Marvell 어닝콜 분석 + 전체 한글 번역
Q4 FY2024 → Q1 FY2027 (10개 콜, 2024.03 ~ 2026.05)

Good afternoon and welcome to the Marvell Technology Incorporated fourth quarter and fiscal year 2024 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal conference specialist by pressing the star key followed by 0. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Mr. Ashish Saran, Senior Vice President of Investor Relations. Please go ahead, sir.

Thank you and good afternoon, everyone. Welcome to Marvell's fourth quarter and fiscal year 2024 earnings call. Joining me today are Matt Murphy, Marvell's Chairman and CEO, and Willem Meintjes, our CFO. 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 10-K and 10-Q filings. We do not intend to update our forward-looking statements. 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 the Investor Relations sections of our website.

Earlier today, we announced our Accelerated Infrastructure for the AI Era Investor event, which will be held in New York on April 11. Please refer to our press release for more details. We look forward to updating investors on the exciting opportunities we see in front of us from the growth in accelerated infrastructure. Let me now turn the call over to Matt for his comments on the quarter. Matt.

Thanks, Ashish, and good afternoon, everyone. For the fourth quarter of fiscal 2024, Marvell delivered revenue of $1.43 billion, growing 1% sequentially above the midpoint of guidance. In addition, on a non-GAAP basis, the Marvell team drove a substantial 330 basis points sequential increase in gross margin, completed execution on the OPEX reduction plan we outlined earlier in the year, and delivered earnings per share of $0.46, growing 12% sequentially. As Willem will tell you in greater detail, we also drove another strong quarter of operating cash and increased share repurchases. We are pleased to report these results to you in what remains a challenging macro environment. In our data center end market for the fourth quarter, we drove record revenue of $765 million, above our guidance, growing 54% year-over-year and 38% sequentially.

The strong revenue growth in the quarter was driven by the cloud portion of our data center end market. While AI has been a key growth driver, I am pleased that our standard cloud infrastructure revenue has also grown every quarter, and we see that continuing next year. Our 800 Gb PAM solutions led our growth in the fourth quarter. We also benefited from higher sequential demand for our storage products as that portion of our data center end market continues its recovery. Revenue from our Teralynx Ethernet switches also grew sequentially in the quarter. Turning to the first quarter of fiscal 2025, we expect our overall data center revenue to grow in the low single digits sequentially on a percentage basis. We expect revenue from both AI and standard cloud data centers to continue to grow sequentially.

We project our electro-optics revenue to continue to be strong, and we also expect to benefit from the initial shipments of our cloud-optimized AI silicon programs. Partially offsetting this growth, we are projecting a more than seasonal sequential decline in revenue from enterprise on-premise data centers. Over the past several years, Marvell has strategically invested in technology, both organically and through acquisitions, to become a critical enabler of accelerated infrastructure. The seismic shift driven by AI in the data center market is creating new opportunities, and we are actively investing to lead the next wave of innovation. We have in place a full suite of solutions across data center interconnect, switching and compute, and the ability to uniquely stitch these together into a unified platform, a true one-stop shop for our data center customers.

While our 100 Gb per lane, 800 Gb PAM products are currently the workhorse for interconnect inside AI data centers, customers have begun qualifying our next-generation 200 Gb per lane, 1.6Tb

PAM solutions. We expect first deployments to start toward the end of this year. Complementary optical interconnect solutions, we expect to start ramping our PAM DSPs for active electrical cables. This is a new and completely additive market for Marvell, and we expect to be shipping products to multiple tier-one cloud customers this year. Our DCI products, which provide connectivity between data centers, are critical to our customer success and continue to do very well. We see exciting new opportunities ahead of us from growth in generative AI applications driving cloud customers to build new data centers. We also expect a positive uplift from increased investment in inferencing, which will drive more bandwidth between data centers.

We are shipping our 400 Gb DCI products in high volume today and are seeing strong interest for our next-generation 800 Gb products. I'm also very pleased to report to you that in fiscal 2024, we significantly expanded our DCI customer base with design wins at multiple data center customers. We expect these design wins to begin ramping next year. As you will remember from prior calls, Marvell Silicon Photonics Technology has been a critical enabler of our DCI modules. You will hear more at OFC and our upcoming AI event about how we plan to deploy our field-proven silicon photonics technology to enable next-generation, higher density, lower power interconnects. In data center switching, our Teralynx 12.8T products continue to ship in high volume, and we are on track for production shipments of our next-generation 51.2T switch later this year. The Teralynx product line, you will recall, came from our Innovium acquisition.

Combine the Innovium team with Marvell's very successful enterprise and carrier switching organization. This larger scale now enables Marvell to accelerate our development to address new cloud opportunities, particularly in switching for AI deployments. We are encouraged by the traction we are seeing with both existing and new customers, which has expanded our opportunity funnel for cloud switching dramatically over the past year. Turning to our cloud-optimized silicon platform, we're seeing significant progress with the first set of design wins outlined during our last investor day. We expect initial shipments for our two AI compute programs to start in the first quarter and are on track for a very substantial ramp in the second half of the fiscal year. Customer bring-up of these programs is going extremely well, and we are tightly aligned with them on volume expectations and working in lockstep to enable the production ramp.

We now have a clear view of demand for both this fiscal year as well as fiscal 2026. We have been working closely with our suppliers and are confident that we have secured capacity for the ramp. With the visibility we now have for these programs, along with many new opportunities, we are very excited about the potential scale of long-term revenue for Marvell from this business. As the initial set of design wins reaches full run rate, we expect annual revenue from cloud-optimized silicon has the potential to rival our fast-growing data center optics business, which, for reference, grew to over $1 billion in fiscal 2024. With the exploding investment in AI and accelerated computing, the demand for cloud-optimized silicon has grown significantly. We have successfully executed multiple 5-nanometer designs in the last few years and are deeply engaged with cloud customers on many new 3-nanometer opportunities.

These engagements are driving a substantial increase in the size of our design funnel. AI is increasing the cadence of new chip releases, and this plays well to Marvell's strength as a key partner for our cloud customers with a proven ASIC platform. We have a broad suite of differentiated IP, including ultra-high-speed SerDes, ARM compute, security, storage, and advanced packaging, including die-to-die interconnects and chiplets. We are well positioned to act as a force multiplier for our cloud customers, enabling them to scale multiple custom programs in quick succession. Now let me turn to Marvell's carrier and enterprise end markets together. As we have been communicating, these end markets have been dealing with a period of soft industry demand. As a result, both were down sequentially in the fourth quarter, and we expect them to decline again in the first quarter.

On a sequential basis, we expect revenue in the first quarter from carrier to decline by approximately 50% and enterprise networking to decline by approximately 40%. Looking ahead, we expect revenue declines in these end markets to be behind us after the first quarter and forecast a recovery in the second half of the fiscal year. Longer term, these are large and enduring end markets which are critical to the global economy. As a result, we expect both of these end markets to eventually return to contributing over $1 billion each in revenue on an annual basis once demand normalizes, and we begin to realize the benefits of upcoming Marvell-specific product cycles. Turning to the consumer end market, revenue declined in the fourth quarter as expected and is projected to decline approximately 70% sequentially in the first quarter.

This forecast reflects the completion of deliveries for an end-of-life program in the prior quarter, as well as significantly weaker demand from the game console market. Turning to our automotive and industrial end market, revenue in the fourth quarter was $82 million, declining 17% year-over-year and 23% sequentially. As expected, this sequential weakness was primarily driven by a sharp decline in the industrial portion of this end market, where order patterns can be lumpy in any given quarter. Fiscal 2024, our automotive business delivered another strong year, with revenue growing in the double digits year-over-year on a percentage basis. We are benefiting from growth in Marvell content driven by an increase in the number of Ethernet-connected endpoints in cars, coupled with the need for more bandwidth. We have continued to accumulate new Ethernet design wins across a broad swath of automotive OEMs.

While the initial wave of our automotive revenue was driven primarily by EVs and hybrids, we now have also won high-volume internal combustion vehicles with major auto OEMs. These wins tend to be multi-platform in nature, covering numerous models simultaneously. Turning now to our forecast for the first quarter of fiscal 2025, we expect revenue from our overall auto and industrial end market to be flat sequentially. In summary, in fiscal 2024, we delivered total revenue of $5.5 billion. Our data center revenue accelerated throughout the year, growing from about a third of total company revenue in the first quarter to more than half exiting the fourth quarter. As customers continue to shift investment from traditional to accelerated infrastructure, we expect data center to drive the majority of our revenue growth going forward. This transition underscores Marvell's transformation into a leading data center company.

AI was a key driver of our data center growth in fiscal 2024, contributing over 10% of total company revenue, well above our initial forecast. This was a substantial increase from approximately 3% in the prior year. Our momentum accelerated throughout the fiscal year, with AI revenue well over $200 million in the fourth quarter, driven mostly from optics. In fiscal 2025, we expect this trend to continue, driving another strong year for our data center end market. We expect our substantial base of electro-optics revenue from AI should remain correlated to accelerator shipments, and as those continue to grow, we expect to benefit accordingly. In addition, we project significant revenue contributions from our AI cloud-optimized programs well in excess of our prior estimate of a couple hundred million dollars in fiscal 2025.

In fact, as our cloud-optimized AI silicon programs reach high-volume production, we expect our overall cloud-optimized revenue to exceed $200 million exiting the fourth quarter. As a result, on a run-rate basis, this momentum would put our overall cloud-optimized silicon revenue above the annual $800 million target we had provided at our last investor day. With a full year of contributions in fiscal 2026, we expect to be way ahead of the prior target. In aggregate, we see a favorable setup for the second half of this fiscal year, driven by continued growth from our data center end market, ongoing growth from automotive, and a recovery in carrier, enterprise, and consumer. As we continue to drive revenue growth, we remain focused on strong cash flow generation and returning capital to investors. As you saw earlier today, Marvell's board has approved the largest repurchase authorization in our history.

We view the emergence of accelerated infrastructure as one of the most significant technology inflections of our time. I thank all our dedicated employees and leaders for executing on our strategy to fully capitalize on this remarkable opportunity. During a tumultuous period for the semiconductor industry, we have taken control of our destiny and are strategically investing to win. Earlier today, we announced the extension of our longstanding collaboration with TSMC to develop the industry's first technology platform to produce 2-nanometer semiconductors optimized for accelerated infrastructure. This new platform will enable Marvell to deliver substantial advancements in performance, power, and area critical for next-generation accelerated workloads. We are very optimistic about our growth prospects and our role in enabling accelerated infrastructure.

We look forward to updating investors on the massive opportunity in front of us at our Accelerated Infrastructure for the AI Era event on April 11 in New York City. With that, I'll turn the call over to Willem for more detail on our recent results and outlook.

Thanks, Matt, and good afternoon, everyone. Let me start with a summary of our fiscal year 2024 results. Marvell delivered $5.5 billion in revenue with a strong second-half performance from our data center end market. Driven by AI applications, our data center revenue in the second half grew by approximately 50% over the first half. GAAP gross margin was 41.6%, GAAP operating margin was -10.3%, and GAAP loss per diluted share was $1.08. Our non-GAAP gross margin was 61.2%, non-GAAP operating margin was 29%, and our non-GAAP earnings per diluted share was $1.51. We returned $357 million to shareholders through dividends and buybacks. Moving on to our financial results for the fourth quarter. Revenue in the fourth quarter was $1.427 billion, exceeding the midpoint of our guidance, growing 1% on a year-over-year and sequential basis. Data center was our largest end market, driving 54% of total revenue.

The next largest was enterprise networking with 19%, followed by carrier infrastructure at 12%, consumer at 10%, and auto industrial at 5%. GAAP gross margin was 46.6%. Non-GAAP gross margin was 63.9%, growing 330 basis points sequentially, driven by a significantly better product mix as we had expected. Moving on to operating expenses. GAAP operating expenses were $697 million, including stock-based compensation, amortization of acquired intangible assets, restructuring costs, and acquisition-related costs. Non-GAAP operating expenses were $429 million, in line with our guidance. These results reflect the successful completion of our fiscal 2024 cost reduction plan we had outlined at the beginning of the year. GAAP operating margin was -2.3%, while non-GAAP operating margin was 33.8%. For the fourth quarter, GAAP loss per diluted share was $0.45. Non-GAAP income per diluted share was $0.46, growing 12% sequentially. Now, turning to our cash flow and balance sheet.

Cash flow from operations in the fourth quarter was $547 million. I'm pleased to report to you our second straight quarter delivering robust operating cash flow of over $500 million. Our inventory at the end of the fourth quarter was $864 million, decreasing by $77 million from the prior quarter. Our DSO was 77 days, decreasing by a day from the prior quarter. We returned $52 million to shareholders through cash dividends. In addition, we repurchased $100 million of our stock during the fourth quarter, doubling from the prior quarter. We expect to further increase repurchases in the first quarter of fiscal 2025. As you saw earlier today, Marvell's board has approved the largest repurchase authorization in our history, increasing our current plan by $3 billion, which brings our total available authorization to $3.3 billion.

Our total debt was $4.17 billion, our gross debt-to-EBITDA ratio was 2.19 times, and net debt-to-EBITDA ratio was 1.69 times. As of the end of the fourth fiscal quarter, our cash and cash equivalents were $951 million, increasing by $225 million from the prior quarter. Turning to our guidance for the first quarter of fiscal 2025. We are forecasting revenue to be in the range of $1.15 billion ±5%. We expect our GAAP gross margin to be in the range of 44.5%-47.2%. We expect our non-GAAP gross margin to be in the range of 62%-63%. We are forecasting a sequential decrease in non-GAAP gross margin due to lower revenue impacting fixed cost absorption. Looking forward, we expect that the overall level of revenue and product mix will remain key determinants of our gross margin in any given quarter.

For the first quarter, we project our GAAP operating expenses to be approximately $676 million. We anticipate our non-GAAP operating expenses to be approximately $455 million. This forecast includes a step up from the prior quarter due to typical seasonality in payroll taxes and employee salary merit increases. For the first quarter, we expect other income and expense, including interest on our debt, to be approximately $48 million. We expect our non-GAAP tax rate of 7% for the first quarter. We expect our basic weighted average shares outstanding to be 866 million, and our diluted weighted average shares outstanding to be 875 million. We anticipate GAAP earnings per diluted share in the range of a loss of $0.18-$0.28. We expect non-GAAP income per diluted share in the range of $0.18-$0.28. Operator, please open the line and announce Q&A instructions. Thank you.

We will now begin the question and answer session. To ask a question, you may press star, then one on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. In the interest of time, please restrict yourself to one question only. If you have additional questions, please rejoin the queue. At this time, we'll pause momentarily to assemble our roster. Our first question will come from Ross Seymour with Deutsche Bank. Please go ahead.

