. Sounds good. I'll go back in line. Thank you.
Cody Ackrey (Benchmark Company): Hey, guys. Thanks for taking my questions, and congrats on the strong results and guidance. Maybe if I just get one point of clarification, the increase in the optical outlook, the $50 million increase, that is all just Keystone. Is that correct? That's not counting any Washington or Annapurna revenue in 26?
Steve (Executive): That's correct, Cody. That's very correct. It's all driven by Keystone product family. Ann, can you just talk about the visibility you have to that, the order visibility, the backlog builds that's looking into the second half? Can you just give us some color on the extension of your order trends?
Ann (Executive): Yeah, Cody, I can answer that one. Look, I mean, I think this probably goes without saying, but kind of across most of our businesses right now, I mean, the visibility is very good. I mean, kind of given some of the tight supply and just the continued increasing demand, visibility is good. It's going out, you know, on or about six months anyway. So naturally, that gives us the confidence to go and raise these numbers.
Cody Ackrey (Benchmark Company): Thanks for that, Steve. And then just lastly, can you talk about wafer prepayments, maybe the amount that you did in Q2 and any expectation for Q3? And I guess if you can just walk through some of the puts and takes for your gross margin improvement, you know, things like your mix and your incremental supply constraints and any kind of expedite fees that you may be paying off.
Steve (Executive): Sure. Yeah, not a problem at all, Cody. Maybe just hit the prepayment real quick. Certainly with this increased demand and some of the making sure that we're securing wafers and products for our customers going out, we've certainly started to prepay in a lot of cases. So that was up a little bit in the quarter. We expect that to continue next quarter as well. But, you know, that's all against a product that has backlog out a couple of quarters, right? So comfortable with that. Your question with regard to gross margins. So, you know, a little ahead of schedule here. We're excited about hitting the 60% level in our guidance for Q3. As you're probably aware, the mix of our infrastructure products historically has been well above the corporate average. That continues to be the case today. I do see that continue to expand over the next year or two as our infrastructure business grows, as our 800, 1.6T products start to contribute further. We've been a little bit cautious. We've shared this with investors that you know, just the input cost, the wafer cost increases, the packaging test increases that we're seeing out there. We're certainly, you know, kind of careful as we're seeing this across the board. Some cases you can pass this along to customers, and so we've just been a little bit cautious on this front, but certainly we see improvements from here.
Cody Ackrey (Benchmark Company): Thank you, guys. Steve, I just want to add, you know, you can look at the revenue ramp we've had throughout 2026 and raised expectations, especially with the advanced nodes in 5 nanometer. You know, Keystone is the only 5 nanometer SOC shipping in volume for the 100 gig per lane speeds. At least we were the first ones. You know, we have gotten our forecast when it kept going up. And I must say that our Foundry and OSAT partners have been incredibly supportive in making sure that we can meet the surging demand as our calls went through and we started laying more and more customer product ramps on our optical products. So yes, supply is tight, but I think having strong relationship and constant communications with our primary partners and OSAT has been incredibly helpful and that goes a long way in meeting our demand.
Cody Ackrey (Benchmark Company): Excellent. Thank you, guys.
Joe Quattrochi (Wells Fargo): Yeah, thanks for taking the question. Maybe on the optical side of the revenue guide up, how should we think about the revenue run rate of that in the second half as we're just thinking about the trajectory into 2027?
Steve (Executive): Sure, Joe. Look, I mean, we, you know, as new quolls kind of come through production ramps start, I mean, we started out with a great, you know, run rate going into the year. I think that's just continued to improve. Obviously, raising this number here, you know, kind of sets expectations for 27 as well. So, you know, you would expect that. There's not a stair step. I mean, we continue to see as more customers' qualifications get completed, move into production volumes, you're seeing those numbers go up, and I would expect that to continue into next year.
Joe Quattrochi (Wells Fargo): Thanks. And then maybe on the broadband side, maybe just any update there in terms of what you're seeing from a demand perspective and just kind of some of the timing for some of these transitions. Has anything changed there?
Steve (Executive): Yeah, not a whole lot of changes. I mean, as you know, we've been gaining share on some of our pond programs. That's gone exceptionally well this year. I think as we look out the back half of this year and next year, you know, telco, capex spend continue to be good. Our customers continue to be, you know, rolling out in a lot of cases new programs. If you recall, we've got kind of content increases and a couple of other things. So, yeah, I would say everything's on track on that front.
