Q2 2027 Marvell Technology Inc Earnings Call

August 27, 2026

Speaker #1: Good afternoon, and welcome to Marvell Technology, Inc.'s second quarter of fiscal year 2027 earnings conference call. At this time, all participants are in a listen-only mode.

Operator: Good afternoon, and welcome to Marvell Technology incorporated Q2 of fiscal year 2027 earnings conference call. At this time, all participants are in a listen-only mode. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. A question and answer session will follow a formal presentation. Please note this event is being recorded. I will now turn the conference over to Mr. Ross Seymore, Senior Vice President of Investor Relations. Thank you. You may begin.

Speaker #1: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. A question-and-answer session will follow the formal presentation.

Speaker #1: Please note, this event is being recorded. I will now turn the conference over to Mr. Ross Seymour, Senior Vice President of Investor Relations. Thank you.

Speaker #1: You may begin.

Speaker #2: Thank you, and good afternoon, everyone. Welcome to Marvell's second fiscal quarter 2027 earnings call. Joining me today are Matt Murphy, Marvell's Chairman and CEO; Dan Durn, CFO; Chris Koopmans, President and COO; and Sandeep Barathi, President of our Data Center Group.

Ross Seymore: Thank you, and good afternoon, everyone. Welcome to Marvell's Q2 fiscal quarter 2027 earnings call. Joining me today are Matt Murphy, Marvell's Chairman and CEO; Dan Durn, CFO; Chris Koopmans, President and COO; and Sandeep Bharathi, President of our Data Center Group. Let me remind everyone that certain comments made today include forward-looking statements, which are subject to significant risks and uncertainties that could cause our actual results to differ materially from management's current expectations. Please review the cautionary statements and risk factors contained in our earnings press release, which we filed with the SEC today and posted on our website, as well as our most recent 8-K, 10-K, 10-Q, and other documents that we file from time to time with the SEC. We do not intend to update our forward-looking statements. During our call today, we will refer to certain non-GAAP financial measures.

Speaker #2: Let me remind everyone that certain comments made today include forward-looking statements, which are subject to significant risks and uncertainties that could cause our actual results to differ materially from management's current expectations.

Speaker #2: Please review the cautionary statements and risk factors contained in our earnings press release, which we filed with the SEC today and posted on our website.

Speaker #2: As well as our most recent 8-K, 10-K, 10-Q, and other documents that we file from time to time with the SEC. We do not intend to update our forward-looking statements.

Speaker #2: During our call today, we will refer to certain non-GAAP financial measures. A reconciliation between our GAAP and non-GAAP financial measures is available in our earnings press release.

Ross Seymore: A reconciliation between our GAAP and non-GAAP financial measures is available in our earnings press release. Let me now turn the call over to Matt for his comments on the quarter. Matt?

Speaker #2: Let me now turn the call over to Matt for his comments on the quarter. Matt?

Speaker #3: Thanks, Ross, and good afternoon, everyone. Before I discuss our results and outlook, I want to briefly highlight two management transitions that occurred during our last quarter.

Matt Murphy: Thanks, Ross, and good afternoon, everyone. Before I discuss our results and outlook, I want to briefly highlight two management transitions that occurred during our last quarter. First, Willem Meintjes stepped down as Marvell's CFO in mid-June. I deeply appreciate Willem's steady hand, leadership, and tireless commitment to transforming Marvell over his decade with the company, and I greatly respect his desire to spend more time with his family. To ensure a seamless transition, we simultaneously welcome Dan Durn as our new CFO. Dan brings more than three decades of experience in senior finance roles across semiconductor and enterprise technology companies. Having most recently served on Marvell's Board of Directors, Dan comes into the role with a deep understanding of our business and strategy, as well as a unique appreciation for the significant growth opportunities at Marvell ahead.

Speaker #3: First, Willem Meintjes stepped down as Marvell CFO in mid-June. I deeply appreciate Willem's steady hand, leadership, and tireless commitment to transforming Marvell over his decade with the company.

Speaker #3: And I greatly respect his desire to spend more time with his family. To ensure a seamless transition, we simultaneously welcomed Dan Durn as our new CFO.

Speaker #3: Dan brings more than three decades of experience in senior finance roles across semiconductor and enterprise technology companies. And having most recently served on Marvell's board of directors, Dan comes into the role with a deep understanding of our business and strategy, as well as a unique appreciation for the significant growth opportunities that Marvell has ahead.

Speaker #3: Second, in July, we began a transition in our investor relations leadership. After eight years with Marvell, Ashish Saran will retire from the company in April 2027.

Matt Murphy: Second, in July, we began a transition in our investor relations leadership. After eight years with Marvell, Ashish Saran will retire from the company in April 2027. I want to personally thank Ashish for his leadership, partnership, and countless contributions to Marvell. I also appreciate the thoughtfulness and care he has brought to planning this transition, including helping us identify the right successor. On that front, I am very pleased to welcome Ross Seymore, who comes to us from Deutsche Bank, where he covered the semiconductor industry for more than 25 years. Warm welcome to you, Dan and Ross. Now let me move on to our results and outlook. For Q2 of fiscal 2027, Marvell delivered record revenue of $2.739 billion, reflecting 13% sequential and 37% year-over-year growth. Revenue and non-GAAP earnings per share of $0.94 both exceeded the midpoint of guidance.

Speaker #3: I want to personally thank Ashish for his leadership, partnership, and countless contributions to Marvell. I also appreciate the thoughtfulness and care he has brought to planning this transition, including helping us identify the right successor.

Speaker #3: On that front, I'm very pleased to welcome Ross Seymour, who comes to us from Deutsche Bank, where he covered the semiconductor industry for more than 25 years.

Speaker #4: Warm welcome to you, Dan and Ross. Now, let me move on to our results and outlook. For the second quarter of fiscal 2027, Marvell delivered record revenue of $2.739 billion, reflecting 13% sequential and 37% year-over-year growth.

Speaker #4: Revenue and non-GAAP earnings per share of 94 cents both exceeded the midpoint of guidance. On our last earnings call, we increased our sequential revenue growth expectation for the third and fourth quarters of this fiscal year to double-digit percentage growth, up from our prior outlook of high single-digit growth.

Matt Murphy: On our last earnings call, we increased our sequential revenue growth expectation for Q3 and Q4 of this fiscal year to double-digit percentage growth, up from our prior outlook of high single-digit growth. Since then, our outlook has continued to strengthen, and we now expect revenue growth to further accelerate in the H2. The strength is reflected in our guidance for Q3 of fiscal 2027, where we expect total company revenue of $3.15 billion at the midpoint, representing growth of 15% sequentially and more than 50% year over year. We expect growth to further accelerate in Q4, both sequentially and year over year. As a result, we now expect overall Marvell revenue in fiscal 2027 to grow approximately 45% year over year to roughly $12 billion, up from our prior outlook of approximately $11.5 billion just one quarter ago.

Speaker #4: Since then, our outlook has continued to strengthen, and we now expect revenue growth to further accelerate in the second half. This strength is reflected in our guidance for the third quarter of fiscal 2027, where we expect total company revenue of $3.15 billion at the midpoint, representing growth of 15% sequentially and more than 50% year-over-year.

Speaker #4: We expect growth to further accelerate in the fourth quarter, both sequentially and year-over-year. As a result, we now expect 2027 to grow approximately 45% year-over-year to roughly $12 billion, up from our prior outlook of approximately $11.5 billion just one quarter ago.

Speaker #4: The increase in our revenue outlook continues to be driven by our data center business, which we now expect to grow by approximately 60% this fiscal year, up from our prior expectation of approximately 50%.

Matt Murphy: The increase in our revenue outlook continues to be driven by our data center business, which we now expect to grow by approximately 60% this fiscal year, up from our prior expectation of approximately 50%. Importantly, this growth remains broad-based. Interconnect continues to lead the way, while our custom business is expected to ramp significantly in the H2. For our communications and other end markets, the trajectory remains largely as expected. Despite typical quarter-to-quarter lumpiness in these businesses, we currently expect fiscal 2027 growth to approach our 10% target. Looking ahead to fiscal 2028, aggregate demand continues to accelerate, and our operations team is doing an outstanding job securing additional supply despite pervasive industry-wide constraints. As a result, we now expect Marvell's data center revenue to grow more than 60% year over year in fiscal 2028, driven by strong growth across all of our key data center businesses.

Speaker #4: Importantly, this growth remains broad-based. Interconnect continues to lead the way, while our custom business is expected to ramp significantly in the second half.

Speaker #3: For our communications and other end markets, the trajectory remains largely as expected. Despite typical quarter-to-quarter lumpiness in these businesses, we currently expect fiscal 2027 growth to approach our 10% target.

Speaker #3: Looking ahead to fiscal 2028, aggregate demand continues to accelerate, and our operations team is doing an outstanding job securing additional supply despite pervasive, industry-wide constraints.

Speaker #3: As a result, we now expect Marvell's data center revenue to grow more than 60% year-over-year in fiscal 2028, driven by strong growth across all of our key data center businesses.

Speaker #3: This includes custom more-than-doubling, as we indicated last quarter. We look forward to providing a deeper dive into the specific drivers of our longer-term growth at our Investor Day in New York City on October 6th. But the key takeaway for today is clear: the strength of our data center business continues to exceed our prior expectations.

Matt Murphy: This includes custom more than doubling, as we indicated last quarter. We look forward to providing a deeper dive into the specific drivers of our longer-term growth at our Investor Day in New York City on 6 October. The key takeaway for today is clear. The strength of our data center business continues to exceed our prior expectations. Putting it all together, we now expect fiscal 2028 revenue of approximately $18 billion, up $1.5 billion from the $16.5 billion outlook we provided just one quarter ago. Even as our revenue base becomes significantly larger, our growth rate is accelerating. We now expect fiscal 2028 revenue to grow approximately 50% year over year, compared with approximately 45% in our prior outlook. With that, let me provide color on our current business, beginning with data center.

Speaker #3: Putting it all together, we now expect fiscal 2028 revenue of approximately $18 billion, up $1.5 billion from the $16.5 billion outlook we provided just one quarter ago.

Speaker #3: And importantly, even as our revenue base becomes significantly larger, our growth rate is accelerating. We now expect fiscal 2028 revenue to grow approximately 50% year-over-year, compared with approximately 45% in our prior outlook.

Speaker #4: With that, let me provide color on our current business, beginning with Data Center. In our Data Center end market, we delivered record second quarter revenue of $2.17 billion, representing 18% sequential growth and 46% year-over-year growth.

Matt Murphy: In our data center end market, we delivered record Q2 revenue of $2.17 billion, representing 18% sequential growth and 46% year over year growth. Both sequential and year over year growth accelerated from the first fiscal quarter, when data center revenue increased 11% sequentially and 27% year over year. Looking ahead to the Q3, we expect this acceleration to continue, with data center revenue forecasted to grow more than 20% sequentially and roughly 75% year over year. The drivers of this growth remain very broad-based as AI demand for our products continues to rise. We are seeing strong tailwinds across each of our data center businesses, including interconnect, switching, and custom. Connectivity continues to be a critical enabler of AI performance, driven by robust demand for both our interconnect and switching products.