Hi, guys. Thanks for really asking the question. Clearly, it's kind of a tale of two cities. The data center and AI side is going to be really strong, the rest of it not so much. So why don't we just get the bad news out of the way first. Matt, the magnitude of the drops in your data center are kind of shocking. Can you just walk us through how much of that is something that is not going to come back, some of the SAS and 5G, etc., verSAS what do you view as just taking the cyclical medicine and then a snapback should ensue soon thereafter?

Yeah. Hey, great. Thanks, Ross. And yeah, definitely a tale of two cities. On the carrier and enterprise and consumer side, the way to think about it is, sure, the drops are pretty steep in Q4 and Q1. We're definitely going through a cyclical downturn in the industry. You've been doing this a long time, so have I. We've seen that happen, and that's what we're going through. The way to think about both of those businesses is, at their peak together, they were about $2.5 billion in revenue. And this would sort of be during the pandemic and some of the supply chain issues that went on. You can now see we're shipping well below that. And so I said in my prepared remarks, both of these are very solid businesses, Ross, for Marvell. Both will recover to greater than $1 billion in revenue over time.

The question is when. Remember as well, within these businesses, these are very long product life cycles, typically like seven years in production. These are designs in some cases we won three or four or five years ago. Some of them we just won a year or two ago. We feel good about these businesses, but they are going through some demand softness and some inventory correction. We expect to see that behind us. To be very specific, none of this is due to any business that's not "coming back" or share loss. In fact, when things recover back to a normalized run rate, we do have Marvell product growth drivers in both of those segments, carrier and enterprise, to drive growth going forward. We're just managing through it in the short term.

Thank you.

The next question will come from Matt Ramsay with TD Cowen. Please go ahead.

Thank you very much. Good afternoon, guys. I guess kind of a two-part question on the custom silicon business. The first part of it, Matt, you gave us some good color in your script as to how you see $200 million exiting the year and exceeding the $800 million for next. And you kind of referenced the $1 billion at scale. And I just wonder if you could maybe square the rest of that circle with that, just for business you've won today for fiscal 2026, or is there more to come? And I guess the second part of the question, my observation is you guys probably have, A, more shots on goal for custom silicon, and B, each one of the shots on goal could be potentially a very large or larger than expected piece of business given what's happening in the AI trend.

I guess my concern is, as you evaluate those opportunities when those programs will be shipping 2, 3, 4 years in advance and trying to figure out how those programs would sort of align with the dominant player in this space's roadmap 2 or 3 years out and the pace of that innovation, how do you guys evaluate the potential for the size of the business when lots of shots on goal, but the probability of each of those shots on goal being successful might be hard to gauge given how quickly the industry is moving? Hopefully, that makes sense. I'm just trying to get an idea of how you're scaling the business and taking on orders given all the volatility and rapid technology advancements in the space. Thanks.

Yeah. Got you, Matt. Okay, let me just tackle them both. On the first one, yeah, super excited about the ramp we're seeing now on the custom silicon programs we won a couple of years back. So we're shipping in Q1 on both programs. Fantastic. We gave some color in the prepared remarks on the exit rate being $200 million+. I don't want to cap that at this point, but certainly, that's sort of the way to think about it as the floor, and then we go from there. So that would imply, obviously, in fiscal 2026, a much larger number than the $800 million we had called out. And again, I think it's still dynamic and still early, but we're very excited from the bullish forecasts we're seeing from our customers.

2026 looks very strong from the programs that we've won, and we should be way ahead of the plan that we had articulated way back. On the second question, yeah, I don't think I've ever seen more design win activity in my career as right now in AI, custom silicon, networking, optics, you name it, this whole transformation that's going on in data center architectures is creating this massive opportunity for Marvell, specifically on the custom portion of it. I mean, we're talking about a TAM creation that's going to be in the tens of billions of dollars range. We'll talk more about that at our AI Day, but very significant sort of opportunity that's emerging in front of us. That being said, I view that as very complementary to the merchant leader in this space.

I think both have a place given the workloads that are required, given the scale of computing that's needed. I don't think it's a zero-sum game. I've been saying this for a while. I think both segments, the merchant side as well as the custom side, are going to grow to be very enormous TAMs. And so yeah, we're right in the mix on all the major opportunities and programs. We have assembled an incredible team, an incredible portfolio of technology. We announced today our continued partnership with TSMC with a very full and robust roadmap of IP and technology to specifically address AI and accelerated computing applications for the next generation. So that's got a lot of excitement with the customers as well. So yeah, overall, we're very bullish, and we think all the boats are going to lift on this one.

Certainly, for Marvell, it creates a huge new TAM opportunity that we really didn't have just a few years ago.

Thanks, Matt.

Thank you. Yeah.

The next question will come from Christopher Rolland with SASquehanna. Please go ahead.

Hey, thanks, guys. And I guess, first of all, Matt, thanks for giving the custom ASIC opportunity numbers. Again, I think that probably means you guys have a pretty strong pipeline, but would love to drill down on that a little bit more. So I guess, first of all, maybe you can talk about these opportunities, training verSAS inference, how you see that verSAS perhaps just compute. And then what's kind of the—do you have a secret sauce that's landing these? Your competitor has really used their, at the time, leading edge, SerDes IP as a driver of those wins. Is there something that you have, some special sauce that are winning these? Thanks.

Yeah. Thanks, Chris. Great to hear from you. And yeah, hopefully, some of the custom numbers were helpful. Investors last year and this year were a lot of interest in sort of what the size of that was. And now that we've got the visibility, it's great to start articulating where we think that is. I think on your second sort of piece of your question around training verSAS inference and compute, at this point, I would just put it in a very large bucket of what I'm calling deca billions in TAM creation. I don't know that we're on this call, certainly prepared to slice it out. And I don't even think we know where this is going to be in three to five years relative to that exact split. But I would say the opportunity set for us crosses all of those applications, okay?

And then relative to where we are in terms of our technology, our competitiveness, I mean, it's pretty astonishing if you think about it. When we won the designs we won, Chris, at 5-nanometer, that was really our first time as Marvell to compete in this segment, especially in the data center. The origins of this business go back to our purchase of Avera in 2019. We pivoted that roadmap during the pendency of the close and right after from 14-nanometer technology all the way to 5. And even though it was our first time out, SerDes was competitive. Packaging technology, interconnect, manufacturing scale, strategic partnerships up and down the supply chain. And that enabled us to win a significant share of ASICs in business, which is now coming to fruition here in fiscal 2025 and 2026.

We followed that up with our 3-nanometer platform, which has now been a big part of the opportunity set in the funnel we're competing in today. We are in a completely different position now relative to 5-nanometer because we had the learnings, we had the readiness. And now we're really leaning in, okay, in terms of being a first mindset around not just nanometers, but die-to-die interconnect, packaging, SerDes technology, optics, and really in chiplets and thinking about how to stitch all this together. And on top of that, with the scale of Marvell and our strategic partnerships, we really look to our customers like an incredibly solid, trustworthy, long-term partner for their needs to really help them realize their AI silicon ambitions. So that's where we are today. I mean, we did great on 5-nanometer.

We're going to do great on 3, and we're going to do great in the future. Thanks.

Congrats. Thanks, Matt.

Yep.

The next question will come from Quinn Bolton with Needham and Company. Please go ahead.

Hey, guys. I'm going to follow up on the CloudOps ASIC question as well. But I guess I'm coming at it from a margin perspective, Matt. You look at some of these programs on the cloud compute side to the extent that they integrate high bandwidth memory, it certainly does nice things to the ASP, but there's also a pretty significant cost that you may have to pass through. And so I'm wondering, can you talk about the gross margins on some of these ASIC platforms? How does that compare to the corporate average? And as you ramp, especially if Cloud ASICs get to be similar in size to the optics, which I know are good margins, how do you see the margin mix changing with this now very, very strong ramp of Cloud ASIC programs? And then I've got a quick follow-up if I can sneak it in.

Sure. Yeah. I mean, the way we've talked about that business, actually, since Avera in 2019, is that it would always, due to the nature of custom business, be at a lower gross margin overall than the company average and the target. At the same time, because of the NRE and non-recurring engineering that we receive as part of the customer funding of these programs, the operating margins of this business tend to be very competitive and over time in line with our company targets. When you start talking about these very, very large programs, you've got opportunity, given the volume and scale, on the OM line to really drive a lot of leverage in the model. But the GMs, just due to the nature of that business model, will always be a little bit lower than the total.

I would say, though, at the same time, because the sort of follow-on sometimes is, "We'll see if that happens," that what happens to the overall company gross margin profile. And remember, we still have very strong gross margin merchant businesses in storage and in networking, automotive. Some of those were even under shipping demand right now. So as the year plays out, some of those businesses will come back, and that should be a little bit of a margin offset to some of the custom stuff. So we're still managing to our long-term target model. But yeah, the cloud stuff, especially at these volumes, certainly will have lower gross margin.

Great.

If we got a quick one for the second, we can do it. Otherwise, we got to.

Yeah, quick one on the second one. You had mentioned sort of ramping AECs at multiple hyperscalers this year. Just wondering if you might be able to give us some sense. Is that meaningful? Any sense on the magnitude of that ramp?

Yeah. I think what I'd say is it's absolutely a real market. We felt that way for some time. Even back when we acquired Inphi, that was sort of shot on goal, we thought was possible. I think the big news is that we're qualifying at multiple hyperscalers now. We're starting to go into production this year. We'll get a very nice, solid kind of more full-year-ish ramp in fiscal 2026. But it's definitely an incremental additive category to Marvell, and it really leverages our high-speed DSP, our high-performance DSP, and PAM technology, which is really now inflecting in this wave of AEC. Before, it was based on the older modulation techniques, where we didn't participate. So yeah, really excited about it, but let's let it play out for a few more quarters. Thanks.

Thanks, Matt.

The next question will come from Harsh Kumar with Piper Sandler. Please go ahead.

Yeah. Hey, guys. Thanks for letting me ask a question. Matt, so AI is hot. There's no other way to put it. You are in kind of a pole position with your optical piece, the old Inphi piece. Can you give us a sense of the magnitude of the size of that business, either quarterly or last year? Anything you can throw at us that helps us size it. And also kind of what kind of growth rate you expect to see from this business. And then, Matt, when you say the bottom is for some of the pieces like consumer and networking, the bottom will be this 1Q timeframe, what piece do you think will come off the bottom in 2Q, or do you expect all the pieces to come off the bottom in 2Q?

Okay. Let me do this. I'll take the first one, and I'll let Willem take the second one. So I can take a breather, and he can also answer your question. Yeah, on the first one, I think we gave some pretty good color. I mean, if you think about it, the Q4 exit rate on AI, right, was well north of $200 million. And the bulk of that, as we said, was in optics. So if you just and then you could start extrapolating, "Well, geez," then you got to add in how much revenue is Marvell getting on the standard cloud side in optics. And that's another very nice chunk. And then you've got some of the stuff that we have that shows up on the carrier side, if you're talking about Inphi now, on the coherent DSPs. There's some ASICs that we have.

So the overall Inphi business, if that's what you were asking, since we bought it, has clearly outperformed the deal model and has just become an incredibly strategic asset for us, both in terms of just the technology we picked up, but the team, the synergy with the other portfolio, the other product lines we have. And so just super positive about that. And it just looks like that whole opportunity is going to be much larger than I think we or Inphi thought just a few years back. Willem, do you want to take off and take the second part of it?

Yeah. Thanks, Matt. Hey, Harsh. Yeah. So we're really working with customers to focus on Q1 being the bottom, really confident that that's the bottom. And then we see growth resuming in the second half across enterprise networking, carrier, and consumer. So yeah, really just trying to make sure that we put this behind us really quickly and see growth in the second half.

Thank you.

The next question will come from Vivek Arya with Bank of America. Please go ahead.

Thanks for taking my question. Matt, one more on electro-optics. I think near term, it seems in Q1, there's probably a little bit of a breather after several strong quarters. But the more important question is that should we assume that your electro-optics, that is, related to AI, should grow somewhat proportional to the growth in accelerators? So for example, if you look at accelerator growth this year, I've seen various numbers between 50%-100% kind of year-on-year growth. So should the AI part of your electro-optics grow kind of commensurate with that, or is there something different? And then when does 1.6, sorry, when does that start to play a role in your electro-optics business?

Yeah. Thanks, Vivek. Well, I think it depends on how you the definition of breather you use. I mean, basically, it's ramped up just so significantly, right, the electro-optics business, Q2 to Q3, Q3 to Q4, and it's staying strong in Q1. Maybe it's a breather from the sequential growth point of view, but we still have not seen that slow down. And then on the, let's see. I got your second one. Your third one was on 1.6T. I'm going to come back to your second one in a second. That is going to ramp later this year. That's gone really well, the quals and the product bring-up. We announced at OFC last year and a lot of demand and interest. And then, sorry, your second question on AI?

Yeah. Should your electro-optics grow kind of proportional to the growth in accelerator? Yeah.

Yeah. Yeah. Sorry. Yeah. The accelerator one. Yeah. So yeah, for sure. The way we think about it is that business year-over-year should grow in line with accelerator growth, accelerator unit growth. We view it as very correlated. Obviously, there's some timing issues in terms of supply chain and things like that. But that's a simple way to think about it. And everyone's got a little bit of a different model at this point about what that number is. But our view is we're highly correlated to accelerator shipments in our optics business. Yeah.

The next question will come from Gary Mobley with Wells Fargo. Please go ahead.

Hey, guys. Thanks for taking my question. As a way to think about the win or hit rate for your custom ASIC business when engaging with prospective customers in the future, how should we think about the increasing competitive environment from the ARM ecosystem, ARM specifically, with more versions of Neoverse? It's a total design ecosystem. It's compute subsystems, and as well, all the ASIC design community. First of all, how do you feel about ARM essentially becoming more of a competitor? And then as well, how do you think about the way in which you'll compete against that and succeed? Thank you.

Yeah. Thanks, Gary. I think, look, I think there's a lot in this market today. There's obviously a lot of excitement because of the opportunity in front of us. I mean, the way that we're working is there's a number of companies that are our partners, solution providers, etc., that may or may not have their own offering or not. Whether it gets taken up or not, we'll have to see. Where we come together really is we pull it all together. We're able to actually deliver with Marvell intellectual property, design methodology and techniques, our IP, and our know-how pulled together with our customers, RTL and IP, and partners, the total solution, which means we actually lay the chip out. We package it up. We manufacture it in high volume. We QA it. We test it. We yield it. We drive reliability. We drive cost improvement.

We drive it through the cycle. That is a very different business model than providing a piece that goes in. ARM has been our partner for a long time. We use them in our products kind of all over the place. As they evolve and others evolve, we'll figure that out too. But in the end, it comes down to, we believe, for these large volume, mission-critical, big compute silicon chips, it's going to require somebody like a Marvell with the manufacturing scale, the design techniques, and know-how to really execute it. We haven't seen any change there.