Suji Da Silva (Roth Capital Partners): Hi, Kishore. Hi, Steve. Congratulations on the strong progress here. I know you're growing very strong in optical in 26, but I'm trying to understand 27 a little bit. Just, you know, what's the share opportunity, Kishore, as Rushmore grades happen from Keystone? Do you guys have an advantage that it perhaps even grow your share, or should we expect that it holds from the success you have in Keystone?
Kishore (Executive): So, Suji, obviously the kind of growth we are seeing comes from two factors, right? The market itself is going very, very strongly, and the fact that we have raised our expectation for 26 revenue, which means a higher run rate expectations getting towards second half of 26, which has implications for 27 as well. It's a matter of as and when we learn about the ramps and how strong the ramps are, we're upgrading our revenue expectations. So it's happening in both ways, right? One is through the TAM growth and the other one is through market share growth. So, yes, on both fronts, performance differentiation and increasing traction with successful rollout of our products and various other customers is having a knock-on effect of more, what I call, more acceleration in the ramps that they are seeing. With regards to Rushmore, obviously, Keystone is a foundational product for MaxLinear. This was the first major one that went to mass rollout from MaxLinear's point of view, even though it represents our third generation of technology. But Rushmore at 1.6 terabit is now sampling. It's got performance and power advantages that are very, very substantial.
And at the same time, it has also got supply chain diversification that is very unique with MaxLinear versus our competition. So if you roll in all these factors, we feel very optimistic and actually, frankly, very excited about Rushmore and the upside potential of ASP increases with the enhanced speeds. So I think that the same customers that are using Keystone are eagerly working towards deploying our 1.6 terabit. And obviously the call interrupt cycle is a bit longer and natural at higher speeds, but we feel we're very well positioned to be successful with 1.6 terabit Rushmore as well as a successor to Keystone offering. The important thing is my own forecast for the industry is both 800 gigabit and 1.6 terabit will be one of the workhorse speed nodes for a long time to come. So even as Rushmore runs, Rushmore comes online, Keystone will still be having a lot of growth engine and capacity moving forward.
Suji Da Silva (Roth Capital Partners): Okay, sweet. Later on. Great, thanks. And then my other question is on the TIA driver market, the Washington product and so forth. In the 1.60 platforms, are you seeing more kind of creative sort of CPO, LPO architectures that drive higher attach rate and make better use of your products as they break out some of the components there?
Kishore (Executive): I think you have to look at that for the first time we are actually positioning and marketing Washington as both a standalone TIA and paired with Rushmore. Obviously, the first success we'll have is a paired offering with our own Sirtis, and PAM-4 DSP, maybe Rushmore. Having said that, as you go to higher speeds, our deep RF expertise is very, very valuable and differentiated. and it's got a lot of potential to be used as a standalone product working with other DSPs and at the same time being designed into LPOs and LRO type of applications. So at this stage, I would say preliminary, we expect our first traction to come from our own pairing with our own device.
Quinn Bolton (Needham & Company): Hey, Steven, Kishore. I'll offer my congratulations as well. I wanted to follow up on CJ's question just on Rushmore. As you look at the qualification programs you're engaged in now, is that a sort of expanding set or expanding opportunity? Do you think you are sort of going after more 1.6T modules at your customers than, say, you were before? Originally looking at on 800 gig, I'm just kind of wondering, you know, can you tell from the qualification activity whether you think your share continues to increase with Rushmore?
Kishore (Executive): So, wow, very, very good question. And I'm actually very pleased with where we are. From where we started in Keystone today, I can safely say that we are now comprehensively designed across the board of all of the optical module players, you know, on the 800 gigabit solution across the board. So in a sense, 1.6 terabit now has to systematically get designed to each of those customers where we have laid the foundation with Keystone and then developing their modules, calling them, and then interropping them. So if anything, Keystone has created the footprint for us to roll out 1.6 terabit. Obviously, it's a very multifaceted play in terms of calling 1.6 terabit Rushmore, and it's just being designed in with the module makers. Then it leads to the next phase of calls with the data center operators, and that's when the revenue ramps would start. So we expect this to happen towards the second half of next year, and with some initial revenue ramps starting in 27.