Speaker #4: Both sequential and year-over-year growth accelerated from the first fiscal quarter, when data center revenue increased 11% sequentially and 27% year-over-year. Now, looking ahead to the third fiscal quarter, we expect this acceleration to continue, with data center revenue forecasted to grow more than 20% sequentially and roughly 75% year-over-year.

Speaker #4: The drivers of this growth remain very broad-based, as AI demand for our products continues to rise. We are seeing strong tailwinds across each of our data center businesses, including interconnect, switching, and custom.

Speaker #4: Connectivity continues to be a critical enabler of AI performance, driven by robust demand for both our interconnect and switching products. Thus far, the largest driver of growth for these businesses has been scale-out applications.

Matt Murphy: Thus far, the largest driver of growth for these businesses has been for scale-out applications. Here, Marvell's market-leading franchises in optical DSPs, switching, and broadband analog components continue to see significant demand. On the optical DSP side, 800G demand remains strong, while our 1.6T business is ramping rapidly, a trend we expect to accelerate further in fiscal 2028. Within scale-out switching, our business remains on track to more than double this year, driven by a strong ramp in our 51.2T products across a broadening array of customers. Within broadband analog, demand for our industry-leading TIAs and drivers continues to exceed expectations. Moving beyond scale-out, we expect this connectivity strength to broaden as hyperscalers build significantly larger AI clusters that increasingly span multiple data centers.

Speaker #4: Here, Marvell's market-leading franchises and optical DSPs, switching, and broadband analog components continue to see significant demand. On the optical DSP side, 800-gig demand remains strong, while our 1.6T business is ramping rapidly—a trend we expect to accelerate further in fiscal 2028.

Speaker #4: Within scale-out switching, our business remains on track to more than double this year, driven by a strong ramp in our 51.2T products across a broadening array of customers.

Speaker #4: And within broadband analog, demand for our industry-leading TIAs and drivers continues to exceed expectations. Now, moving beyond scale-out, we expect this connectivity strength to broaden as hyperscalers build significantly larger AI clusters that increasingly span multiple data centers.

Speaker #4: As we have discussed on prior calls, aggregate bandwidth requirements for these scales across networks are projected to be more than 10 times greater than those of current front-end DCI networks.

Matt Murphy: As we have discussed on prior calls, aggregate bandwidth requirements for these scale-across networks are projected to be more than 10 times greater than those of current front-end DCI networks. Marvell is ideally positioned to address this opportunity through our leadership in coherent DSP-enabled 1.6T ZR and ZR+ DCI modules. Finally, we continue to expect the adoption of scale-up networking and AI infrastructure to create a massive new TAM for Marvell. Scale-up domains are expected to become significantly larger, requiring high-bandwidth interconnects closely coupled with high-radix, low-latency switches. While customers are initially deploying copper interconnect for scale-up networking, as cluster sizes grow, the reach and bandwidth limitations of copper are increasingly driving customers towards optical interconnects, as well as purpose-built UALink, ESUN, and NVLink scale-up switches. As a result, we are investing aggressively to lead the industry in next-generation scale-up optical interconnect and switching technologies.

Speaker #4: Marvell is ideally positioned to address this opportunity through our leadership in coherent-enabled DSP, coherent DSP-enabled 1.6T ZR, and ZR+ DCI modules.

Speaker #4: Finally, we continue to expect the adoption of scale-up networking and AI infrastructure to create a massive new TAM for Marvell. Scale-up domains are expected to become significantly larger, requiring high-bandwidth interconnects closely coupled with high-radix, low-latency switches.

Speaker #4: Now, while customers are initially deploying copper interconnect for scale-up networking, as cluster sizes grow, the reach and bandwidth limitations of copper are increasingly driving customers towards optical interconnects, as well as purpose-built UA-Link, eSUN, and NVLink scale-up switches.

Speaker #4: As a result, we are investing aggressively to lead the industry in next-generation, scale-up optical interconnect and switching technologies. On the interconnect side, pluggable modules remain the primary form factor for scale-out networks, and we do not expect that to change.

Matt Murphy: On the interconnect side, pluggable modules remain the primary form factor for scale-out networks, and we do not expect that to change. However, the significantly higher bandwidth density required by scale-up networks is best served by bringing optics much closer to XPUs and switches. While the transition in scale-up networks from copper to optics is expected to take several years, with both technologies coexisting, customers are aggressively planning scale-up optics deployments starting as early as next year. Given how early we are in this transition, customers are evaluating a broad range of potential solutions with multiple technologies under consideration, including NPO and CPO packaging options, with both leveraging advanced silicon photonics as well as three different modulator technologies: MZM, EAM, and MRM. Each of these choices has different considerations around cost, power, and technology maturity.

Speaker #4: However, the significantly higher bandwidth density required by scale-up networks is best served by bringing optics much closer to XPUs and switches. While the transition of scale-up networks from copper to optics is expected to take several years, with both technologies coexisting, customers are aggressively planning scale-up optics deployments starting as early as next year.

Speaker #4: Given how early we are in this transition, customers are evaluating a broad range of potential solutions with multiple technologies under consideration, including NPO and CPO packaging options, with both leveraging advanced silicon photonics, as well as three different modulator technologies.

Speaker #4: MZM, EAM, and MRM—each of these choices has different considerations around cost, power, and technology maturity. Importantly, given the breadth of our optical portfolio across modulation technologies, fully supported by our broadband analog TIAs and drivers, Marvell is uniquely positioned to help customers move towards the optical scale-up architecture that best meets their needs.

Matt Murphy: Importantly, given the breadth of our optical portfolio across modulation technologies, fully supported by our broadband analog TIAs and drivers, Marvell is uniquely positioned to help customers move towards the optical scale-up architecture that best meets their needs. The full spectrum of Marvell-developed solutions is reflected in accelerating design activity with a broad set of customers. In addition to our ongoing success in CPO, we are also seeing a strong adoption of our NPO solutions at multiple customers. As a result, our fiscal 2028 revenue outlook for scale-up optics has increased meaningfully compared to prior expectations, positioning Marvell to be one of the largest enabler of NPO in AI infrastructure. Moving to scale-up switching, we are seeing similar momentum. Marvell is uniquely positioned to support all three purpose-built scale-up protocols through our internally developed UAL and ESUN switches, as well as our expanded partnership with Nvidia around NVLink Fusion.

Speaker #4: The full spectrum of Marvell-developed solutions is reflected in accelerating design activity with a broad set of customers. In addition to our ongoing success in CPO, we are also seeing strong adoption of our NPO solutions at multiple customers.

Speaker #4: As a result, our fiscal 2028 revenue outlook for scale-up optics has increased meaningfully compared to prior expectations, positioning Marvell to be one of the largest enablers of NPO and AI infrastructure.

Speaker #4: Moving to scale-up switching, we are seeing similar momentum. Marvell is uniquely positioned to support all three purpose-built scale-up protocols through our internally developed UAL and eSUN switches, as well as our expanded partnership with NVIDIA around NVLink Fusion.

Speaker #4: Our scale-up switches leverage decades of experience developing large, reticle-sized switch silicon, combined with our in-house, best-in-class, high-performance CERTES technology. The close coupling of optics and switching in scale-up networks provides another important differentiator for Marvell, given our market-leading positions in both technologies.

Matt Murphy: Our scale-up switches leverage decades of experience developing large, radical-sized switch silicon, combined with our in-house best-in-class high-performance SerDes technology. The close coupling of optics and switching in scale-up networks provides another important differentiator for Marvell, given our market-leading positions in both technologies. This allows us to deliver highly optimized scale-up solutions designed to provide customers with exceptional performance and reliability while accelerating time to market. As a result, we are engaged in multiple deep discussions with tier 1 customers across our scale-up switch portfolio, with each engagement representing a multi-billion dollar lifetime revenue opportunity given the expected size of the scale-up TAM. Taken together, we are extremely excited about the continued acceleration and broadening of networking demand as AI architectures require ever-increasing performance across scale-out, scale-across, and scale-up domains. Okay. Now let's turn to the custom business within our data center end market.

Speaker #4: This allows us to deliver highly optimized scale-up solutions designed to provide customers with exceptional performance and reliability, while accelerating time-to-market. As a result, we are engaged in multiple deep discussions with tier-one customers across our scale-up switch portfolio, with each engagement representing a multi-billion-dollar lifetime revenue opportunity, given the expected size of the scale-up TAM.

Speaker #4: Taken together, we are extremely excited about the continued acceleration and broadening of networking demand, as AI architectures require ever-increasing performance across scale-out, scale-across, and scale-up domains.

Speaker #4: Okay, now let's turn to the custom business within our data center end market. As I mentioned earlier, we are seeing a significant acceleration in custom demand in the second half of this year.

Matt Murphy: As I mentioned earlier, we are seeing a significant acceleration in custom demand in the second half of this year. We remain confident that this business will more than double year-over-year in fiscal 2028 and accelerate significantly in fiscal 2029. We expect this growth to be driven by both our XPU and XPU-attached products. In XPUs, we continue to make strong progress across current and next generation programs at multiple hyperscalers. In XPU attach, we are benefiting from increasing demand for both CXL and custom NICs. Looking further ahead, we expect our custom business to continue to deliver strong revenue growth as we see ongoing robust design activity with hyperscale customers. The most recent example of this momentum is the 8-K we filed last week disclosing an expanded commercial agreement and associated warrant with a key hyperscaler, one of the largest adopters of custom silicon.

Speaker #4: We remain confident that this business will more than double year over year in fiscal 2028, and accelerate significantly in fiscal 2029. We expect this growth to be driven by both our XPU and XPU-attached products.

Speaker #4: On XPUs, we continue to make strong progress across current and next-generation programs at multiple hyperscalers. And on XPU attach, we are benefiting from increasing demand for both CXL and custom NICs.

Speaker #4: Looking further ahead, we expect our custom business to continue to deliver strong revenue growth, as we see ongoing robust design activity with hyperscale customers.

Speaker #4: The most recent example of this momentum is the 8-K we filed last week, disclosing an expanded commercial agreement and associated warrant with a key hyperscaler, one of the largest adopters of custom silicon.

Speaker #4: The warrant agreement encompasses custom programs already in execution that were awarded to Marvell over the past several years, new design wins, and future potential programs.

Matt Murphy: The warrant agreement encompasses custom programs already in execution that were awarded to Marvell over the past several years, new design wins, and future potential programs. The warrant structure reflects the scale and long-term potential of the relationship and further aligns common interests as our work together expands. It spans a broad range of custom silicon programs, including those that attach to the TPU ecosystem, such as AI inference accelerators, storage controllers, network interface controllers, memory interface controllers, and near memory compute. We look forward to continuing working closely with this customer to enable the next generation of AI infrastructure. This expanding range of attached products and the scale of this agreement provides significant validation of the XPU attach category that Marvell has pioneered. We are excited to see both the use cases and attach rates for this category of products continue to broaden.

