Q4 2025 Marvell Technology Inc Earnings Call
Speaker Change: Good afternoon, and welcome to Marvell Technology, ANX, Fourth Quarter and Fiscal Year 2025 earnings conference calls. All participants will be in a listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Speaker Change: After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would not like to turn the conference over to Mr. Ashish Saran, Senior Vice President of Investor Relations. Please go ahead.
Speaker Change: Thank you and good afternoon everyone. Welcome to Marvell's fourth quarter in fiscal year 2025 on East Call.
Speaker Change: Joining me today are Matt Murphy, Marvell Shaman and CEO , and Willem Meintjes, RCFO. Let me remind everyone that certain comments made today include forward-looking statements which are subject to significant risks and uncertainties that would cause our actual results to differ materially from management's current expectations.
Speaker Change: Please review the cautionary statements and risk factors contained in our earnings press release, which we file with the SEC today and post it on our website, as well as our most recent 10-Kent thank you findings. We do not intend to update our forward looking statements.
Speaker Change: During our call today, we will refer to certain non-GAAP financial measures. A reconciliation between our gap and non-GAAP financial measures is also available in our earnings press series. Let me now turn the call over to Matt for his comments on the quarter. Matt.
Matt Murphy: Thanks, Ashish, and good afternoon, everyone. For the fourth quarter of fiscal 2025, Marvell delivered record revenue of 1.817 billion above the midpoint of guidance, growing 20% sequentially and 27% year-over-year.
Matt Murphy: Our Data Center end market was the primary growth driver, fueled by strong AI demand and execution. In addition, we saw continued demand recovery across our multi-market businesses, including Carrier Enterprise Networking and Automotive and Industrial.
Matt Murphy: I am pleased to report that we achieved gap profitability in the fourth quarter and expect this to continue in fiscal 2026. Our record non-GAAP earnings per share of 60 cents exceeded the midpoint of guidance growing 40% sequentially.
Matt Murphy: The earnings growth rate, double our top line growth rate, underscores the substantial operating leverage in our business model.
Matt Murphy: For the full fiscal year 2025, we delivered $5.77 billion in aggregate revenue, with our data spent a revenue growing 88% year-over-year.
Matt Murphy: We ended the year with our AI revenues substantially above our 1.5 billion target from April 2024's AI Day, and we also expect to very significantly exceed our $2.5 billion target in fiscal 2026.
Matt Murphy: Our overall revenue growth accelerated in the second half of the year through my recustom silicon program ramps, along with continued strong growth in electro optics.
Matt Murphy: In fiscal 2025, we also drove a record $1.68 billion in operating cash flow and significantly increased capital returns to our stockholders through stock repurchases and dividends, totaling $933 million in aggregate. Thank you very much.
Matt Murphy: I'm extremely pleased with our fiscal 2025 results, and even more excited about our outlook for robust Eurorear revenue growth in fiscal 2026. We are poised for a strong start to the new year, forecasting revenue growth of over 60% Eurorear in the first quarter at the midpoint of guidance.
Matt Murphy: Let me now discuss our results and expectations for each of our end markets.
Matt Murphy: In our data center and market for the fourth quarter, we achieved record revenue of 1.37 billion, growing 78% year-over-year and 24% sequentially.
Matt Murphy: The strong results were driven by our custom AI Silicon programs ramping to high volume production.
Matt Murphy: Additionally, we benefited from strong shipments of our electro-optics products in Terrelink Ethernet switches, with revenue from both product lines growing double digits sequentially on a percentage basis.
Matt Murphy: Within our Electrooptics franchises, we continue to see strong demand for a market leading 800 GIGPAM products and our 400 ZR DCI products.
Matt Murphy: We also began shipments of the industry's first 1.60 PAM DSP in 5 nanometer process technology.
Matt Murphy: The further optimized AI interconnect performance, we accelerated the cadence of next generation products by introducing the industry's first three nanometer 1.60 DSP, featuring 200 gig per lane electrical and optical interfaces.
Matt Murphy: This new Marvell DSP enables customers to reduce 1.60 optical module power consumption by more than 20% compared to its predecessor. When we expect to go into production in the second half of this year as 1.60 adoption accelerates.
Al tremendous focus remains on GPUs and XPUs.
Matt Murphy: The distributed nature of computer AI makes connectivity just as critical as the individual processors. As a result, the design of the next generation of accelerated infrastructure is inexorably tied to how efficiently data can be moved on and off the accelerators and throughout the cluster.
Matt Murphy: This increase in the role of high-speed networking and AI data centers is perfectly aligned to our strength as an industry leader. Thank you.
Matt Murphy: and just like compute, hyperscalers are also customizing networking, and we are seeing similar momentum for flash-based storage, HBM and CXL-based D-RAM pooling.
Matt Murphy: We'd announce the design win at Meta for a custom neck at OCP last October , and we are seeing
Matt Murphy: This is evident in our recent design wins, which now include multiple custom necks, as well as the follow on custom CXL memory solution.
Matt Murphy: We are also enabling new interconnect technologies such as CPO and LPO for scale-up fabrics and coherent light DSPs.
for Emerging Campuswide Large Scale AI Data Centers. [inaudible]
Matt Murphy: Earlier this year, we announced Mark Null's breakthrough co-package optics architecture for custom XPUs, enabling customers to integrate optics into few future custom accelerators.
Matt Murphy: First demonstrated at OFC 2024, the heart of Marvell's CEO platform is our 6.4T, 3D Silicon Photonics Engine.
Matt Murphy: It integrates hundreds of active and passive components in a single unified device, and builds on multiple generations of silicon photonics innovations that we have been shipping in high volume in our DCI modules for several years.
Matt Murphy: Co-package optics can enable an increase in the size and scale of AI servers, which currently rely on passive copper interflex. [inaudible]
Matt Murphy: We expect this transition from copper to optical interconnects will significantly expand Marvell's interconnect revenue and market opportunities.
Matt Murphy: We are engaged with customers to evaluate this advanced technology and we anticipate a multi-year period of trial system development ahead of wide scale industry adoption for CPO.
