Sometimes the market will do what the market does.

That appeared to be the case Friday as shares of MaxLinear, an optical networking company, plummeted following a second-quarter earnings report that was better-than-expected and third-quarter guidance that was well above Wall Street's expectations.

The company late Thursday posted adjusted earnings of 35 cents a share, from 2 cents a year ago and above Wall Street's 33 cents expectation. Revenue grew 55% to $168.8 million, beating the analyst consensus view of $164.6 million, according to FactSet.

The earnings and revenue growth were due to strong momentum in the company's optical artificial-intelligence date center business, and management expects that demand to continue.

For the third quarter, MaxLinear forecast revenue between $210 and $220 million. That too is well was well above Wall Street's third-quarter expectation for revenue totaling $173.85 million, according to FactSet.

Management also raised its full-year optical data center revenue guidance. The company expects $210 to $230 million, from its previous $150 to $170 million view.

Still, investors weren't satisfied.

MaxLinear stock sank 21% to $72.34 on Friday, set to log its worst daily percentage decline since July 25, 2024, according to Dow Jones Market Data.

Benchmark Equity Research analyst Cody Acree on Friday wrote that sky high expectations for the company drove the selloff and that there wasn't anything material in the earnings release to justify the sharp share price decline. Acree reiterated his Buy on the shares and his $125 price target.

"We believe the decline mainly reflects the expectation hurdle after the stock's sharp post-1Q re-rating," Acree wrote. "The 2Q beat was real but comparatively modest."

It seems like investors are selling after the shares surged 166% from when the company reported first-quarter earnings on April 23 and the closing bell on Thursday.

Overall, July hasn't been kind to the stock. Shares are down 44% this month after closing higher in April, May, and June. However, shares remain up 314% this year and have booked a 341% advance over the past 12 months, boosted by the AI trade.

It looks like investors just raised the bar for MaxLinear.

Write to Kit Norton at kit.norton@barrons.com

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July 24, 2026 14:47 ET (18:47 GMT)

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