Marvell Technology(MRVL) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics - Revenue for Q3 FY2025 was $1.516 billion,$66 million above the midpoint of guidance, growing 19% sequentially and 7% year-over-year [7][9] - Non-GAAP EPS was $0.43, 43$1.1 billion, growing 98% year-over-year and 25% sequentially [12][25] - Enterprise networking revenue was $151 million, while carrier revenue was$85 million, collectively growing 4% sequentially [19] - Consumer revenue was $97 million, growing 9$83 million, also growing 9% sequentially [20][21] Business Line Performance - Custom AI silicon drove strong performance, with significant demand and supply chain capacity secured for Q4 [12][13] - Electro-optics products grew double-digits sequentially, with strong bookings for 800-gig PAM products and shipments of 1.6T PAM DSPs [14] - Active electrical cable market saw acceleration in production ramp of 100-gig per lane 800-gig DSPs, with sampling of 200-gig per lane 1.6T AEC DSPs [16] Market Performance - Data center end market is expected to grow in the low-to-mid 20% range sequentially in Q4, driven by custom AI revenue and Ethernet switch products [17][18] - Enterprise networking and carrier markets are expected to grow sequentially in the mid-teens in Q4, with recovery momentum improving [19] - Consumer end market is expected to decline sequentially in the mid-teens in Q4 due to seasonality in gaming demand [20] - Automotive and industrial end market is projected to grow sequentially in the low-to-mid single-digits in Q4 [21] Strategy and Industry Competition - The company is focused on AI-driven growth, with custom silicon programs and strong optics growth driving the transformation into an AI-first data center semiconductor company [9][25] - Strategic investments in technology, including 2-nanometer and 3-nanometer platforms, are aimed at maintaining leadership in process technology and energy efficiency [27][28] - The company has redirected investments towards the data center, resulting in a $750 million restructuring charge in Q3 [26][37] Management Commentary on Operating Environment and Future Outlook - Management is optimistic about the AI super cycle, with strong demand for custom AI silicon and optical interconnect products [12][23] - The company expects to significantly exceed the full-year AI revenue target of$1.5 billion, with strong growth forecasted for Q4 and FY2026 [23][33] - The recovery in enterprise networking and carrier markets is gaining momentum, with targeted investments planned to grow revenue in these areas [29][30] Other Important Information - The company announced a five-year agreement with Amazon Web Services, covering custom AI products, optical DSPs, and other data center semiconductors [10][11] - Stock repurchases totaled $525 million through Q3, with$3 billion remaining in the repurchase authorization [32] - The company expects to return to GAAP profitability in Q4, with strong operating leverage and cash flow generation [46] Q&A Session Summary Question: AI Revenue Quantification and Fiscal 2026 Outlook - AI revenue for FY2025 is tracking significantly ahead of the $1.5 billion target, with hundreds of millions in upside. The outlook for FY2026 is also strong, driven by demand for custom AI and optical interconnect products [51][52] Question: Management Commitment and Customer Diversification - The CEO reaffirmed commitment to Marvell, emphasizing the company's transformation and focus on the AI super cycle. Customer diversification is strong, with multiple large volume opportunities across custom AI and compute solutions [55][56] Question: Competitive Landscape for Custom Silicon - The company sees itself and one other major competitor as the primary players in custom silicon, with high barriers to entry due to the complexity of design, manufacturing, and supply chain capabilities [87][88] Question: Gross Margins and Operating Leverage - Gross margins are expected to remain around 60% in FY2026, with operating leverage driving significant margin expansion as revenue outpaces operating expenses [111][112] Question: Custom Silicon Growth and Non-AI Business - Custom silicon is largely driven by AI, with significant growth expected in FY2025 and FY2026. Non-AI custom programs are also contributing, but AI remains the dominant driver [106][107] Question: ASIC Opportunities and Customer C - Customer C remains the largest opportunity among the three major custom silicon customers, with progress tracking well and unchanged expectations from the AI Day presentation [119][120]