In fact, I think at the sort of 3-nanometer node we're at and beyond, it's going to be even more critical to have a partner who's got your back, who can help you get to production quickly and spin derivatives quickly, which is now increasingly looking like what's going to be needed: more SKUs, faster beat rate in terms of when products are released, and then obviously ramping them very hard and quickly, given the competitive environment.

Thanks, Matt.

The next question will come from Harlan Sur with JP Morgan. Please go ahead.

Yeah. Good afternoon. Thanks for taking my question. Matt, you mentioned initial shipments of your AI ASIC programs. Can you just clarify? Because I know last you updated us, these programs were in qualification. So have you guys passed qual on both these programs? And this is sort of the initial start of the full production ramp, or maybe you're still in qual, but you've got enough line of sight to passing the quals, just given you're at the tail end of this process? And maybe more importantly, have you guys secured the follow-on AI programs for these two initial projects?

Yeah. Thanks for the question, Harlan. So yeah, we are in the initial start of the production ramp on both products. And then as far as the follow-ons, like I said, the opportunity funnel we see across all of the various opportunities right now is significant. And we're involved in, we believe, we think, every single one of them. So yeah. And there'll be more to come sort of at our AI Day. But I would just say our 3-nanometer funnel and our 3-nanometer hit rate and design win rate is very encouraging. And it really gives us just tremendous confidence in where this business is headed. It also has the side benefit by driving this advanced technology for the custom ASIC side is it's pulling along the technology development that benefits all the other businesses in Marvell, like our high-performance switching, our DSPs for optics, etc.

So there's actually kind of a virtuous cycle happening where being at that bleeding edge is now we're able to show our other solutions that interoperate with this custom silicon, really a best-in-class roadmap there. But more on the overall strategy and opportunity side of the AI Day. Got to give you something to look forward to.

Thank you, Matt.

Yep.

The next question will come from Tore Svanberg with Stifel. Please go ahead.

Yes. Thank you. Matt, I had a question on the 800 Gb upgrade cycle. So you mentioned that ramping, but you also mentioned 1.6 terabit, the ramping later this year. My understanding is that we're still in the early stages of the 800 Gb. And I'm just wondering if you expect a more broad-based 800 Gb upgrade cycle before 1.6 really starts to take off, or will we potentially see kind of both ramping at the same time?

Yeah. I think there's 3 different pieces we should talk about. So the first is 1.6T. I would just call that early shipments, first volumes type of thing in the second half, end of the year, and then more next year. And that's really I'd call it the early adoption of that technology. But it's very promising because that's obviously what's going to follow. The 800 Gb for AI has still got tons of legs, right, and is going to be very, very strong this year, very, very strong next year. And then there'll be some transition over time. And then I think what you're also indicating is at some point, you're going to see an 800 Gb transition on traditional cloud infrastructure from either 200 or 400 gig to 800 gig. And that is also true in something we're planning for.

So I think they're going to end up happening kind of all of them in parallel a little bit, right? You're going to have bleeding-edge people adopting 1.6. You're going to have the bulk of the volume on AI still driving 800 gig for the next few years. And then you're going to have a transition on the traditional PAM side as well that's going to upgrade. So I think they're all going to be in production in parallel for different reasons, which is great because it just ends up being multiple customers, multiple SKUs, and kind of a rich portfolio of solutions that we're offering so that people can optimize their systems for the best TCO and the best performance that they need. Thanks, Tore.

Excellent. Thank you.

We will take our last question today from Srini Pajjuri with Raymond James. Please go ahead.

Thank you. Hi, Matt. Just a follow-up to one of the previous questions, Matt, about the custom silicon opportunity going forward. Obviously, there are four big cloud customers, hyperscale customers. Based on what we know so far, most of them seem to be investing in custom silicon, either one or two chips. It does feel like the number of opportunities are relatively small. Of course, these are very large opportunities. Just curious, how do you see that evolving? Do you see this continuing with one or two programs for each customer, which are multi-billion opportunities? Or are you seeing spreading out or kind of more diverse opportunities as we, I guess, as AI becomes bigger and broader? Just want to hear your thoughts on that.

Yeah. Sure, Srini. The way I think about it is if you go back just a couple of years when AI was emerging, there was kind of one chip, one program that would sort of happen. It would take several years. Then you'd gear up for the next one. There was definitely a serial type of approach, and that was probably fine. I think what we've seen to your point is really multiple programs now across all the key customers. That's kind of where I'd leave it. I think getting more specific, I don't really want to do that with respect to my customers. I would just say what we hear is very much a need for each of them needing their own very differentiated, unique solutions, needing more SKUs and at a much more rapid rate by far than we've seen so far.

And so I just think it's creating, not that. I know it's creating just a very significant new opportunity in custom silicon that really wasn't there before in terms of the total dollars that are available, the number of chips, and then the speed that they want to go. And that's why earlier I had said, if you look at this kind of 3-nanometer cycle we're in, it's significantly larger than we saw back at 5-nanometer, even if you account for the fact that some of these 5-nanometer PAMs have gone up a lot because the market went up. Even if you sort of factor that in, what we're looking at is a lot more. And I think that's just going to continue for the next few years.

But sure, by design, I think any of these high-volume data center applications are always going to, in any product line, by the way, always concentrate down to a few key partners. That's just the way the business works. But super exciting time. There's a lot of activity here. Thanks, Srini.

Thanks, Matt.

All right. Was that the last question?

Thank you for the question and answers. Yes, sir. I was going to pass the call to Mr. Murphy.

Yeah. I was going Yeah. I was going to make some quotes. Oh, perfect. Yeah. Thank you.

Go ahead, sir. Take the floor.

Excellent. Thanks. All right. So first, everybody, appreciate the participation in the call today. It's a very exciting time in the semiconductor industry relative to sort of the opportunity that's in front of us. We see a huge transformation underway right now with fundamentally a complete overhaul of data centers and data center architectures. And Marvell, we've been on this journey for the last four or five years to really transition and transform ourselves into a data center company. And as you've seen from our recent results now, that is our largest end market. It's where we're putting the majority of our R&D effort. And we're positioning the company to win big here. We chose a strategy years ago to be really levered to the accelerated computing and infrastructure part of the market, which includes, and the most prominent piece being AI.

It's become much larger of an opportunity than we thought a few years ago, but it's a market we clearly chose to invest in. We're expecting a lot of growth in the coming year in our data center business. We're very excited about that. And some of these programs, as I indicated, they're just getting started. And some of them are ramping in the second half. Some of them are starting to ramp now. But it really gives us a great setup for our fiscal 2026. And kind of final couple of comments. I did a lot of thought about and we did a lot of work with our customers over the break this past December. And early January, I did a fireside chat with Harlan at JPM.

There was a lot of excitement after that call because we had gained confidence at that point about some of the production ramps. I would say just a couple of months later now, sitting here on this call, our confidence in our growth this year and the robustness of these programs has only gotten stronger and only increased. So we're very excited about where the company's positioned. I appreciate everybody's support and interest in Marvell. I look forward to seeing everybody at the AI Day. Team is working extremely hard, and they will not disappoint. So thanks, everybody. We'll see you soon. Bye.

Thank you for attending today's presentation. You may now disconnect.

Good afternoon, and welcome to Marvell Technology, Inc.'s First Quarter of Fiscal Year 2025 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing a star followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Mr. Ashish Saran, Senior Vice President of Investor Relations. Please go ahead.

Thank you, and good afternoon, everyone. Welcome to Marvell's first fiscal quarter 2025 earnings call. Joining me today are Matt Murphy, Marvell's Chairman and CEO, and Willem Meintjes, our CFO. 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 10-K and 10-Q filings. We do not intend to update our forward-looking statements. 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 the investor relations section of our website.

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

Thanks, Ashish, and good afternoon, everyone. For the first quarter of fiscal 2025, Marvell delivered revenue of $1.16 billion, above the midpoint of guidance, driven by stronger than forecasted results from our data center end market. Higher revenue, combined with disciplined expense control, drove non-GAAP earnings per share of $0.24, also above the midpoint of guidance. The Marvell team executed well in the first quarter, and we are looking forward to revenue growth and financial performance strengthening throughout this fiscal year. Let me now discuss our results and expectations for each of our end markets. In our data center end market for the first quarter, we drove record revenue of $816 million, well above our guidance.

The outperformance was driven by strong demand from cloud AI applications for our electro-optics portfolio, including PAM, DSPs, TIAs, and drivers, as well as our ZR data center interconnect products. Data center revenue grew 87% year-over-year and 7% sequentially, with double-digit growth from cloud more than offsetting a higher-than-seasonal decline in revenue from enterprise on-premise data centers. Strong revenue growth was driven by cloud AI, as well as standard cloud infrastructure. In addition to strong contributions from our market-leading electro-optics products, we also benefited in the first quarter from the initial shipments of our custom AI compute programs. Turning to the second quarter of fiscal 2025, we expect our overall data center revenue to grow in the mid-single digits sequentially on a percentage basis as our custom AI silicon continues ramping.

I'm very pleased with our results and projected guidance for our data center end market. Our continued growth in data center, and AI in particular, is being driven by our leading portfolio of connectivity and custom compute products. Starting with our interconnect solutions, our 100G per lane, 800G PAM products are the primary interconnect enabler for state-of-the-art AI deployments today, and customers have already started qualifying our first to market, next generation, 200G per lane, 1.6T solutions. Our 1.6T solutions are poised to enable the next generation of AI accelerators. We are seeing similar success with our DCI products, with 400G ZR shipping in high volume, strong interest for our next generation 800G products, and an expanding DCI customer base with design wins at multiple new data center customers.

As we discussed at our recent AI event, we are further expanding our DCI opportunity, enabled by our new coherent DSP, which extends the reach of our DCI modules to 1,000 kilometers, creating what is expected to be a new $1 billion market for Marvell over the long term. In aggregate, we expect our overall market for DCI products to grow to $3 billion by calendar 2028. Complementing our optical interconnect solutions, we have started shipping PAM DSPs for active electrical cables with design wins at multiple tier one cloud customers. This is expected to be another new and completely additive $1 billion market for Marvell over the long term. This morning, we announced that we are entering a new interconnect market with our PCIe Gen 6 retimers.

AI applications are driving data flows and connections inside server systems at significantly higher bandwidth, driving the need for PCIe retimers to meet the required connection distances at the faster speeds. PCIe Gen 6 is the first PCIe standard to use PAM4 signaling, technology Marvell has been leading for many generations. We have also been working closely with key customers and industry partners to intercept this technology transition and are now sampling our new 8- and 16-lane PAM4-based PCIe Gen 6 retimers. These products are designed to help data center compute fabrics continue to scale inside accelerated servers. We look forward to updating you on our progress in this new market. In data center switching, we are looking forward to starting production shipments of our next-generation 51.2T switch later this year.

We are encouraged by the traction we are seeing with both existing and new customers, which has expanded our opportunity funnel for cloud switching. As we discussed at our AI Day, we have also been making excellent progress with our custom compute business. Our custom compute AI programs are beginning to ship in the first half of this fiscal year, and we are expecting a very substantial ramp in the second half of this year, followed by a full year of high volume production in fiscal 2026.... The multiple custom cloud products we are ramping today are validating the strategy we put in place following the acquisition of Cavium and Avera, combining decades of experience in both compute and custom silicon. As we gain momentum, we are now even more optimistic about our prospects in benefiting from the rapidly expanding opportunity funnel for custom cloud silicon.

In fact, at our AI Day in April, we outlined our significant and growing new design wins for custom AI compute, in addition to our continued work with existing customers on a multigenerational basis. As a result, we are increasingly confident in our ability to meaningfully grow our share over the next several years in the market for custom accelerated compute, which is expected to grow from approximately $7 billion in calendar 2023 to over $40 billion in calendar 2028, a 45% CAGR. Underscoring Marvell's strategy to be the leader in data infrastructure, data center drove approximately 70% of our consolidated revenue in the first quarter. We see a massive opportunity ahead, with the data center TAM expected to grow from $21 billion last year to $75 billion in calendar 2028, at a 29% CAGR.

We have numerous opportunities across compute, interconnect, switching, and storage. As a result, we expect to double our market share over the next several years from our approximately 10% share last fiscal year. Now let me turn to Marvell's enterprise, networking, and carrier end markets together. As expected, reflecting a period of inventory correction and soft industry demand, revenue from both end markets declined in the first quarter. Enterprise networking revenue was $153 million, while carrier revenue was $72 million. In line with our expectations for these end markets to reach a bottom in the first half of this fiscal year, we project our revenue in the second quarter for both enterprise networking and carrier infrastructure to be flat sequential.

In enterprise networking, we are encouraged by recent comments from our networking customers that their order patterns are stabilizing and that they expect their end customers' inventory to start to normalize. As a result, we expect to start a recovery in the second half of this fiscal year as we begin shipping closer to end market demand. In the carrier end market, while overall demand remains subdued, we are looking forward to the initial transition to our next generation 5-nanometer-based OCTEON 10 DPUs at a tier one customer. As previously outlined, while we are shipping the baseband socket in the current generation, we have already secured both the transport and baseband sockets in the next generation. The transition begins towards the end of this fiscal year, and more meaningfully next year, we expect Marvell's market share to continue to grow in the 5G market.

In aggregate, we are beginning to see encouraging signs that support our expectations for the start of a modest revenue recovery later this fiscal year in both the enterprise, networking, and carrier end markets. While the pace of recovery will depend on how quickly the still elevated inventory levels normalize at our customers, we are looking forward to these two end markets returning to strength for Marvell. Turning to the consumer end market, revenue in the first quarter was $42 million, declining 70% year-over-year and 71% sequentially. These results were in line with our forecast and reflected the completion of deliveries for an end-of-life program in the prior quarter, as well as a change in demand from the game console market.

During the quarter, we worked closely with our gaming customer to help them quickly complete the realignment of their inventory of our products to their updated production plan. This gaming inventory correction behind us, we are expecting our revenue in the second quarter from the consumer end market to rebound and approximately double on a sequential basis. Turning to our automotive and industrial end market, revenue in the first quarter was $78 million, declining 13% year-over-year, 6% sequentially. These results are reflective of a broad inventory correction taking place across the automotive end market, which is expected to take some time to fully resolve. As a result, we are forecasting revenue from our overall auto and industrial end market for the second quarter of fiscal 2025 to be flat sequentially.

Looking further ahead, we expect revenue growth to resume in the second half of this fiscal year, driven by an increase in Marvell's Ethernet content in upcoming model year 2025 vehicles as they enter production towards the end of this calendar year. Marvell continues to deepen relationships with the world's largest automotive OEMs. General Motors recently named us Supplier of the Year and honored us with the 2023 Overdrive Award for Automotive Ethernet technology. This prestigious award recognizes suppliers who consistently exceed expectations in their partnership with GM. We are excited that our automotive Ethernet portfolio is being recognized for playing a critical role in the industry. In summary, the first fiscal quarter played out largely as we had expected.