Matt Murphy: Let me now turn to our current custom silicon programs. Marvell has successfully ramped highly complex 100 billion plus transistor XFUs and CPUs from initial samples to high volume production on first pass silicon.
Matt Murphy: Our custom business continues to gain momentum as customers increasingly rely on Marvell to help them achieve their custom silicon ambitions.
Matt Murphy: As I mentioned, our two leading AI custom programs are on high volume production and we expect growth to continue.
Matt Murphy: One of these is a custom arm CPU which we expect we'll see expanding adoption of our customer's data centers.
Matt Murphy: The second program is for a custom AIXPU, which is also performing extremely well with significant volume production ahead.
Matt Murphy: In parallel, we are fully engaged with this customer on the follow on generation of this XPU and planning for a production ramp once it completes its sampling and qualification cycles.
Matt Murphy: As a result, we expect our revenue from custom XPUs for this customer to not only grow this year, fiscal 2026, but continue to grow next year, fiscal 2027, and beyond.
Matt Murphy: Additionally, we are making tremendous progress with the new design win announced in our AI Day in April 2024 for a custom AI XPU with an additional U.S. hyper-skill. Our veils engineering team in close partnership with the customer has successfully completed a number of key technical milestones during the joint development process.
Matt Murphy: As a result, we believe we are well-entracted to meet our customers desired schedule to start production in calendar 2026.
Matt Murphy: Engagement is also multi-generational, and we expect it to result in a very significant amount of incremental revenue for Marvell over the next several years.
Matt Murphy: I'm very pleased with our custom revenue achievement for fiscal 2025, driven by multiple program racks. The success coupled with strong progress on upcoming custom programs gives us even greater confidence in our ability to achieve our long-term market share targets for custom revenue.
Matt Murphy: We are continuing to invest in all aspects of our technology platform, including advanced process nodes, electrical and optical surgeries.
Matt Murphy: High-speed di-to-di-interconnects, embedded memory, custom HBM, 2.5D and 3D packaging, and silicon photonics. This week, we announced the demonstration of the industry's first two nanometer silicon IP for next generation AI and cloud infrastructure.
Matt Murphy: Produced on TSMC's June Animator process, this working silicon is a critical part of the Marvell platform with developing custom XPUs, CPUs, switches, and other technology critical for next generation accelerated workloads.
Matt Murphy: Now let me turn to our outlook for our data center end market for the first quarter of fiscal 2026.
Matt Murphy: We forecast that the cloud and AI portion of this end market will continue to drive sequential, double-digit revenue growth.
Matt Murphy: The on-premise portion of our data center and market, we expect the seasonal sequential decline in revenue to partially offset growth from cloud and AI. As a result, we expect our overall data center revenue to grow sequentially in the mid-single digits on a percentage basis. [inaudible]
Matt Murphy: Now, let me turn to Marvell's Enterprise Networking and Carrier Infrastructure and Markets. In the fourth quarter, Enterprise Networking Revenue was $171 million, and Carrier Infrastructure Revenue totaled $106 million. In the fourth quarter, we saw continued recovery in both of these end-markets with revenue collectively growing 18% sequentially. [inaudible]
Matt Murphy: Looking ahead to the first quarter of fiscal 2026, we expect aggregate revenue from enterprise networking and carrier infrastructure to grow sequentially by approximately 10%.
Matt Murphy: We are pleased with the continued recovery in these two end markets, although this forecast still anticipates Marvell products, shipping below and market consumption.
Matt Murphy: In the consumer end market, revenue on the fourth quarter was 89 million, declining 8% sequentially.
Matt Murphy: The first quarter of fiscal 2026, consistent with our prior comments, we expect seasonality and gaming demand to drive a sequential decline in revenue from our consumer and market of approximately 35%.
Matt Murphy: We're the next several years, we continue to anticipate our revenue from the consumer end market to be a approximately 300 million on an annual basis.
Matt Murphy: Turning to our automotive and industrial end market, fourth quarter revenue was 86 million, growing 3% sequentially as we continue to see a modest recovery in the end market.
Matt Murphy: Looking ahead to the first quarter of fiscal 2026, we anticipate continued sequential growth in the automotive end market. However, we expect this to be more than offset by a decline in revenue from our industrial end market, or order patterns can be lumpy in any given quarter.
Matt Murphy: As a result, we project our overall revenue from the auto and industrial end market to decline sequentially in the high single digits on a percentage basis.
Matt Murphy: In summary, we throw a tremendous revenue growth throughout fiscal 2025, significantly scaling the company from an annualized revenue run rate of 4.6 billion in the first quarter to over 7.2 billion by the fourth quarter.
Matt Murphy: Building on a six-banded base, we anticipate strong year-over-year revenue growth in fiscal 2026. Our AI-driven data center end market is expected to remain a key contributor, further supported by the ongoing recovery in our multi-market businesses.
Matt Murphy: Margill's data center and market accounted for 75% of consolidated revenue in the fourth quarter.
Matt Murphy: Reflecting this rapid transformation during fiscal 2025, we purposely redirected our investments towards data center relative to our other end markets to fully capitalize on the massive opportunity created by AI.
Matt Murphy: We recently evolved our organizational structure to fully enable this strategic transformation.
Matt Murphy: All products focused on hyperskilled customers are now managed by a single cloud data center group led by Raghib Hussain, a president of products and technologies.
Matt Murphy: We have merged the rest of our end markets into a single multi-market business group, but by Chris Kutmans, our Chief Operating Officer.
Matt Murphy: Marvell has solidified its position as a leading provider of data infrastructure semiconductors with the unique business model spanning full-custom to full-merchant solutions.
Matt Murphy: We are seeing strong investment in accelerated infrastructure from both established hyper-scalers and the number of well-funded new market entrants as they raised to build million XPU training clusters.
Matt Murphy: These customers are highly incentivized to increasingly use custom infrastructure to augment their merchant solutions.