Speaker #4: The warrant structure reflects the scale and long-term potential of the relationship, and further aligns common interests as our work together expands. It spans a broad range of custom silicon programs, including those that attach to the TPU ecosystem, such as AI inference accelerators, storage controllers, network interface controllers, memory interface controllers, and near-memory compute.

Speaker #4: We look forward to continuing to work closely with this customer to enable the next generation of AI infrastructure. This expanding range of attached products and the scale of this agreement provide significant validation of the XPU-attached category that Marvell has pioneered.

Speaker #4: We are excited to see both the use cases and attach rates for this category of products continue to broaden. These products are built upon a rich portfolio of Marvell IP and perform specialized functions designed to significantly improve the performance and efficiency of the overall AI data center.

Matt Murphy: These products are built upon a rich portfolio of Marvell IP and perform specialized functions designed to significantly improve the performance and efficiency of the overall AI data center. This is another strong confirmation of Marvell's leadership in connectivity, compute, and memory technologies, and the increasingly important role they play in enabling our customers to design more advanced AI infrastructure. In terms of the impact of the new warrant agreement, revenue from programs covered by the agreement through fiscal 2028 is already reflected in the overall custom revenue target we have previously provided. Looking at fiscal 2029 and beyond, this agreement, along with several additional programs, gives us even greater confidence in our ability to grow the custom business to a significantly larger scale in that timeframe. We look forward to sharing more details on the long-term trajectory of our custom business at our upcoming Investor Day.

Speaker #4: This is another strong confirmation of Marvell's leadership in connectivity, compute, and memory technologies, and the increasingly important role they play in enabling our customers to design more advanced AI infrastructure.

Speaker #4: In terms of the impact of the new warrant agreement, revenue from programs covered by the agreement through fiscal 2028 is already reflected in the overall custom revenue target we have previously provided.

Speaker #4: Looking ahead to fiscal 2029 and beyond, this agreement, along with several additional programs, gives us even greater confidence in our ability to grow the custom business to a significantly larger scale in that time frame.

Speaker #4: We look forward to sharing more details on the long-term trajectory of our custom business at our upcoming Investor Day. Turning to our Communications and Other end market, we delivered second-quarter revenue of $568 million, down 3% sequentially and up 10% year over year.

Matt Murphy: Turning to our communications and other end market, we delivered Q2 revenue of USD 568 million, down 3% sequentially and up 10% year over year. Going forward, we expect revenue to remain somewhat lumpy on a quarterly basis given the mix of businesses in this segment. For Q3, we expect revenue to decline in the low to mid-teens percentage range, both sequentially and year over year, followed by a solid sequential recovery in Q4. To summarize, the momentum across our business remains exceedingly strong. In the near term, that strength is reflected in the significant increases to our outlook. Compared with the expectations we provided just one quarter ago, we have increased our fiscal 2027 revenue outlook by approximately USD 500 million and our fiscal 2028 outlook by approximately USD 1.5 billion.

Speaker #4: Going forward, we expect revenue to remain somewhat lumpy on a quarterly basis given the mix of businesses in this segment. For the third fiscal quarter, we expect revenue to decline in the low to mid-teens percentage range both sequentially and year over year, followed by a solid sequential recovery in the fourth quarter.

Speaker #4: To summarize, the momentum across our business remains exceedingly strong. In the near term, that strength is reflected in the significant increases to our outlook.

Speaker #4: Compared with the expectations we provided just one quarter ago, we have increased our fiscal 2027 revenue outlook by approximately $500 million, and our fiscal 2028 outlook by approximately $1.5 billion.

Speaker #4: The center of this higher outlook is our data center business, where growth continues to both accelerate and broaden. We've increased our forecast for data center revenue growth in fiscal 2027 from our prior expectation of 50% to approximately 60%, and we see potential for further acceleration in fiscal 2028.

Matt Murphy: The center of this higher outlook is our data center business, where growth continues to both accelerate and broaden. We have increased our forecast for data center revenue growth in fiscal 2027 from our prior expectation of 50% to approximately 60%, and we see potential for further acceleration in fiscal 2028. Within connectivity, we continue to see strength established in areas such as optical DSPs, while also seeing significant growth across broadband analog TIAs and drivers, scale-across DCI modules, and scale-out switching. Each of these three businesses is on or ahead of the trajectory toward the billion-dollar annualized revenue run rate we highlighted last quarter. Scale-up opportunity remains massive and is still largely ahead of us. Marvell is ideally positioned for the transition toward NPO and CPO optical interconnects, as well as the adoption of purpose-built scale-out, scale-up switches.

Speaker #4: Within Connectivity, we continue to see strength established in areas such as optical DSPs, while also seeing significant growth across broadband analog TIAs and drivers, scale across DCI modules, and scale-out switching.

Speaker #4: Each of these three businesses is on, or ahead of, the trajectory toward the $1 billion annualized revenue run rate we highlighted last quarter. The scale-up opportunity remains massive and is still largely ahead of us.

Speaker #4: Marvell is ideally positioned for the transition toward NPO and CPO optical interconnects, as well as the adoption of purpose-built scale-out and scale-up switches. Our custom business, including both XPU and XPU-attached, is also on a strong growth trajectory, both near-term and longer-term.

Matt Murphy: Our custom business, including both XPU and XPU attach, is also on a strong growth trajectory, both near term and longer term. The 8-K we filed last week highlights the expanded scope of our relationship with a key hyperscaler and reinforces our confidence in the increasingly important role custom silicon will play in the ongoing AI infrastructure build-out. We look forward to sharing more about the longer term growth opportunities we see for Marvell at our Investor Day on 6 October in New York City, and we hope to see many of you there. Now with that, I will turn the call over to Dan for more details on our recent results and outlook.

Speaker #4: The 8-K we filed last week highlights the expanded scope of our relationship with a key hyperscaler and reinforces our confidence in the increasingly important role custom silicon will play in the ongoing AI infrastructure build-out.

Speaker #4: We look forward to sharing more about the longer-term growth opportunities we see for Marvell at our Investor Day on October 6th in New York City.

Speaker #4: And we hope to see many of you there. Now, with that, I'll turn the call over to Dan for more details on our recent results and outlook.

Speaker #1: Thank you, Matt. Good afternoon, everyone. Before I get into the financials, since this is my first earnings call as Marvell's CFO, I want to spend a moment on three things.

Dan Durn: Thank you, Matt. Good afternoon, everyone. Before I get into the financials, since this is my first earnings call as Marvell's CFO, I want to spend a moment on three things: why I joined Marvell, what I hope to accomplish as CFO, and what I believe that should ultimately mean for our stockholders. First, I joined Marvell because I believe the company has incredible growth potential. I believe Marvell is at a unique inflection point with a broad and diverse set of capabilities that have been intentionally built and are ideally aligned to enable the future of AI infrastructure. Second, my goal as CFO is to help Marvell scale efficiently and effectively to capture what I expect to be a tremendous opportunity. The company has a strong history of disciplined execution, and maintaining that rigor will remain paramount as we strategically allocate capital to fuel our growth.

Speaker #1: Why I joined Marvell, what I hope to accomplish as CFO, and what I believe that should ultimately, ultimately mean for our stockholders. First, I joined Marvell because I believe the company has incredible growth potential.

Speaker #1: I believe Marvell is at a unique inflection point, with a broad and diverse set of capabilities that have been intentionally built and are ideally aligned to enable the future of AI infrastructure.

Speaker #1: Second, my goal as CFO is to help Marvell scale efficiently and effectively to capture what I expect to be a tremendous opportunity. The company has a strong history of disciplined execution, and maintaining that rigor will remain paramount as we strategically allocate capital to fuel our growth.

Speaker #1: And third, I expect that growth to translate into significant value creation for our stockholders. I recognize that the growth opportunity ahead must be matched by its quality.

Dan Durn: And third, I expect that growth to translate into significant value creation for our stockholders. I recognize that the growth opportunity ahead must be matched by its quality, and I plan to remain intensely focused on expanding operating margins, growing cash flow, and driving attractive stockholder returns. With that, let me turn to our financial results for the second quarter of fiscal 2027. Revenue was $2.739 billion, growing 37% year over year and 13% sequentially. Data center was our largest end market, contributing 79% of total revenue and growing 46% year over year. GAAP gross margin was 53.1%. Non-GAAP gross margin was 58.9%, slightly above the midpoint of our guidance. Moving to operating expenses. GAAP operating expenses were $996 million, including stock-based comp, amortization of acquired intangible assets, restructuring costs, and acquisition related costs.

Speaker #1: And I plan to remain intensely focused on expanding operating margins, growing cash flow, and driving attractive stockholder returns. With that, let me turn to our financial results for the second quarter of fiscal 2027.

Speaker #1: Revenue was $2.739 billion, growing 37% year over year and 13% sequentially. Data center was our largest end market, contributing 79% of total revenue and growing 46% year over year.

Speaker #1: GAAP gross margin was 53.1%. Non-GAAP gross margin was 58.9%, slightly above the midpoint of our guidance. Moving to operating expenses, GAAP operating expenses were $996 million, including stock-based compensation, amortization of acquired intangible assets, restructuring costs, and acquisition-related costs.

Speaker #1: Non-GAAP operating expenses were $611 million, slightly above our guidance. GAAP operating margin was 16.8%, while non-GAAP operating margin was 36.6%. Non-GAAP operating margin expanded 180 basis points year over year, and 160 basis points sequentially, demonstrating the significant operating leverage in our model.

Dan Durn: Non-GAAP operating expenses were $611 million, slightly above our guidance. GAAP operating margin was 16.8%, while non-GAAP operating margin was 36.6%. Non-GAAP operating margin expanded 180 basis points year over year and 160 basis points sequentially, demonstrating the significant operating leverage in our model. For the second quarter, GAAP earnings per diluted share were $0.33. Non-GAAP earnings per diluted share were $0.94, a penny above the midpoint of our guidance, and up 40% year over year. Now, turning to cash flow and the balance sheet. Cash flow from operations was $606 million in the second quarter, down slightly quarter over quarter, primarily reflecting the higher capacity prepayments to suppliers in support of Marvell's future growth.

Speaker #1: For the second quarter, GAAP earnings per diluted share were $0.33. Non-GAAP earnings per diluted share were $0.94, a penny above the midpoint of our guidance, and up 40% year over year.

Speaker #1: Now, turning to cash flow and the balance sheet. Cash flow from operations was $606 million in the second quarter, down slightly quarter over quarter, primarily reflecting the higher capacity prepayments to suppliers in support of Marvell's future growth.

Speaker #1: Inventory at the end of the second quarter was $1.36 billion, down just slightly from the prior quarter. During the quarter, we repurchased $200 million of our common stock through our ongoing capital return program, and returned $54 million to stockholders through cash dividends.

Dan Durn: Inventory at the end of Q2 was $1.36 billion, down just slightly from the prior quarter. During the quarter, we repurchased $200 million of our common stock through our ongoing capital return program and returned $54 million to stockholders through cash dividends. At the end of Q2, total debt was $4.96 billion, with gross debt to EBITDA ratio of 1.32x and net debt to EBITDA ratio of 0.27x. Turning to our guidance for Q3 of fiscal 2027. We are forecasting revenue of $3.15 billion, plus or minus 5%. We expect GAAP gross margin to be between 52.9% and 53.9%. We expect our non-GAAP gross margin to be between 57.5% and 58.5%.

