MXL

Greetings, and welcome to the MaxLinear Q1 2026 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press *0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Leslie Green, Investor Relations. Thank you. You may begin.

Thank you, Maria. Good afternoon, everyone, and thank you for joining us on today's conference call to discuss MaxLinear's Q1 2026 financial results. Today's call is being hosted by Dr. Kishore Seendripu, CEO, and Steve Litchfield, Chief Financial Officer and Chief Corporate Strategy Officer. After our prepared comments, we will take questions. Our comments today include forward-looking statements within the meaning of applicable securities laws, including statements relating to our guidance for the second 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 future financial and operating results, opportunities for revenue and market share across our target markets, new products, including the timing of production and launches of such products, demand for and adoption of certain technologies, and our total addressable market. These forward-looking statements involve risks and uncertainties, including risks outlined in our Risk Factors section of our recent SEC filings, including our 10-Q for the quarter ended March 31st, 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 Q1 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 and other expense, and income tax on both GAAP and non-GAAP bases. We encourage investors to review the detailed reconciliation of our GAAP and non-GAAP presentations in 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. Now let me turn the call over to Dr. Kishore Seendripu, CEO of MaxLinear. Kishore.

Thank you, Leslie, and good afternoon, everyone. Q1 was a strong and important start to the year, and we believe it marks the beginning of a multi-year growth phase for MaxLinear, led by our optical data center business. Revenue grew 43% year-over-year, reflecting strong execution, accelerating adoption of our newest products, improving visibility in bookings, and sustained momentum across our infrastructure programs. Infrastructure is now our largest revenue category, growing 136% year-over-year in Q1, driven by robust production ramps in optical data center-oriented platforms. We see this momentum continuing to build as hyperscale customers rapidly scale AI-centric architectures. Based on customer orders and rising visibility of the program ramps, we are increasing our expectations for 2026 optical data center revenue to $150 million-$170 million range.

We also expect a step function data center revenue increase beginning in Q2, with expected strong upside as run rates expand into 2027. At the center of this data center momentum is our Keystone PAM4 DSP optical transceiver platform. Keystone is now ramping at multiple major hyperscale customers across both the U.S. and Asia, supporting 400G and 800G PAM4 deployments for scale-up and scale-out applications. These ramps validate our differentiation in performance, power efficiency, and integration. At OFC this year, we showcased our 1.6 Tb data center platform featuring Rushmore, our 200 Gb per lane PAM4 DSP, Washington, our matching 200 Gb per lane TIA, and Annapurna, which is our 1.6 Tb AEC and 3.2 Tb onboard electrical retimer platform for scale-up applications. Rushmore and Annapurna are foundational to the next wave of data center optical architectures, including LPO, LRO, AECs, XPO, and co-packaged optics.

With Keystone validating our ability to execute at scale, customer engagement around Rushmore has accelerated faster than expected. We anticipate production ramps beginning in late 2026, with revenue growth expected to continue strong growth through 2027 as the next generation speed and bandwidth cycle unfolds. We are also expanding our footprint within hyperscale data centers beyond PAM4-based optical and electrical interconnects. We have secured our first XGS-PON design win at a U.S. hyperscale data center through a Tier 1 OEM partner as cloud operators deploy resilient, dedicated PON-based control plane architectures spanning multiple data centers. Adjacent to compute, we have also won USB bridge controller designs with two major hyperscalers to support rack-level AI system management, which opens the door to increasing content per rack over time.

Our Panther hardware storage accelerator SoC family continues to build momentum with growing design win activity among Tier 1 network appliance and cloud service providers. Persistent memory constraints are highlighting Panther's advantages in hardware-accelerated compression, high throughput, and ultra-low latency memory access. We're actively sampling next generation Panther 5 with key customers, and based on current engagement, we expect storage accelerator revenue to at least double in 2026 compared to 2025. Beyond data centers, wireless infrastructure momentum is improving as carriers increase investments in 5G RAN access and backhaul to support cloud-connected and edge AI functionality. Our Sierra single-chip radio SoCs are now deployed with multiple North American operators, with expanding opportunities as 5G networks continue to evolve.