Matt Murphy: Recent developments in the AI market, such as the advent of reasoning models, are also expected to continue to driving strong demand for compute, networking and storage semiconductors. [inaudible]
Matt Murphy: As a result, we remain very optimistic about both our short and long-term growth prospects and our role in enabling accelerated infrastructure. We look forward to updating investors on our business model and the significant opportunities ahead of us at our investor day on June 10th in New York.
Willem Meintjes: With that, I'll turn the call over to Willem for more detail on our recent results and outlook.
Willem Meintjes: Thanks, Matt, and good afternoon everyone. Let me start by summarizing our full fiscal year results.
Willem Meintjes: In fiscal 2025, Marvell delivered 5.767 billion in revenue, with strong 37% growth in second half revenue compared to the first half.
Willem Meintjes: This growth was primarily driven by our AI programs in the data center and market as well as continuing recovery in our other end markets.
Willem Meintjes: For the full year on a gap basis, our gross margin was 41.3%. Operating margin was negative 12.5% and loss per deleted share was $1.02.
Willem Meintjes: On a non-GAAP basis, our gross margin was 61%, operating margin was 28.9%, and earnings per deleted share was $1.57.
Willem Meintjes: We delivered over a thousand basis point improvement in our non-GAAP operating margin through fiscal 2025 from 23.3% in the first quarter to 33.7% in the fourth quarter.
Willem Meintjes: We also drove a record 1.68 billion in operating cashflow and significantly increased capital returns to our stockholders, returning 933 million through dividends and buybacks, moving on to our financial results for the fourth quarter of fiscal 2025.
Willem Meintjes: Revenue in the fourth quarter was $1.817 billion, exceeding the midpoint of our guidance, growing 27% year over year and 20% sequentially.
Data Center was our largest in market, contributing 75% of total revenue.
Gapgrohe's margin was 50.5% Non-Gapgrohe's margin was 60.1%
Moving on to Operating Expenses. [inaudible]
Willem Meintjes: Gap operating expenses were 682 million, including stock-based compensation, amortization of acquired intangible assets, restructuring costs and acquisition related costs.
Willem Meintjes: Non-Gab operating spaces came in at 479 million, then line with our guidance.
Willem Meintjes: A gap-opening margin was 12.9%, while non-gap-opening margin was 33.7%.
Willem Meintjes: For the fourth quarter, gap earnings for Dalita chair was 23 cents. [inaudible]
Willem Meintjes: Nonguev, Inc. to share with 60 cents, perfecting sequential growth of 40%, which is double the pace of revenue growth, demonstrating the significant operating leverage in our model.
Willem Meintjes: Now, turning to our cash flow and balance sheet, cash flow from operations in the fourth quarter was 514 million.
Willem Meintjes: Inventory, at the end of the fourth quarter, was 1.03 billion, an increase of 170 million from the prior quarter, to support the strong growth we are experiencing in our business.
Willem Meintjes: RDSO was 51 days, decreasing by 9 days from the prior quarter. We returned 52 million to share all those through cash dividends. In addition, we repurchased 200 million of our stock during the fourth quarter.
Willem Meintjes: Our total debt was 4.06 billion with a gross debt to a bidar ratio of 2.06 times and a net debt to a bidar ratio of 1.58 times.
Willem Meintjes: We have seen continuous improvement in our data ratios as we have driven an increase in our EBITDA through fiscal 2025.
Willem Meintjes: We were pleased to receive an upgrade to our investment grade-credit rating from Fitch in January , citing the positive outlook on mobile strong operating momentum for robust data center demand, structurally improved leverage metrics, strong market position, and strength and cashflow profile.
Willem Meintjes: As of the end of the fourth fiscal quarter, our cash and cash equivalents were 948 million, increasing by 80 million from the prior quarter. Turning to our guidance for the first quarter of fiscal 2026.
Willem Meintjes: We are forecasting revenue to be in the range of 1.875 billion plus or minus 5 percent. We expect our gap gross margin to be approximately 50.5 percent.
Willem Meintjes: We expect our non-GAAP gross margin to be approximately 60%. Looking forward, we anticipate that the overall level of revenue and product mix will remain key determinants of our gross margin in any given quarter.
Willem Meintjes: For the first quarter, we project our gap operating expenses to be approximately 712 million.
Willem Meintjes: We anticipate our non-GAAP operating expenses to be approximately 419 million, a modest increase of approximately 2% from the prior quarter.
Willem Meintjes: This is because we expect more leverage from our custom model and expect higher NRE in the first quarter on a sequential basis.
As a reminder, NRE is treated as contra-opex.
Willem Meintjes: For the first quarter, we expect other income and expense, including interest on our debt to be approximately 43 million.
Willem Meintjes: We expect a non-GAAP tax rate of 10% for the first quarter. We expect our basic weighted average shares outstanding to be 867 million, and our diluted weighted average shares outstanding to be 818 million.
Willem Meintjes: We anticipate gap earnings per dollar to share in the range of 14 cents to 24 cents.
Willem Meintjes: I am very pleased with Marvell's institution on all our key financial metrics throughout fiscal 2025.
Willem Meintjes: As we enter fiscal 2026, we intend to continue driving strong operating leverage and expect to make significant progress towards our long-term non-GAAP operating margin target of 38 to 40 percent.
Willem Meintjes: We will also remain focused on generating strong cash flow and returning capital to our stockholders.
Willem Meintjes: I'm very excited about our future prospects and look forward to its strong Eurovision year revenue growth in fiscal 2026, but that we are ready to start our Q&A session, operator, please open the line and announce Q&A instructions, thank you.
Speaker Change: We will now begin the question and answer session. That's a question you may press star them one on your touchtone phone. If you are using a speaker phone, please pick up your hands up before pressing any keys. [inaudible]
Speaker Change: To a drier question, please press star then two. In the interest of time, please restrict yourself to one question only. If you have additional questions, please rejoin the queue. At this time, we will pause momentarily to assemble our roaster.
Speaker Change: Your first question comes from Ross Seymour with Dorcha Bank. Your line is now open.
