MACOM’s (NASDAQ:MTSI) Q4 Sales Top Estimates, Provides Encouraging Quarterly Revenue Guidance

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Radek Strnad

Thu, Feb 6, 2025, 6:31 AM 4 min read

Network chips maker MACOM Technology Solutions (NASDAQ: MTSI) reported Q4 CY2024 results topping the market’s revenue expectations , with sales up 38.8% year on year to $218.1 million. Guidance for next quarter’s revenue was optimistic at $230 million at the midpoint, 2.1% above analysts’ estimates. Its non-GAAP profit of $0.79 per share was in line with analysts’ consensus estimates.

Is now the time to buy MACOM? Find out in our full research report.

MACOM (MTSI) Q4 CY2024 Highlights:

Revenue: $218.1 million vs analyst estimates of $214.7 million (38.8% year-on-year growth, 1.6% beat)
Adjusted EPS: $0.79 vs analyst estimates of $0.78 (in line)
Adjusted EBITDA: $62.16 million vs analyst estimates of $66.17 million (28.5% margin, 6.1% miss)
Revenue Guidance for Q1 CY2025 is $230 million at the midpoint, above analyst estimates of $225.2 million
Adjusted EPS guidance for Q1 CY2025 is $0.84 at the midpoint, roughly in line with what analysts were expecting
Operating Margin: 8%, up from 7% in the same quarter last year
Free Cash Flow Margin: 28.1%, up from 18.1% in the same quarter last year
Inventory Days Outstanding: 179, down from 195 in the previous quarter
Market Capitalization: $10.09 billion

“Q1 was a good start to our fiscal 2025,” said Stephen G. Daly, President and Chief Executive Officer, MACOM.

Company Overview

Founded in the 1950s as Microwave Associates, a communications supplier to the US Army Signal Corp, today MACOM Technology Solutions (NASDAQ: MTSI) is a provider of analog chips used in optical, wireless, and satellite networks.

Analog Semiconductors

Demand for analog chips is generally linked to the overall level of economic growth, as analog chips serve as the building blocks of most electronic goods and equipment. Unlike digital chip designers, analog chip makers tend to produce the majority of their own chips, as analog chip production does not require expensive leading edge nodes. Less dependent on major secular growth drivers, analog product cycles are much longer, often 5-7 years.

Sales Growth

A company’s long-term sales performance signals its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Luckily, MACOM’s sales grew at a solid 11% compounded annual growth rate over the last five years. Its growth beat the average semiconductor company and shows its offerings resonate with customers, a helpful starting point for our analysis. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions.

We at StockStory place the most emphasis on long-term growth, but within semiconductors, a half-decade historical view may miss new demand cycles or industry trends like AI. MACOM’s annualized revenue growth of 6.6% over the last two years is below its five-year trend, but we still think the results were good and suggest demand was strong.

This quarter, MACOM reported wonderful year-on-year revenue growth of 38.8%, and its $218.1 million of revenue exceeded Wall Street’s estimates by 1.6%. Company management is currently guiding for a 26.9% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 19.2% over the next 12 months, an improvement versus the last two years. This projection is healthy and indicates its newer products and services will spur better top-line performance.

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Product Demand & Outstanding Inventory

Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business’ capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.

This quarter, MACOM’s DIO came in at 179, which is 23 days above its five-year average. These numbers suggest that despite the recent decrease, the company’s inventory levels are higher than what we’ve seen in the past.

Key Takeaways from MACOM’s Q4 Results

We were impressed by MACOM’s strong improvement in inventory levels. We were also glad its revenue guidance for next quarter came in higher than Wall Street’s estimates. Overall, this quarter had some key positives. The stock traded up 3.3% to $140 immediately following the results.

Indeed, MACOM had a rock-solid quarterly earnings result, but is this stock a good investment here? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.

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