In broadband and connectivity, we are executing large-scale deployments of our single-chip fiber PON and Wi-Fi 7 gateway platforms with a second major Tier 1 service provider in North America, with additional ramps expected later in the year in Europe. These long-cycle deployments provide a stable foundation, leverage the same strengths in integration and power efficiency that clearly differentiate MaxLinear's data center portfolio. In summary, we are very pleased with the strong start to 2026 and are especially excited by the momentum accelerating in our optical data center business. With multiple customers entering meaningful ramps of our 800 Gb Keystone family and broader engagement across our 1.6 Tb Rushmore and Annapurna product families across scale-out and scale-up AI architectures, we believe MaxLinear is exceptionally well-positioned for sustained transformative growth.

Our disciplined focus on execution and innovation gives us confidence that 2026 will be a pivotal year as we continue to evolve our strategy and deliver long-term value for our customers and shareholders. With that, let me now turn the call over to Steve Litchfield, our Chief Financial Officer and Chief Corporate Strategy Officer.

Thanks, Kishore. Total revenue for the Q1 was $137.2 million, up from $136.4 million in the previous quarter, and up 43% from the $95.5 million in the Q1 of 2025. Infrastructure revenue for the Q1 of 2026 was approximately $63 million. Broadband revenue was approximately $44 million. Connectivity revenue was approximately $19 million, and industrial multi-market revenue was approximately $12 million. GAAP and non-GAAP gross margins for the Q1 was 57.5% and 59.5% of revenue. The delta between GAAP and non-GAAP gross margin in the Q1 was primarily driven by $2.6 million of acquisition-related intangible asset amortization. Q1 GAAP operating expenses were $96.1 million and non-GAAP operating expenses were $59.9 million. The delta between GAAP and non-GAAP operating expenses was primarily due to stock-based compensation and performance-based equity accruals of $28.5 million combined, and acquisition-related cost and other cost of $6.5 million.

GAAP loss from operations for Q1 2026 was 13%, and non-GAAP income from operations in Q1 was 16% of net revenue. GAAP and non-GAAP interest and other expense during the quarter was $1.4 million and $1.3 million, respectively. In Q1, net cash flow used in operating activities was approximately $8.9 million. We exited Q1 of 2026 with approximately $89.9 million in cash equivalents, and restricted cash. The primary use of cash was due to substantial prepayment for wafers supporting rising demand for our data center low geometry products, for which we have increasing order backlog in the second half of the year. Our days sales outstanding was down in Q1 to approximately 27 days. Our inventory was up by approximately $8 million versus the previous quarter, with days of inventory improving to approximately 128 days. This concludes the discussion of our Q1 financial results.

With that, let's turn to our guidance for Q2. We currently expect revenue in the second quarter of 2026 to be between $160 million and $170 million. Looking at Q2 by end market, we expect to see growth from all four of our business segments, with particular strength in infrastructure driven by data center optical interconnects. We expect second quarter GAAP gross margin to be approximately 56%-59%, and non-GAAP gross margin to be in the range of 58% and 61% of revenue. We expect Q2 2026 GAAP operating expenses to be in the range of $91 million-$97 million. We expect Q2 2026 non-GAAP operating expenses to be in the range of $61 million-$66 million. We expect our Q2 GAAP interest and other expense to be in the range of approximately $1.8 million-$2.2 million.

We expect our Q2 non-GAAP interest and other expense to be in the range of $1.8 million-$2.2 million, with FX volatility being the primary risk. We expect a $2 million tax benefit on a GAAP basis, and a non-GAAP tax provision of approximately $1 million. We expect our GAAP and non-GAAP dilutive share count in Q2 to be approximately $95 million each. In summary, with strong growth in our data center optical business and several additional high-value products still early in their market ramp, we have transformed MaxLinear into an infrastructure-focused company. Our investments over the past several years have brought us to this point where we are well-positioned to deliver sustained growth, operating leverage, and increasing shareholder value. We're excited about the opportunities ahead and confident in our ability to execute. With that, I'd like to open up the call for questions. Operator?