Ross Seymour: Hey guys, thanks for my asking questions. Matt, I want to go back to the comments you've had in your strip about the confidence in growing with your lead XPU customer. Not only this year, but next year, there's, as I'm sure you appreciate a ton of debate.
Speaker Change: about a competitor taking sockets, etc. and market share. How would you suggest we reconcile your confidence in their confidence simultaneously? It doesn't seem like both sides could be direct.
Matt Murphy: Yeah, Ross, thanks for the question and I very much understand the debate that's out there and I appreciate.
Speaker Change: A lot, the significant interest from the analyst community and our investors on this topic so let me try to be as helpful as I can given the constraints we've got around customer confidentiality and their concerns about. Thank you very much.
Speaker Change: Their own programs and their confidentiality. Okay, so, so we're very pleased with the ramp of our current lead XPU program. We delivered this with first pass silicon success. Thank you very much.
Speaker Change: We see significant volume production on the current generation in front of us and you can already see.
The ramp in our numbers from starting in Q4.
Speaker Change: In parallel, we have been deeply engaged on the next generation of this AIXPU with this customer. I said this in my prepared remarks, but I'll just go over it again. And we're planning for a production ramp once it completes its sampling and qualification cycles.
So to be crystal clear.
We do expect revenue from-
Speaker Change: You know, this, these custom x-fews with this customer not only to grow in fiscal 26, which is the year end, but to grow in fiscal 27.
Speaker Change: Ambion, and I just want to also note that I'm not including revenue here that would be from other products such as networking or connectivity.
Speaker Change: that would be incremental to custom and certainly we've got a great setup I think overall with this account relative to the opportunity set but it's really on both.
Speaker Change: And then with respect to the question that our customer may be working with someone other than Marvell on a next generation, next PU, it's just something we can't comment on.
Speaker Change: What I can comment on is visibility for the products that we will be building for the customer, and as I said this extends to the next generation of our current AI XPU program.
Thank you.
Thank you. Thank you.
Speaker Change: Your next question comes from Vivek Arya with Bank of America. Your line is now open.
Vivek Arya: Thank you for taking my question. Matt, just one clarification if you could help quantify the mix between AI and non-AI in your data center for Q4 and Q1. Is it like 2-3-1-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-3-
Vivek Arya: Quantification there would be helpful. And then a little more generic, you know, question which is that when we look at Q4 and Q1 data center and AH.
Speaker Change: They are very strong on an ear on ear bases but the extent of the beats is somewhat modest.
Vivek Arya: when we contrast that with a very strong spending at your largest customer. So any commentary there would be very helpful. Is it a supply issue? Is it just early days of the rant? So any commentary there would be helpful. Thank you.
Vivek Arya: Yeah, thanks Vivek. Maybe I'll answer the second part first, just on the overall setup. If you look at it, we've seen very strong growth the last few quarters. I think really, really, actually above overall market. I think we were up data center revenues. [inaudible]
Vivek Arya: 25% sequentially Q2 to Q3, 25% Q3 to Q4. As I said in the prepared remarks, our AI and cloud revenue, you know, that portion of the data center business is up double digits.
Vivek Arya: Q4 to Q1. So these are all sequential numbers, by the way, and of course, on the year on years. Thank you very much.
Vivek Arya: You know, if you look at Q4, we're like up 77% or something in data center, and I think Q1 we're pretty similar. So we're very pleased with the trajectory of this business in terms of just the sequential and your growth rates. I think it's, it's, um,
Vivek Arya: That's tracking really well. On the AI side and how we think about it is...
Vivek Arya: You know, and I'll just give you kind of a flashpoint, just as we sort of exit the year, but a good overall proxy. So today AI is more than...
Vivek Arya: is more than half the revenue, so it's now the majority, it's crossed over, and I think as we go forward that's going to just continue to increase and so because overall Marvell is now...
Vivek Arya: 75% of our revenue kind of plus going forward in data center, that's going to end up being a really good proxy. You know, underneath that, about half of that is, um...
Vivek Arya: You know, if you just look at overall data center now, just to provide a little more color, about half of that is an electoral optics and custom now has grown to about 25 percent, about a quarter, a little bit more of the data center revenue, and then the balance is made up of everything else so. [inaudible]
Vivek Arya: Again, it's a nice trajectory here. We've got AI that's sort of outgrown the total. It's the majority driving the business. Data centers now, you know, significant total portion of overall Marvell.
Vivek Arya: and then the mix continues to grow nicely with custom really ramping. So hopefully some of those data points are helpful but we're very pleased overall with the trajectory of the business.
Thanks Matt, yeah.
Can we get the next question please?
Operator.
I'm checking.
Fox, please hold while we get the operator back online.
Speaker Change: Their next question comes from the line of Timothy Arcuri from UBS. Their line is now open.
Timothy Arcuri: Thanks a lot. Matt, I wanted to clarify the answer you just gave on the breakdown of AI revenue. You said more than half is AI, which I get of data center. And then you said half the data center is optics. Did you mean half of AI's optics so that the, you know, AI breakdown is basically. [inaudible]
Speaker Change: You know, roughly, you know, half is optics and then half is, you know, custom-asic, is that what you meant? Yeah, I meant, yeah, sorry, oh, yeah Tim, thanks for the clarification to be precise, it's overall data center of those numbers I gave you. Thank you.
Okay, and then, Um,
Speaker Change: You had guided AI to two and a half billion this year. I think you said you used the word very significantly. You're going to exceed that in fiscal 26.
Speaker Change: What does that mean? I guess most of the cell-side is thinking like three and a half billion, so that certainly would qualify as very significantly but is that what you mean when you say very significantly by like a billion dollars? Is that the type of thing that would qualify as that? Thanks.
Speaker Change: Tim, thanks for the question. Yeah, we're definitely leaving this year open ended in terms of what we can go do. Last year, we had talked about one and a half billion. We blew through that.
