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MaxLinear (NASDAQ:MXL) held its second-quarter earnings conference call on Thursday. Below is the complete transcript from the call.
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Summary
MaxLinear's Q2 2026 revenue grew 55% year-on-year to $168.8 million, driven by strong performance in the infrastructure segment, particularly in optical data center products.
The company reported a GAAP EPS of $0.02, marking a return to profitability, and a non-GAAP EPS of $0.35. GAAP and non-GAAP gross margins were 57.8% and 59.5%, respectively.
MaxLinear is increasing its optical data center revenue expectations for 2026 to $210-$230 million, with continued growth anticipated into 2027, driven by the Keystone and upcoming Rushmore products.
The company is forecasting Q3 2026 revenue between $210 million and $220 million, with non-GAAP gross margin expected to be 58.5% to 61.5%.
Strategic initiatives include the expansion of the PAM4 series technology and the introduction of Rushmore, Washington, and Annapurna platforms, targeting next-generation AI and cloud infrastructure.
The company is seeing robust demand across both U.S. and Asia markets, with significant growth from 800 gigabit PAM4 solutions.
MaxLinear's broadband and connectivity segments are showing growth, bolstered by deployments of single-chip fiber PON and Wi-Fi 7 gateway platforms.
Management highlighted strong customer relationships and supply chain management as key factors in meeting rising demand and maintaining growth momentum.
Full Transcript
OPERATOR
Greetings and welcome to the MaxLinear second quarter 2026 earnings conference call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance, please press 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Leslie Green, Investor Relations. Please go ahead.
Leslie Green, Investor Relations
Thank you, Paul. Good afternoon everyone and thank you for joining us on today's conference call to discuss MaxLinear's second quarter 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 third quarter of 2026 including revenue, GAAP and non-GAAP gross margins, 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 target segments, 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 the Risk Factors section of our recent SEC filings, including our most recent Annual Report on Form 10-K and our Form 10-Q for the quarter ended June 30, 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 second quarter of 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 a GAAP and non-GAAP basis. 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. And now let me turn the call over to Dr. Kishore Seendripu, CEO of MaxLinear.
Kishore Seendripu, CEO
Thank you, Leslie, and good afternoon everyone. Our Q2 financial results highlight the exciting inflection in our business trajectory and the beginning of a multiyear growth phase for MaxLinear. Overall revenue grew 55% year on year, reflecting strong execution, accelerating adoption of our newest data center products, improving visibility, and gathering momentum in our infrastructure portfolio. With the improvement in profitability in the quarter, we also returned a positive GAAP EPS of $0.02.
In addition, with the favorable product mix shift towards our infrastructure business, we are now forecasting Q3 2026 non-GAAP gross margin to be 60% at the midpoint of our guidance range, as well as a substantial increase in our non-GAAP profitability. Infrastructure is now our largest revenue category and grew 145% year on year, driven by robust production ramps in optical, data center–oriented platforms. Based on robust customer orders and rising visibility of program ramps, we are once again raising our expectations for 2026 optical data center revenue to be between $210 million to $230 million, with continued growth as run rates expand into 2027. Keystone, our 100 gigabit per lane, 5-nanometer CMOS PAM4 DSP and SerDes technology, continues to ramp into high-volume production at major hyperscale customers across the U.S. and Asia for 400 gig and 800 gig deployments, delivering almost 40% lower power consumption than competition. Keystone's success serves as the foundation for multigenerational customer engagements that extend to the adoption of next-generation 1.6 terabit and 3.2 terabit optical scale-up and scale-out architectures at 200 gigabit and 400 gigabit per lane speeds, respectively.
We expect Rushmore, our 1.6 terabit optical PAM4 DSP at 200 gigabit per lane speeds, to become an important optical connectivity growth driver beginning in 2027, which will layer on top of Keystone's successful ongoing ramp. Beyond our PAM4 series technology, we have comprehensively expanded our portfolio for optical and electrical scale-up and scale-out connectivity opportunities, including TIAs, drivers, and onboard retimers. Together these products support a broad range of data center architectures consisting of pluggable optics, LRO, LPO, NPO, and CPO, providing customers with greater flexibility in their deployment of next-generation AI and cloud infrastructure using MaxLinear solutions. Washington, our standalone 200 gigabit per lane TIA platform, not only pairs seamlessly with Rushmore, but it can also be deployed standalone in LPO and NPO implementations that do not require a DSP. As the performance requirements for TIAs and drivers increase significantly at 200 and 400 gigabit per lane speeds, our deep SerDes expertise enables us to drive compelling performance advantages for such customer solutions.