Speaker #1: At the end of the second quarter, total debt was $4.96 billion, with a gross debt to EBITDA ratio of 1.32 times and a net debt to EBITDA ratio of 0.27 times.

Speaker #1: Turning to our guidance for the third quarter of fiscal 2027, we are forecasting revenue of $3.15 billion, plus or minus 5%. We expect GAAP gross margin to be between 52.9% and 53.9%.

Speaker #1: We expect our non-GAAP gross margin to be between 57.5% and 58.5%. Revenue levels and product mix remain key determinants of gross margin in any given quarter, with the forecasted acceleration of our custom business creating the sequential headroom in the fiscal third quarter.

Dan Durn: Revenue levels and product mix remain key determinants of gross margin in any given quarter, with the forecasted acceleration of our custom business creating the sequential headwind in the fiscal Q3. We currently expect to maintain gross margin in this range in the Q4. We project GAAP operating expense of approximately $1.015 billion in fiscal Q3 and non-GAAP operating expenses of approximately $655 million. We expect GAAP other income and expense, including interest on our debt, to be an expense of approximately $86 million. On a non-GAAP basis, we expect other income and expense, including interest on our debt, to be an expense of approximately $36 million. We expect a non-GAAP tax rate of 11%.

Speaker #1: The sequential headwind in the fiscal third quarter—we currently expect to maintain gross margin in this range in the fourth fiscal quarter. We project GAAP operating expense of approximately $1.015 billion in fiscal Q3, and non-GAAP operating expenses of approximately $655 million.

Speaker #1: We expect GAAP other income and expense, including interest on our debt, to be an expense of approximately $86 million. On a non-GAAP basis, we expect other income and expense, including interest on our debt, to be an expense of approximately $36 million.

Speaker #1: We expect a non-GAAP tax rate of 11% looking ahead, given the significant increase in our revenue and earnings outlook. We expect a non-GAAP tax rate of approximately 13% in fiscal 2028.

Dan Durn: Looking ahead, given the significant increase in our revenue and earnings outlook, we expect non-GAAP tax rate of approximately 13% in fiscal 2028. We expect basic weighted average shares outstanding of approximately 900 million and diluted weighted average shares outstanding of approximately 921 million, both roughly flat with Q2. We anticipate GAAP earnings per diluted share of $0.48 to $0.58. We expect non-GAAP earnings per diluted share of $1.05 to $1.15. As we look ahead, we intend to continue investing in our business to drive substantial revenue growth in the years ahead while delivering operating leverage. For fiscal 2027, we expect non-GAAP operating expenses of approximately $2.55 billion, slightly above our prior expectation of $2.45 billion, reflecting the significantly larger revenue opportunity we now see.

Speaker #1: We expect basic weighted average shares outstanding of approximately 900 million, and diluted weighted average shares outstanding of approximately 921 million. Both are roughly flat with the second quarter.

Speaker #1: We anticipate GAAP earnings per diluted share of $0.48 to $0.58. We expect non-GAAP earnings per diluted share of $1.05 to $1.15. As we look ahead, we intend to continue investing in our business to drive substantial revenue growth in the years ahead, while delivering operating leverage.

Speaker #1: For fiscal 2027, we expect non-GAAP operating expenses of approximately $2.55 billion, slightly above our prior expectation of $2.45 billion, reflecting the significantly larger revenue opportunity we now see.

Speaker #1: Importantly, we expect revenue to continue growing substantially faster than operating expenses. As a result, we expect significant operating leverage, with non-GAAP operating margin likely to enter our 38% to 40% long-term target range in Q4 of this fiscal year.

Dan Durn: Importantly, we expect revenue to continue growing substantially faster than operating expenses. As a result, we expect significant operating leverage with non-GAAP operating margin likely to enter our 38% to 40% long-term target range in Q4 of this fiscal year. Looking ahead to fiscal 2028, we currently expect non-GAAP operating expenses to grow at roughly half the rate of revenue growth in percentage terms. This reflects continued investment against an expanding opportunity set, while yielding continued operating leverage to achieve the upper end of our target non-GAAP operating margin of 38% to 40% as we progress through the year. Moving to cash usage. Based on the design wins we've secured and our confidence in the sustained customer demand, we're aggressively securing additional capacity to support our growth.

Speaker #1: Looking ahead to fiscal 2028, we currently expect non-GAAP operating expenses to grow at roughly half the rate of revenue growth in percentage terms. This reflects continued investment against an expanding opportunity set, while yielding continued operating leverage to achieve the upper end of our target non-GAAP operating model of 38% to 40%, as we progress through the year.

Speaker #1: Moving to cash usage, based on the design wins we've secured and our confidence in the sustained customer demand, we're aggressively securing additional capacity to support our growth.

Speaker #1: We remain on pace to make approximately $1 billion of capacity prepayments to suppliers in fiscal 2027, consistent with the guidance we provided last quarter. As a reminder, these prepayments will be applied against future material purchases and will be funded through our strong balance sheet and robust operating cash flow.

Dan Durn: We remain on pace to make approximately USD 1 billion of capacity prepayments to suppliers in fiscal 2027, consistent with the guidance we provided last quarter. As a reminder, these prepayments will be applied against future material purchases and will be funded through our strong balance sheet and robust operating cash flow. In parallel, we intend to continue repurchasing shares to manage dilution. Now, let me come back to where I started. I joined Marvell because I believe the company has an exceptional opportunity ahead of it. Having now stepped into the CFO role, I am even more convinced of the incredible strength of our technology portfolio, our deep customer relationships, and the substantial long-term growth potential.

Speaker #1: In parallel, we intend to continue repurchasing shares to manage dilution. Now, let me come back to where I started. I joined Marvell because I believe the company has an exceptional opportunity ahead of it.

Speaker #1: Having now stepped into the CFO role, I'm even more convinced of the incredible strength of our technology portfolio, our deep customer relationships, and the substantial long-term growth potential.

Speaker #1: Our job from here? It's to execute, scale the company to capture that opportunity, and ensure that our growth translates into expanding margins, strong cash flow, and compelling returns for our stockholders.

Dan Durn: Our job from here is to execute with discipline as we efficiently scale the company to capture that opportunity and ensure that our growth translates into expanding margins, strong cash flow, and compelling returns for our stockholders. I am honored to be Marvell's CFO at such an important point in the company's evolution, and I look forward to working with Matt and the rest of the team to deliver on the incredible opportunity we see ahead. With that, we are ready to start Q&A. Operator, please open the line and announce the instructions.

Speaker #1: I'm honored to be Marvell's CFO at such an important point in the company's evolution, and I look forward to working with Matt and the rest of the team to deliver on the incredible opportunity we see ahead.

Speaker #1: With that, ready to start Q&A? Operator, please open the line and announce the instructions.

Speaker #2: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press *1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press *2 if you would like to remove your question from the queue. 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 roster. Our first question comes from Tom O'Malley with Barclays. Please state your question.

Speaker #2: A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.

Speaker #2: 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 roster.

Speaker #2: Our first question comes from Tom O'Malley with Barclays. Please state your question.

Speaker #3: Hey, guys. Thanks for taking my question. Appreciate it. Good results. I wanted to ask first about the warrants with Google. Obviously, it's been a very robust relationship over a multi-year period of time.

Tom O'Malley: Hey, guys. Thanks for taking my question. Appreciate it, and good results. I wanted to ask first on the warrants with Google. Obviously, a very robust relationship over a multi-year period of time. I would love if you could give a little color on what is contributing to that revenue. Obviously, you have an AI inference accelerator, but you talked a lot about XPU attach, which you guys did kind of start the industry standard on in terms of defining. So maybe, what XPU attach are you excited about there? Any sort of color you can give us on the percentage of contribution between the AI inference accelerator and some of the attach that you are seeing there.

Speaker #3: I'd love if you could give a little color on what's contributing to that revenue. Obviously, you have an inference accelerator, but you talked a lot about XPU attach, which you guys did kind of start the industry standard on in terms of defining.

Speaker #3: So maybe you know, what XPU attach are you excited about there? And, like, any sort of color you can give us on the percentage of contribution between the inference accelerator and some of the attach that you're seeing there?

Speaker #1: Yeah, great. Hey, thanks, Tom. Good to hear from you. So I I I think you captured it well. It's it it it's a it's a very exciting time for Marvell.

Matt Murphy: Yeah, great. Thanks, Tom. Good to hear from you. I think you captured it well. It's a very exciting time for Marvell. This engagement and warrant is significant. You can see that in the scale of the opportunity we have. As you pointed out, a couple things I would just validate. The first is it's very broad-based. It's a number of products and product lines, which is very exciting. It includes AI inference accelerators, as you mentioned, also storage controllers, NICs, memory interface controllers, near memory compute, a whole bunch of different products. You're right, we did define what we call the XPU attach category a couple of years back, and actually, we gave quite a detailed view of that in our June 2025 custom silicon event.

Speaker #1: This engagement and warrant is significant—you can see that in the scale of the opportunity we have. And as you pointed out, a couple of things I would just validate.

Speaker #1: The first is, it's very broad-based. It's a number of products and product lines, which is very exciting. It includes inference accelerators, as you mentioned, also storage controllers, NICs, memory interface controllers, near-memory compute—a whole bunch of different products.

Speaker #1: And you're right, we we did define the what we called the XPU attached category you know, a a couple of years back. And actually, we gave a a quite a detailed view of that in our June 2025 custom silicon event.

Speaker #1: And I think all of our projections to date have been, you know, under-called, meaning that the opportunity continues to get more and more significant.

Matt Murphy: I think all of our projections to date have been under-called, meaning that opportunity continues to get more and more significant. It's a broad set of products, Tom, that are covered here, and it's very broad-based in terms of where we can engage and where we're going to contribute. I wouldn't call out any one of them at the moment specifically, but all of them in total, you can see represent, if you look at the total envelope of the opportunity, it's just massive for Marvell and game-changing at the sort of peak performance of what could be achieved now over the next 6 and a half years.

Speaker #1: So it's a broad set of products, Tom, that are covered here, and it's very broad-based in terms of where we can engage and where we're going to contribute.

Speaker #1: And I wouldn't call out any one of them at the moment specifically, but all of them in total, you can see, represent—you know, if you look at the total envelope of the opportunity, it's just massive for Marvell and game-changing at the sort of peak performance of what could be achieved.

Speaker #1: Now, over the next, you know, six, six and a half years.

Speaker #2: Thank you. And your next question comes from Harlan Sur with J.P. Morgan. Please state your question.

Operator: Thank you. Your next question comes from Harlan Sur with J.P. Morgan. Please state your question.

Speaker #4: Yeah, good afternoon. Thanks for taking my question. And, welcome to the team, Dan and Ross. Matt, given the Google commercial program you signed back in late July, $120 billion in cumulative revenue over six years, if you hit all of your milestones, right, that puts you if you just analyze it at about 18 and a half billion dollars per year in revenue, just in Google XPU attached custom ASICs, right?