Speaker Change: You know, this year, again, we anticipate being substantially above that. I'm not putting a number on it just yet. I think that there's a lot to go here in terms of the momentum in the business and the opportunity set in front of us. [inaudible]
Speaker Change: and so right now we're kind of keying off the last update we did, which was in the...
Speaker Change: The AI Day from last year and then we'll find the right appropriate time in the future but right now we're trending extremely well. You can really start to see it in the numbers as I mentioned earlier at some point this data center revenue is now 75% of Marvell.
Speaker Change: I gave you the AI percent, so you can start using that as I think a really good proxy for where things are going.
Ok, Matt, thanks. Yeah.
Speaker Change: Your next question comes from the line of Harsh Kumar from Biper Sandler. Your line is now open.
Speaker Change: Yeah, hi, thanks for allowing me ask a question. Matt, I think you mentioned that you have three kind of custom-aided customers for you. I wanted to talk about, I wanted some color on the stickiness of these customers.
Speaker Change: What are some of the triggers that might cause some of these customers to go look for another design partner? Is it price?
Speaker Change: Or is it just 100% performance if you can produce and stop looking? [inaudible]
Speaker Change: And, you know, what is the second part of the question is, what is the possibility of you being able to attach your networking products to some of these custom-asic players, or if you do, could you just help us understand what's being attached today?
Yeah, thanks for the question. I think the um...
Speaker Change: You know, and our view is consistent with sort of what we've been saying, which is...
Speaker Change: When you look at the tab that's out there, which is, you know,
Speaker Change: And we sized, you know, back in April of last year, for Marvell at like a $75 billion data center tab, which is probably, if anything, just gotten stronger.
and a big portion that coming from custom.
Speaker Change: You know, the reality is the service that the customer base is really looking for partners with a couple of key attributes. The first is...
Speaker Change: Technology Leadership, and Technology Investment, and IP, and we just announced as an example just a couple of days ago.
Speaker Change: You know, our working-to-nanometer platform, we've got a very competitive offering on custom HBM, die-to-die, advanced packaging. So, so that's part of it, you know, the second is to have...
Speaker Change: The manufacturing scale, the ability to go drive the right design methodology in terms of first past silicon success, and be able to actually ramp these highly complex, you know, upwards of 100 billion transistor type of chips into production. Thank you very much.
Speaker Change: Partners that are flexible in their business model that can look at different approaches to different ships all the way from traditional ASIC services to. Thank you.
Speaker Change: to, you know, full-blown, built-of-spec, type of solutions, and we've, we've provide all those. So, in the end, those are, those are the types of different, different things, and then, and when you, when you sort of add all that up, there's...
Speaker Change: Really, our view still is that it's ourselves in one other very large competitor of ours that can service that market. So, these sockets are very sticky.
Speaker Change: At the same time, each generation, you know, you've got to go bid and you've got to go compete. But we've been very successful since we started winning these big custom silicon programs back in 2021.
Speaker Change: Getting awarded those and now taking those into production and then looking at the next generation, we're very comfortable with where we stand. So there is a high degree of stickiness, there's a high barrier to entry, but at the same time you got to win them each time. Thank you very much.
Speaker Change: And then the final thing I'd say is just from a design opportunity perspective.
Speaker Change: That pipeline just continues to expand, and within that we continue to close very significant designs as recently even as our fourth quarter. So those are the dynamics we still see.
Speaker Change: and it's competitive and everybody's in a race, but we feel like we're in the best position we've ever been in quite frankly, relative to the technology, the platform, and our ability to go really drive in a very, very focused manner, the execution around what I think is the biggest opportunity. Bye.
Speaker Change: I've seen in a very long time in the semiconductor industry, which is the AI super cycle that's still in front of us.
Thanks, Matt, and then for my follow-up.
Speaker Change: I was curious if you could expand on your common around. [inaudible]
Timothy Arcuri: You said I think growth in data center, clouds, La Sia, will be double digit on-prem, will be down. You help us think about what you mean by that, what is double digits, is the teens or higher than that, just because investors are super sensitive to growth rate in your cloud and AI business.
Thank you for watching. I'll see you next time.
Timothy Arcuri: Yeah, I mean, we're getting a little more precise, and certainly this is the guide, but you know, double digits, you know, is...
Double digits, and it's not.
Timothy Arcuri: It's not 20% or something. It's above 10% and that's what you should think about it.
Timothy Arcuri: Clearly we'll see where the quarter lands, but that's what we're seeing at the moment.
Timothy Arcuri: You also asked me about attaching networking, so I just wanted to cover that real quick and we'll go to the next question.
Speaker Change: Yeah, that is proven to be extremely sticky, obviously, and that is probably the other leg that goes hand in hand with the custom designs is that
Speaker Change: Is that, I said some of this in my prepared remarks, but the...
Speaker Change: The value of the solution now is really moved just beyond who can do the best sort of individual compute piece of Silicon. I mean it's that's critical and you've got to have the right sort of performance and you've got to take advantage of Moore's Law and all those things but the way to get...
Speaker Change: Ultimately, outside performance and the solution is you've got a couple of that with the networking and the connectivity. Thank you very much.
and I think the IO.
Speaker Change: from scale up to scale out to all the various different interconnect type of solutions we have is proving to be a very compelling reason for customers to use us because we can co-architect.
Speaker Change: Those Together, and we actually get with the compute.
Custom Silicon Opportunities, [inaudible]
Speaker Change: And when we do that, by the way, and especially when we engage on something like an accelerator or a CPU, we get very early information and perspective on the customer architecture.
Speaker Change: Again, not just the piece of compute, but then all the I.O. that's required and we drive our solutions around that. So this is all by design in terms of how we formulated our technology platform approach.
Speaker Change: but it is a much more compelling value prop for our customers versus maybe competitors of ours that only have one of those pieces.
Very helpful man, thank you very much!
Speaker Change: The next question comes from the line of Aaron Rakers from Wells Fargo. Their line is now open.
Aaron Rakers: Yeah, thanks for taking the question. I'm going to stick with the AI questions as well.
