Core Insights - Marvell Technology (MRVL) reported strong Q3 fiscal 2026 results, driven by its data center business, which generated $1.52 billion in revenue, a 38% increase year-over-year, accounting for approximately 73% of total revenues [1][10] Data Center Business - The primary growth driver for the data center segment is the increasing artificial intelligence (AI) spending by large cloud customers, leading to higher demand for Marvell's interconnect products, including optical digital signal processors and drivers [2] - Marvell's data center switching and storage business is also experiencing solid growth, with strong demand for 12.8T switches and the introduction of 51.2T switches, expecting data center switch revenues to exceed $500 million in fiscal 2027 [3] Custom Silicon Business - The custom silicon segment is another key growth area, with Marvell having secured purchase orders for a major next-generation XPU program, anticipating at least 20% growth in this business for fiscal 2027 [4] Future Outlook - Marvell expects data center revenues to grow over 25% in fiscal 2027, supported by ongoing AI investments and strong customer demand, with Zacks Consensus Estimates indicating a year-over-year revenue increase of 41.9% for fiscal 2026 and 22.4% for fiscal 2027 [5][10] Competitive Landscape - Marvell competes with Broadcom and NVIDIA in the data center market, with Broadcom reporting a 65% year-over-year increase in AI revenues to $20 billion in fiscal 2025, and NVIDIA achieving $51 billion in data center revenues, up 66% year-over-year [6][7] Valuation and Performance - Marvell's shares have increased by 16.6% over the past six months, compared to the Zacks Electronics - Semiconductors industry's growth of 25.8% [8] - The company trades at a forward price-to-sales ratio of 7.33X, higher than the industry average of 6.42X [11] - Zacks Consensus Estimates for fiscal 2026 and 2027 earnings imply year-over-year growth of 80.9% and 26.1%, respectively, with recent upward revisions in earnings estimates [13]

Financial Data and Key Metrics Changes - Marvell reported record revenue of $2.075 billion for Q3 2026, reflecting a 3% sequential increase and a 37% year-over-year growth [5][35] - Non-GAAP earnings per share were $0.76, exceeding guidance by $0.02, with year-over-year growth of 77% [5][36] - GAAP gross margin was 51.6%, while non-GAAP gross margin was 59.7%, an increase of 30 basis points sequentially [35][36] - Cash flow from operations reached a record $582 million, growing approximately $121 million from the prior quarter [36] Business Line Data and Key Metrics Changes - Data center revenue was $1.52 billion, representing 2% sequential growth and 38% year-over-year growth, contributing 73% of total revenue [17][35] - Communications and other end market revenue was $557 million, growing 8% sequentially and 34% year-over-year [29][35] - Excluding the automotive Ethernet business, communications revenue growth would be approximately 20% sequentially and 50% year-over-year [29] Market Data and Key Metrics Changes - The data center market is expected to grow year-over-year by more than 25% next fiscal year, driven by increased demand for switching products [17] - The communications end market is expected to grow in line with enterprise IT spending, with an annualized revenue run rate of approximately $1 billion in Q4 [30] Company Strategy and Development Direction - Marvell announced the acquisition of Celestial AI, aimed at enhancing its data center portfolio and capitalizing on the scale-up interconnect market [6][14] - The company is focusing on data center growth, having divested its automotive Ethernet business and made several strategic acquisitions since 2019 [6][7] - The acquisition of Celestial AI is expected to close in Q1 of the next fiscal year and is projected to contribute significantly to revenue starting in the second half of fiscal 2028 [14][41] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about continued growth in the data center business, with strong demand signals and bookings across the portfolio [32][33] - The company anticipates a strong fiscal 2027, with total revenue forecasted at $2.2 billion for Q4 2026, representing 6% sequential and 21% year-over-year growth [31][38] - Management highlighted the importance of AI in reshaping data center architecture and the significant opportunities in the optical interconnect market [9][10] Other Important Information - Marvell executed a $1 billion accelerated stock repurchase program and repurchased $300 million of stock through its ongoing buyback program [31][36] - The company expects to continue returning capital to shareholders while funding the acquisition of Celestial AI through a combination of stock and cash [41][42] Q&A Session All Questions and Answers Question: Revenue expectations for next year - Management indicated that the revenue target for next year is around $10 billion, based on organic growth without M&A contributions [43][44] Question: Update on sub-3-nanometer design win pipeline - Management confirmed strong visibility on the transition to next-generation products, with several programs in the pipeline for 2-nanometer designs [50][52] Question: Revenue targets for Celestial AI - The revenue targets for Celestial AI include contributions from the PF chiplet and other potential businesses, with a focus on broad engagement across the industry [53][54] Question: Diversification of revenue stream from Celestial AI - Management noted that while there is strong engagement with a tier-one hyperscaler, the revenue stream is expected to diversify over time as the product enters volume production [55][56] Question: Growth rate for custom business - Management confirmed a base case growth rate of at least 20% for the custom business next year, with potential for higher growth depending on program success [58][59]