What happened

Shares of semiconductor maker MaxLinear (NYSE:MXL) are on a tear Thursday, up 12% in 11:40 a.m. EDT trading after the company preannounced Q3 2020 financial results this morning.

Heading into Q3, analysts forecast that MaxLinear will report $0.15 per share in profits on $126.1 million in sales for the quarter -- far more than the $72 million to $76 million in sales that MaxLinear last suggested it might collect in its Q3 guidance. Now, however, the company says that it actually earned even more than the analysts had hoped.  

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So what

How much more? In today's report, MaxLinear gives its preliminary estimate that Q3 sales totaled somewhere between $155 million and $157 million. That's the good news.  

The bad news is that gross profit margins on those sales appear to be much worse than even MaxLinear anticipated three months ago -- as low as 41.5% to 43.5% -- and operating expenses will range from $99 million to $102 million, which is much higher than it had anticipated.

Now what

MaxLinear did not tell investors what it expects to earn on the bottom line when official Q3 results come out after close of trading on Nov. 5. Still, a rough guess assuming $156 million in sales, 42.5% gross profits on those sales, minus $100 million in operating expenses and $4 million or so in interest and taxes implies that MaxLinear will end the quarter with a generally accepted accounting principles (GAAP) loss in the neighborhood of $39 million or so.

Try as I might, I cannot square that result with analysts' projection for a $0.15 per-share "profit." Even in the face of the astounding sales numbers, I'm really not sure investors should be so excited about this news.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.