Aaron Rakers: Matt, you had mentioned that you had four customers in the hyper-skillage or you had engaged and you mentioned two and two, and the third one coming. The fourth, I'm just going to be clear, is that also a compute opportunity or is that referring to the Nick? Thank you very much.
Aaron Rakers: custom Nick opportunity that you're currently engaged in. And then also on that same narrative, how do you think about the custom logic opportunity around HBM 4 and the timing of when that might be impactful for Marvell? Thank you.
Aaron Rakers: Yeah, thanks Aaron, and great two questions. So yeah, on the first one, I think you...
I think you got it right.
Aaron Rakers: You actually nailed it so that, and that opportunity sets bigger than just that product as an example, but, yeah, the fourth customer, we had a, we had a, um,
Aligning around.
Aaron Rakers: and so we're very engaged right now both with the key memory partners of ours who we work with jointly with our hyper scale customers and the benefits are quite significant that we're able to propose in terms of the...
Aaron Rakers: Beachfront Area Reduction on the Logic Die, the ability for our customers to get significantly more compute packed into that die and then also improving the throughput between the HBM.
Aaron Rakers: and the compute and then actually being able to have a higher density memory solution wrapped around our customers' compute die. So all those are still very valid and I think that's going to be a significant sort of industry trend that we're going to see.
and in the next generation of these high-end accelerator products. Thanks.
Thank you.
Speaker Change: Your next question comes from the line of Tom O'Malley from Barclays, Surleyn is now open.
Speaker Change: Hey guys, thanks for taking the question, appreciate it. So I kind of wanted to pivot a little bit to the technology side, so Matt in the script, you talked about increasingly optical connections taking over areas where electrical connections were today. So I kind of wanted to get your opinion, like when you look at the world of just optics in general and particularly co-packed optics. Do you see that at first happening kind of inside of the rack or do you see that kind of happening in the aggregation layer? And then, you know, what does that mean for your DSP business? Like obviously. [inaudible]
Speaker Change: and you're share of the optical world is a little bit different than you're share of the switching world. I just would love your commentary on where you see kind of co-package optics coming first and then kind of as it relates to your product set, where you feel like you have some strength.
Speaker Change: Yeah, great. Thanks, Tom. So yeah, maybe some perspective. So I think the first is in the history of CPO, you know, I think this is really prior to this CTI change in the last few years of
Speaker Change: The Growth in Accelerated Computing, the Holy Grail that's been out there for a decade plus, maybe close to 20 years is...
Speaker Change: that the aggregation layer of the scale out was ultimately could go to CPO. And there's been a lot of POCs in this area. There's been a lot of different efforts in the industry. I mean, I was at OFC.
Last year, Peter,
Speaker Change: And that's kind of where a lot of the air really did come out of the balloon. I think, you know, I think, you know, not just from us but our big cloud customers.
Speaker Change: sort of said, that's a very long-term type of opportunity. And that's been our view, too, by the way. It's something that we're paying attention to. We've got some investment there.
Speaker Change: But what's really happened in the lab and by the way the same thing sort of happened with LPO which was linear optics you know 2023 there was a ton of noise on this topic that that would be able to replace DSP based pluggables you know that had not happened. .
Speaker Change: But what's emerged, as I mentioned in my prepared remarks, is that in the scale up and the connectivity in the rack and between accelerators and inside the cluster. [inaudible]
Speaker Change: That's where there's a lot of opportunity to go active and accelerated in terms of the connectivity and to go optical from passive.
Speaker Change: and that could be accomplished a couple different ways and co-package optics is a very interesting and compelling way to do that.
Speaker Change: We demoured our 6.4-T product, you know, a year ago at OFC, we're definitely investing in this area, and we have a lot of traction here relative to us presenting that as a solution as part of our ASIC platform.
Speaker Change: and then also with LPO, same thing. I think that may find a home in some of these connection points again within the rack. But these will be important applications, especially in closed systems. There's a lot of technology that needs to get developed and a lot of work to do.
Speaker Change: We're very much investing here and we will be in this business to compete with best-in-class technology. The question is...
Speaker Change: When does it want to get adopted? What is the qualification process?
Speaker Change: You know, what are all the manufacturing and yield issues we're going to have to deal with? So it's complex, Tom, but-
Speaker Change: This is not something that we're backing off of. In fact, we think it's a critical part of our long-term technology investment to not only have best-in-class DSPs,
Speaker Change: Investing in the next generation where we can enable significant breakthroughs in power and performance. We just have to balance those off with the reality of this is very complex new. Thank you.
Speaker Change: and not traditional sort of basic CMOS technologies. These are more complex. So,
Speaker Change: You'll see more from us at OFC on this, and certainly, you know, this is an area to watch, but we think it's going to take some time for it to finally work its way through industry-wide into real high volume production. Thanks.
Thank you.
Speaker Change: Super helpful and then just on the near term obviously on the optical side sounds like things are are better there but there's been noise as there's about many things these days in relation to AI about potentially some headwinds in terms of inventory at 800 gig or the pricing dynamic as you moved to 1.60 could you maybe comment on the the health of both of those nodes and kind of what you're seeing in terms of the growth trajectory for the 800 gig world this year and just the health of pricing etc just because there's been a lot of noises. [inaudible]
Thank you Matt.
Speaker Change: Yeah, no, we feel really good. Optics has been very, very strong for us. We saw a big uptick in the second half of last year in terms of orders. We've been fulfilling those. We see demand very strong this year, particularly in 800 gig.
Speaker Change: A very healthy demand. We do see 1.6 T transition happening, but quite frankly, 800 gig continues to be the workhorse.
Speaker Change: And we'll be ready to support both our five nanometer 1.16 device, but we're very excited about our three nanometer product. It's getting a lot of great traction because of the power savings. I mean, it's 20% per link.
Speaker Change: So it really adds up when you talk about the massive scale and the number of interconnect points in these massive clusters that are being built.
Speaker Change: So all that looks very positive to come. And of course, there's always noise in the system. This is a very hot area. I'm saying AI overall, but from a Marvell perspective, you know, sharing what we see, we see very healthy, strong demand, continuing.