Annapurna, a 200 gigabit per lane Ethernet retimer platform, targets 1.6 terabit active electrical cable and onboard retimer requirements for scale-up in AI systems requiring low latency, short-reach electrical interconnects within server racks and switches. Annapurna's onboard retimer applications expand our presence into another critical layer of AI infrastructure. For both Annapurna and Washington, we expect initial revenue in 2027 followed by a more meaningful volume ramp in 2028.
Outside of optical, our first XGS-PON hyperscaler design win for dedicated data center control plane architectures has completed qualification for a 2027 ramp and beyond. Additionally, we have secured design wins for USB bridge controllers at two major hyperscalers for AI rack management alongside a broader analog and power management portfolio. These wins broaden our engagement across the data center platform and strengthen our strategic positioning with key customers.
Our Panther family of storage accelerators addresses CPU, memory, and storage bottlenecks. We expect revenues from Panther to roughly double this year, with the potential to nearly double again in '27. Outside the cloud data center, we expect edge-AI-driven upgrades to 5G wireless WAN access and transport infrastructure to increase demand for our signature Sierra 5G radio SoC and our millimeter and microwave wireless backhaul RF and modem solutions in the mid to long term.
Moving to broadband and connectivity, both categories delivered revenue growth in Q2, driven by large-scale deployments of our single-chip fiber PON and Wi‑Fi 7 gateway platforms at major Tier 1 service providers in North America and Europe. We're also in the early stages of DOCSIS 3.1 and 4.0 deployments, which will provide additional stability to growth as ramps progress throughout '27 and '28. In summary, we are pleased with our first-half performance and the momentum we have in our data center business.
Keystone has established MaxLinear as a proven high-volume, high-quality supplier of 400 gigabit and 800 gigabit PAM4 DSPs and SerDes technology. At the same time, our Rushmore, Washington, and Annapurna active electrical cable and retimer platform extend our reach into 1.6 terabit optical and next-generation AI infrastructure. With multiple revenue drivers layering on over the next two years, we believe MaxLinear is exceptionally well positioned for sustained, transformative growth and increasing long-term shareholder value.
With that, let me now turn the call over to Steve Litchfield, our Chief Financial Officer and Chief Corporate Strategy Officer. Steve.
Steve Litchfield, CFO
Thanks, Kishore. Total revenue for the second quarter was $168.8 million, up 23% from $137 million in the previous quarter and up 55% from $108.8 million in the second quarter of 2025. Infrastructure revenue for Q2'26 was approximately $85 million, broadband revenue grew to approximately $45 million, connectivity revenue was approximately $24 million, and industrial and multi-market revenue was approximately $15 million. GAAP and non-GAAP gross margin for the second quarter were 57.8% and 59.5% of revenue.
The delta between GAAP and non-GAAP gross margin in the second quarter was primarily driven by $2.5 million of acquisition-related intangible asset amortization. Second quarter GAAP operating expenses were $101.8 million and non-GAAP operating expenses were $62.8 million. The delta between GAAP and non-GAAP operating expenses was primarily due to stock-based compensation and performance-based equity accruals of $36.5 million combined, and acquisition-related costs and other costs of $2.2 million.
GAAP loss from operations for Q2 was 2% and non-GAAP income from operations in Q2 was 22% of net revenue. GAAP and non-GAAP interest and other expense during the quarter was $2.4 million and $2.3 million, respectively. GAAP EPS for Q2 2026 was $0.02 per share, marking a return to GAAP profitability. Non-GAAP EPS was $0.35 per share in Q2. Net cash flow provided in operating activities was approximately $4.8 million. We exited Q2 of 2026 with approximately $93.7 million in cash, cash equivalents, and restricted cash.
This included a substantial prepayment of wafers supporting rising demand for our data center products, for which we have increasing order backlog in the second half of the year and into 2027. Our days sales outstanding in Q2 was approximately 28 days versus 27 days in the previous quarter, and our days of inventory was down in the quarter from 128 days to 123 days. This concludes the discussion of our Q2 financial results. With that, let's turn to the guidance for Q3 of 2026.