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press *1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press *2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the * keys. We ask that analysts limit themselves to one question and a follow-up so that others may have an opportunity to do so as well. One moment please while we poll for questions. Our first question comes from Tore Svanberg with Stifel. Please proceed with your question.

Yes. Thank you, and congrats on the momentum here. Kishore, you mentioned optical DSP revenue are now tracking to $160 million-$170 million. I think that's about $30 million-$40 million higher than what you had expected before. Just wondering what transpired in this quarter to see such a steep increase. Is this new customers? Are you basically just seeing steeper ramp at existing customers? Any more color you can add on that additional revenue would be great. Thank you.

Thank you, Tore. Yes, at the time when we set the guidance, we obviously are looking at a number of ramps at a number of customers and we were being conservative. At the same time, we were also fairly optimistic internally that we should be seeing strong growth coming in the latter half of this year. Now with all the visibility and the lead times that are necessary for providing the product, we have very good visibility and the ramps are setting in very nicely, both across 400G and 800G solutions. I just think it's all about timing of the ramps and the success of the calls and our ability to scale up to meet the surging demand we are seeing now.

Very good. As a follow-up for you, Steve, so you mentioned that prepayment for wafer capacity. I'm just wondering, are you sort of done with that now? Or should we expect more cash outflows in the coming quarters? I also noticed you increased the revolver by $30 million. Anything you can say here on the balance sheet and cash position going forward? Thank you.

Yeah. Sure, Tore. Not a problem. Consistent with what we raised back in Q4 of last year, we knew we would have some working capital needs kind of going in Q4 as well as Q1. That certainly played out the way that we expected. Are we through it entirely? I guess to some degree, depends on how much demand continues to improve, right? As that demand improves, certainly we may continue to see some prepayments, but you'll start to see this inflect as the revenues increase. Second part of your question on the revolver. Yeah, we did have a revolver that was expiring in June, so we renewed the revolver. We took it up slightly, a pretty minor move for the size of the company and the direction of the company.

Great. Thank you.

Our next question comes from Joe Quatrochi with Wells Fargo & Co. Please proceed with your question.

Yeah. Thanks for taking the question. Maybe just to follow up on that. I guess, can you talk about just your supply chain and capacity to support the growth that you're seeing? Clearly the mix of your growth is a bit different than maybe previously when you were at kind of similar revenue levels.

Yeah, Joe, I'll take this. Look, I don't think it's any surprise to anyone there's some supply constraints out there. I think we planned well for this and worked really closely with the partners on this front. I think we've seen really good success, and we expect to continue to see that going forward.

Okay. As a follow-up, can you talk maybe a little bit about the presentation on the gross margin guidance? Why wouldn't we see maybe a little bit more leverage on the sequential revenue step up that's pretty significant here?

Yeah. No, obvious question. I think this is consistent with what we've been seeing. You've heard my caution on this, Joe, and it's a little bit of the input cost. Certainly there's some concerns out there, wafer cost, packaging, et cetera, are moving up. A lot of cases the industry, ourselves included, have been able to pass along these costs, and so we expect that to be the case. Just given the uncertainty out there, I think we just want to remain cautious. You're absolutely right from the understanding that the infrastructure business typically does drive a higher gross margin. We're very optimistic as we look out. The rest of this year and even into next year in that being a positive influence on our gross margins.

Our next question comes from Tim Savageaux with Northland Capital Markets. Please proceed with your question.

Hi, and congrats on the results and especially guidance. A question on the infrastructure side, and I know that's mostly data center driven, but looks like you grew something mid-thirties sequentially in Q1. I imagine data center was a big driver there. Given what you're guiding to, do you expect some sequential growth of a similar magnitude in Q2 in infrastructure?