Harlan Sur: Yeah, good afternoon. Thanks for taking my question, and welcome to the team, Dan and Ross. Matt, given the Google commercial program you signed back in late July, USD 120 billion in cumulative revenues over 6 years if you hit all of your milestones, right? That puts you, if you just annualize it, at about USD 18.5 billion per year in revenues just in Google XPU attached custom ASICs, right? I actually thought that that would start to show up in fiscal 2028 or your calendar 2027, but given your guidance, looks like custom is still going to be around USD 5 to 6 billion in calendar 2027. Maybe some of the big programs associated with this commercial agreement are more back-end loaded. Maybe the better question is, the team has previously targeted USD 10 to 11 billion in custom revenues in fiscal 2029 or calendar 2028.

Speaker #4: I actually thought that would start to show up in fiscal '28 or calendar '27, but given your guidance, it looks like custom is still going to be around $5 to $6 billion in calendar '27.

Speaker #4: But maybe some of the big programs associated with this commercial agreement are more backend-loaded. So maybe the better question is: the team has previously targeted $10 to $11 billion in custom revenues in fiscal '29 or calendar '28.

Speaker #4: What does that number look like now, based on the Google commercial agreement and some of the new programs associated with the agreement?

Harlan Sur: What does that number look like now based on the Google commercial agreement and some of the new programs associated with the agreement?

Speaker #1: Yeah, yeah. Great questions, Harlan. Thank you. So, first, you're right. If you look out to next year, we have comprehended already, you know, revenue that would come as part of this warrant in our numbers.

Matt Murphy: Yeah. Great questions, Harlan. Thank you. First, you're right. If you look out to next year, we have comprehended already revenue that would come as part of this warrant in our numbers now. That's because some of these programs obviously are already in flight or have already started, but the programs ahead of us that are either in execution or just starting production, those will contribute much more significantly in fiscal 2029. For next year, all I've said, by the way, is that custom is going to over double, so I haven't capped it, I haven't sized it exactly.

Speaker #1: Now, now, that that's because some of these programs obviously are already in flight or have already started. But the the the programs ahead of us, you know, that are that are e either in execution or or just starting production, those will contribute much more significantly in fiscal 29.

Speaker #1: And for next year, all I've said, by the way, is that, you know, custom is going to more than double. So I haven't capped it.

Speaker #1: I haven't sized it exactly, but it is going to more than double next year. And then, you know, so then you look out to fiscal '29, where in our last call, I talked about a $10 billion kind of plus number for custom in fiscal '29, which isn't a new number by the way.

Matt Murphy: It is going to over double next year. Then you look out to fiscal 2029, where in our last call, I talked about a $10 billion kind of plus number for custom in fiscal 2029, which isn't a new number, by the way. That was something that we outlined back in June 2025, and even back in April 2024, we were talking about custom revenues in the $8 billion to $10 billion range. So we've had a consistent view of what that can look like. This opportunity with this customer greatly increases the revenue opportunity for us in custom with some of that potentially starting in 2029.

Speaker #1: That was something that we outlined back on June 25, and even back in April 24, we were talking about custom revenues in the $8 to $10 billion range.

Speaker #1: So we've had a consistent view of what that can look like. This opportunity is with this customer, you know, greatly increases the revenue opportunity for us in custom, with some of that potentially starting in '29.

Speaker #1: I'm not going to size it on the call here today, but you should assume with our Investor Day coming up, Harlan, you know the Marvell team—we always do a thorough job in our analyst and investor days.

Matt Murphy: I am not going to size it on the call here today, but you should assume with our investor day coming up, Harlan, the Marvell team, we always do a thorough job in our analyst investor days, and so you should expect a very robust, detailed review of how we step through the revenue, not just through fiscal 2029, but really out until the end of the decade. So we're excited to present that to everybody, which will then really help us contextualize the scale of the warrant that we just signed, along with all the other exciting programs we have in custom. If you don't mind, hold tight on that one. There'll be more to come. But clearly, there's a lot of upside bias in those numbers in fiscal 2029 and beyond in custom.

Speaker #1: And so you should expect a very robust, detailed review of how we stepped through the revenue, not just through fiscal '29, but really out until the end of the decade.

Speaker #1: And so we're excited to present that to everybody, which will then really help us contextualize the scale of the warrant that we just signed, along with all the custom.

Speaker #1: So, if you don't mind, hold tight on that one. There'll be more to come. But clearly, there's a lot of upside bias in those numbers in fiscal '29 and beyond in custom.

Speaker #4: Yeah, absolutely. Absolutely. Looking forward to it. Thanks, Matt.

Harlan Sur: Yeah, absolutely. Absolutely looking forward to it. Thanks, Matt.

Speaker #1: Yeah, you're welcome.

Matt Murphy: Yeah, you're welcome.

Speaker #2: Your next question comes from Vivek Arya with Bank of America Securities. Please state your question.

Operator: Your next question comes from Vivek Arya with BofA Securities. Please state your question.

Speaker #5: Thanks for the question, and best wishes to Dan and Ross. Matt, I was hoping you could give us an update on the other large XPU program that you're planning to start in the next year.

Vivek Arya: Thanks for the question and best wishes to Dan and Ross. Matt, I was hoping you could give us an update on the other large XPU program that you're planning to start in the next year. I think the assumptions there are quite modest for next year, $600 or $700 million or so, and I was hoping you could give us an update on that. What is the opportunity for that program over time? Because that hyperscaler is just getting started on their XPU type. Like every one of their competitors, I imagine they want to make that XPU program much larger than what it is. So give us maybe an update on what the progress is. Can this be a really meaningful program for you over time?

Speaker #5: I think the assumptions there are quite modest for next year—$600 or $700 million or so. And I was hoping you could give us an update on that.

Speaker #5: And then, what is the opportunity for that program over time? Because, you know, that hyperscaler is just getting started on their XPU, right?

Speaker #5: Like every one of their competitors, I imagine, they want to make that XPU program much larger than what it is. So give us maybe an update on what the progress is. Can this be a really meaningful program for you over time?

Speaker #1: Yeah, thanks, Vivek. So, yeah, we're very encouraged by our custom setup for next year. On the double plus, that new program is clearly part of that.

Matt Murphy: Yeah. Thanks, Vivek. We are very encouraged by our custom setup for next year on the double plus. That new program is clearly part of that, and we have been judging that, I think, in a very conservative and practical manner as we have made progress. But we continue to make progress every quarter, not only on design execution but also supply commercials and figuring out the sort of the envelope of that opportunity, and that has only gotten better. So without quantifying it exactly, what I would say is from the last call, if you look at the USD 1.5 billion raise we are doing for next year, just at a high level, it is broad-based. So some of that is from custom next year.

Speaker #1: And you know, we've been judging that, I think, in a very conservative and practical manner. As we've made progress, but we make we continue to make progress every quarter, not only on on on design execution but also supply, commercials, and figuring out the the the sort of the envelope of that opportunity.

Speaker #1: And that's only gotten better. So, without quantifying it exactly, what I would say is, from the last call, if you look at the $1.5 billion raise we're doing for next year, just at a high level, it's broad-based.

Speaker #1: So some of that is from custom next year. There’s also actually—let me get another question on this one—but probably the most meaningful part of the next year raise is actually from the scale-up of optics switching in other areas.

Matt Murphy: There is also actually the, get another question on this one, but probably the most meaningful part of the next year raise is actually from the scale-up optics switching in other areas, but custom is definitely part of it, Vivek. So, even when we size that opportunity, which goes back to a couple of years, we have always said that that is probably one of Marvell's largest revenue opportunities we have, and that is still the case. So we are very encouraged by the prospects of this project. And there will be more to come, but it certainly is tracking, and we feel very good about next year and that layering in the year after and beyond.

Speaker #1: But custom's definitely part of it, Vivek. So you know, even when we sized that opportunity, which which goes back to, you know, a a couple of years, we've always said that that is probably one of Marvell's largest revenue opportunity you know, opportunities we have.

Speaker #1: And that's still the case. So we're very encouraged by the project, the prospects of this project, and there will be more to come. But it certainly is tracking, and we feel very good about next year.

Speaker #1: And that's layering in the year after, and beyond.

Speaker #2: Thank you. Your next question comes from Aaron Rakers with Wells Fargo. Please state your question.

Operator: Thank you. Your next question comes from Aaron Rakers with Wells Fargo. Please state your question.

Speaker #5: Yeah, thanks for taking a question and and and welcome, Dan and and Ross. maybe kind of building on that last question a little bit, Matt, if you can, maybe talk a little bit about what your architecturally seeing in CXL and and how that's evolving.

Aaron Rakers: Yeah, thanks for taking the question and welcome, Dan and Ross. Maybe kind of building on that last question a little bit, Matt, if you can, maybe talk a little bit about what you are architecturally seeing in CXL and how that is evolving, obviously, with the Structera product, and it seems to be a broadening ecosystem around that. And then, similar on an architectural perspective, any update on, you just touched on scale-up optics, the Celestial AI numbers that you have previously outlined, how have those progressed relative to your initial targets? Thank you.

Speaker #5: Obviously, with the structural product, it seems to be a broadening ecosystem around that. And then, you know, similar on an architectural perspective—any update on, you just touched on scale-up, you know, optics, the Celestial AI numbers that you've previously outlined—how have those progressed relative to your initial targets?

Speaker #5: Thank you.

Speaker #1: Sure. So let me start with CXL and then we'll we'll we'll talk about scale-up optics. So i-it with respect to CXL, I mean, this this this investment we made, you know, or organically over the years has has really evolved and is turning out to be a home run for a couple of reasons.

Matt Murphy: Sure. Let me start with CXL, then we will talk about scale-up optics. With respect to CXL, this investment we made organically over the years has really evolved and is turning out to be a home run for a couple of reasons. As you might recall, this started off as a server-centric, traditional compute-centric memory architecture. It turns out all that investment we have made is just ideal for memory expansion and inferencing. We are seeing this technology now getting deployed at multiple hyperscalers with varying architectures, by the way, in extremely high volumes. One is just the demands of inferencing require it. The other is what we are seeing is as a result of the scarcity that is out there in memory, customers are modifying and adjusting their plans to actually use more of this type of technology. This is continuing to have strong upward bias.

Speaker #1: You know, as as you might recall, this started off as a as a server-centric, you know, traditional compute-centric you know, memory architecture. It it turns out all that investment we've made is just ideal for for memory expansion and inferencing.

Speaker #1: And so we're seeing this technology now getting deployed at multiple hyperscalers, with varying architectures, by the way, in extremely high volumes. One is just the demands of inferencing require it.

Speaker #1: The the other is what we're seeing is as a result of the scarcity that's out there in memory, customers are are are modifying and adjusting their their their plans to actually use more of this type of technology.

Speaker #1: So this is continuing to have strong upward bias. We've actually secured additional design wins in this area, you know, in the last couple of quarters.