Led by AI, data center continued to outperform, with revenue almost doubling on a year-over-year basis, while our other end markets found what is expected to be their bottom. For the second quarter, at the midpoint of guidance, we are forecasting consolidated revenue to grow 8% on a sequential basis. We expect a favorable setup for the rest of this fiscal year, driven by continued growth from data center and a recovery in the rest of our end markets. Our storage revenue has also resumed year-over-year growth, and given positive demand commentary from customers, we are expecting that to continue. We project robust growth to continue from AI, with the expected ramp in our cloud custom AI programs to augment our substantial base of electro-optics revenue, which we expect will remain correlated to accelerator shipments.

Given the strong start in the first quarter from AI and our expectations for continued growth, the rest of this fiscal year, we are confident that we are well on our way to exceed the full year AI revenue target we had discussed earlier this year and at our AI event. So with that, I'll turn the call over to Willem for more detail on our recent results and outlook.

Thanks, Matt, and good afternoon, everyone. Let me start with a summary of our financial results for the first quarter of fiscal 2025. Revenue in the first quarter was $1.161 billion, exceeding the midpoint of our guidance, declining 12% year-over-year and 19% sequentially. Data center was our largest end market, driving 70% of total revenue. The next largest was enterprise networking, with 13%, followed by auto industrial at 7%, carrier infrastructure at 6%, and consumer at 4%. GAAP gross margin was 45.5%. Non-GAAP gross margin was 62.4%. Moving on to operating expenses. GAAP operating expenses were $680 million, including stock-based compensation, amortization of acquired intangible assets, restructuring costs, and acquisition-related costs. Non-GAAP operating expenses were $454 million, in line with our guidance.

GAAP operating margin was negative 13.1%, while non-GAAP operating margin was 23.3%. For the first quarter, GAAP loss per diluted share was $0.25. Non-GAAP income per diluted share was $0.24, $0.01 above the midpoint of guidance. Now, turning to our cash flow and balance sheet. Cash flow from operations in the first quarter was $325 million. As a reminder, our first quarter cash flow results reflect the payment of annual employee cash bonuses for the prior fiscal year. Our inventory at the end of the first quarter was $826 million, decreasing by $38 million from the prior quarter. On a year-over-year basis, we have reduced our inventory by $200 million or almost 20%. Our DSO was 69 days, decreasing by 8 days from the prior quarter.

We returned $52 million to shareholders through cash dividends. In addition, we repurchased $150 million of our stock during the first quarter, an increase of $50 million from the prior quarter. We expect to further increase repurchases in the second quarter of fiscal 2025. Our total debt was $4.15 billion. Our gross debt to EBITDA ratio was 2.27 times, and net debt to EBITDA ratio was 1.8 times. As of the end of the first fiscal quarter, our cash and cash equivalents were $848 million, decreasing by $103 million from the prior quarter. This is primarily due to payment of annual employee bonuses as we funded stock repurchases and dividend payments through our operating cash flow generation during the quarter. Turning to our guidance for the second quarter of fiscal 2025.

We are forecasting revenue to be in the range of $1.25 billion ±5%. We expect our GAAP gross margin to be approximately 46.2%. We expect our non-GAAP gross margin to be approximately 62%. We are forecasting a small sequential decrease in non-GAAP gross margin due to a projected change in product mix as our consumer revenue rebounds and custom cloud silicon continues to ramp. In the second half, we expect a substantial ramp in our custom silicon programs to drive strong revenue growth, with only a modest recovery in our traditional businesses. As a result, we expect this revenue growth and accompanying mix shift is likely to be dilutive to our current gross margins, but to be accretive to operating margin and earnings.

We expect that a rebound in our traditional businesses to more normalized levels would meaningfully improve our overall gross margins in the future. For the second quarter, we project our GAAP operating expenses to be approximately $688 million. We anticipate our non-GAAP operating expenses to be approximately $455 million. For the second quarter, we expect other income and expense, including interest on our debt, to be approximately $46 million. We expect a non-GAAP tax rate of 7% for the second quarter. We expect our basic weighted average shares outstanding to be 867 million, and our diluted weighted average shares outstanding to be 877 million. We anticipate GAAP loss per diluted share in the range of $0.15-$0.25. We expect non-GAAP income per diluted share in the range of $0.24-$0.34.

Our guidance for revenue in the second quarter is to grow sequentially in the high single digits at the midpoint on a percentage basis, and we continue to be optimistic about the prospects in the second half of this fiscal year. As we drive revenue growth, we remain focused on delivering robust operating leverage, strong cash flow generation, and returning increasing amounts of capital to investors through our active stock repurchase program. Operator, please open the line and announce Q&A instructions. Thank you.

Thank you. We will now begin the question-and-answer session. To ask a question, please press star one in your touch tone phone. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star two. In the interest of time, please restrict yourself to one question only. If you have additional questions, please rejoin the queue. At this time, we will pause momentarily to assemble our roster. Our first question comes from Vivek Arya of Bank of America Securities. Your line is already open.

Thanks for taking my question. Matt, just kind of near term, I was hoping you could help quantify how much custom compute accounted for in Q1 and how you're thinking about it in Q2. And then as we look into the back half, I think you've given an overall AI number for the data center. But is that a supply constraint number? Just give us a sense for what are the puts and takes in the back half. How much flexibility is in the model to upside expectations from here on?

Hey, Vivek. Hey, thanks for the question. Yeah, so we started production shipments, which was great, in our first quarter. And, you know, that's on its way up. If you look at our Q2, you know, most of the growth in the data center segment is coming from custom. So that's a positive. And then the whole thing, you know, inflects meaningfully in the second half. And I'd say from a full year perspective, the way to think about it, maybe some additional color would be, you know, we talked about a floor of $1.5 billion for AI revenue for Marvell for this fiscal year, with about two-thirds in electro-optics and a third in custom. And we see now both of those, you know, exceeding that number.

And then kind of to flow into your second part of your question on the supply constraints and the second half and how do we think about it, we feel like we're in a good position. We on the optics side, you know, we did get that initial very strong upside about a year ago, if you recall, and the team did a great job, and we've been reacting, as you saw in our fourth quarter and in our first quarter, where we overachieved on our revenues there. And so we're continuing to manage that supply chain very, very carefully and in a very focused manner to make sure we have the flexibility we need, Vivek. And the same is true for the second half, both on the optics and the custom side.

And so we're positioning ourselves very much to handle upside above and beyond the numbers we've talked about. Thanks.

Thank you, Matt.

Your next question comes from Timothy Arcuri of UBS. Your line is already open.

Thanks a lot. Matt, I wanted to ask about the evolution of the custom ASIC TAM. You had said it's roughly 66, I think you said last year. And I guess at the, you know, Analyst Day, you said that you'd be at a 10% share very soon. So is it fair to say that you could be at $1 billion in custom compute next year? I mean, I would think that the TAM gets to roughly $10 billion next year. So do you think you can get to that $1 billion in custom compute number next year? And then also, I'm just kind of wondering if you can talk about the upside. You know, data center came in $30-$35 million better in fiscal Q1. What was that from?

It sounds like it wasn't necessarily custom compute, because that's still pretty small. So is it more on the connectivity side? Thanks.

Yeah, great. Hey, thanks, Tim. Yeah, so we articulated at the AI Day, you know, a very robust custom silicon TAM in excess of $40 billion going out into, you know, 2028 timeframe, and that TAM growing very significantly. And yeah, we I think your numbers are about right in terms of the share, you know, we're going to end up with near term, and then Raghib articulated, you know, our goal to drive that in the custom silicon area to 20%. So you got to draw a line kind of from here to there in terms of the opportunity and obviously, the TAM's got to materialize. But yeah, we're well on our way. Our programs are, you know, continue to kind of upsize in terms of the magnitude we're looking at.

I'd just say we didn't give the breakout exactly for next year, but we did talk about an incremental $1 billion as the floor for next year from this year, so going from $1.5 billion to $2.5 billion, and a lot of that is going to be due to the custom programs, you know, hitting their first full year of volume. So we're not calling out the exact split next year, for next year, but maybe that will help you triangulate in the middle in terms of where we are today, where we're trying to drive the business, and then also where we see the overall AI business for next year. And I'm confident you and the team can come up with a great model around that.

On Q1, yeah, most of the, because custom had just started, again, our optics business continued to be very strong, outperformed again, and it's, and you know, all indications are that business, certainly on a year-over-year basis, will perform very well and be above the targets we outlined even at the AI Day.

Great, Matt.

Thanks.

Thank you so much.

Thanks, Tim. Yeah.

Your next question comes from Chris Caso of Wolfe Research. Your line is already open.

Yes, thank you. Good afternoon. Question is on gross margins and some of the comments that you made with regard to gross margins in the second half of the year. Could you give a little more detail about, you know, some of the puts and takes of that? You know, understand that some of the lower margin segments, you know, such as consumer, I guess you would include, you know, some of the carrier business and that coming back will weigh on margins. You know, what are the segments in the traditional businesses that need to come back to bring the gross margins back to more normalized levels?

Yeah, thanks. So let me, let me take that. So, you know, when we look at our, our gross margin, it's still very much driven by overall product mix, and then as well as the, the overall level of revenue and the, the overhead absorption that we get. If you look at, at the, the merchant side of our business, those gross margins continue to be extremely healthy, actually quite a bit above our, our overall corporate, target range. However, some of the, the key components of that, you know, if you look at data center storage, enterprise networking, enterprise on-prem, are already going through a significant inventory correction. And so at the same time, you know, we're, we're seeing the beginning of a very strong ramp on our custom programs. And those are typically, lower gross margin.

However, we get a ton of leverage on the OpEx, especially, as we're able to recognize the, the NRE on that as contra R&D. And so as a result, that really drives really strong operating margin for us. So overall, you know, I'm not gonna guide more than one quarter year at a time. I think, you know, you'll have to triangulate with what we're indicating here. But you know, we do see, you know, as those other merchant businesses start recovering, that drives a nice tailwind for us, so you know, across next year.

Yeah. Thanks, Willem. And Chris, just one more add, and then we can go to the next question. I'd say in addition to that, which is really, as Willem said, both the on-prem data center, the enterprise networking, those types of segments being weaker, that are healthier gross margins. The other one that, you know, is poised for a stronger recovery as well, is automotive in the second half, and that's been a strong driver for us as well. So there's some goodness out there for sure. We'll have a better read, obviously, as our current quarter progresses in terms of what the second half is gonna look like on those other businesses, but we do expect them to recover and return to growth. It's just a timing issue.

Hopefully that's helpful to think about the different drivers of gross margin. Next question.

Your next question comes from Karl Ackerman of BNP Paribas. Your line is already open.

Yes, thank you. Within data center, it looks like the AI portions of your business are about $500 million this past quarter. So I was hoping you'd just also size the non-AI portion of data center, and I guess what you're seeing there, both this quarter and going forward, because there does appear to be green shoots within the storage ecosystem and perhaps even Fibre Channel from a seasonal basis. So if you could just discuss the non-AI portion of data center, both this quarter and throughout the balance of fiscal 2025, that'd be very helpful. Thank you.

Yeah. Hey, hey, Karl. Thanks. Yeah. So yeah, without getting into the, you know, the granularity by quarter, relative to the pieces within data center, the way I'd say it is the AI, as we discussed, is, has been very strong. It continues to upside, and it continues to look very promising this year and next year. But to your point, a couple other things are going on that we see playing out through the year. The first is, in standard cloud infrastructure, those companies providing those services in particular, are continuing to invest for sure. And that, and so when we're seeing our recent results, we're seeing growth in both AI and standard cloud infrastructure, and we see that continuing throughout the year.

And then as it relates to the on-prem piece, which has been very depressed relative to just what's happened with traditional server shipments over really the probably the last eight quarters or so, we do, we do very much see a bottom in our, in our first quarter in that business. And so that's gonna be part of the growth throughout the rest of the year, as well as some of that coming back normalized levels. And that ties back to Willem's comment earlier about some of the gross margin improvement we can look forward to as those businesses recover. So I see growth in all three kind of from here, but with different dynamics driving those. Thanks.

Your next question comes from Tom O'Malley of Barclays. Your line is already open.

Good afternoon, guys. Thanks for taking my question. Matt, this one's for you, and it's sort of a follow-up from the AI day. So you talked about wins and kind of training, inference, and CPU, and when you look into the future, could you talk about, you know, if you think any of the three are more or less defensible? Do you think you could be over-indexed to any of those? I know that you, you've spent a lot of time at the AI day saying this is really a process that both involves your chip design as well as the customer's design. So I understand that where flags are planted today, there may be some defensibility, but just could you talk about those three opportunities and where you see more defensibility and where you may see some more success?

Yeah. Hey, hey, Tom, thanks for the question. I think I would, you know, bucket them all largely in the same camp, okay? And what I mean by that is, if you're in the data center custom silicon market, as we are, and providing a wide variety of solutions, Raghib showed those types of solutions on a slide at the AI Day, plus a bunch of other ones, right, that we're involved in. But these are, you know, multiyear development cycles. These are multiyear or multigenerational types of engagements we have, because you're talking about developing literally the most state-of-the-art semiconductor products in the industry. You know, some of these are 100 billion type of transistors and up. It's the most advanced packaging, the most advanced process node, the most advanced IO.

As a key partner, you know, we have to be able to put all that together for the customer and then actually deliver it in high volume, with high yield, high reliability, as well as have the parallelism to be working on the next generation. These plans typically get set, you know, well in advance. You know, the first wins we talked about on these custom programs was in 2021, Tom, and then we're sort of looking out to the 2024 ramp we're seeing. I'm talking about calendar now, and then really 2025 for kind of full year. So and that's moving heaven and earth, you know, with the engineering teams in both companies. So there these are very defensible, very sticky sockets when you partner and when you do a great job.

And I wouldn't, you know, sort of put one over the other. There's various dynamics within all the different kinds of custom silicon investments our customers are making with us. But in general, you know, once we're in, and we are, and we prove our execution and our partnership, it typically leads to the next one. So I feel really good about our position there, and, you know, and so does Raghib, and that's why we're very confident in our ability to drive share gains over the next few years. And if the market really develops, like I think we all think and hope it will, it will be very meaningful for Marvell. So thanks for the question.

Your next question comes from Quinn Bolton of Needham. Your line is already open.

Thank you. Hey, Matt, just wanted to, I guess, to come back to the gross margin question. Obviously, I understand the ramp of custom compute is a bit of a headwind, but when you talk about sort of the pressure on margins as custom compute ramps, can you just level set us? Are you kind of talking relative to the long-term model of 64%+, or are you sort of talking about pressure from sort of the July quarter guidance level of 62%?