Speaker Change: Your next question comes from the line of Harlan Sur from JP Morgan, your line is now open.
Harlan Sur: Good afternoon, guys. Thanks for taking my question. It's great to see that you captured the follow-on AIXPU program after your current XPU program, which is ramping, not all with your...
Major Cloud and Hector Skill customer.
Speaker Change: Matt, just to clarify, so, is the new follow-on XPU program a training XPU as well?
Is that a calendar 26 rant? [inaudible]
Speaker Change: and is that at 5 nanometer or 3 nanometer, any more color there would be helpful and then for Willem, your inventories were of 20% sequentially which...
Speaker Change: In a strong demand in part-cycle environment, like typically imply strong future growth but-
Speaker Change: You compare that to the 3% sequential total revenue guide for April . There seems to be some disconnect. So the way to interpret this is that the 20% sequential growth in inventories is more reflective of the AI strong growth profile ahead for the team.
Yeah, all started off. Um.
Speaker Change: I'll start off Harlan. So, yeah, so, so, couple things. So, again, given the confidentiality wrapper we've got, here we go. The first is you should assume this is a...
Speaker Change: It's a very high volume program and it's a continuation of what we're doing.
it
Speaker Change: on the time and you should assume just in general on every next generation type of device.
You're going to see no transitions in technology advancements.
Speaker Change: As you go forward, so you should assume that. And then also on a timing perspective, all I can say there is we'll be ready.
Speaker Change: Reddy Durab, when it's time, and we'll manage that transition. We're very confident our ability to manage that transition successfully with our customer, but that timing is something that...
Speaker Change: We're just going to have to see when that's ready and we'll time it around that. And I can't really comment on what my customer plans are in this kind of detail. They just don't like it, and I don't blame them.
Speaker Change: Archuri, but if you look at it on a days, it's actually a flat quarter of a quarter. [inaudible]
Thank you for the input, guys.
Yep.
Speaker Change: Your next question comes from the line of Mark Lipacis from Evercore ISI. Your line is now open.
Great, thanks for taking the question.
Speaker Change: You know, this risk of a deceleration is spending, or maybe even a digestion period. And...
Speaker Change: You seem to express confidence and the visibility as you go through this year.
and I wonder if you can...
Speaker Change: Help us understand the tell us that you look for on your dashboard, that tell you that there's this risk of a digestion period, and I think maybe as part of that, I guess I've always thought of Marvell as like a calm IC company, now you just have this process or business as...
Speaker Change: That's really ramping, and I wonder if you kind of deconstruct that risk assessment, do you think about those two businesses differently?
Speaker Change: Yeah, okay, yeah, I'll break it into two pieces. So,
Speaker Change: So we do a lot of triangulation, Mark, you know, as a company relative to how we forecast our data center business in particular.
Art products, and especially where they're just completely sole source being a potential gate for our customers.
Speaker Change: We've been, you know, we plan our supply chains very carefully together and I think you can see the evidence of that over the last. Thank you very much.
Speaker Change: two years as we ramped with sort of the advent of chat GPT. And it's amazing to think of where we were. If I actually go back to this call two years ago and the big breakthrough was we were saying we were going to do 200 million and AI revenue in calendar 23 and 400 million. And it's been a long time.
Speaker Change: 24 and now we just finished 24 and we're talking about blowing through 1.5 billion and doing 2.5 plus so just as a quick side note it's just kind of remarkable but we scaled right along with our customers. First.
Speaker Change: and generally continue to exceed expectations and be able to ramp with what they need. So when we look to the rest of the year, and even quite frankly on a multi-year view,
Speaker Change: It's a very strong outlook and some of that is our own specific things because we have new programs let's say in the custom area that are ramping that are incremental. We also have, um,
Speaker Change: We just have additional sockets. We have customers transitioning from a technology perspective. Let's say an interconnect. So we have a lot of positive tailwinds. Now we're monitoring, you know, and certainly the supply chain. [inaudible]
Speaker Change: You know, it needs constant review, but at the moment, you know, again, we see a very strong setup for strong growth.
and our Fiscal 26.
Speaker Change: and our fiscal 27 driven by both the custom programs ramping as well as continued growth and strength and connectivity and in higher layer networking and in things like storage coming back so all these all these look like a positive setup at the moment.
Good, thank you very helpful.
Yeah
Speaker Change: Your next question comes from the line of Ben Ritesis from Melius Research, your line is now open.
Ben Reitzes: Hey guys, thanks for the question, and thanks for the intermission there in the middle. That was a nice break. The...
Hmm.
Speaker Change: The question that I have is with regard to sequential growth, Matt, and then a long-term question. Did you clarify that...
Speaker Change: and did, you know, when Tim asked his question earlier, and if so, what's your confidence? And then, if you could just kind of step back also Matt, you know, the lot of noise on due to the speculation around that customer and content there.
Speaker Change: You know, when you step back, you have a goal of 15 billion for the data center long term by calendar year 28. Are you seeing the progress in your custom business? Still to hit that number because nobody on the street is even close to that. Thanks.
Yeah, Ben, thanks for the questions. So...
Speaker Change: Yeah, on the assumptions through the year, I think what I said was in Q1, our data center business, ex the on-prem stuff was going to be a double digits, coming off of overall data center, like 25% a quarter sequentially.
Speaker Change: So I didn't comment it throughout the whole year, but you should just assume it's not a bad assumption, or it would be a fair assumption to think that it's...
Speaker Change: Obviously going to continue given the strength and the business and the momentum that we're seeing and just from what we're looking at from a year-over-year perspective. On the long term...
Speaker Change: I think we're tracking extremely well to our 20% market share number.
Speaker Change: You know, when we look back to kind of calendar 23 and then 24 and 25 and you start bouncing it up against what we said it's the AI day. Okay.
Speaker Change: I think it looks very favorable. We're definitely gaining share from 23 to 24, and we'll definitely gain more share from 24 to 25. And so, you know, to get to that revenue target.