Yes, I think, Tim, from my standpoint, we obviously don't typically guide end markets in that level of detail. We did say that it was going up. We did emphasize in our prepared remarks that, as we look at this year, now, clearly the infrastructure business has much bigger growth drivers. We have a lot of new products that are ramping with some new customers. We would certainly expect infrastructure to be a much bigger driver of growth in the coming year.

Okay. To follow up once again, given the step-up we're seeing in Q2, do you have any comments about overall revenue growth expectations for 2026? Looks like we could be tracking, I don't know, 35%, 40%, but any comment from the company?

Yeah. Look, we only got one quarter, and we're not going to change that here today. We are very excited about the growth potential that we have and these new customers and the new product ramps. Yeah, and frankly, with the visibility that we have, we start to roll into 2027 as well. I think we're excited to see the growth in 2026 and even backlog starting to build into 2027.

Okay. Thanks very much.

Thanks, Tim.

Our next question comes from Ananda Baruah with Loop Capital Markets. Please proceed with your question.

Yeah. Good afternoon, guys. Really appreciate the question. Congrats on doing all the work to get to this place with DSP. It's cool to see it play out.

Yeah, you guys are very welcome. Kishore, you mentioned just as a first question, as a DSP question, you mentioned to one of the prior questions that around magnitude of step up and guide that you guys had baked in some conservatism, sort of a programmed start ramp here, and that that contributed to sort of the magnitude of step up and guide. Can you guys tell though, I guess what I'm wanting to ask is, can you tell if the market ramp feels bigger than what you guys had originally anticipated as distinct from conservatism? Let me just ask that question. Do you have any sense if the market ramp feels bigger, if the market TAM feels bigger? Then I have a quick follow-up as well. Thanks.

Let me answer the first question. Obviously, the TAM expansion is real, or the SAM expansion even more so. The PAM4 DSP expansion is very real as both U.S. and China hyperscalers are deploying very rapidly. Depending on the architecture implementation, the amount of PAM4 DSP used can vary completely based on the GPU configurations. Scale-up and scale-out are both equally growing very strongly. To the extent that we are conservative, it's in the balance of things, that's our general positioning as a company, right? I don't think that's behaviorally any different from us. Do we expect more upsides? Absolutely. We do expect more upsides that is commensurate to all the programs reaching full run rates. I hope that answers the first question. Your second question, please.

Oh, yeah. On Panther, you had mentioned Panther is benefiting from some of the memory dynamics in the marketplace. Can you just walk us through the ways in which Panther is holistically benefiting? Is it as simple as memory shortage, Panther provides performance, and you've been waiting here with Panther as well, so you're benefiting? Or are there more sophisticated nuanced reasons as well that Panther is benefiting?

Yeah. There's obviously been sophisticated nuance to Panther, right? Now, of course, memory is fashionable, right? Not three years ago when we got punished for some of our actions. 60% of the data center spend is in memory. All memory is not equal. As the AI engine moves forward, accelerates, low latency, high capacity memory access is super important. The big benefit of Panther is it's an accelerator, so it reduces latency dramatically and the power efficiency that brings to it, so enables much more capability than just a memory compression, right? I really feel that the performance part related to low latency, high bandwidth access enablement that Panther provides is the key differentiator. Thus far, our use of Panther has been really at the enterprise appliance level, if you will. Now these enterprise storage appliance are getting increasingly deployed into mainstream cloud centers.

I really feel there's much more to come with Panther 5 and Panther 6 in the future. This is just the beginning of our Panther roadmap product family. We expect this year the revenues to double. We have said that before. Hopefully next year as well, we got very strong growth, based on the visibility we have.

With all that said, do you feel bigger about the ultimate TAM potential for Panther? Big picture.

In the big picture, absolutely Panther has a lot of potential, but Panther, as it is today, will not be sufficient, right? The world and the deployment models evolve, so there'll be more investment required, but the TAM is pretty huge, and we just have to keep on converting more of the TAM into our SAM, and that will drive our roadmap.

Thank you. Appreciate it.