Yeah, thanks for the question, Quinn, and the clarification. Yeah, we're really talking about in the short term here, as we think about these custom programs ramping and what that's gonna do to our business, you know, starting in Q2 and through this year. You know, we have a mix of different business models and different product lines, as you know, and we're in a period right now where, you know, the custom piece, as Willem indicated, which does drive tremendous operating leverage, does carry a lower-than-corporate average gross margin. So in the near term, as we see a very strong ramp and inflection on that business with the sort of more margin-rich businesses taking longer to recover, I think that's what we're trying to say.

You know, we've successfully managed for some time now, you know, the ability to drive a healthy gross margin across the portfolio of products, but we still gotta kinda get through this post-cyclical period we're in and get back to a period of normalcy in terms of demand. And I think when that happens and you see those other ri-- margin, more margin-rich businesses return to their run rates that they were at and then grow from there, I think we'll have a much healthier margin profile. But that's really, that's really sort of beyond, I would say, you know, the next few quarters. And that's really what we're just trying to signal to everybody and on how to think about the business as you model it in the near term.

Willem, do you have anything to add?

No, I think that's perfect, Matt. Nothing else.

Okay, thanks.

Your next question comes from Ross Seymore of Deutsche Bank. Your line is already open.

Hi, guys. Thanks very much for asking the question. Wanted to get to the cyclical parts of your business. Matt, you talked about kind of a slow recovery and the combination of the enterprise networking and carrier business. Just wondered if they're dropping so hard and so abruptly over the course of a couple quarters, why would it be such a gradual increase? Usually, if you have those kind of big drops, you'd have big step-ups.

Are you just being conservative in that? Is there share loss? Just what sort of slope would you expect in that recovery? And I think last quarter you said they should get to be billion-dollar businesses, individually, so $2 billion overall. The timetable for that is, you know, can you get there next year? Is it further off? Any color on those two topics would be helpful.

Yeah. No, it's a great question, Ross, and maybe I'll give you one example. So to answer the first part, yeah, I think we're taking a—you know, given the magnitude of the drop, we are taking a conservative view on the recovery slope. I would say until we really see the bookings and the backlog laying in, and I'd say when it's here, it'll be much easier to call. I know that sounds a little bit snarky, but it's not. It's just the reality is, when something drops, you wanna be a little thoughtful about the recovery. But that being said, I've seen this pattern, too, and in fact, look at our consumer business. You know, it had a down Q1, and now it's doubling going into Q2, right?

As that inventory worked through and we realigned and so that was like a, you know, that was a fairly quick one. On those two dynamics, it it's probably important for me to take a second on what we're seeing there in both the carrier and enterprise markets. And we do, and I do see those returning back to their to kind of a, you know, call it $2 billion combined, $1 billion each, run rates. But it's very different, I think, the paths and maybe a little counterintuitive in terms of what we're seeing, but here it goes. On the carrier side, you know, the overall environment, the end environment with operators and capital spending still looks very weak, you know, and it still looks depressed.

However, you know, we have some of our own growth drivers in this market, in particular on the wireless side, with some new content ramping. And in this area, we've actually seen bookings and demand improve in terms of the outlook for later this year. And so when you start getting those orders, for the second half and really kind of into Q4, it starts to give us a lot of confidence in that return to growth, even in sort of a broader, more depressed environment. So that one, counterintuitively, we're feeling pretty good about just in terms of, because we're seeing the order activity. On the enterprise side, it's a little bit different. The end market commentary continues to strengthen, which is good.

Our end customers are talking about improvements in their order backlog, in their sales activity, and they're also starting to modestly work down their own internal inventory and even talk about their customer inventory starting to work down. So that's positive. But I think given the magnitude of the inventory out there, we still haven't seen that recovery is, you know, yet. And so, you know, hopefully, that's helpful in terms of how you think about modeling it. But I'm hopeful within the, you know, the next quarter, we'll have a much better visibility on the second half for both of those businesses. But I'd say, kinda to my surprise, carrier started to pick back up first, but we do expect enterprise to follow. The question is when?

But I'd say if anything, if you—like the carrier example, it wasn't share loss, it was actually share gain we've got going forward. It's just a tough, depressed environment at the moment. But all of our, you know, indications are they will return to growth, and hopefully we'll have a better second half.

Thank you.

Your next question comes from Blaine Curtis of Jefferies. Your line is already open.

Hey, guys, thanks for taking my question. Actually, my question was similar to Ross, but I, I was wondering, you did a pretty good explanation there, if you could talk in data center, right? So outside of the laser optical, if we know the ASIC ramp is gonna be what it is, I'm just kinda curious, the cyclical correction. I thought you said storage was up year-over-year, but I think it's a pretty easy comp. So if you look at kinda storage and kinda the other bits of data center that aren't the AI and optical, what kind of cyclical correction is going on there? How much... I don't know if you can comment on how much is down and kind of are you seeing any improving trends there as well?

Yeah, no, great, great one to add, Blaine, actually. You know, although we don't break it out exactly, I reviewed all these numbers heading into the call. So you're right, year-over-year comps are pretty easy, I guess, but it's still a positive trend for sure, overall in storage, in that, you know, we saw our bottom there in the first quarter a year ago, and it's seen very steady improvement, actually, each quarter since. But kinda to Ross's question, it hasn't hockey sticked up, but it's been growing nicely, and that's on the total storage portfolio and within data center storage. So all that's coming back, which is great. And again, the end customer commentary, particularly on the hard drive side, seems very encouraging.

So as they work down again, the inventory that they had accumulated, those end market signals, at least from what we're picking up at the end customer level, are starting to look bullish as well. So we're hopeful that and that feeds mostly that storage business feeds the data center part of it, but that is part of our growth we're expecting as well in the second half, although the majority of it's gonna be continued ramp in AI, for sure, Blaine. But storage has been a nice one that's been on the recovery path. I'd say slow and steady, but back on the path to the levels we think it should be at.

Thanks.

Yep.

Your next question comes from Harlan Sur of J.P. Morgan. Your line is already open.

Good afternoon. Thanks for taking my question. On the optical side, you know, you guys are benefiting from the strong growth in 800G support, all these AI build outs. 1.6T starts later this year with your lead partner, NVIDIA. Is optical driving quarter-on-quarter growth here in July and through this year, given that this is the profile of your customers, sort of GPU and compute ASIC deployments? And then secondly, you've got a lot of other potential upside drivers, right, in optical. For example, it's right around this time for some of your cloud customers to start the broad data center networking footprint upgrades to 400G, 800G, especially with your Teralynx 10, you know, Broadcom's Tomahawk 5 platforms shipping this year.

That will drive, I think, some incremental growth for your 800G DSP solutions. And then on top of that, you have two new customers that I think are gonna fire on your 400 ZR DCI solution. So I guess the follow-up question here is: Are you starting to get some visibility on some of these potential upside drivers in optical?

Yeah, excellent question, Harlan. I think you actually got the narrative pretty well nailed down, but maybe some additional comments. I'd say on the short term, the way to think about the optical business into July is, you know, we're modeling it right now, and our guide is flattish to slightly up. And the reason for that is, you know, it outperformed pretty big, both in Q4 and Q1. So in fact, I'd say since last year, once sort of ChatGPT hit and the whole AI thing hit. We've been beating those numbers every quarter, and we're positioned from a supply standpoint to do that. But it's just, it ramped up very fast, and it's continued to hold there and outperform.

So as we look into July, we're modeling it to be flat to slightly up. It may do better. You know, let's see where the order trends come in. But year-over-year, you know, we'll be very strong. Because also in the second half, to your point, those traditional standard cloud infrastructure build-outs and upgrades are going to happen, and so that's part of our model as well in the second half, is seeing standard cloud infrastructure ramp on the optical business. You know, and then we've got our switching portfolio you mentioned. And then also ZR, we've engaged with, you know, multiple customers now. That's probably more of a next year thing, but again, some contribution this year. And then we've got AECs as well.

So there's a lot happening in this area, and that's why when you look at sort of Marvell in the second half of this year, you know, we guided the whole company up 8% for Q2. And, you know, when I look at the second half, you know, total company is gonna be up, you know, more than that, in Q3 and Q4, with growth accelerating, primarily driven by data center and AI, and primarily driven by the trends, all of which you mentioned, are dynamics that we see. So yeah, we see a great setup for the second half. Very, very optimistic for the second half.

I appreciate that. Thank you, Matt.

Yep.

Your next question comes from C.J. Muse of Cantor Fitzgerald. Your line is already open.

Yeah, good afternoon. Thank you for taking the question. I guess, Matt, wanted to follow up on your prepared remarks, where you talked about increasing optimism on the custom silicon prospects and funnel. And I guess, you know, as you think about that, is that visibility to units? Is that visibility to winning next-gen projects at existing customers? Is it selling, you know, additional silicon content to those customers, or are you also potentially seeing greater breadth of vertically integrated players, you know, contemplating their own silicon? Thanks so much.

Yeah, thanks, CJ. Yeah, no, the comment was really focused on the existing design wins we have that are ramping into production for this year, and that right now, those are all doing better than we thought. Even, even from certainly last quarter, when we talked about the business or even from the AI Day, all of those have strengthened in terms of the total revenues we expect, both this year and next year from those businesses. So, I think the demand remains very strong for, for, for AI, both for custom silicon and for optics and for the whole portfolio. And, we, we have, we have not seen that slow down. We've only seen our customers raise their estimates on us and their requirements, and so we're working with our supply chain partners and making sure we can, we can meet it.

And then on the—I'd say additionally to that, though, the customer engagement side and momentum remains very strong. You know, we're in execution phase on a number of new programs, many of which we talked about at the AI Day. So yeah, we're heads down, teams driving technology, driving innovation, driving the schedule, and it's a pretty exciting time to be in the part of this market, in the semiconductor industry right now, and have such a unique role. So yeah, activity is off the charts, both demand, revenue, and design wins. Thanks.

Your next question comes from Tore Svanberg of Stifel. Your line is already open.

Yes, thank you. Matt, I had a question on PCIe. What exactly are the company's ambitions there? I mean, it's a concentrated supplier base today. I think the largest competitor is getting into the market as well. So, how big is this market? What are your ambitions from a share perspective? And when should we see the earliest revenues for PCIe?

Yeah. Hey, hey, Tore. Thanks for the question, and, you know, for us, we really look at this as a, as an incremental opportunity to leverage our core capability in, in, PAM-based DSP design. And we've known about this market for some time, obviously, you know, as you, as you know well, 'cause you're really deep in this stuff, but people can just look at it. You know, this is PCIe Gen 6, so there was retimers on Gen 5 and Gen 4 and Gen 3 and so forth. I mean, I remember working on this kind of stuff back when I was at Maxim, okay, for, like, early PCIe.

So I've sort of been around this market, and the thing that we've looked at always at Marvell, going back a couple of years, was on the PCIe Gen 6 transition, which is happening now on the products that we announced or sampling, is when the modulation scheme moves from NRZ to PAM. And so that was our decision to intercept this market at this juncture. And I would just say, you know, that I think it's a proven market size. I think it probably grows from where it was, you know, in Gen 5 to Gen 6. It'll be led by probably a lot of the... Just like the rest of the market, a lot of the AI stuff first, and then when the standards are sort of formalized and ratified, then you'll see it in broader adoption over the next couple of years.

But we intend to be, you know, a player here. It plays to our strengths. It's in our wheelhouse, and we have world-leading capability in this area. And so, and it's a perfect fit to our whole connectivity portfolio. And as you think about us. We are the one-stop shop in terms of connectivity solutions for our customers across the board. When you think about optical DSPs, AECs, these retimer products, you name it, you know, we have the breadth of technology and breadth of product offering, and it's proven, and people know what they're dealing with. So, we're optimistic. It's early, Tore. It's still a, you know, emerging standard, but we definitely have a lot of customer interest, and that's why we announced the products today. Thanks.

Thank you for that.

Your next question comes from Srini Pajjuri of Raymond James. Your line is already open.

Thank you. Matt, my question is also on custom silicon. I guess, you know, you're ramping pretty aggressively second half of this year, and you said, you know, the first full year of ramp is gonna be next year. I'm just curious. I'm guessing most of these ramps are 5-nanometer design wins. I'm just curious as to how long each generation typically ramps, and then when you go to the next generation, I'm just trying to understand how the transition typically works. Because, you know, if you look at the largest GPU supplier, they have kind of switched from a 2-year cadence to 1-year cadence. I don't know how the custom silicon programs that you're engaged with are, you know, how your customers are thinking about the cadence of those products.

I, I guess just trying to understand how long should we expect the current generation to ramp, and then when they actually ramp down and then when the next generation starts, how should we think about that transition?

Yeah, yeah. Thanks, Srini. And kind of the first point you mentioned, yeah, the ramp is very steep this year. You know, we talked about at the AI Day, exiting this year at a $200 million+ run rate on custom. So very strong. You know, these are, you know, for kind of full year, these are probably 2+ year kind of cycles once they hit. I would just say that without talking about specific engagements, I'd say that the custom side is as keen on making sure they're at the next node and have the latest technology just as fast as the biggest merchant supplier as they want to complement their offerings.

So that's where some of the comments I made earlier around it being in execution mode on next generation products and design activity, you're gonna see that same trend. But for at least the current ones we have now, if that's part of your question, we have very strong visibility over the next couple of years on the 5-nanometer programs. You know, the 3-nanometer, you know, design pipeline and, and wins have been very strong, and then we're already, you know, deeply engaged on 2-nanometer. So it's almost the way it's working now is you've got 5 in production and 3 sort of in flight, and 2 is the next one.

And how all that plays out, Srini, is still a bit dynamic, but you're gonna see the same kind of intensity in terms of R&D and technology requirements on the custom side as you see on the merchant side. You just have to meet the power and TCO requirements that the market needs. And we're well positioned to go do that and support our customers on it. And they're very motivated to make that happen as a way to, you know, have both, right, in terms of the breadth of their spend, and AI is gonna require them to have both types of solutions, both from the leading merchant supplier, as well as augmenting with their own. All right, thank you. I think we got a couple more questions here.

Yeah. Your next question comes from Christopher Rolland of Susquehanna. Your line is already open.

Hey, guys. Just a quick follow-up on the PCIe retimer, and then my question. Just if you had any idea on the TAM and how you're viewing that market, that would be great. But my question is really around storage, enterprise networking, carrier, you know, some of your and wireless carrier and consumer. Of these markets, they've previously been driven by product cycles, a lot of them, you know, whether it's consoles or 5G or campus upgrades or, you know, nearline drives. Are there any product-specific drivers for these markets that can get them beyond a cyclical recovery that you've identified?

