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After MaxLinear reported its October results, we updated our revenue and profit projections for the next three years. We moved our call from Avoid to Watch because the company is now making a profit much earlier than we expected. We added the product roadmap for 1.6T networking chips to what we track as a primary growth driver. We also added the company's increased $200 million borrowing limit to our assessment of its cash needs during this period of faster growth.
Susquehanna lowered its price target to $70 from $80 after the company shared its latest results. Wells Fargo also updated its view, keeping its rating at the equivalent of a hold and setting a target of $78. The average target across all analysts who follow the stock now sits at about $97.
Source: Susquehanna
The company reported earnings of $0.62 per share, beating the $0.56 analysts expected. Revenue reached $218 million, driven by a 210 percent jump in its infrastructure business. This segment is where the company sells specialized chips that manage high-speed data flow in AI data centers.
This performance marks a turning point as the company successfully moves away from its older, slower-growing broadband business. Profit margins improved as these newer AI-focused products carry higher prices. While the company still faces risks if big tech firms slow their data center spending, this quarter shows it is winning a meaningful share of the hardware being built to support AI training.
See the full quarter, and how our tracked metrics did
Source: 8-K filing
On October 16, the company updated its credit agreement with Wells Fargo to add $70 million in borrowing capacity. This brings its total revolving credit line, a flexible loan the company can use as needed, to $200 million.
The agreement also lowered the company's liquidity covenant, which is the minimum amount of cash it must keep on hand, from $80 million to $60 million. These changes give the business more room to spend on operations and growth as it ramps up production of its new AI data center chips.
Source: 8-K filing
The company launched Topaz, a new system-on-a-chip designed for high-speed fiber internet gateways. These chips handle the connection where the provider's network enters a home or office, supporting speeds of 10 gigabits and higher.
By adding AI acceleration directly into these gateway chips, the company is betting that service providers will want more intelligence at the edge of the network rather than relying entirely on distant data centers. This expands the company's reach beyond the data center and into the hardware that powers everyday internet connections.
Source: Business Wire
Management has consistently set beatable targets and cleared them for two years straight. This suggests they have a firm handle on their costs as the business returns to profitability.
| Expectation | |
|---|---|
| EPS | $0.79 |
| Revenue | $250M |