Our next question comes from Christopher Rolland with Susquehanna International Group. Please proceed with your question.

Hey, guys. Thanks for the question. Congrats on the strong results, and I apologize if this was asked, but in your prepared remarks, or actually in the press release, you talked about, for optical, multiple hyperscalers. Previously, I think your messaging around optical was very broad-based. I think at OFC, we see all the design wins across so many different optical vendors. This seems like it's a big change, and might be changing customer concentration. Perhaps if you could talk a little bit about that. Are you now diversifying around these key hyperscaler opportunities? Is it like one or two or all of them? If you could elaborate a little bit, as to what seems like is a pretty meaningful change here, that would be great.

Yes. Thank you, Chris. It is pretty broad-based, our design win, because all the module vendors in the world. We have designs. We have always maintained that we have designs across all the module vendors. It's taken a while to map the module vendors victories with the various end data centers, while we ourselves had to sort of do the business development work that creates the pull for various module vendors. Even at the end customers, it's pretty broad-based. Obviously, we'll be concentrating on a few during the ramps, and as the ramp expands into 2027, we'll have other data centers that come online. Even as we speak now, it's a pretty broad-based success. Is there more work to do to expand further? Yes, I think we are only halfway there to our end data center diversification across all the hyperscalers.

There's more work to be done, but what Keystone provides us is an affirmative statement of MaxLinear's ability to successfully get through the interops, supply product at scale. Remember, we were worried about our ability to supply and provide it at scale where it's very confidence-boosting in terms of our credibility as a world-class chip supplier.

Thank you for that, Kishore. Maybe a quick follow-up. I guess, if you could perhaps talk about 1.6 Tb, like how you think design wins and the ramp will go there. Is 800 just kind of the beginning? They're qualifying on 800, and then they have plans to use you guys at 1.6, and they've communicated these plans. You also mentioned scale up, optical for scale up, in your press release as well. I don't think there's a huge transceiver usage for scale up right now, mostly scale out. If you could talk about that, and what that means for you guys, that'd be great as well.

Okay. You hit many number of topics here, right? There are going to be different deployment models for scale up, to start with, right? There are many, many different product categories on scale up. Having said that, the optical transceivers, 30% of the market is for scale up, right? That's a pretty substantial part of the TAM, and 70% is for scale out today. Our participation in scale up derives from the optical transceivers as well as now the new offering in 1.6 Tb for electrical retimers, which is onboard retimers, and for the active electrical cables as well. Those are all scale-up based applications. I hope that answers your question of where our scale-up opportunities are coming from.

They're really in that 30% of the TAM I talked about. Moving forward to 1.6 Tb, the critical thing to keep in mind is that there is enormous confidence out there with shipping Keystone to major data centers today, and they're ramping very strongly in 2026. We now rolled out our 1.6 Tb Rushmore product Annapurna family for electrical applications. I think that this level of execution and the success with the cloud relationships, module partnerships, and the qual and interop completion is creating a far more pull for our 1.6 Tb participation than I would have guessed at this point in time. In a sense, we hope that by the end of the year, we'll have called on 1.6 Tb.

I just want to keep this point that 800G 1.6 Tbs will be probably one of the most long-lasting interconnect applications in the data center world. Having 1.6 Tb will actually expand our ability to garner more revenues and more market share.

Excellent. Thank you guys, and congrats again.

Thank you.

Thanks.

Our next question comes from Richard Shannon with Craig-Hallum Capital Group. Please proceed with your question.

Well, thanks, guys, for taking my question. Maybe I'll follow up on the topic of DSP here and ask the question slightly different way here, which is, obviously your 400G, 800G with Keystone are going very well, and heard some relatively positive comments about Rushmore so far here. I'd love to get a sense here since it seems like you're gaining some very nice share in Rushmore here. Excuse me. In Keystone. To what degree is this conveying directly or could it convey directly to success in Rushmore? And how do you view the potential revenue trajectory over a period of time relative to what you've seen so far with Keystone?

