Marvell Technology(MRVL) - 2026 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Marvell reported record revenue of $2.075 billion for Q3 FY2026, reflecting a 3% sequential increase and a 37% year-over-year growth [6][39] - Non-GAAP earnings per share were $0.76, exceeding guidance by $0.02, with a year-over-year growth of 77% [6][40] - GAAP gross margin was 51.6%, while non-GAAP gross margin was 59.7%, showing a sequential increase of 30 basis points [39] - Cash flow from operations reached a record $582 million, growing approximately $121 million from the prior quarter [41] 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 [19][39] - Communications and other end market revenue was $557 million, growing 8% sequentially and 34% year-over-year [33][39] - Excluding the automotive Ethernet business, communications revenue growth would be approximately 20% sequentially and 50% year-over-year [33] Market Data and Key Metrics Changes - The data center market is expected to grow year-over-year by more than 25% in FY2027, driven by increased demand for switching products and custom solutions [19][36] - The communications end market is projected to grow approximately 25% year-over-year in Q4 FY2026, with an annualized revenue run rate of about $1 billion [34][39] Company Strategy and Development Direction - Marvell announced the acquisition of Celestial AI, aimed at enhancing its data center portfolio with disruptive photonic technology [8][9] - The company is focusing on data center growth, having divested its automotive Ethernet business and made several strategic acquisitions since 2019 [9][10] - Marvell anticipates significant revenue contributions from Celestial AI starting in the second half of FY2028, with a forecast of reaching a $500 million annualized run rate by Q4 FY2028 [16][44] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about continued growth in the data center business, with expectations of strong demand for AI-related infrastructure [17][36] - The company expects to see a strong finish to FY2026 and anticipates revenue growth to accelerate in FY2027 and FY2028 [36][37] - Management highlighted the importance of partnerships with hyperscalers and the expected increase in Cloud CapEx, which is projected to grow over 30% next year [17][36] Other Important Information - Marvell executed a $1 billion accelerated stock repurchase program and repurchased $300 million of stock through its ongoing buyback program [35][41] - The company plans to fund the acquisition of Celestial AI through a combination of stock and cash on hand, without taking on additional debt [44] Q&A Session Summary Question: Revenue expectations for next year - Management confirmed that the implied revenue target for next year is around $10 billion, based on organic growth without M&A contributions [48][49] Question: Update on sub-3-nanometer design win pipeline - Management indicated strong visibility on the transition to next-generation products, with several programs in the pipeline for 2-nanometer designs [58][60] Question: Revenue targets for Celestial AI - Management clarified that the $500 million and $1 billion targets for Celestial AI include all potential revenue streams, primarily driven by the PF chiplet products [65][66] Question: Breadth of revenue stream from Celestial AI - Management noted that while there is strong engagement across the industry, initial revenue will likely come from a few large customers, including a tier-one hyperscaler [70][71]