Matt Murphy: We have actually secured additional design wins in this area in the last couple of quarters. We are going to outline all of that at the Investor Day. That opportunity, Aaron, turns out to be massive. I think it is a case where the pivot we made about five years ago, where we really put the pedal to the metal on organic internal investment on a number of new technologies, this is one that is really bearing fruit. So very exciting, and you should expect to see a very comprehensive memory expansion section in our Investor Day presentation. On scale-up optics, this is turning out to be, I think, one of the most exciting areas for us. Last quarter, the way we framed it was we had the Celestial AI CPO photonic fabric solution, which, for reference, was about $150 million for next year.

Speaker #1: We're going to outline all of that at the Investor Day. But that opportunity, Aaron, turns out to be massive. And I think it's a case where, you know, the pivot we made about five years ago, where we really put the pedal to the metal on organic, internal investment on a number of new technologies—this is one that's really bearing fruit.

Speaker #1: So very exciting and and you'll you should expect to see a very comprehensive you know, memory expansion section in our investor day presentation. on s on scale-up optics, this is turning out to be, I think, one of the most exciting areas for us.

Speaker #1: Last quarter, the way we framed it was, we had the Celestial AI CPO photonic fabric solution, which, for reference, was about $150 million for next year.

Speaker #1: We had actually said that overall scale-up optics, inclusive of that, was about $300 million. As a category, that includes NPO, by the way. And as I said in my prepared remarks, all of that together—scale-up optics—is accelerating even further from the number I gave you last quarter.

Matt Murphy: We had actually said that overall scale-up optics inclusive of that was about $300 million as a category. That includes NPO, by the way. As I said in my prepared remarks, all of that together, scale-up optics, is accelerating even further from the number I gave you last quarter. A significant driver of the $1.5 billion raise we have for next year, Aaron, is coming from that area. It is not just a one-trick pony. I think that is the thing I want to stress to you is the CPO is absolutely a key part of it. It will be for next year and certainly the year after. If I look at the opportunity set that is happening now at a much faster pace in parallel with the CPO programs we have is for NPO.

Speaker #1: And so a a a a, you know, a a a significant driver of the billion and a half raise we have for next year, Aaron, is coming from that area.

Speaker #1: And it's not just a one-trick pony. I think that's the thing I want to stress to you is the CPO is absolutely a key part of it.

Speaker #1: It will be for next year and certainly the year after. But if I look at the opportunity set that's happening now at a much faster pace, in parallel with the CPO programs we have, it's for NPO.

Speaker #1: And an NPO, we participate through a wide variety of design wins. We have and partners some of those are with our broadband analog products and silicon germanium, both TIAs and drivers, which we have we're a significant market share and and content.

Matt Murphy: In NPO, we participate through a wide variety of design wins we have and partners. Some of those are with our broadband analog products in silicon germanium, both TIAs and drivers, which we have a significant market share and content, and also on our own organically developed NPO solution, which we call our light engine, which we have been in development on for several years, and we have shown it off at OFC for several years. All of that as a category, Aaron, is really how we think about the business. Certainly, Celestial and photonic fabric is a key part of that. What I want to stress is that this is not an or, it is an and. It is a little bit analogous to when people thought, well, there is 800G DSPs, then they are going to move to 1.6T, and it is all going to just cut over.

Speaker #1: And also on our own organically developed NPO solution, which we call our Light Engine, which we've been in development on for several years, and we've shown it off at OFC for several years.

Speaker #1: So all of that as a category, Aaron, is really how we think about the business. Certainly, Celestial and photonic fabric is a key part of that.

Speaker #1: But what I want to stress is that this is not an, an, an, an or. It's an and. And it's a little bit analogous to when people thought, well, there's 800-gig DSPs, and then they're going to move to 1.6T and it's all going to just cut over.

Speaker #1: That's not how this works anymore. Our customers have varying architectures that they're pursuing. They have a number of different solutions that they're going to, you know, implement simultaneously.

Matt Murphy: That's not how this works anymore. Our customers have varying architectures that they're pursuing. They have a number of different solutions that they're going to implement simultaneously. We see this as an and, not an or, and I think the magnitude of our scale-up optics opportunity next year is much larger than we thought just a quarter ago. The year after is going to be, I think, way larger than I sort of could have ever comprehended back even last year when we were looking at Celestial AI. If you look at the solution we're providing, which is here by my last comment, we are pedal to the metal on our switching roadmap and coupling those optical solutions with our switches, both UAL and ESUN, as well as being able to seamlessly integrate and architect with our customers on the XPU/GPU side.

Speaker #1: So, we see this as an 'and,' not an 'or.' And I think the magnitude of our scale-up optics opportunity next year is much larger than we thought just a quarter ago.

Speaker #1: The year after is going to be, I think, way larger than I sort of could have ever comprehended. Back even last year, when we were looking at Celestial, and if you look at the solution we're providing—which is here, by my last comment—we are pedal to the metal on our switching roadmap and coupling those optical solutions with our switches, both UAL and eSun.

Speaker #1: As well as being able to seamlessly integrate and architect with our customers on the XPU/GPU side. So, all of that together—having the end-to-end link that we're able to provide, the entire solution, the scale in manufacturing, R&D, the diversity of all the technologies we have in terms of packaging, modulator technologies, silicon photonics, and a decade of experience there.

Matt Murphy: All of that together, and having the end-to-end length that we're able to provide and the entire solution and the scale in manufacturing, R&D, the diversity of all the technologies we have in terms of packaging, modulator technologies, silicon photonics, a decade of experience there, it's a massive opportunity, and Marvell is very uniquely positioned to participate in it. We couldn't be happier with the Celestial AI team. They've integrated well. They're a key part of the program. But this thing is going to be a much bigger overall business for Marvell. Thanks.

Speaker #1: It's a massive opportunity, and Marvell's very uniquely positioned to participate in it. We couldn't be happier with the Celestial team—they've integrated well.

Speaker #1: They're a key part of the program, but this thing is going to be a much bigger overall business for Marvell. Thanks.

Speaker #5: Thanks, Matt.

Aaron Rakers: Thanks, Matt.

Speaker #6: Your next question comes from Joe Moore with Morgan Stanley. Please state your question.

Operator: Your next question comes from Joseph Moore with Morgan Stanley. Please state your question.

Speaker #7: Thank you. On the same lines, can you talk about your progress in copper scale-up? And you mentioned the sort of success across the three protocols.

Joseph Moore: Thank you. Along the same lines, can you talk about your progress in copper scale-up? You mentioned the sort of success across the three protocols. How do you think about copper scale-up as it transitions to optical? Are those initial successes foundational to what you do in optical, or are those sort of two separate decisions?

Joe Moore: Thank you. Along the same lines, can you talk about your progress in copper scale-up? You mentioned the sort of success across the three protocols. How do you think about copper scale-up as it transitions to optical? Are those initial successes foundational to what you do in optical, or are those sort of two separate decisions?

Speaker #7: How do you think about copper scale-up as it transitions to optical? Are those initial successes foundational to what you're doing in optical, or are those two separate decisions?

Speaker #1: Yeah. Yeah. Thanks, Joe. I think you're talking about from a from a switching perspective, right? As we implement those those at those electrical you know, slash copper solutions.

Matt Murphy: Yeah. Thanks, Joe. I think you're talking about from a switching perspective, right, as we implement.

Joseph Moore: Yes

Joe Moore: Yes

Matt Murphy: Those electrical/copper solutions, and then how does that success translate when we move to optical? So a couple of things. One is on the Ethernet side, we've seen great traction and success with our Teralynx architecture, which came from the acquisition we did of a company called Innovium back in 2021. That business has a significant head of steam on it. We've expanded the customer base. We're driving significant revenue there, and we've proven to the market that we can deliver these solutions in volume. So that translates itself, Joe, very seamlessly to scale-out. In fact, we're seeing even at 100T, our scale-out solutions be applicable to scale-up as well. So we're driving that independently of the optics or not. Same thing on UAL. We're aggressively investing in UAL switching. That product development's coming along nicely, and we certainly can intercept any electrical or copper-based solution there.

Speaker #1: And then how does that success translate when we move to optical? So a couple things. One is on on on the Ethernet side, you know, we've seen great traction and success with our Teralynx architecture, which came from the acquisition we did of of of a company called Enovium back in 2021.

Speaker #1: That business has a significant head of steam on it. You know, we've expanded the customer base. We're driving, you know, significant revenue there, and we've proven to the market that we can deliver these solutions in volume.

Speaker #1: So that translates itself, Joe, very seamlessly to scale-out. And in fact, we're seeing even at 100T, our scale-out solutions be applicable to scale-up as well.

Speaker #1: So we're driving that independently of the optics or not. Same thing on UAL. We're aggressively investing in UAL switching. That product development's coming along nicely.

Speaker #1: And we certainly can intercept any electrical or copper-based solution there. What customers really want to see, though—and that's why I'm spending time on it—is that's all great.

Matt Murphy: What customers really want to see, though, and that's why I'm spending time on it, is that's all great, and at this point, they trust us that we can deliver these very complex switching products because we've done it already. Which by the way, is no small feat. There's been a lot of companies that have tried and failed to do these radical size, very complex Ethernet switches, and it's only getting harder with the SerDes performance and the speeds. But the next level of that, Joe, is that you then need to show a compelling, clear roadmap that you can execute with credibility on the optics side, both NPO and then all the way to full integration on CPO.

Speaker #1: And at this point, you know, they trust us that we can deliver these very complex switching products because we've done it already—which, by the way, is no small feat.

Speaker #1: There have been a lot of companies that have tried and failed to do these reticle-sized, very complex Ethernet switches. And it's only getting harder with the SerDes performance and the speeds.

Speaker #1: But the next level of that, Joe, is that you then need to show a compelling, clear roadmap that you can execute with credibility on the optics side.

Speaker #1: Both NPO and then all the way to full integration on CPO. And so our discussions while certainly there's opportunities in the next few years that are going to come and we're going to we're going to we're going to have on the copper side, I think why we really win long-term is because we convince our customers we can execute on on the full end-to-end.

Matt Murphy: And so our discussions, while certainly there are opportunities in the next few years that are going to come and we are going to have on the copper side, I think why we really win long term is because we convince our customers we can execute on the full end-to-end. Which really is what our customers are looking for. At the end of the day, especially on scale up, they need to bookend the link, and they need to trust that on both sides of it and everything in between, they have got a partner that can handle that job. And point solutions at this juncture, we believe, are not going to get it done. You really have to have the end-to-end portfolio. And that is what we are hearing from our customers, by the way. So the existing silicon will do fine, it will do great.

Speaker #1: Which really is what our customers are looking for. At the end of the day, especially in scale-up, they need to bookend the link. And they need to trust it on both sides of it, and everything in between.

Speaker #1: They've got a partner that can handle that job. And point solutions at this juncture, we believe, are not going to get it done.

Speaker #1: You really have to have the end-to-end portfolio, and that's what we're hearing from our customers, by the way. So the existing silicon will do fine.

Speaker #1: It'll do great. But I'm even more excited about the optics attached once that gets going over the next few years, because it just effectively almost doubles the SAM of the switching.

Matt Murphy: But I am even more excited about the optics attached once that gets going over the next few years, because it just effectively almost doubles the SAM of the switching, in terms of the attach you can get. Thanks.