Thank God for Keystone, right? Everything valuable takes a long time. It has taken us a long journey through two, three generations of investment. Now we are into Rushmore, and the success of Keystone makes us an incumbent, right? The power of incumbency is the ability to have the relationships with the cloud customers, the module makers, the confidence in your ability to supply, and the quality of your product. On the 1.6 Tb solution, I dare say we are in the top tier on the performance category. Our customers acknowledge that, so they're readily going to develop solutions that would be quickly moved to the next phase with calls, et cetera, with the data center folks. As you know, we are not the first ones with 1.6 Tb relative to our incumbent competitors, two of them. I really feel it bodes very well.

With 1.6 Tb, you expect the ASPs to increase, right? Clearly for the same units or even expanding units that are happening, the TAM dollar substantially increased. As the mix becomes more and more 1.6 Tb, I really believe that it'll have an uplifting effect on our revenues and gross margins, even as our market share expands.

Okay. Kishore, thanks for that detail. My following question is on the cable and broadband space here. Just generally, love to get a sense of your expectations for the trajectory of this year. Last call, you talked about a soft first half. Certainly, your starting point shows that here. Talking about calendar 2026 being down, which I can completely believe here. Want to get a sense of any update on that and whether you have any visibility into when DOCSIS 4.0 starts to have an impact.

Thank you for the question. We had a spectacular growth year in 2025 for broadband. Grew about 75%. We had a pullback in Q1, which has also some seasonality built into it. Happy to say that looking forward, all our businesses are growing actually, which is sort of a tailwind that as our data centric and infrastructure revenues grow, we also have other segments of our diversified portfolio really generating some positive momentum as well. I'm happy to share that we expect our broadband business to continue to start growing from Q2 and into 2027. I think cable DOCSIS 4.0 certifications happen, but some of the operators are still delayed on their network readiness. However, a big growth is coming with Ultra DOCSIS 3.1 and 4.0 into 2027.

The one thing that's happened post-COVID, is that during the down period, we have been winning market share in broadband, which bodes very well for our fiber play. In fact, fiber PON business continues to grow through Q1, Q2, and we started major deployment with a major tier one operator in North America. That's happening in the second half of the year, for which we've already done pre-shipments. Later we have European deployments. I think it's all good. It's all growing. We waited for a time to recover through the COVID slowdown. I think we feel very good about that.

Okay, great. Thank you, guys.

Yep.

Our next question comes from Karl Ackerman with BNP Paribas Asset Management. Please proceed with your question.

Yes. Thank you. I have two clarifications, if I may. Kishore, you spoke briefly about cable and broadband just now, but could you be more specific with respect to the June quarter guide? It seems like most of the growth is coming from infrastructure. Can you talk about what your outlook is for broadband connectivity and multi-market, and whether they can all grow on a sequential basis in the June quarter too? I have a follow-up, please.

Hey, Karl. Steve. Yeah, thanks for the question. Yeah, I think we mentioned earlier all four end markets will be up. I do expect a lot of that growth to be from infrastructure, just seeing the inflection that we're seeing from particularly some of the data center products. Yeah, that is our expectation.

Got it. Okay. Just to follow up on Chris's earlier question, is much of your optical DSP growth coming from hyperscaler-owned designs and therefore you are qualifying with them directly? Or is your hyperscaler exposure predominantly through module vendors providing a merchant solution?

Both.

Got it. Thank you very much.

Thank you, Karl.

Our next question comes from Quinn Bolton with Needham & Co. Please proceed with your question.

Hey, guys. Let me offer my congratulations on the nice results and outlook. Kishore, I guess I wanted to follow up on Tim's question earlier about just the breadth of the growth in the infrastructure business in Q1. Was it predominantly from the optical DSPs or did you see good contribution from Panther, the wireless access products as well?

Quinn, I'll jump in here on this one. Look, really across the board, we saw some really good growth from all of the products within the infrastructure segment. I would say from here, you start to see data center really break out. The other product lines absolutely contribute. Kishore mentioned earlier about Panther. Panther is going extremely well. Wireless infrastructure, which was pretty soft last year, we talked about the improvements. We expect to see more of that this year. Those are probably the top three or four products there.

