MaxLinear, Inc. (MXL) Earnings

Management highlights

### Business Inflection and Growth Trajectory - Management confirms Q2 2026 results mark an inflection point, beginning a multi-year growth phase for MaxLinear driven by strong execution and accelerating adoption of new data center products. - Infrastructure (led by optical data center products) is now the company's largest revenue segment, with a favorable product mix shift driving improving overall profitability. ### Data Center Optical Product Progress - Keystone (100 gigabit per lane 5nm PAM4 DSP) is ramping to high volume production at major U.S. and Asian hyperscalers for 400-gig and 800-gig deployments, delivering 40% lower power consumption than competitors. It has established MaxLinear as a proven high-volume supplier of optical DSPs. - Rushmore (1.6 terabit 200 gigabit per lane PAM4 DSP) is currently sampling to customers, expected to drive new growth starting in 2027 as a next-generation product layered on top of Keystone revenue. - Expanded portfolio now includes complementary TIAs (Washington), drivers, and onboard retimers (Annapurna) that support all major data center interconnect architectures (pluggable optics, LRO, LPO, NPO, CPO), expanding the company's total addressable market. - Washington (standalone 200 gigabit per lane TIA) can pair with Rushmore or deploy standalone, with initial revenue expected in 2027 and volume ramps in 2028. Annapurna (200 gigabit per lane Ethernet retimer for active electrical cables) targets low-latency AI interconnects, also expected to start generating revenue in 2027 and ramp in 2028. ### Broader Data Center Expansion - Secured first XGS-PON hyperscaler design win for data center control plane architectures, qualified for 2027 production ramp. - Won secure design wins for USB bridge controllers with two major hyperscalers for AI rack management, expanding the company's footprint across data center platforms alongside its analog and power management portfolio. - Panther storage accelerators, which address CPU/memory/storage bottlenecks for AI workloads, are expected to roughly double revenue in 2026 and nearly double again in 2027. ### Broadband and End Market Growth - Broadband and connectivity segments grew revenue in Q2, driven by large-scale deployments of single-chip fiber and Wi-Fi 7 gateway platforms at North American and European tier-one service providers. Early DOCSIS 3.1 and 4.0 deployments are on track to drive stable growth through 2027 and 2028. - Long-term growth is expected from edge AI-driven 5G infrastructure upgrades that will increase demand for the company's 5G radio SOC and wireless backhaul RF solutions.

Guidance

- **Q3 2026 Revenue Guidance**: Total revenue expected between $210 million and $220 million, with growth across all four segments, led by strength in infrastructure optical data center products. - **Q3 2026 Profitability Guidance**: GAAP gross margin expected 57% to 60%, non-GAAP gross margin expected 58.5% to 61.5% (60% at the midpoint, a substantial improvement from prior periods); GAAP operating expenses expected $98 million to $104 million, non-GAAP operating expenses expected $66 million to $71 million. - **2026 Optical Data Center Revenue Guidance**: Raised to a range of $210 million to $230 million, an increase of over $50 million from prior guidance. All of this upward revision is attributable to the Keystone product family, with no contribution from newer products like Washington or Annapurna in 2026. - **Long-term Targets**: Long-term targets of 65% non-GAAP gross margin and 30% to 35% non-GAAP operating margin remain unchanged, with the company on track to hit these targets ahead of prior expectations as higher-margin infrastructure business grows faster than forecast.