We currently expect revenue in Q3'26 to be between $210 million and $220 million. Looking at Q3 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 third quarter GAAP gross margin to be approximately 57% to 60% and non-GAAP gross margin to be in the range of 58.5% to 61.5% of revenue. We expect Q3 2026 GAAP operating expenses to be in the range of $98 million to $104 million.
We expect Q3 non-GAAP operating expenses to be in the range of $66 million to $71 million. We expect our Q3 GAAP interest and other expense to be in the range of approximately $3.8 million to $4.2 million. We expect our Q3 non-GAAP interest and other expense to be in the range of approximately $3.7 million to $4.1 million. We expect a $1.5 million tax provision on a GAAP basis and a non-GAAP tax provision of approximately $1 million. We expect our Q3 GAAP and non-GAAP diluted share count to be approximately 99 million each.
In summary, our results this quarter reflect the continued strength of our optical products and the momentum we are seeing across multiple growth vectors within our infrastructure business. Our growth and innovation in this area has been transformational, and we believe we are in the early stages of a multi-year cycle characterized by revenue growth and expanding operating leverage. We're excited about the opportunities ahead and confident in our ability to create long-term shareholder value.
With that, we'd like to open up the call for questions. Paul,
OPERATOR
Thank you. We'll now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you.
Our first question is from Tore Svanberg with Stifel.
Tore Svanberg, Analyst at Stifel
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.
Steve Litchfield, CFO
Okay. Kishore, would you like to maybe take that one?
Kishore Seendripu, CEO
Yes, sorry. Thank you. We are obviously very excited about the growing infrastructure business and especially about our success with our wins for 400 gig and 800 gigabit optical PAM4 business. So as we entered the year, we were more concentrated [in] 400 gigabit revenues. But all the revenue growth we are seeing now is driven by 800 gigabit PAM4 success for us. And 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, you know, 800 gigabit is now substantially going to be a bigger portion of our run-rate revenues moving forward. With regard to our end customers, you know, we do not share our particular customer names. We have not done that. However, our customers span both U.S. and Asia hyperscalers and tier-one 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.
Tore Svanberg, Analyst at Stifel
Very good. And as my follow-up, just thinking about some of the extension of products that you're now sampling, whether it's Washington and Annapurna, you talked about '27 contribution. But I'm just curious, should the ramp be mainly in '28 or could you potentially start to see some ramps with TIAs and retimers already in 2027?
Kishore Seendripu, CEO
So our Rushmore product line, our Annapurna, and even our TIAs for the 1.6 terabit or 200 gigabit per lane speeds has been sampling. Now it's in the customer qual phases and design-in process. So we expect revenue to start generating in 2027. So we expect the ramps at some, you know, at one or two opportunities to start somewhere in the second half of the year and then layer on top of that through '28 and '29. So yes, we do have some expectations of 1.6 terabit revenues and for the TIA as a companion and for Annapurna active electrical cables in 2027.
Tore Svanberg, Analyst at Stifel
Sounds good. I'll go back in line. Thank you.
OPERATOR
Our next question is from Cody Acree with the Benchmark Company.
Cody Acree, Analyst at The Benchmark Company
Hey guys, thanks for taking my questions and congrats on 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.
Kishore Seendripu, CEO
That's correct, Cody. That's very correct. It's all driven by the Keystone product family.
Cody Acree, Analyst at The Benchmark Company
And 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?
Steve Litchfield, CFO
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 about six months anyway. So naturally that gives us the confidence to go and raise these numbers.
Cody Acree, Analyst at The 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.
Steve Litchfield, CFO
Sure, yeah, not a problem at all, Cody. Maybe just hit the prepayment real quick. Certainly with this increased demand and 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 that's all against 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, you know, well above the corporate average. That continues to be the case today. I do see that continuing to expand, you know, over the next year or two as our infrastructure business grows, as our 800 and 1.6T products start to contribute further.
You know, we've been a little bit cautious—we've shared this with investors—that, you know, just the input costs, 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. In 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. Thank you guys.
Kishore Seendripu, CEO
Steve, I just want to add, you know, if you 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 forecasts 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 quals went through.
And we have started laying more and more customer product ramps on our optical products. So yes, supply is tight, but I think having strong relationships and constant communications with our foundry partners and OSATs has been incredibly helpful and that goes a long way in meeting our demand.