Yeah. Thanks, Chris. Let me on the first one, yeah, we haven't spelled out the TAM yet. We thought it was a bit early when we were doing our AI Day to do that, but it'll be... It-- It-- you know, our view is it was significant enough of an opportunity to enter the market and develop the products, and that's something we can provide information on in the future. But there's, quite frankly, pretty good market reports out there that you're probably very- But that's something we can provide in the future for sure. On the product cycle side, you know, some of these are really gonna be driven by us in terms of our own design wins. You know, the carrier is a good example, both on adding an additional socket that ramps up.

That's content gain, right? As well as there, once the wired side picks up as well, there'll be a nice transition from 400G to 800G coherent. So we've got those going on. Those are, those are two examples. I think consoles are what they are. You know, and then in networking, you know, we've just been gradually, over time, increasing our share, increasing our content. You know, I don't see that changing, but we've always kind of said that business is, you know, GDP plus kind of grower in terms of a market, and we can do better. Now, we had several years there where we were going, like, 20% or 30%. We had some really nice performance in terms of the share we were able to capture.

But from here on out, I think we've consistently said it's just all we. In fact, we've always said, even we sort of say it and then we beat it, but it's always, I think, better to be conservative on the enterprise side in terms of modeling, which is, you know, call it mid-single digit, kind of a grower as a market, and we can do a little bit better. That's once all the inventory and all that stuff is normalized. I don't see any major product cycle there other than just, you know, as multi-gig continues to ship more than one gig, we get an ASP uplift. And in the switching side, you know, the ASP per port goes up as the bandwidth goes up.

So there's some nice trends there, Chris, but I think we did a good job of establishing a very solid footprint from a share perspective. And so the model going forward should really be kind of, you know, market growth plus our own content and, you know, modest share gain. I think with that, we've got one more question, then we can wrap it up.

We will take our last question from Atif Malik of Citi. Your line is already open.

Hi. Thank you for taking my final question. Matt, in response to Harlan's question, you talked about optical, you know, flat to slightly up on 800G. I'm curious, when are you thinking about the volume adoption of 1.6T, and what is holding that, if it's not the DSPs? Are the lasers not ready, or is it just waiting for the Blackwell?

Yeah, great. Thanks, Atif. I think the way to think about it is just timing relative to the system builds, our customers' qual schedule, you know, their ramp, you know, et cetera. So, it's, yeah, this one at the moment doesn't have. It's not a, I mean, I remember all these issues in the past, right? You know, there was a green laser problem, there's this problem or that. There's always some issue in this optical space. But this time it's really everyone's going a million miles an hour trying to get their products ramped. Our module partners are ramping up with our solution. Our end customers that are driving this are going as fast as they can.

So it's just more of a timing issue, that we need to intercept the platforms as they're ramping, and we're doing that. So think of that as sort of shipments, you know, in the back half, but really contributing much more meaningfully next year on the 1.6T transition. But it's definitely underway, and we see a clear path to help enable, right, this part of the, you know, this next generation of accelerators, to be able to ship in volume with the latest, you know, optical standards. And we're at the forefront and in the lead in that regard. So yeah, it'll be later this year and then more volume next year, and it'll, I think, be a big product cycle for us.

I think with that, that would be the last question. So, I think we can wrap up the call from here. Thanks, everybody, for your interest in Marvell and in the company, and look forward to seeing all of you, you know, in the coming months. And Atif, I'll see you probably in September at the Citi conference. So all right, take care, everybody. Thanks.

Ladies and gentlemen, this concludes our question and answer session. Thank you for attending today's presentation. You may now disconnect.

Good afternoon, and welcome to Marvell Technology, Inc.'s Second Quarter of fiscal year 2025 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Mr. Ashish Saran, Senior Vice President of Investor Relations. Please go ahead.

Thank you, and good afternoon, everyone. Welcome to Marvell's second fiscal quarter 2025 earnings call. Joining me today are Matt Murphy, Marvell's Chairman and CEO, and Willem Meintjes, our CFO. 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 10-K and 10-Q filings. We do not intend to update our forward-looking statements. During our call today, we will refer to certain non-GAAP financial measures. A reconciliation between our GAAP and non-GAAP financial measures is also available in our earnings press release.

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

Thanks, Ashish, and good afternoon, everyone. For the second quarter of fiscal 2025, Marvell delivered revenue of $1.27 billion, above the midpoint of guidance, driven primarily by strong demand from our data center end market. Higher revenue, combined with disciplined expense control, drove non-GAAP earnings per share of $0.30, also above the midpoint of guidance. Revenue in the second quarter grew by 10% sequentially, and we are projecting significantly higher sequential growth for the third quarter, with all our end markets expected to grow. Achieving the midpoint of our third quarter guidance would also result in a return to year-over-year revenue growth for Marvell. Let me now discuss our results and expectations for each of our end markets.

In our data center end market for the second quarter, we drove record revenue of $881 million, growing 92% year over year and 8% sequentially. These above guidance results were driven by strong demand for our electro-optics products, custom silicon beginning its anticipated ramp, as well as growth in our storage and switch revenue. Strong bookings continue for our market-leading 800G PAM products and 400 ZR data center interconnect, or DCI products, and we are looking forward to starting shipments of our next generation 200G per lane, 1.6T DSPs in the third quarter. As a result, we expect our electro-optics revenue will continue to grow every quarter this fiscal year on a sequential basis. We are also looking forward to addressing a number of new opportunities within the data center.

We have begun initial shipments of our 100G per lane, 800G DSPs for active electrical cables, or AECs, and we are anticipating the production ramp to accelerate in the second half. In addition, we recently started sampling the industry's first 200G per lane, 1.6T AEC DSPs to address upcoming higher speed, short reach, copper interconnect applications. Accelerated servers are turning to PCIe Gen 6 technology, which needs higher order PAM4 modulation. Given our leadership position in PAM technology, customers are turning to Marvell to enable this transition, and we are now sampling our new PAM4 -based PCIe Gen 6 retimers.

As you can see, we are continuing to broaden our end-to-end product portfolio to address all the critical interconnect needs of our data center customers, positioning us to take full advantage of an interconnect TAM, expected to grow at a 27% CAGR to $14 billion by calendar 2028. We are confident in our ability to continue to lead the industry in power and performance with our current optical DSP and DCI franchises, while we expand into new opportunities, including AEC DSPs, PCIe retimers, silicon photonics, and longer distance thousand-kilometer reach DCI modules. As a result, we expect to maintain a leadership position in this large and fast-growing interconnect market. We are making significant progress in bringing Compute Express Link, or CXL technology to the market, having recently introduced two new families of CXL devices to address memory bandwidth and memory capacity challenges in next generation servers.

In our cloud security business, we were pleased that Microsoft will begin integrating Marvell's FIPS 140 Level 3 compliant Liquid Security hardware modules in their Azure Key Vault offerings. These products offer Azure's customers the most secure encryption and key management services in a cloud platform. Let me now turn to our custom silicon business. As investment in AI and accelerated computing continues to surge, Tier 1 cloud providers are increasingly focused on using custom silicon to improve their data center TCO and drive differentiation. AI is accelerating the cadence of new chip releases, resulting in shorter design windows and faster time to production, accompanied by significant increases in complexity with each new generation. This trend is driving cloud customers to partner with companies like Marvell, who have extensive experience in delivering multiple generations of high volume, high complexity, leading-edge chips developed using robust design methodologies.

Additionally, cloud customers are seeking access to our differentiated and field-proven technology platform, which include ultra-high-speed SerDes, Arm Compute, optimized HBM interfaces, security, storage, die-to-die interconnects, silicon photonics, and advanced packaging. Customers are also adopting concurrent product development with staggered platform launches to produce silicon on an annual cadence. This approach reinforces the value of a trusted silicon partner like Marvell, who has decades of processor expertise and can take on greater design responsibilities. As a result, the nature of our customer engagements is shifting from point design wins to multi-generational relationships. Our AI custom silicon programs are progressing very well, with our first two chips now ramping into volume production. Development for new custom programs we have already won, including projects with a new Tier 1 AI customer we announced earlier this year, are also tracking well to key milestones.

Looking ahead to the third quarter of fiscal 2025 for our data center end market, we are forecasting revenue growth to accelerate into the high teens percentage sequentially. We expect the largest contributor to this growth will be our AI custom silicon programs as they begin to ramp meaningfully in the third quarter, further augmented by ongoing growth from our optics portfolio. Now let me turn to Marvell's enterprise networking and carrier end markets. In the second quarter, enterprise networking revenue was $151 million, while carrier revenue was $76 million. As expected, these end markets reached a bottom in the first half of this fiscal year, and revenue from both end markets collectively was flat sequentially in the second quarter. Looking ahead, after multiple quarters of inventory digestion, we are starting to see signs of growth for our revenue in both end markets.

In the carrier end market, we have begun receiving orders for our next generation 5nm based OCTEON 10 DPUs from multiple customers. In enterprise networking, our customers have started to see growth in their orders. We have seen increased bookings for our enterprise products. As a result, for the third quarter, we project our aggregate revenue from enterprise networking and carrier infrastructure to grow sequentially in the mid-single digits on a percentage basis. While this forecast still anticipates Marvell product shipping below end market consumption, our order momentum has picked up. On a combined basis, we expect sequential revenue growth from carrier and enterprise networking to further improve in the fourth quarter. Turning to the consumer end market, revenue in the second quarter was $89 million, growing 112% sequentially, following the gaming inventory correction we expected in the prior quarter.

Looking ahead to the third quarter, we are expecting revenue from the consumer end market to grow slightly on a sequential basis. Over the next couple of years, we anticipate our revenue from the consumer end market to normalize at approximately $300 million annually, with the majority coming from our custom SSD controller for a leading game console platform. As a result, seasonality of gaming demand will be the primary factor driving our quarterly revenue profile for the consumer end market. Turning to our automotive and industrial end market, revenue in the second quarter was $76 million, declining 31% year over year and 2% sequentially. These results reflect broad inventory correction taking place across the automotive end market.

Looking ahead to the third fiscal quarter, we expect growth to resume and are projecting revenue from the auto and industrial end market to grow sequentially in the mid-single digits on a percentage basis. In summary, the Marvell team executed well in the second fiscal quarter, driving 10% sequential top-line growth, delivering both revenue and non-GAAP earnings per share above the midpoint of guidance. AI led the way, with data center revenue almost doubling year over year. Our consumer revenue recovered, more than doubling sequentially, and we believe that our enterprise networking, carrier, and auto and industrial end markets found their bottom in the second quarter. As you may recall, at the beginning of fiscal 2024, we outlined the large opportunity developing in AI and accelerated infrastructure, even as we saw a slowdown in our storage, enterprise networking, and carrier end markets.

We outlined our plan to aggressively reprioritize our investments toward the highest ROI opportunities, including strategic roadmap adjustments and combining some of our businesses to reflect changes in the market. This strategy has led to an expansion in our data center TAM and increased pace of new product releases targeted at this market. As we outlined at our AI Day, we plan to continue pivoting our resources towards what we believe to be a once-in-a-generation opportunity. Within data center, we expect custom silicon to be the largest revenue growth driver, given the size of the opportunity and our expanding design win portfolio. We believe continued success in custom silicon will accelerate our timeline to achieve our target operating margin model.

Although custom has a lower gross margin than our merchant products, it benefits from inherently lower operating expense levels given NRE offsets from customers and the sharing of IP with our merchant business. As a result, as custom silicon becomes a larger part of our overall revenue, we see a path for operating expenses as a percentage of revenue decreasing below our current target operating model. For the third quarter, we are forecasting consolidated revenue to grow 14% sequentially at the midpoint of guidance. We expect this growth to be primarily driven by data center AI, and further augmented by the start of a recovery in our enterprise, networking, and carrier end markets.

Given the strong start in the first half of the fiscal year from AI and our expectations for accelerated growth in the second half, we remain confident in our ability to significantly exceed the full year AI revenue target discussed earlier this year at our AI event. The Marvell team is executing on all fronts. We expect our AI custom programs to continue ramping up. Our bookings continue to strengthen, and we believe that we have secured capacity and set up our supply chain to drive strong revenue growth in the fourth quarter and the next fiscal year. We are also excited to see our hard work showing up in our financials, strong cash flow generation, which is funding increased capital returns to our stockholders. With that, I'll turn the call over to Willem for more details on our recent results and outlook.

Thanks, Matt, and good afternoon, everyone. Let me start with a summary of Marvell's financial results for the second quarter of fiscal 2025. Revenue in the second quarter was $1.273 billion, exceeding the midpoint of our guidance, declining 5% year-over-year and growing 10% sequentially. Data center was our largest end market, driving 69% of total revenue. The next largest was enterprise networking with 12%, followed by consumer at 7%, carrier infrastructure at 6%, and auto and industria l at 6%. GAAP gross margin was 46.2%. Non-GAAP gross margin was 61.9%. Moving on to operating expenses. GAAP operating expenses were $688 million, including stock-based compensation, amortization of acquired intangible assets, restructuring costs, and acquisition-related costs. Non-GAAP operating expenses were $456 million, in line with our guidance.

GAAP operating margin was -7.9%, while non-GAAP operating margin was 26.1%. For the second quarter, GAAP loss per diluted share was $0.22. Non-GAAP income per diluted share was $0.30, $0.01 above the midpoint of guidance. Non-GAAP EPS grew by 25% sequentially. Now, turning to our cash flow and balance sheet. Cash flow from operations in the second quarter was $306 million. Our inventory at the end of the second quarter was $818 million, decreasing by $8 million from the prior quarter. On a year-over-year basis, we have reduced our inventory by $198 million or almost 20%. We returned $52 million to stockholders through cash dividends.

In addition, we repurchased $175 million of our stock during the second quarter, an increase of $25 million from the prior quarter. We expect to further increase repurchases in the third quarter of fiscal 2025. Our total debt was $4.13 billion. Our gross debt to EBITDA ratio was 2.29x, and net debt to EBITDA ratio was 1.84x. As of the end of the second fiscal quarter, our cash and cash equivalents were $809 million, decreasing by $39 million from the prior quarter. Turning to our guidance for Marvell's third quarter of fiscal 2025. We are forecasting revenue to be in the range of $1.45 billion, ± 5%. We expect our GAAP gross margin to be approximately 47.2%.

We expect our non-GAAP gross margin to be approximately 61%. For the third quarter, we project our GAAP operating expenses to be approximately $693 million. We anticipate our non-GAAP operating expenses to be approximately $465 million. For the third quarter, we expect other income and expense, including interest on our debt, to be approximately $46 million. We expect a non-GAAP tax rate of 7% for the third quarter. Please note that we forecast our non-GAAP tax rate in fiscal 2026 to step up to 9% in anticipation of a meaningful year-over-year increase in our operating income. We expect our basic weighted average shares outstanding to be 867 million, and our diluted weighted average shares outstanding to be 875 million.