Quinn Bolton (Needham & Company): Got it. And then, Kishore, as you look at the broadband, sort of the CPE gateway business, and you talk to your customers, do those CPE boxes tend to use a fair amount of memory? Is the rising cost of memory causing any sort of delays and rollouts or perhaps lower units? Or do you think that the CPE business is able to absorb the memory cost increases?
Kishore (Executive): So at this point in time, we do not have not seen on our solution platforms, you know, effects of memory as being a major driver in their decisions on using a product. If anything, we have been able to share gains because our solution actually integrates a lot of, you know, different implementations, different solutions use, competition uses a lot more external memory than we do. So we actually save our customers a lot more money due to the integrated solution with on-chip memory and, you know, incorporated. So we have not seen much impact with our customers. Obviously, they're absorbing the cost of the memory, and they're able to pass it on to their operator customers. So there is some juggling going on, but at our own level, we have not seen what I call real tangible impact on the volumes that we were expecting and forecasting for this year and looking into next year. You have to keep in mind that the lead times are pretty long these days, so you get fairly strong visibility based on backlog and bookings.
Tim Savage (Northline Capital Markets): Hey, good afternoon, and Congrats as well, especially on the guide. Wow. And my first question is kind of about that, which is in terms of what you're seeing here, can you maybe try to be more granular between, you know, overall market growth, uptick in unit volumes, broadly speaking, being a driver here versus share gain on Max Linear's part maybe at the expense of capacity-constrained competitors. I don't know if there would be another factor, but I'd love to have you weight those two in terms of what you're seeing in the step function here these couple of quarters.
Steve (Executive): Okay. Yeah, no, I was just going to say, I don't know that we can, it's hard to break out. I guess from our perspective, I mean, what we're confident in, I think what we are seeing is that we are seeing more market share gains. Certainly the market's growing nicely, but we're seeing our share go up. I think, you know, part of the rationale from seeing our guidance go up is that we've been able to take additional market share. And so we're seeing that in the short term. And we think you'll also see that, you know, throughout next year as newer programs start to ramp.
Tim Savage (Northline Capital Markets): Got it. And kind of following up on the guidance, I guess would it be, I think it's about $45 million. Would it be fair or perhaps conservative to say the majority of that sequential growth is coming from optical in Q3?
Steve (Executive): Yeah, I guess I would just say that the majority of it's coming out of infrastructure, certainly. I mean, we're seeing growth across that end market, call it much more so than some of the others. The others are going up as we guided, but a lot of that growth is coming from infrastructure. And certainly we upped our optical guide. So that number goes up as well.
Tim Savage (Northline Capital Markets): Got it. And when you talk about growth across the rest of the segments, I assume you're referring to sequential growth there, not year over year.
Steve (Executive): I was. Yeah, just reflecting the guidance.
Tim Savage (Northline Capital Markets): Great. And last question for me. Looks like no 10% customers here. And I imagine that, you know, Old Broadband guys are kind of falling off the list. But as we move forward and you continue to ramp in optical, do you have the prospect of having one or more of these module guys as a 10% customer in the near future or in the future in general? Thanks. That's it for me.
Steve (Executive): Yeah, so I think we mentioned this before, Tim. Look, I think we've talked about being in a lot of customers. Kishore just mentioned that again as well. We've got a number of module guys, a number of data centers that we're supplying product into today. But over time, yeah, I do think you'll expect to see more concentration. I think that's well understood as we go into next year. I don't think that'd be surprising at all.
Christopher Roland (Susquehanna): Hi, guys. Congrats on the results and apologize if this has been asked as I joined late. But in terms of the composition, customer composition, particularly moving forward for DSP, is there any movement in terms of the balance between hyperscalers versus module makers and then also North America versus like Eastern guys? Or is it still incredibly broad-based?
Steve (Executive): Yeah, you might have just missed this question because it was just before you. We continue to see growth. I mean, Kishore mentioned in the prepared remarks that we're seeing growth out of both regions. So, from a geography standpoint, we're certainly seeing growth on both sides. As far as concentration itself, as mentioned previously, there's not a 10% customer, but I do expect, as we've talked in the past, I think you'll see a little more concentration as we move forward. I mean, there's not tons of these customers. So I think it will be understandable that you'll see some more concentration as we move forward.
Christopher Roland (Susquehanna): Okay. But just to be clear, you don't have one marquee customer pushing?
Steve (Executive): So, Ken, we don't have a 10% customer. It's a little broader base, but you should expect there's a handful of customers that are going to drive the most volumes over the next, call it, six quarters.