Cody Acree, Analyst at The Benchmark Company
Excellent. Thank you guys.
Steve Litchfield, CFO
Thanks, Cody.
OPERATOR
Our next question is from Joe Quattrocci with Wells Fargo.
Joe Quattrocci, Analyst at Wells Fargo
Yeah, thanks for taking the questions. Maybe on the optical side, on 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 Litchfield, CFO
Sure, Joe. Look, I mean we, you know, as new quals 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 Quattrocci, Analyst at 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 Litchfield, CFO
Yeah, not a whole lot of changes. I mean, as you know, we've been gaining share on some of our PON 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 continues 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.
Joe Quattrocci, Analyst at Wells Fargo
Thank you.
OPERATOR
Thanks, Joe. Our next question is from Suji DaSilva with Roth Capital Partners.
Suji DaSilva, Analyst at 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 what's the share opportunity, Kishore, as Rushmore grades happen from Keystone? Do you guys have an advantage to perhaps even grow your share, or should we expect that it holds from the success you have in Keystone?
Kishore Seendripu, CEO
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 by '26 revenue, which means a higher run rate, expectations getting towards second half end 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 our 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 we 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 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, 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 qual and interop 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 ramps, Rushmore comes online, Keystone will still be having a lot of growth engine and capacity moving forward.
Suji DaSilva, Analyst at Roth Capital Partners
Okay, so later on, thanks. And then my other question is on the TIA/driver market, the Washington product and so forth in the 1.6T platforms. Are you seeing more kind of creative 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 Seendripu, CEO
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, you know, SerDes and PAM4 DSP, namely Rushmore. Having said that, as you go to higher speeds, you know, 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 applications.
So at this stage I would say, preliminary, we expect our first traction to come from our own pairing with our own device.
Suji DaSilva, Analyst at Roth Capital Partners
Okay, very helpful, Kishore, thanks.
OPERATOR
Our next question is from Quinn Bolton with Needham and Company.
Quinn Bolton, Analyst at Needham & Company
Hey, Steven, Kishore. I'll offer my congratulations as well. 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 originally looking at on 800 gig? I'm just kind of wondering, can you tell from the qualification activity whether you think your share continues to increase with Rushmore?
Kishore Seendripu, CEO
So, wow. Very, very, very good question and I'm actually very pleased with where we are from where we started in Keystone to 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, qualifying them, and then interoperating 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 qualifying 1.6-terabit Rushmore and it's just being designed in with the module makers. Then it leads to the next phase of quals with the data center operators and that's when the revenue ramps will start. So we expect this to happen towards the second half of next year, and with some initial revenue ramp starting in 2027.
Quinn Bolton, Analyst at 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 in rollouts or perhaps lower units? Or do you think that the CPE business is able to absorb the memory cost increases?
Kishore Seendripu, CEO
So at this point in time, we have not seen on our solution platforms, you know, effects of memory as being a major driver in their decisions on using our product. If anything, we have been able to share gains because our solution actually integrates a lot. You know, different implementations, different solutions used, 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 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.
Quinn Bolton, Analyst at Needham & Company
Understood. Thank you, Kishore.
OPERATOR
Thank you, Quinn. Our next question is from Tim Savageau with Northland Capital Markets.
Tim Savageau, Analyst at Northland 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 overall market growth, uptick in unit volumes, broadly speaking, being a driver here versus share gain on MaxLinear's part, maybe at the expense of capacity-constrained competitors? I don't know if there'd 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.
Kishore Seendripu, CEO
Follow up from there. So look—go ahead, Steve. Sorry. Go ahead, Steve.
Steve Litchfield, CFO
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 and 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 Savageau, Analyst at Northland 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 Litchfield, CFO
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 Savageau, Analyst at Northland 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 Litchfield, CFO
I was, yeah. Just reflecting the guidance. Yeah, that's correct, Tim. Great.
Tim Savageau, Analyst at Northland Capital Markets
And last question for me. Looks like no 10% customers here and I imagine the 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.
Steve Litchfield, CFO
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.
Tim Savageau, Analyst at Northland Capital Markets
Thanks very much.
OPERATOR
Our next question is from Christopher Rowland with Susquehanna.
Christopher Rowland, Analyst at 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 Litchfield, CFO
Yeah, you might have just missed this question because it was just before you. But 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 growth, more concentration as we move forward.