This outlook marks an anticipated sequential reduction in our share count, reflecting the positive impact from our ongoing stock repurchases. We anticipate GAAP income per diluted share in the range of -$0.09 to $0.05. We expect non-GAAP income per diluted share in the range of $0.35-$0.45. At the midpoint of guidance, we expect revenue in the third quarter to grow 14% sequentially. This is driven in large part from a ramp in our custom AI products. Although this is driving a sequential decline in our non-GAAP gross margin outlook, we project our non-GAAP earnings per share to grow by 33% sequentially at the midpoint, more than twice the revenue growth rate. As our custom programs expand, we expect to continue to drive substantial operating leverage to the bottom line.

We are pleased to forecast sequential growth returning to all our end markets, with our AI data center revenue continuing to grow rapidly. As we drive revenue growth and operating leverage, we also remain focused on strong cash flow generation and returning increasing amounts of capital to investors through our active stock repurchase program. Operator, please open the line and announce Q&A instructions. Thank you.

We will now begin the question-and-answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. In the interest of time, please restrict yourself to one question only. If you have additional questions, please rejoin the queue. At this time, we will pause momentarily to assemble our roster. Your first question comes from Tore Svanberg with Stifel. Your line is now open.

The strong results. Matt, could you just elaborate a little bit more on your comments there at the end about the operating leverage to gross margin? You know, I think we all know that the custom ASIC business, gross margin is lower, but because of the NREs, it's also very operating margin accretive. So maybe you could just elaborate a little bit and perhaps give us some milestones, you know, especially in relation to certain revenue run rates.

Yeah, thanks, Tore. Hey, I'll have Willem lead off on this one, and then I can comment at the end.

Yeah, Tore, I think, you know, when you look ahead here beyond the Q3 guide, really see gross margin for the next couple of quarters remaining in a similar zip code. You know, I see when you look, there's a couple of dynamics there. First of all, we expect the custom programs to continue ramping very nicely, and that's obviously got lower gross margin. But then we see the recovery and the growth in our core merchant products really mostly offsetting that. And then in addition, we see some really good leverage and additional absorption in our manufacturing over it as the top line is growing. So we think where we guided in Q3 is sort of the right zip code for the next couple few quarters here.

Your next question comes from Toshiya Hari with Goldman Sachs. Your line is now open.

Hi, guys. Thank you so much for taking the question. Matt, you talked about, you know, your confidence in exceeding or significantly exceeding the full year AI revenue target you guys shared a couple of months ago or several months ago. The incremental strength you're seeing in that business, is it you're seeing it both in custom compute as well as your optics business, or is it more skewed toward the custom compute business? And if you can speak to your visibility into next year as well. I think your target was $2.5 billion going into next year. Should we see continued upside to that number as well? Thanks so much.

Yeah, great. Thank you. Yeah, first of all, the demand has been extremely strong in the AI business, as we mentioned, both in custom and in our optics business, and that's the 800G products as well as traditional cloud, as well as DCI. So that's all going extremely well. And for next year, that should absolutely ripple through. We see continued strength next year, you know, above what we had communicated relative to the target for next year, both in custom and in optics and the broader portfolio. So very pleased with the progress. Demand has been strong.

Bookings momentum has been extremely strong, and we have a great setup here in the second half, that's gonna lead us to what we think is gonna be a very strong fiscal 2026 for Marvell in AI.

Your next question comes from Timothy Arcuri with UBS. Your line is now open.

Thanks a lot. Matt, I'm wondering, since you're giving us these, you know, AI targets, I'm wondering if you can give us a little more granularity in the, in the actual numbers that you report. What was the AI revenue in July? I'm thinking it was close to probably $300 million, and custom was probably $50 million, something like that. Can you just give us some sense, is that about right? And then can you give us some sense of where you think AI will be in October, and maybe should we expect custom at-- Sounds like custom is gonna tick up maybe $100-$125 million Q1Q. Are those numbers in the right ballpark?

Yeah, maybe just to keep it at a higher level for the broader investors on the call here, Tim. I, you know, we had set targets of $1.5 billion for this year and $2.5 billion for next year. As I said earlier, both custom and electro-optics are contributing. It was what we said was at the AI Day, you know, just what? Three, four months ago, about two-thirds of the $1.05 billion was in electro-optics, the other one-third was in custom, and so both of those are doing better. Obviously, the custom is back-end loaded, but we're going through a very strong ramp right now.

So you know, we're not calling those numbers out typically by quarter, but all I can tell you is both of them have upsized, both in terms of aggregate revenue we're going to achieve next this year and next year, as well as the slope of the ramp in custom continues to be very strong. And I'll leave it at that for now.

Your next question comes from Ross Seymore with Deutsche Bank. Your line is now open.

Hi, guys. Congrats on the strong results and guide. Willem, one potentially for you, and, and, I appreciate the commentary on the gross margin stability at the current level through the end of this year, but could you give us an idea of what the puts and takes would be for next year? I mean, we know the custom stuff carries lower margins, and it sounds like the merchant business is coming back. But I think a big concern people have is just how should we think about the revenue growth relative to the gross margin next year, as accretive as it may be in most of those scenarios on the operating line either way?

Yeah, I think the way to think about that is for that trend to really continue into next year. And so, you know, not guiding the full year next year, but I think it's in that similar zip code, where, you know, we continue to see good growth from both optics and then the recovery in the merchant products really offsetting the continued growth in custom. And then in addition, as you see that top line growing nicely, we do continue to get that benefit from better absorption. And then overall, you know, when you look at you know our OpEx management, you know, we're gonna continue to be very disciplined looking at next year.

And so, you know, we do expect to drive a ton of leverage and operating margin down to the bottom line next year.

Thank you.

Yeah. Hey, Ross, if I could just add, you know, as Willem said, I think the GM side needs to play out. We need to see where this non-AI data center demand recovers to. We're very pleased with the third quarter guide of mid-single, and then in enterprise and carrier, that growth improving, you know, from Q3 to Q4, so growing even a little bit faster. You know, bookings have picked back up. We're laying in backlogs, so that's all a positive sign. And then, of course, we've got to get into next year to see where those traditional core businesses really recover to. That's going to be one factor. As we said earlier as well, we anticipate a lot higher revenue next year, so that's going to help on sort of manufacturing overhead absorption.

And then, to the extent how much, you know, custom is really going to be, that's going to be a factor as well. So we're looking at all that. That does need to play out a bit, but as Willem said, we're very confident in our OpEx management and our plan on spending there relative to our outlook for next year. And so we're very excited and feel very confident in the path to our operating margin targets that we've set, kind of independent of where that GM lies. So that's where we're headed right now, Ross. There'll be more to come as these markets recover. Thanks.

Thanks, Matt.

Your next question comes from Vivek Arya with Bank of America. Your line is now open.

Thanks for taking my question. Matt, I was hoping to get your views on the competitive landscape in the two parts of your AI business, so both on the DSP side and in custom silicon. On the DSP side, do you see any captive or merchant competitors challenge Marvell's dominance as the industry transitions to 200G per lane or these 1.6 transceivers? And then similarly, in custom compute, do you see any competitive changes from your Taiwan competitors? I know a little bit out there in 2026 when the industry moves to the 3nm node, but I was just hoping to get your views on any changes in the competitive landscape in the next one to two years in these two important parts of your AI business. Thank you.

Yeah, yeah, no problem, Vivek. Let me maybe break it into the two pieces you mentioned. So on, on the DSP and optics side, you know, look, it's been a competitive market. We got into this, as you all remember, through the acquisition of Inphi. And there's been, you know, these competitive dynamics from the beginning. Now, this market has gotten big, right? So that would sort of only intensify. But we've consistently maintained a very high market share in this area through the integration of Inphi into Marvell, and now as we're positioned going forward, primarily because, one, we've executed extremely well from an engineering standpoint, and also we have the full platform, which includes DSPs, the broadband analog components like drivers and TIAs.

You know, we have the complete architecture and solution and also the partnerships with the module vendors as well as the hyperscalers directly. And finally, I would say we continue to have a best-in-class roadmap as well in terms of the cadence, the power, and the performance that we're delivering. So we feel very good on these transitions. As an example, we went through the 100G transition very successfully. The 200G one's in front of us. We're going to start shipping those products this quarter, our 200G per lane, 1.6T DSPs, and we feel very well positioned. It's going to be competitive, Vivek, but the team is actually really excited about what we can go off and do with the platform we have.

And on custom silicon, you know, I think our thesis is playing out in that, you know, given the, you know, tremendous increases in complexity of these chips, it's not about just having one piece of it, like a design service piece or a manufacturing capability, but it's everything. It's having the best-in-class technology roadmap in terms of nanometers, advanced packaging, I/O, et cetera, and then the ability to actually go execute these products. These are hundred billion transistor type of chips, and so to package them up, get them to yield, ship them into volume, be ready to work on the next one in parallel, it's a massive sort of effort. And so we think that still is going to be the winning strategy.

And when we look at it from that point of view, we really have one large competitor that's very capable in this area as well. And we do think long term, given the amount of activity we see in AI, especially on the custom side, it's going to require really scaled-up, full solution providers and partners like Marvell to compete. So that's the current status of those two from a competitive dynamic. Thanks, Vivek.

Thank you, Matt.

Your next question comes from Matt Ramsay with TD Cowen. Your line is now open.

Thank you very much. Good afternoon, everybody. Matt, I wanted to ask a longer-term question on your custom compute business. My antennas went up a little bit. One of the lines in the script, I think, was something to the effect of not just single-generation relationships, but multi-generation relationships with some of the customers in the custom business. And so I wanted to explore that a little bit as we do get questions from investors on not the programs that are ramping now, but the subsequent generation and how confident you are in those. So maybe you could speak to that. And I think the second part of the question, as you're evaluating custom programs and compute, this isn't a question for just your company, but for your competitor as well.

How much visibility do you guys get and when to the software that will be run on those compute engines as they're deployed? I think that's pretty important in evaluating what volume might end up being or not being versus merchant suppliers. Thanks.

... Yeah, no, thanks, thanks, Matt. And I think your, you know, your question is one we get. I mean, I think since we won these designs, there's been a lot of noise, you know, in this area, in custom, in terms of from some of our international competitors in particular. I mean, look, the reality is, despite wherever, whatever's been said so far, we have executed these programs. They've upsided tremendously from when we won them, and even as we signaled over the last year and a half, and now they're ramping into production.

We, in all of our engagements across the board that we see as we get deeper into this, there is absolutely a desire on the part of these customers to have a multigenerational view, because the amount of work you put in to do one of these, it's a diminishing return to pivot too quickly, assuming you're doing a great job. So we feel very good about it, Matt, is the bottom line. We have multiple engagements across multiple generations on different types of ICs that we're doing for these customers. We just announced, as an example, at the last AI Day, we had won an additional customer for AI Silicon, and all of those are tracking well. So that's all I can say at the moment.

I think you got to also look at what the results are and what our outlook is, and if you believe the thesis I gave you around what's important relative to being a long-term, reliable partner that's going to be there for the long term over multi-generations, we think we're extremely well-positioned. Thanks, Matt.

Your next question comes from Christopher Rolland with Susquehanna. Your line is now open.

Hey, guys. Congrats on the results. I have an Inphi question primarily, and Matt, you talked about 1.6T. That's pretty exciting that, if I understood that correctly, you're going to be ramping in 3Q. Perhaps you can talk about the profile of this ramp, what it looks like in 3Q, 4Q, and into 2025. I think the street's all over the place on this note, but if you could talk about that, and, you know, maybe even the economics, what it means for you guys, that would be fantastic. Thank you.

Yeah. Hey, thanks, Chris. Yeah, it's still early. You know, we were first to market in this area, having, you know, introduced these products, you know, at OFC, you know, a year ago. It's great to see that they're going into production. You know, we'll know a lot more when we start to see how our customers are planning to deploy it, but we are seeing initial shipments now. The way I would think about it, though, is 800G right now and into next year and through next year is still going to be the workhorse, high volume platform. Even some of the newer launches that are coming, as an example, are going to still support 800G as well as 1.6 T. So it's really hard to call exactly.

It's going to be an important transition. There's no question. The only question is the timing of which, and Chris, I think we'll be in a better position to comment on that probably as we get closer to the end of the year. We start looking at the setup for calendar 2025 and what our customers are thinking, but either way, you know, we're going to be well-positioned for both of those opportunities for next year.

Thanks, Matt.

Yeah.

Your next question comes from Harlan Sur with J.P. Morgan. Your line is now open.

Hey, good afternoon. Thanks for taking my question, and good to see the strong growth outlook. You know, we've seen multiple quarters now of strong growth in nearline HDD to the cloud, and, you know, those guys continue to expect anticipated growth sort of going forward. In addition to that, you guys have, I think, numerous next generation PCIe Gen 5 enterprise SSD platforms ramping. I know it's been a couple of years, but I think those ramps are finally starting to happen. Is this all kind of contributing to the second half strength in the data center business? And then more on the memory side, you know, as customers are thinking about next gen HBM4E, sort of these next generation architectures, there is the potential for customization on the base advanced logic die. It's a fairly complex piece of silicon.

You guys have a lot of IP here. I'm wondering if you're winning any custom ASIC opportunities for some of these upcoming programs.

Yeah, thanks, Harlan. Yeah, let me take the two pieces. On the first one, we're very pleased to see the recovery in data center storage. I think we're on, like, the sixth quarter now of the turn, which is great. You know, we bottomed out last year. It was a pretty severe downturn that we saw. It's been growing basically every quarter, and we see this trend back over time. We had called it basically as getting back to, like, $200 million a quarter. It's not there yet, but it's on its way, and that's had a nice recovery. It hasn't been too spiky. It's just kind of been slow and steady on the way back up. As inventories consume, that supply chain revitalizes.

Quite frankly, it's great to see the end market commentary because that just gives us more confidence on that return over time. And then I, you know, even actually, you know, had it in my prepared remarks as one of the key, you know, offerings that we have on our, on our ASIC and AI platform is, we think, as you mentioned, that, you know, HBM and how to stitch all that together from a memory interconnect standpoint is going to be extremely important. And it's complex, and it's going to be, I think, a key part of the solution, just given how memory intensive, the current set of accelerators are, but also how they're looking at positioning for the next generation.

That's a key IP that Marvell is developing and that we'll bring to the table as part of our platform offering for AI accelerators from a custom standpoint. Thanks.

Great. Thank you.

Your next question comes from Aaron Rakers with Wells Fargo. Your line is now open.

Yeah, thanks, for taking the question. I wanted to ask about the, the data center switching opportunity now that the, the 51.2T silicon is in the market. Just, you know, if you could give us kind of a, a thought of, like, how we should expect that to ramp, appreciating that's more in the next fiscal year. But, you know, any kind of visibility in terms of how, how we should think about, you know, that opportunity to participate in, in these AI fabric build-outs going forward at Marvell? Thank you.