Speaker #1: In terms of the attach you can get, thanks.

Speaker #6: Your next question comes from Ben Reitzes with Melius Research. Please state your question.

Operator: Your next question comes from Ben Reitzes with Melius Research. Please state your question.

Speaker #7: Hey guys, thanks for the question. Hey, Dan and Ross. Hey, Matt. So I want to go back to the Google deal. I think people are just wrestling with this.

Ben Reitzes: Hey, guys. Thanks for the question. Hey, Dan and Ross. Hey, Matt. So I want to go back to the Google deal. I think people are just wrestling with this, and I realize that you have a great Analyst Day coming, so do not shoot me. But for FY, if you look at the $120 billion over the course of the years, that is about $18 billion a year, and at the $120 billion divided by 6.5. And that is like adding an FY 2028 Marvell every year. Now, I realize that we do not know how much is incremental versus what is already in your guides, but are we talking like FY 2029 and FY 2030 big step-ups as a result of this incrementally?

Speaker #7: And I'm coming. So, you know, don't shoot me. But for FY, you know, if you look at the $120 billion over the course of the years, that's about, you know, $18 billion a year.

Speaker #7: And at the $120 billion, you know, divided by six and a half, and that's like adding an FY28 Marvell, you know, every year.

Speaker #7: Now, I realize that we don't know how much is incremental versus what's already in your guides. But are we talking, like, FY29 and FY30 big step-ups, you know, as a result of this incrementally?

Speaker #7: Because these numbers are huge. And I know you're going to tell us at the Analyst Day, but I think we're all just trying to figure out, you know, how high to go in those out years.

Ben Reitzes: Because these numbers are huge, and I know you're going to tell us at the Analyst Day, but I think we're all just trying to figure out how high to go in those out years, and is it at the comparable margin? Just any more color, if you're in our shoes, how we should handle it into Analyst Day or just wait, that'd be great. Thanks.

Speaker #7: And is it at a comparable margin? And just any more color—if you were in our shoes—how should we handle it at the Analyst Day, or just wait?

Speaker #7: That'd be great. Thanks.

Speaker #1: Yeah. Hey, Ben, thanks. And by the way, you know, fully valid question. I mean, when you look at the scale of this, your math is not wrong.

Matt Murphy: Yeah. Hey, Ben, thanks. By the way, fully valid question. When you look at the scale of this, your math is not wrong. What you can conclude from what I'm saying is because most of this is comprehended already in next year, the big impact would be in 2029 and beyond. So if you took the full performance and the full opportunity, then you're right. It's just a monster number. What I would say, we do need the Analyst Day, though, I think you guys understand, to contextualize it and probably show some ranges of outcomes. But you should assume in that timeframe that on the custom side, these numbers would be a lot larger than overall custom than anybody's been modeling so far. I think there's been doubt for years that we could even do the $8 billion to $10 billion.

Speaker #1: And what you can conclude from what I'm saying is, because, you know, most of this is comprehended already, next year the big impact would be, you know, in '29 and beyond.

Speaker #1: So it's if if you took the full performance and the full opportunity then you're right. It's just it it's just a it's it's just a a a a monster number.

Speaker #1: What I would say... and so we do need the analyst day, though. I think you guys understand—the purpose is to contextualize it and probably show some ranges of outcomes.

Speaker #1: But you should assume, in that time frame, that on the custom side, these numbers would be a lot larger than overall custom than anybody's been modeling so far.

Speaker #1: I mean, I think there's been doubt for years that we could even do the $8 to $10 billion. You know, this should give, I think, investors comfort that we've secured, you know, a pretty big set of programs.

Matt Murphy: This should give, I think, investors comfort that we secured a pretty big set of programs, not just here, but across the broad range of our customer set. On the margins, just in general, this is custom business and we've got a financial model for custom. We've got a financial model for our standard and merchant products. It would be in line with that. But it's significant, and I'm not able to quantify it today for you, but you should assume starting in FY 2029 beyond, whatever you've modeled previously prior to the warrant for custom numbers definitely goes higher. How big, we'll be happy to show the range of outcomes. But in the context of where Marvell was, Ben, we were an $8 billion company last year. We just took everybody to $12 billion this year. We haven't even finished that year and 18 next year.

Speaker #1: You know, not just here but across the broad range of our of our customer set. on the on the on the margins, you know, just in general, this is this is custom business.

Speaker #1: And we've got a financial model for custom. We've got a financial model for our standard and merchant products. It would be in line with that.

Speaker #1: But it's significant, and I'm not able to quantify it today for you. But you should assume starting in FY29 and beyond, whatever you've modeled previously prior to the warrant for custom numbers definitely goes higher.

Speaker #1: You know, how big will be happy to show the range of outcomes. But it in the context of where Marvell was, Ben, I mean, we were a 8 billion dollar company last year.

Speaker #1: We've just took everybody to $12 billion this year. We haven't even finished that year. And $18 billion next year. And the rough math you do at full performance provides an incredible step up to the scale of the company.

Matt Murphy: The rough math you do at full performance provides an incredible step up to the scale of the company if all those programs did come to fruition at their max performance. But I think what this is helpful to show is just the scale of the opportunity in general that Marvell is participating in, because we have significant engagements across the customer base. This one's a little unique because of the warrant that given the magnitude and the equity side, we needed to disclose it. But I think you've seen over the last couple of years, we've entered into very strategic partnerships with other big players in the AI market, and some of that we've done publicly and some of that we're doing just on our own.

Speaker #1: If all those programs did come through to fruition at their max performance—which, but I think what this is helpful to show is just the scale of the opportunity in general that Marvell is participating in.

Speaker #1: Because we have significant engagements across the customer base. This one’s a little unique because of the warrant, and given the magnitude and the equity side, we needed to disclose it.

Speaker #1: But you know, I think you've seen over the last couple of years, we've entered into very strategic partnerships with other big players in the AI market.

Speaker #1: And some of that we've done publicly, and some of that we're doing just on our own. So, I think one takeaway I would have right now is just a significant validation of where Marvell sits in the market today.

Matt Murphy: I think one takeaway I would have right now is just a significant validation of where Marvell sits in the market today, and we are very honored to be a part of the ecosystem, the TPU ecosystem. We will see how it plays out, but

Speaker #1: And we're very honored to be a part of the ecosystem, the TPU ecosystem. And we'll see how it plays out. But, but I hope that's enough for now.

Ben Reitzes: All right.

Matt Murphy: I hope that is enough for now. I want to save a little bit of firepower for my Investor Day.

Speaker #1: I felt I want to save a little bit of firepower for my Investor Day.

Speaker #7: No, thank you. I appreciate that, and congrats on that deal. I'll see you soon.

Ben Reitzes: No, thank you, and I appreciate that. Congrats on that deal. I will see you soon.

Speaker #1: Yeah. Thanks, Ben.

Matt Murphy: Yeah. Thanks, Ben.

Speaker #6: Your next question comes from CJ Mews with Cantor Fitzgerald. Please state your question.

Operator: Your next question comes from CJ Muse with Cantor Fitzgerald. Please state your question.

Speaker #5: Yeah. Good afternoon. Thank you for taking the question. I think one of the more interesting takeaways from Nvidia's report last night is Jensen's view of the fungibility of compute, networking, and memory to deliver performance in the AI data center in a cost-constrained world.

CJ Muse: Yeah, good afternoon. Thank you for taking the question. I think one of the more interesting takeaways from Nvidia's report last night is Jensen's view of the fungibility of compute networking and memory to deliver performance in the AI data center in a cost-constrained world. Considering your vast experience and expertise across all these three areas, how is this backdrop, particularly in light of where memory pricing is today, supporting your new design wins? Is it really focused on the memory controllers, custom HBM to increase shoreline, or is it also driving strength on the XPU side as well? We would love to hear your thoughts there. Thank you.

Speaker #5: And considering your vast experience and expertise across all these three areas, you know, how is this backdrop particularly in light of where memory pricing is today you know, support your new design wins?

Speaker #5: And you know, is it really focused on the memory controllers, custom HBM to increase shoreline? Or, or is it also, you know, driving strength on the XPU side as well?

Speaker #5: Would love to hear your thoughts there. Thank you.

Speaker #1: Yeah. Thanks, CJ. No. I first of all, I'm I'm I'm I'm I I see the same thing. I'm very mind-melded with what what the what they talked about.

Matt Murphy: Yeah. Thanks, CJ. First of all, I see the same thing. I am very mind-melded with what they talked about. I think at the broadest level to start, it definitely, this fungibility requirement, given the dynamic nature of the market and some of the constraints we are seeing, some are supply constraints, some are power constraints, some are architectural constraints. Having our ability to very quickly execute custom and semi-custom designs or modify our products or adapt to shifting architectures at Marvell, it is a key capability, this flexibility that the company has, because we have built a business around being able to customize quickly, and it has been in our DNA even from 2021 Investor Day. We talked about how every hop in the network at some point was going to get some level of customization, and it was not going to just be the accelerator.

Speaker #1: I think it I think at a at the broadest level to start, it definitely this fungibility requirement given the dynamic nature of the market and some of the constraints we're seeing, some are supply constraints.

Speaker #1: Some are power constraints. Some are architectural constraints. Having our ability to very quickly execute custom and semi-custom designs, or modify our products, or adapt to shifting architectures at Marvell—it's a key capability, this flexibility that the company has.

Speaker #1: Because we've built a business around being able to customize quickly. And it's been in our DNA, even from the 2021 Investor Day. You know, we talked about how every hop in the network at some point was going to get some level of customization.

Speaker #1: And it wasn't going to just be the accelerator. And here we are, five years later, and that's playing out. CXL and memory expansion is one example where, very quickly, customers are adapting.

Matt Murphy: And here we are 5 years later, and that's playing out. CXL and memory expansion is one example where very quickly customers are adapting. But there's also other opportunities where to optimize for inference, as an example, and this was one of the things that was in the warrant, but it's a trend in the market, AI inference accelerators, that's another trend in the market you see. So I think companies are all looking at how they can maximize their performance, how they can maximize the cost and performance relative to the tokens generated. And we're in a monetization era, so this stuff really matters. It went from training very quickly to inference and to companies now monetizing this. So we're seeing a big pickup in activity, and it's not just on the custom side.

Speaker #1: but there's also there's also other opportunities where to to optimize for inference as an example. And and this was one of the things that was in in the warrant.

Speaker #1: But it's a trend in the market. AI inference accelerators—that's another trend in the market you see. So I think companies are all looking at how they can maximize their performance, how they can maximize, you know, the cost and performance relative to the tokens generated.

Speaker #1: And we're in a monetization era, so this stuff really matters. It went from training very, very quickly to inference and to companies now monetizing this.

Speaker #1: And so we're seeing a big pickup in activity. And it's not just on the custom side. I mean, this discussion we had earlier about CPO and NPO and optics and copper—that's all moving very, very fast.

Matt Murphy: This discussion we had earlier about CPO and NPO and optics and copper, that's all moving very fast because, again, companies are architecting at a speed we really haven't seen to make sure that they have the most competitive solution. So Marvell fits right in there, CJ, on a number of fronts. It's not just, quote, "our custom revenue," but it's the solutions underneath we provide, including our networking and our storage and storage and memory in our compute.