Christopher Roland (Susquehanna): Okay, perfect. And then as a follow-up, I think it's been some time since you've given some long-term metrics for the model more broadly. I think at one point in time we talked about 65% gross margins. Do you have any sort of an update for your longer-term model, including what a path might look like to 65%? Does that still hold for you guys?
Steve (Executive): Yeah, so I don't think the target has changed. We certainly feel like with the product mix, the end market that we participate in, that that's still the right goal, and I think there's a path to certainly get there. Raise the number for our Q3 guide goes up a little bit ahead of schedule, so that's good. I think that reflects just our infrastructure business in general, growing at a faster rate than some of the other end markets, and they do have gross margins that run ahead of the corporate average. You know, right now we're seeing lots of increases of cost, right? I mean, whether it be on the waiver side or just test assembly, packaging. So, you know, so doing our best to pass some of those costs along. But, you know, where you're paying premiums in some cases, you know, meeting customer demands. So we're paying a little bit more right now. But I certainly think that there's a strong path to see continued growth out of our gross margins.
Ananda Barua (Loop Capital Markets): Hey, guys. Thanks for taking the question. Really appreciate it. Same for me. I apologize if it's been asked. I jumped on late as well. I guess the CSP question, you know, sort of as you look out the next couple of years, guys, and you think about what the drivers of growth are, in any way to help us think about order of magnitude, sort of the growth comes from bigger customer participation, i.e. hyperscalers versus price lifts, from going to 1.6T and 3.2 versus just broader growth in the marketplace. Any help there would be useful. Thanks.
Kishore (Executive): Yeah. Hey, Anand, that's... We answered that question too, you know, as best we could. It's going to take all of those factors to play in our growth expectation plans. It's going to be share growth. There is going to be TAM growth. There is going to be TAM unit growth. And there's going to be ASP growth as we go to higher and higher speeds. At the same time, our footprint inside the data center is increasing. Now we are also offering a broad comprehensive product portfolio of TIAs, drivers, and at the same time, for active electrical cables, we have our Annapurna offering, and also for onboard retimers, right? So as that product portfolio expands and broadens, it can address a number of architectures that include CPOs, NPOs, LPOs, LROs, and other implementations both for optical and electrical scale-up and scale-out implementations. So it's going to take all of those and the good news is that the offering has become more comprehensive and we continue to work towards that to expand that SAM, if you will, of the larger footprint. and we feel we are really making excellent progress getting these into the pipeline and then eventually they will result in multi-year revenue growth and expansion for MaxLinear.
Ananda Barua (Loop Capital Markets): Yeah, that's really helpful, Kishore. Thanks for that. That's really helpful. I guess a quick follow-up is and maybe this also was a talk too earlier on the call, so I apologize if it was. But anything notable either on the technical side of things or on the relationship side of things of note that sort of is helping you move the ball forward over the last 90 days that we should be aware of, that would be useful context for us to be aware of. and that's it for me, thanks.
Kishore (Executive): On the DSP, DSP business, thanks. Look, everybody matters, right? We are really building on the successful penetration ramp that is happening on Keystone and that itself is a self-reinforcing driver and force actually. So if you really look at the larger picture in the larger landscape today, with the track record of the millions of units of shipments and optical transceiver PAM-4 DSPs. There are only three players right now, and we are one of them. So I think that track record is really, really important. And then having the next generation offering with Rushmore and expanding the product portfolio, all of this play a role into how things move around, how we build relationships. You also have to keep in mind that we are now not just talking about, you know, electrical and PAM-4 optical offerings, the TIS drivers, active electrical cables, and onboard retimers.
We also have storage accelerators now in our portfolio that will get more and more important as this agency AI becomes very important and the storage bottlenecks that prevent increasing the number of agents, right? That's very important how we expand that hardware acceleration and compression is going to be very, very important to expand the agents and at the same time reduce the time to first token which all involves lower latency and improving power consumption. So I think we're also showing other parts to the portfolio, including our XGS font for control plane for the data centers. It's going to take a lot of stuff to put together to continue to expand our relationship with the end customers. If you look at our two big competitors, right, they're very large companies and they have a lot to offer to our end customers as well. So it's going to take, you know, working away, chipping away with more offerings that, you know, we could be a full-blown comprehensive player in the data center infrastructure.