Got it. I know sometimes gross margin takes a couple of quarters to reflect your product mix because you've got a flow product sitting in inventory. You had, I think, 30% increase in infrastructure in the quarter, maybe a 25% decrease in broadband quarter-over-quarter. I would have thought that would have been a nice tailwind for you. Gross margins were relatively flat. Just wondering, was there anything that sort of held back gross margin given the mix shift, or do you think it's just sort of a timing issue? Obviously, the go forward look and the mix, the infrastructure sounds like it's a nice tailwind to gross margin. Just trying to think when we might start to see it show up in the income statement. Thanks, Steve.

Yep, certainly. Yeah, no problem, Quinn. Yeah, look, we came in more like right at our guidance. What we had talked about, the mix is definitely continuing to improve. I mentioned a little early in a separate question about just input cost. I think we're just trying to be cautious as we look forward. Just as you stated, yes, I do believe it's a tailwind, especially as you move into 800G, 1.6 Tb, all of those have higher gross margins. We will certainly continue to see nice benefits on the gross margin side as infrastructure gets to be a larger percentage of our business.

Great, thank you. Congrats again.

Thanks, Quinn.

Our next question comes from Suji Desilva with Roth Capital Partners. Please proceed with your question.

Hi, Kishore. Hi, Steve. Congratulations on the progress here. You talked about 2Q, some of the optical stepping up here. Are the programs all commencing ramp or are the other programs phasing in and starting in Q3, Q4? Just to give us a set of layers across the year, or really are we in ramp for all of the key programs already?

Hi, Suji. They're different product cycles with different ramps, and they're all kicking in now, and there'll be some more that'll catch up later in the end of the year. It really took a while for them all to start deploying with intro calls, everything complete. Now we are strengthening. We're seeing strength, each of these layerings, based on the bookings we have.

Okay, that's helpful color. Thank you, Kishore. Kishore, you mentioned in the prepared remarks. I believe I heard wireless infrastructure playing a part in data center connectivity, maybe data center interconnect or somewhere along those lines. Can you help us understand that opportunity and how big that is? Is that a niche or can that become a mainstream opportunity?

Could you repeat that question, Suji?

Oh, the wireless infrastructure, the connectivity helping backhaul for data center and so forth. Is that a niche application or is that a growing application? Yep.

If you look at the prepared remarks, I talked about 5G access and transport, and you have seen a number of announcement investments where there's a lot of AI at the edge and AI-enabled network infrastructure. We see a lot of the telecom infrastructure people in the wireless now gathering some momentum about deployment increases, and especially that means that it changes the transport overhaul, backhaul stuff as well as certain elements of the access will change as well. This should all provide us a tailwind on the wireless infrastructure. Now, the growth mechanisms in wireless infrastructure, the rates of ramps will never match those of the data centers. However, you have now started seeing, you saw the announcement between Nvidia and Marvell, and you're seeing now genuine interest to move towards AI in the DU side of the network on the edge in the wireless side as well.

We should definitely benefit as being one of the top two players in the wireless infrastructure space.

Okay. Very helpful, Kishore. Thanks.

Operator, do we have one more question?

Yes. Our next question comes from Tore Svanberg with Stifel. Please proceed with your question.

Yeah, thank you. Just two quick follow-ups, especially on your new products. Kishore, first on Annapurna. Obviously, this starts with 1.6 Tb. But I'm just wondering, if you could talk a little bit about MaxLinear's positioning there. Are you going to go after all the standards? Obviously, there's Ethernet standards, there's UALink. Are you going to participate perhaps also with some NVLink fusion protocols? Just trying to understand exactly where you're trying to intersect the market with Annapurna, especially on the retimer.