Christopher Rowland, Analyst at Susquehanna
Okay, but just to be clear, you don't have one marquee customer pushing—so—
Steve Litchfield, CFO
We don't have a 10% customer. You know, it's a little broader based, but I mean you should expect, you know, there's a handful of customers that are going to drive the most volumes, you know, over the next, call it, six quarters.
Christopher Rowland, Analyst at 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 Litchfield, CFO
Yes. So yeah, I don't think the target has changed. We certainly feel like with the product mix, the end markets that we participate in, that that's still the right goal. And I think there's a path to certainly get there. You know, raised 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 wafer side or just test, assembly, packaging. So yeah, doing our best to pass some of those costs along, but where you're paying premiums, in some cases meeting customer demand. 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.
Christopher Rowland, Analyst at Susquehanna
Thanks, Steve.
Steve Litchfield, CFO
Thanks, Chris.
OPERATOR
Thank you. Our next question is from Ananda Barua with Loop Capital Markets.
Ananda Barua, Analyst at 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. But I guess ASP 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 bigger cuts, sort of the growth comes from bigger customer participation, i.e. hyperscalers, versus price lift from going to 1.6T and 3.2 versus just broader growth in the marketplace.
Any help there would be useful. Thanks.
Steve Litchfield, CFO
Kishore, you want to take that?
Kishore Seendripu, CEO
Yeah. Hey Ananda, that's... I think 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 you go to higher and higher speeds. At the same time, we are also—our footprint inside the data center is increasing. Now we are also offering a broad, comprehensive product portfolio of TIA 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, 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, you know, eventually they will result in multi-year revenue growth and expansion for MaxLinear.
Ananda Barua, Analyst at 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 talked to 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 on the DSP business. Thanks.
Kishore Seendripu, CEO
Look, it really 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 in optical transceiver PAM4 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 I think—and then having the next generation offering with Rushmore and expanding the product portfolio—all of this play a role into how things go around, how we build relationships. You also have to keep in mind that we are now not just talking about, you know, electrical and PAM4 optical offerings with TIA drivers, active electrical cables and onboard retimers. We also have storage accelerators now in our portfolio that will get more and more important as agentic AI becomes very important.
And the storage bottlenecks that prevent increasing the number of agents, right, that's very important. How do you 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 are also showing other parts to the portfolio including our XGS-PON 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 working away, chipping away with more offerings that we could be a full-blown, comprehensive player in the data center infrastructure.
Ananda Barua, Analyst at Loop Capital Markets
Great. Very helpful context. Really appreciate it. Thanks guys. Thanks Kishore.
Kishore Seendripu, CEO
Thanks, Ananda.
OPERATOR
Our next question is from Carl Ackerman with BNP Paribas.
Carl Ackerman, Analyst at BNP Paribas
Yes, thank you gentlemen. Two, if I may, I'm going to pivot 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 in the second half and next year? I know you've 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 2020, 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 the second half, into 2027, would be very helpful.
Steve Litchfield, CFO
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 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 is 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, Analyst at 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 Litchfield, CFO
Yeah, good question, Carl. Yeah, you're right. We've been talking about this. I mean this is an area that's 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 PON business specifically. And 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 telcos kind of, you know, with some spending there.
Carl Ackerman, Analyst at BNP Paribas
Yep, great. Thank you.
Steve Litchfield, CFO
Thanks, Carl.
OPERATOR
Our next question is from Tore Svanberg with Stifel.
Tore Svanberg, Analyst at Stifel
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 another 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 yeah, any more color on the difference in those two?
Because obviously it's a pretty important increase in both items.
Steve Litchfield, CFO
Yeah, yeah. I mean, so obviously the purchase obligations are probably the bigger takeaway. We did have some prepayments. I mean with the stock price increase that we saw in 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.
Tore Svanberg, Analyst at Stifel
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 Litchfield, CFO
Yeah, I mean, look, I don't, I don't want to guide beyond the quarter that we're in, but I think you—well, 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 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.
Tore Svanberg, Analyst at Stifel
Great. Thank you very much.
Steve Litchfield, CFO
Thank you. Appreciate it, Tore.
OPERATOR
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, Investor Relations
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.
OPERATOR
This concludes today's conference. You may disconnect your lines at this time. Thank you again for your participation.
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