Carl Ackerman (BNP Paribas): Yes, thank you, Dylan. Two, if I may, I'm going to quote a bit from the Questions with respect to Optical, which is well covered, and you've certainly done very well this quarter on that. Could you discuss some of the key drivers for your industrial and multi-market business into the second half of next year? I know you mentioned it was going to grow sequentially into September, but I ask because while this area has improved, you're still halfway from the run rate business you achieved in 2023, and that appears to be Margin Accretive for you. And so if we could just talk about the drivers of that, that could also drive revenue into 20, the second half, into 2027 would be very helpful.
Steve (Executive): Yeah, sure, Carl. I can take that. The industrial business has definitely been recovering. Last year was very weak. We started to see, you know, you're seeing nice year-over-year improvements this year. I think I would expect that to continue next year. I mean, you're starting to hear more improvements. More of the industry itself starting to recover, so that's good. And I think we've talked about this a little bit before. Some of this has driven some of the China business. We're actually seeing good pricing improvements in that region, so I would expect pricing as well as new products to contribute to that growth.
Carl Ackerman (BNP Paribas): Got it. If I may have a follow-up, within broadband, could you discuss the mix of revenue on fiber today and whether you see that crossing over from cable broadband. Is that something that can occur in 2027? Can you just talk about the growth process between fiber and cable? Within that would be helpful. Thank you.
Steve (Executive): Yeah, good question, Carl. Yeah, you're right. We've been talking about this. I mean, this is an area that is still relatively new. We're a relatively new player, but we've now won the top two guys in North America. So the second guy is ramping this year on track, as we had talked about. So it's definitely growing nicely, the pond business specifically. And as we, I would expect that to continue next year. It's hard to say when the crossover will be. I mean, I would guess 27, but it may push out into 28, frankly, because, you know, some of the upgrades that are happening in the DOCSIS world are also growing. So we're seeing, you know, seeing decent growth on both sides, and it's good to see that Telco's kind of, you know, with some spending there.
Tori Sondberg (Steve Ford): Yeah, thank you. Just had a follow-up and I'll ask a question that has not been asked. So looking at the filing, looks like your purchase obligations went up about $40 million, but then you also have an other obligations item that I think went up even more than that, $45 million. Can you just explain a little bit, you know, the difference between those two? I mean, you talked about obviously the wafer prepays and so on and so forth. I'm sure there's stuff you've got to do on the back end as well, but any more color on the difference in those two? Because obviously it's a pretty important increase in both items.
Steve (Executive): Yeah, yeah. I mean, so obviously the purchase obligations are probably the bigger takeaway. We did have some pre-payments. I mean, with the stock price increase that we saw on the quarter, there were a handful of payroll accruals that had to be done as well. And so that's a portion of it around stock comp. But again, the majority is the prepayments. And as we had kind of talked about a little bit earlier, that portion obviously supporting growth in Q4 and into Q1 as those lead times, like we're starting to place orders now for Q1. And that's the majority of those numbers and those commitments.
Tori Sondberg (Steve Ford): Got it. And then last question. So there was a little bit of discussion about the long-term model. I mean, you're going to be at 30% operating margin this quarter or at least close to it. I know you've been here before, but how should we think about, you know, that sort of number now sort of being more the baseline going forward, especially in relation to your OPEX guidance?
Steve (Executive): Yeah, I mean, look, I don't want to guide beyond the quarter that we're in, but I think you know our long-term goal is to be between 30% and 35% operating margins. You're absolutely right. You know, kind of headed in that direction, you can kind of see the model starting to move there pretty quickly. I mean, profitability is good. You know, we're seeing good growth next year on the top line. Gross margins are favorable from an OPEX standpoint. Yeah, we'll see some increases in OPEX definitely supporting, you know, the growth in these areas. But as we've talked about, the operating leverage I think is compelling. It's exciting to kind of see you're right. We've been here before. But, you know, we want to continue to show this kind of long-term sustainability of these profit margins.
Tori Sondberg (Steve Ford): Great. Thank you very much.
Management: Thank you. There are no further questions
at this time.
I'd like to hand the floor back over to Leslie Green for any closing remarks.
Leslie Green (Management): Thank you, Paul, and thank you for joining us on today's conference call. This quarter, we will be presenting at a number of financial conferences and virtual events. The details will be posted on the Investor Relations page of our website, and we look forward to speaking with you again soon. Thank you. This concludes today's conference. You may disconnect your lines
at this time.
Thank you again for your participation.