Segment performance

Total Q2 2026 revenue was $168.8 million, an increase of 23% quarter-over-quarter and 55% year-over-year. The four business segments performed as follows: 1. Infrastructure: $85 million in revenue, representing 50.4% of total revenue. This segment grew 145% year-over-year, driven by strong production ramps for data center optical interconnect products, and is now the company's largest revenue segment. 2. Broadband: $45 million in revenue, representing 26.7% of total revenue, with growth driven by large-scale deployments of fiber and Wi-Fi 7 gateway platforms at tier-one service providers. 3. Connectivity: $24 million in revenue, representing 14.2% of total revenue, with growth reported for the quarter. 4. Industrial and Multi-market: $15 million in revenue, representing 8.9% of total revenue, which is recovering after a weak 2025 and showing year-over-year improvement. Profitability metrics for Q2 2026: GAAP gross margin was 57.8%, non-GAAP gross margin was 59.5%; GAAP EPS was $0.02 (returning to GAAP profitability), non-GAAP EPS was $0.35; net cash flow from operating activities was $4.8 million, ending cash, cash equivalents and restricted cash totaled $93.7 million.

Risks & headwinds

- Forward-looking statements are inherently subject to risks and uncertainties, including those outlined in the company's recent SEC filings (10-K and Q2 2026 10-Q), with no obligation to update forward-looking statements after the call. - The company faces industry-wide input cost increases for wafers, packaging, and testing, requiring cautious gross margin planning, with some premium costs currently incurred to secure supply to meet customer demand. - Supply for high-demand 5nm products is tight, though management notes strong relationships with foundry and OSAT partners have helped mitigate this constraint to date. - Longer product qualification cycles for next-generation 1.6 terabit products mean revenue ramping can extend over multiple quarters, leading to uncertainty around near-term revenue contribution timing.

Analyst Q&A

• Q: What is driving the over $50 million upward revision to 2026 optical data center revenue, what is the 400 gig vs 800 gig mix, and what is the regional customer split? /

  A: All of the upward revision is driven by strong growth in 800 gigabit PAM4 Keystone products, which will make up the majority of optical revenue run rate going forward. Customers span both U.S. and Asian hyperscalers, OEMs, and module makers, with growing traction in both regions. Next-generation 1.6 terabit Rushmore products will start contributing revenue in late 2027 and drive growth beyond that.

• Q: Is all of the 2026 optical revenue increase from Keystone, what visibility do you have into backlog and order trends, and how do prepayments and supply constraints impact gross margins? /

  A: The entire 2026 upward revision is indeed from Keystone. Order visibility is very good, extending out six months, which gives management confidence to raise guidance. Wafer prepayments increased in Q2 and will continue in Q3 to secure supply against growing backlog. Non-GAAP gross margins are on track to hit 60% at the Q3 guidance midpoint, ahead of schedule, driven by the mix shift to higher-margin infrastructure products. While input costs for wafers and packaging are rising, the company's strong foundry relationships have helped mitigate supply tightness for Keystone, the only volume 5nm 100 gigabit per lane DSP currently shipping.

• Q: Can you discuss market growth vs market share as drivers of the recent step-up in optical growth, and what is the outlook for 1.6 terabit Rushmore market share? /

  A: Both market growth and market share gains are contributing, but management notes the largest driver is accelerating market share gains against capacity-constrained competitors. Keystone has already secured designs across all major optical module makers, creating a strong footprint for the next-generation Rushmore 1.6 terabit product. Rushmore has substantial power and performance advantages, plus unique supply chain diversification, positioning the company to maintain or grow share as 1.6 terabit ramps. Qualification is ongoing, with initial revenue starting in the second half of 2027. Both 800 gigabit Keystone and 1.6 terabit Rushmore will remain growth drivers for the foreseeable future, as both will be industry workhorse speeds.

• Q: What is driving growth in the industrial and multi-market segment, and when will fiber revenue overtake cable broadband revenue? /

  A: The industrial segment is recovering after a weak 2025, with ongoing year-over-year improvements expected to continue into 2027. A key driver is improving pricing in the China market, alongside new product introductions. For broadband, fiber (PON) is growing rapidly, with the company already winning designs with the top two North American service providers, and ramping on track. Cable broadband is also growing from ongoing DOCSIS upgrades, so fiber is expected to overtake cable revenue in 2027, but this could push to 2028 depending on deployment timing.