Speaker Change: You got to get there both ways. You got to grow the share from kind of 10%, let's call it to 20%, and then the market's got to develop. Right? Obviously, you got to get to the sort of $75 billion cam, but both of those are trending in a very positive direction. In fact,
Speaker Change: Certainly in 24 and even in 25, it's just kind of big round numbers, it looks like, you know, both the market.
Speaker Change: And our growth, if you just bounce it up against sort of what's the compounded growth rate you needed from 23 to 28, it's actually growing above that right now.
Speaker Change: So now we're in ramp phase, but that's going to continue. So I think we're in very good shape in terms of where we're tracking from a market share perspective and certainly if the market
By the way, is bigger, I mean, remember... [inaudible]
Speaker Change: We gave that point of view in April of last year, and the world has changed then since then in terms of the absolute cat-backs.
That's being deployed.
Speaker Change: Certainly even in recent months, all of the various programs, you know, from from all the different key players and the potential of what's out there. Thank you very much.
Speaker Change: Sovereign Programs, Government Programs, Programs from New Entrance, so we just see the quite differentiated the Tam and the opportunity for Marvell.
Speaker Change: You know, if anything, being, you know, way larger than it was.
Speaker Change: When we looked at it almost a year ago. So, all those make me feel very good about the market size developing and then certainly our progression on the market share. Thank you very much.
Speaker Change: And you're right, that would be an absolute home run to get there and that's what me and my team are absolutely driving in this company day in and day out.
Speaker Change: And execute like crazy and do it in a very focused manner, which is also where we reorganize the company with a dedicated data center engineering and business group to drive it. So I think the setup's really good. Thanks.
Thanks Matt.
Speaker Change: Your last question comes from the line of Christopher Rolland from Susquehanna. Your line is not open.
Christopher Rolland: Hey, thanks for squeezing me in. And some of this was addressed, but scale up. You know, you guys have a lot of opportunities here. You know, some of this could be optical, some it could be co-packaged.
Christopher Rolland: Some of it could be active copper, I think you might even have some like...
Christopher Rolland: UAL, or NB Link, like alternatives, DSP throughout the system.
Christopher Rolland: I guess as we see changes in architecture, either GPU or XPU, where do you think your biggest opportunities are? And when might we see some of these wins? Thanks Matt.
Christopher Rolland: Yeah, excellent Chris, great question to end the session. So first of all, you've done your homework and I think the key message is we are planning on participating and enabling all of the things you mentioned. We have programs underway and developments in all those different areas.
Christopher Rolland: The key thing I want to stress to you and to the investors on the call of this is incremental time.
Christopher Rolland: The scale-up opportunity, we flagged it a few different times as ripe for a tam expansion, and it looks like that's what's...
Christopher Rolland: What's going to play out at some point here? So that is all incremental. That's not, hey, if that happens and all of a sudden, you know, Marvell's DSP revenue goes down or something, like within the scale up and this type of connectivity, that is a revenue upside, market upside. .
Christopher Rolland: type of opportunity. So, so that one I think is, is um...
Christopher Rolland: He's we're very excited about and I think you're going to hear a lot more about that from us. Certainly a thing like OFC and our investor day and so forth but yeah big opportunity there no question.
Thanks, guys. Yeah, thanks for this.
Christopher Rolland: Let me now turn the call over to Mr. Murphy for closing comments.
Christopher Rolland: Yeah, thank you, operator. And first of all, I appreciate everybody joining the call. You know, I apologize for the gap there. Hope everybody enjoyed a quick coffee break and we'll certainly figure out what happened, but I appreciate the interest in the company. I want to thank...
Christopher Rolland: Thank everybody for their interest and just kind of reflect on a few things. I think the first is...
Christopher Rolland: We had really strong progress in fiscal 25. We started off at a 4 billion-ish, 4.2, 4.3 billion type of run rate in the first half.
Christopher Rolland: You know, we're now at the 1875 kind of guide, you know, well about seven and a half kind of a billion run rate, so that's...
Christopher Rolland: Heading into the year, and a big change. We're also getting leverage in the model.
and the Operating Leverage, Cash Flow Generation, Operating Margin Expansion. [inaudible]
Christopher Rolland: And you can even see it in things like our Q4 to Q1 op-ax, which normally would go up, as Willem said.
Christopher Rolland: More than it, more than we're forecasting, but we're starting to see the benefit of these custom silicon programs kicking in in the NRE contribution and...
Christopher Rolland: So we're seeing it both on the top line revenue growth, but also…
Christopher Rolland: on the expense line as well, and that is a great setup. We were gap-profitable as well in Q4, which was great.
We're going to keep driving that.
Christopher Rolland: You know, it wasn't just AI, our standard cloud infrastructure, side of things in data center, also had a very strong year. The programs that we, maybe there was some concern about going back a year ago, you know, can you ramp? Yeah, I have.
Christopher Rolland: These products are going to get qualified, what's going to happen, I think our team, and I want to thank the Marvell team for an excellent job of ramping these very complex devices into full volume production, supporting our customers.
Christopher Rolland: Tom had a question about electrooptics. We had a banner year for our electrooptics business and it looks very strong heading into next year.
Christopher Rolland: Also, the multi-market businesses that was a source of concern over the past year, the enterprise and carrier and things like that. You're seeing very strong sequential growth now, sequential growth out of those businesses as they recover. Thank you very much.
Christopher Rolland: and they sort of tread back towards the, they're at least to enterprise in carrier, they're $2 billion run rate.
Christopher Rolland: And, you know, look, we had a beaten race, we're guiding revenue and earnings growth to continue in the first quarter. Customer engagements really strong, as I mentioned, you know, very strong design wins in the last year, great execution by our sales team in business units. [inaudible]
Christopher Rolland: to win those key designs that are going to drive our future growth. And we're very optimistic about where this head. So I appreciate everybody's interest. I look forward to seeing all of you in various investor meetings coming up and continue the discussion. So thanks everybody, I appreciate it. Thank you very much.
Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.