Speaker #1: Because again, companies are architecting at a a a speed you know, we we we really haven't seen. to to make sure that they have the most competitive solution.

Speaker #1: So Marvell fits right in there, CJ, on a number of fronts. It's not just, quote, "our custom revenue," but it's the solutions underneath we provide.

Speaker #1: Including our networking, and our storage, and storage and memory in our compute.

Speaker #6: Thank you. Your next question comes from Jim Schneider with Goldman Sachs. Please go ahead with your question.

Operator: Thank you. Your next question comes from James Schneider with Goldman Sachs. Please go ahead with your question.

Speaker #8: Good afternoon. Thanks for taking my question. I was wondering if you could maybe just give us a little bit of an update in terms of the growth rate for connectivity.

James Schneider: Good afternoon. Thanks for taking my question. I was wondering if you could maybe just give us a little bit of update in terms of the growth rate for connectivity you expect. I think, Matt, you outlined those growth rates for both this fiscal year, next fiscal year, last quarter. Could you maybe just give us an update on where those are landing given the incremental strength? Sounds like most of that's being driven by that subsegment right now.

Jim Schneider: Good afternoon. Thanks for taking my question. I was wondering if you could maybe just give us a little bit of update in terms of the growth rate for connectivity you expect. I think, Matt, you outlined those growth rates for both this fiscal year, next fiscal year, last quarter. Could you maybe just give us an update on where those are landing given the incremental strength? Sounds like most of that's being driven by that subsegment right now.

Speaker #8: You expect, I think, you Matt—you outlined those growth rates for both this fiscal year and next fiscal year last quarter. Can you maybe just give us an update on where those are landing, given the incremental strengths?

Speaker #8: Sounds like most of that's being driven by that subsegment right now.

Speaker #1: Well, yeah. Thanks, Jim. As I said, the way to think about it is the $500 million raise for this year and the $1.5 billion for next year.

Matt Murphy: Well, thanks, Jim. As I said, the way to think about it is the USD 500 million raise for this year and the USD 1.5 billion for next year is broad-based. Connectivity clearly is a driver, and I say connectivity at a broader level because underneath that, we spent time talking about scale-up optics. That is one, which is our NPO and CPO and Siggy products. But it is also just the transceiver market for scale-out and optical DSPs going into that segment. That is upsized versus the prior growth rates we talked about. So that is in the USD 500 million and the USD 1.5 billion. That business continues to be absolutely on fire, and we are executing well there. And then within connectivity as well as a broader segment, you also have our switching, which is biasing higher this year, but also from our last quarter update, again next year.

Speaker #1: is is is broad-based. connectivity clearly is is a driver. And and I say connectivity at a broader level 'cause underneath that we we we spend time talking about scale-up optics.

Speaker #1: That's one, which is our NPO and CPO, and SIGGY products. But it's also just the transceiver market for scale-out and optical DSPs going into that segment.

Speaker #1: That's upsized versus the prior growth rates we talked about. So that's in the, you know, the $500 million and the $1.5 billion.

Matt Murphy: That is upsized versus the prior growth rates we talked about. So that is in the USD 500 million and the USD 1.5 billion. That business continues to be absolutely on fire, and we are executing well there. And then within connectivity as well as a broader segment, you also have our switching, which is biasing higher this year, but also from our last quarter update, again next year.

Speaker #1: That business continues to be absolutely on fire, and we're executing well there. And then, within connectivity as well, it is a broader segment.

Speaker #1: You also have our switching, which is biasing higher this year, but also from our last quarter update — again, next year.

Speaker #1: So you really have those three, plus I'd say custom, that are all floating up versus our prior expectations. But Jim, we're really seeing broad-based strength.

Matt Murphy: You really have those three plus, I would say, custom that are all floating up versus our prior expectations. But Jim, we are really seeing broad-based strength. I think it is across almost all of our product lines when we look out, but those are a few of the ones I would highlight. And you are right, connectivity is a bigger bucket, is probably the largest driver net net of the USD 1.5 billion raise. If I just look at all those pieces I mentioned underneath, scale-out, scale-up, and switching.

Speaker #1: There's—there's—I think it's across almost all of our product lines when we look out. But those are a few of the ones I'd highlight.

Speaker #1: And you're right. Connectivity is a bigger bucket—it's probably the largest driver, net-net, of the $1.5 billion raise. If I just look at all those pieces I mentioned underneath.

Speaker #1: Scale-out. Scale-up. And and switching.

Speaker #8: Thank you.

James Schneider: Thank you.

Jim Schneider: Thank you.

Speaker #6: Thank you. And our last question for today comes from Quinn Bolton with Needham & Company. Please state your question.

Operator: Thank you. And our last question for today comes from Quinn Bolton with Needham & Company. Please state your question.

Speaker #8: Thanks for squeezing me in. And I guess, Matt, I just wanted to come back to the near-term guidance. Within Data Center, I think you guided up greater than 20% sequentially.

Quinn Bolton: Thanks for squeezing me in. I guess, Matt, just wanted to come back to the sort of the near-term guidance. Within data center, I think you guided up greater than 20% sequentially, but with margins coming down 90 basis points quarter-on-quarter, is custom the fastest-growing segment within data center that drives that lower margin? Or is there some other mix going on within data center kind of driving the lower 90, or sorry, the 90 basis point lower guidance for the October quarter? Thank you.

Speaker #8: But with margins coming down 90 basis points quarter on quarter, is custom the fastest-growing segment within data center that drives that lower margin?

Speaker #8: Or is there some other mix going on within data center kinda driving the the lower 90 or sorry, the 90 basis point lower guidance for the October quarter?

Speaker #8: Thank you.

Speaker #1: Y-y-yeah. Sure. Tha-thanks. And and let me let me I'll tee it up. But I'm gonna have Dan comment. 'Cause you guys are you guys are sparing him too much on this call.

Matt Murphy: Yeah, sure. Thanks. I will tee it up, but I am going to have Dan comment because you guys are sparing him too much on this call. He is the new CFO. You are supposed to be asking him questions, and you are asking me all the questions. Joking aside, you can clearly see it in the numbers. Stronger Q3 guide implied much stronger Q4 guide. We did say custom was ramping meaningfully in the second half. I said that. Dan said that. But Dan, why don't you make a few comments on the margins and how you see that playing out, and also through next year as we grow. Thanks.

Speaker #1: I mean, he's the new CFO. You're supposed to be asking him questions, and you're asking me all the questions. So, joking aside, you know, you can clearly see it in the numbers.

Speaker #1: I mean, you know, stronger Q3 guide, and, you know, implied much stronger Q4 guide. We did say custom was ramping meaningfully in the second half. I said that.

Speaker #1: Dan said that. But Dan, maybe you—why don't you make a few comments on the margins and how you see that playing out.

Speaker #1: And also, you know, through next year as well, as we, you know, as we grow. Thanks.

Speaker #7: Sure. So just jumping in, we clearly see the performance of the company doing well. You see the acceleration in Q2, followed by acceleration in Q3.

Dan Durn: Sure. Just jumping in. We clearly see the performance of the company doing well. You see the acceleration in Q2, followed with acceleration in Q3, followed with acceleration in Q4. Part of the acceleration story in Q3, as you point out, mix is the primary driver. We have got a strong ramp in custom, and so you can see that play out in the profiling of the margins. Not a surprise. We have been signaling that custom ramp for quite some time. As we window into Q4, that strength, we are signaling a bigger step up, much larger step up from a revenue standpoint if you roll in the $12 billion annual target. That step up in Q4 is broad-based. You see it not only in custom, you see it in connectivity, you see it in a rebound in comm and other. So broad-based performance.

Speaker #7: Followed with acceleration in Q4. Part of the acceleration story in Q3, as you point out, mixes the primary driver. We've got a strong ramp in custom.

Speaker #7: And so you can see that play out in the profiling of the margins—not a surprise. We've been signaling that custom ramp for quite some time as we window into Q4.

Speaker #7: That strength—we're signaling a bigger step up, a much larger step up from a revenue standpoint if you roll in the $12 billion annual target.

Speaker #7: And that step up in Q4 is broad-based. You see it not only in custom, you see it in connectivity, you see it in a rebound in comm, and other.

Speaker #7: So, broad-based performance. Net it all out. We see Q4 gross margins in the same target range as Q3. If we use the back half of the year as a jumping-off point and think about how that looks going into FY28.

Dan Durn: Net it all out, we see Q4 gross margins in the same target range as Q3. If we use the back half of the year as a jumping-off point and think about how that looks going into FY 2028, that broad-based strength continues. We take the momentum exiting this year, and we push that forward into next year, and it is across custom, it is across connectivity. All parts of the business are higher. They are up. Gross margin depends on ultimate mix. My preliminary view is gross margins next year are going to be in a similar range, same range as we are exiting this year. So back half of this year, same range for FY 2028. So we feel good about the performance of the company. We are going to drive growth at this company. We are going to do it with discipline. We are going to deliver strong margins.

Speaker #7: That broad-based strength continues. We take the momentum exiting this year, and we push that forward into next year. And it's across custom, it's across connectivity.

Speaker #7: You know, all parts of the business are higher—they're up. Gross margin depends on the ultimate mix. My preliminary view is gross margins next year are going to be in a similar range.

Dan Durn: All parts of the business are higher. They are up. Gross margin depends on ultimate mix. My preliminary view is gross margins next year are going to be in a similar range, same range as we are exiting this year. So back half of this year, same range for FY 2028. So we feel good about the performance of the company. We are going to drive growth at this company. We are going to do it with discipline. We are going to deliver strong margins.

Speaker #7: Same range as we're exiting this year, so back half of this year. Same range for FY28, so we feel good about the performance of the company.

Speaker #7: We're gonna drive growth at this company. We're gonna do it with discipline, and we're gonna deliver, you know, strong margins. But when we think about that margin profile, operating margins still have significant leverage embedded in it.

Dan Durn: When we think about that margin profile, operating margin still has significant leverage embedded in it. You are going to see it up in Q3. You are going to see us entering our target long-term model range, 38% to 40% exiting this year. You will see us achieve the high end of that range as we progress through FY 2028, and we are going to reset that long-term target model here in the coming weeks at the Analyst Day. We feel good about the performance of the company and the broad-based strength.

Speaker #7: You're going to see it up in Q3. You're going to see us entering our target long-term model range of 38 to 40 percent. Exiting this year, you'll see us achieve the high end of that range.

Speaker #7: As we progress through FY28, we're going to reset that long-term target model here in the coming weeks at Analyst Day. So, we feel good about the performance of the company and the broad-based strength.

Speaker #8: Thanks Matt.

Quinn Bolton: Thanks, Sandy.

Speaker #6: Thank you. And ladies and gentlemen, thank you all for your participation. This does conclude today's teleconference. You may disconnect. And have a wonderful day.

Operator: Thank you. Ladies and gentlemen, thank you all for your participation. This does conclude today's teleconference. You may disconnect and have a wonderful day.