I know there's a lot of hoopla about AECs because of success of one very successful company on AECs. If you look at the market size opportunity for a silicon player, the retimer market electrical for AI scale-up inside the compute server is humongous as the speeds increase. You're going to see a lot of retimers. Currently, our retimer offering is Ethernet-based naturally. However, the fundamental physics and the challenges of doing a very demanding PHY for the electrical retimer application is done now. With regard to adding the various standards, that's just an interface game. Now, you can imagine this also lends itself to other chiplet sort of stories and things like that. We're laying the framework and the groundwork of building a platform from which we'll have the optionality to chase wherever the SAM and the TAM goes.

At this point, we are in the electrical retimer market for Ethernet-based application.

That's very helpful. On Washington, I assume that obviously gets sold with either Keystone or Rushmore. Are you seeing designs as well where your TIAs are perhaps participating on other people's DSP platforms?

Right now, our Rushmore and Washington are sampling, right? Customers are using them, but they're very excited about the performance. Honestly, the TIA is beyond the TIA for Rushmore, right? If you think of an LPO strategy, the TIA is a fundamental block. If you think about LRO strategy, the TIA is a fundamental block. MaxLinear is very well known for its great RF analog skills. The CPO market, if they're going to be bare bones, then the TIA and driver is a natural fit. If they go more sophisticated on the DSP-based one, we already have the platform offering. The real question comes as you go towards XPO, CPOs and the various manifestations of it. The full offering is super important. Washington is the first step in the direction of a fundamental platform that will have multiple derivatives and incarnations.

Makes a lot of sense. Thank you.

Yep.

Our next question comes from Tim Savageaux with Northland Capital Markets. Please proceed with your question.

Thanks. Quick follow-up for me as well, and that's on the hyperscale win for PON, which sounds like the data center out-of-band management stuff is. I guess, can you talk a little bit more about the timing there and how significant this opportunity? When would you expect this design win to ramp? And could it be a needle mover of some sort? Thanks.

Absolutely. We just secured the win, so we expect the ramp. It is a lot of qualification that goes through it. Sometime in 2027 it starts ramping. How big that can be today, I think this is one of the first of its kind, sort of what they call a very interesting development where the data centers are seeing the value of a dedicated, reliable link to control the entire data center network, right? We expect this TAM to expand to over hundreds of millions of dollars. Currently our expectation that at our revenues, it's going to be quite a bit of needle mover even in the next year itself in the second half on a run rate basis.

Thanks.

Our next question comes from Richard Shannon with Craig-Hallum Capital Group. Please proceed with your question.

Hi, guys. I just have one follow-up for me here, and that's to dig in a little bit on the DSP side here. I want to get a sense of how big the other applications outside of what most people assume, and I certainly do, the duplex optical DSP being a big part of it. How could the rest of that business, that LRO, LPO, CPO, AEC, retimer, et cetera, how big can that be in a year or two? Can that be 10% or even 20% of that total portfolio? Any sense of that would be great. Thank you.

We're still in the early innings of how this whole market is going to play out, whether it's CPOs or whether it is. I know people get excited, but still, I think we are three years or so away from determining that. At this point, it's a very small share of the market from a units point of view, okay? From a silicon units point of view. I don't expect it to be a huge part of our revenues, but from a TAM-wise, I would rate the optical transceiver DSPs to be the number-one TAM substantially overwhelming the rest. Second would be electrical retimers when that happens, and the third would be AECs. And AEC as-we-go story because there's a certain level of point in time application nature to the AEC and that itself will evolve. I would rank them in that order.

At this point it's going to be massively overwhelmed by revenues in the optical transceiver PAM4 DSP.

Okay. That's kind of what I thought. Just wanted to hear that. That's all for me. Thanks, Kishore.

Yep. Thank you.

Thanks, Richard.

We have reached the end of our question and answer session. There are no further questions at this time. I would now like to turn the floor back over to Leslie Green for closing comments.

Thank you all. This quarter we will be presenting at several financial conferences, and the details will be posted on our investor relations page. Thank you all for joining us today, and we look forward to speaking with you again soon.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.