Yeah. Hey, Aaron, thanks for the question. You know, we outlined this opportunity at the investor day we did for AI. And basically, on the 51.2 T cycle we're in, you know, we think we're well positioned. We had great success from an engineering standpoint to get the product to market pretty quickly relative to integrating the Innovium asset into Marvell, and then bringing that product out with the full Marvell 5nm platform. We see strong interest, not only on the 51.2 T generation that we're now starting to go into production this year with a lead customer, but also our roadmap, we believe is very compelling as well.

And while we're a smaller player here today, we do have tremendous interest in this platform, and we think it's very strategic to Marvell, relative to our investments in custom silicon, in being the leader in interconnect, and also even driving future technologies like silicon photonics. So to bring it back around, we're not quite sizing it yet in terms of what it can be. It's still early from the standpoint of when that technology is actually gonna go into full bore production, but we think we're doing well, and we look forward to providing updates on that, Aaron, as kind of this develops. But, we feel good right now. Thanks.

Thank you.

Your next question comes from Srini Pajjuri with Raymond James. Your line is now open.

Thank you. My question is about the traditional businesses, Matt. It's nice to see both of them recovering, and I think you're guiding for sequential growth into Q4 as well. Given that they're down so much, I think one's down 50%, the other's down almost 70% from its, you know, last year's levels. I'm just wondering how to think about the normalized run rate on a quarterly basis, and when do you think we'll get there? And then once we get there, you know, how do we think about, I guess, longer-term growth of these businesses? Thank you.

Yeah, great. Thanks for the question. And, yeah, you're right, those businesses have been down significantly from a year-over-year perspective. Some of that is due to also the overshoot that went on in sort of this post-pandemic, you know, fueled, build-out that occurred, and also all the dynamics we've seen across the industry, right? Relative to, people over ordering and then having too much inventory and then having to go deal with it. The good news is, we've now seen that business, after a flat first half, pick up, you know, guiding both enterprise and carrier up mid-single for the third quarter and then growing faster than that in the fourth quarter, and that the bookings have improved as well. So that's all positive.

The way to think about it is we're trying to drive both of those businesses back, and we believe we have line of sight to drive both of those businesses back to about $1 billion each. Call it $2 billion in aggregate, maybe $2.2 billion of run rate on an annualized basis. We hit the bottom in the first half. It's coming up in Q3, coming up in Q4, and we're monitoring the setup for next year, but we do believe that is very achievable. That's the plan right now.

And then long term, if you go back to all of our investor days, probably for the last, you know, four or five years when we've done them, we've always signaled these markets to be kind of low- to mid-single-digit growers, and then with, as a from a market standpoint, and then with some content or share gain, you know, you can do a little bit better. 5G was a great example. We had very little content in 4G. We rocketed up in 5G. That changed the trajectory. But going forward, in that kind of a business as well as, say, enterprise, you should assume the market grows at a fairly, fairly modest rate.

I think for investors to think about our growth rates in those areas, you know, being in those types of ranges, maybe whatever, you know, mid-single kind of plus, if you can, if we can continue to execute, I think that's fairly safe. They're not gonna be great, you know, enormous growth markets necessarily, but they are very accretive and they're very, they're very profitable businesses for Marvell, and they're important because they're long-term and they're part of the portfolio. So that's some additional color on how to think about it. We are investing there. We're gonna make sure that we continue to grow those businesses. But if you just step back, we've got 70% of our revenue today in data center. We've got a great, great opportunity with AI and accelerated infrastructure.

We're continuing to pivot our R&D in that area overweight, and we think that from a financial return standpoint, this is the best place to put our precious R&D dollars. And so that's the way to think about Marvell going forward, only getting bigger in data center and really maintaining and driving a very healthy enterprise and carrier business, long term. Thanks.

Thank you.

Your next question comes from Quinn Bolton with Needham. Your line is now open.

Hey, Matt, I'll ask a question, but if you don't answer it, maybe I'll follow up. You know, you guys are talking about, you know, nice upside to the $1.5 billion and $2.5 billion targets for AI. Is that something you think you're closer to $2 billion than $1.5, when all is said and done this year? I mean, can you give us any sort of quantification of the upside in AI revs? And if not, I'll follow up with a product question.

Yeah, I don't think we're sort of fresh off the one point five update from, you know, a few months back when we had our AI Day. But I think if you look at the even like Q3, right, where overall revenue for the whole company is growing in mid-teens, and then obviously guiding up, you know, data center, you know, much higher than that, with AI driving it, and then saying also Q4 is gonna be extremely strong in data center and AI, you know, you can probably draw a line of sight to it, but we're clearly exceeding the 1.5, that's for sure. And then again, the setup for next year is really good, 'cause from an exit standpoint, you know, we'll be at a very healthy level by the fourth quarter.

The product question, if you don't mind answering, just kind of thoughts on the latest DCI traction. I know 400G is ramping now. Are you seeing demand or starting to ship 800G ZR? And, you know, of the total electro-optics business, is DCI kind of 10-20% of that total product portfolio, or is there a different percentage you might give us?

Yeah, I don't think I can give you a percentage, and quite frankly, I'd have to get out a spreadsheet and calculate it, because as you know, we have many franchises now across this interconnect platform. But I would say it's that business has just done extremely well, Quinn. I mean, if you look at where that business was when we acquired it, they were. Inphi had basically been, you know, one customer at 100G, with, you know, and I think you know back then it was about a $100 million-ish kind of business. You know, it's just grown dramatically as we've kept the 100G, and then we've added in 400G, and we've added in additional customers. So it's become a very important and strategic business for Marvell.

And then, to your point, in front of us, that roadmap is getting invested in very aggressively, both at 800G and then longer term, 1.6 T for DCI. So each of these different key technologies that we have now in interconnect, they're going gangbusters today, but there's also a next generation and the generation after, you know, N plus two out, that we're investing in very aggressively to maintain market leadership. Yeah, thanks a lot. I think we got two questions left, operator.

Yes, your next question comes from Harsh Kumar with Piper Sandler. Your line is now open.

Yeah. Hey, guys. First of all, let me just give my congratulations on very strong guide. The story is coming along, all business is turning. Matt, I wanted to ask you. You seem extremely enthusiastic about custom ASIC, near term as well as next year. Could you talk about some of the major drivers or major products, however you wanna do it, that are hitting, that's giving you this optimistic viewpoint of the near mid and call it even the next year outlook?

Yeah, well, I think as we had outlined in the past, you know, there's been several programs that we won, you know, a broad range of them, actually, in custom silicon for data center. And then the ones that were levered to AI, you know, have just taken off, and you're starting to see that in our financials. And so, I mean, maybe not to make it too simple, but the reason we're excited is we're getting bookings, and we have backlog and we're, you know, planning our capacity ramps for next year, and we're talking about the next generation.

And so I think, you know, this was, these went from design wins a few years ago to trying to execute NPI and get the chips taped out, to then trying to get them qualified and make sure that they worked, you know, they worked relatively quickly, once they came back, which they did, and now they're ramping. So it's just part of the evolution. But, I mean, it feels really good when you have backlog and you have bookings, and you have a strong outlook from your customer, and you're planning your future together. So that's really it.

I mean, I can't go into what they're using it for and their workloads and all that kind of thing, but the conviction from our customers on the programs we have are very strong in terms of their commitment to deploy and to deploy very aggressively, using us, using their chips plus Marvell as their key partner. And we'll go let them get all the glory as they deploy and they achieve their silicon ambitions with us, kind of in the backdrop to make sure we're there to help them, but let them go do what they need to do.

Got it. Thanks, Matt. Congratulations.

Yeah, hey, thanks. I think we have one more.

Our last question comes from Karl Ackerman with BNP Paribas. Your line is now open.

Yes, thank you. Good afternoon, and thank you for squeezing me in. Could you talk about the breadth of cloud titans you have ramping 800G electro-optics that anchors your view on the second half? And given your industry-leading position in electro-optics, have you seen growing evidence that U.S. cloud titans are seeking to diversify the procurement of optical transceivers outside of China? I ask because that would appear to be a share opportunity for you. Thank you.

Yeah, thanks, Karl. I'd say just broadly, you know, we're, you know, market share and aggregate is pretty high for us in this area, so we tend to be engaged pretty much with everybody. And I think that trend you mentioned about, you know, supply chain diversification and, you know, kind of concerns about geopolitical risk across the supply chain, you know, by the hyperscale customers is a real thing. They really care about it. What I would say is there are efforts from both international suppliers into that space of modules, as an example, to diversify their supply chains, and also the U.S.-based folks trying to make sure that they have a supply chain as well that's acceptable. So, you know, look, we're happy to work with everybody.

We've driven a very broad ecosystem of partnerships, and I think in any case, you know, we should be just fine. I'm not sure there's gonna be any major shift. You know, this has kind of been going this has been underway for many years, quite frankly, relative to just those concerns you mentioned being out there. So we've kind of tracked with those pretty well, and we've stayed, I think, very competitive and very neutral relative to how to support everybody and ship as much revenue as we can. So thanks for the question, Karl, and I think that's it. Anything else, Willem or Ashish?

Yeah, I think that's it. Thanks, thanks, Matt.

Okay, operator, I think we can end the call. Thanks, everybody, for joining. Really appreciate it, and I look forward to all the catch-ups, you know, in the call-backs and then also when we're on the road at the conferences. Thanks, everybody.

This concludes our question and answer session. Thank you for attending today's presentation. You may now disconnect-

After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Mr. Ashish Saran, Senior Vice President of Investor Relations. Please go ahead.

Thank you, and good afternoon, everyone. Welcome to Marvell's third fiscal quarter 2025 earnings call. Joining me today are Matt Murphy, Marvell's Chairman and CEO, and Willem Meintjes, our CFO. 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 Form 10-K and Form 10-Q filings. We do not intend to update our forward-looking statements. During our call today, we will refer to certain non-GAAP financial measures. A reconciliation between our GAAP and non-GAAP financial measures is also available in our earnings press release.

I am pleased to announce that our next Investor Day will be held in New York City on June 10, 2025. More details will be shared in an upcoming press release. Let me now turn the call over to Matt for his comments on the quarter. Matt?

Thanks, Ashish, and good afternoon, everyone. For the third quarter of fiscal 2025, Marvell delivered revenue of $1.516 billion, $66 million above the midpoint of guidance, growing 19% sequentially, with the outperformance driven by strong AI demand and execution. As a result, our non-GAAP earnings per share of $0.43 was also well above the midpoint of guidance, growing by 43% sequentially. This earnings growth rate, which was more than double our top-line growth rate, highlights the substantial operating leverage in our business model. Stronger-than-forecast ramp in custom silicon was a key contributor to this performance. We believe that continued success in custom silicon will help accelerate our timeline to achieve our long-term target operating margin model. On a year-over-year basis, third-quarter revenue grew by 7%, marking a return to year-over-year growth for Marvell.

I'm very pleased with our results and even more excited about our outlook for the fourth quarter, where we project revenue growth to accelerate to 26% year-over-year growth at the midpoint of guidance. Marvell is entering a new era of growth, driven by the substantial volume production ramp of our custom silicon programs, along with continued strong growth in optics. Yesterday, we announced the expansion of our strategic relationship with Amazon Web Services through a comprehensive multi-generational five-year agreement. This multi-generational agreement encompasses a broad range of Marvell's data center semiconductors, including custom AI products, optical DSPs, active electrical cable DSPs, PCIe retimers, data center interconnect optical modules, and Ethernet switching silicon solutions. Additionally, Marvell will collaborate with AWS for EDA in the cloud, leveraging the advanced and scalable compute capabilities of AWS to accelerate silicon design.

This agreement represents a significant step up in the expected volume of business between the two companies in the coming years, and we look forward to working with AWS on custom AI and networking semiconductors that meet the demanding needs of accelerated infrastructure. Let me now discuss our results and expectations for each of our end markets. In our data center end market for the third quarter, we achieved record revenue of $1.1 billion, growing 98% year-over-year and 25% sequentially. These strong results were driven by a significant step up in our custom AI silicon ramp, as our customers saw increasing demand for the differentiated capabilities offered by these new custom AI chips. We are seeing strong custom AI demand continue into the fourth quarter and have secured supply chain capacity to support our customers' growth forecasts.

Our success in ramping these highly complex, 100 billion+ transistor chips, from initial samples to high-volume production on first-pass silicon without any respins, is a testament to Marvell's robust design methodology and world-class engineering team. Our seasoned operations team and deep partner relationships were key enablers of the rapid ramp we were able to drive in a constrained supply environment. The superb execution is a significant time-to-market advantage for our customers and has given them even more confidence to expand their collaboration with Marvell on their critical silicon projects. In the third quarter, we benefited from higher-than-forecasted revenue from our electro-optics products, which grew double digits sequentially on a percentage basis. We continue to see strong bookings for our market-leading 800GB PAM products, and we also began shipments of the industry's first 1.6T PAM DSP and 5nm process technology.

We continue to see a strong design win momentum with leading customers for this product and expect the production ramp to accelerate next year. To meet AI's insatiable need for the highest bandwidth at the lowest power, Marvell is accelerating the cadence of next-generation products. Today, we announced the industry's first 3nm 1.6T DSP, featuring 200 GB per lane electrical and optical interfaces. By leveraging 3nm process technology and advances in electrical and optical SerDes, this next-generation platform is designed to reduce 1.6T optical module power consumption by more than 20% compared to its predecessor, marking a significant improvement in energy efficiency. Marvell's DSP team remains laser-focused on driving best-in-class performance, schedule, and time-to-market to continue to remain the leader in this large and fast-growing electro-optics market.

In the active electrical cable market, we are starting to see an acceleration in the production ramp of our 100GB per lane 800GB DSPs with multiple module partners. We have also started sampling the industry's first 200GB per lane 1.6T AEC DSPs to address upcoming higher-speed, short-reach copper interconnect applications. Looking ahead to the fourth quarter of fiscal 2025 for our data center end market, we are forecasting strong sequential growth in the low to mid 20% range. We expect this growth to be driven by another significant step up in our custom AI revenue as these programs continue to ramp into high-volume production. This will be further augmented by strong growth from both our Ethernet switch products as well as our interconnect portfolio, which include optical DSPs, TIAs, drivers, AECs, and DCI products. Now let me turn to Marvell's enterprise networking and carrier end markets.

In the third quarter, enterprise networking revenue was $151 million, while carrier revenue was $85 million. We began to see a recovery in both of these end markets, with revenue collectively growing 4% sequentially. We expect the pace of recovery to accelerate in the fourth quarter, with aggregate revenue from enterprise networking and carrier infrastructure forecasted to grow sequentially in the mid-teens on a percentage basis. We are pleased to see our revenue growth and order momentum continue to improve in these two end markets, although this forecast still anticipates Marvell products shipping below end market consumption. Turning to the consumer end market, revenue in the third quarter was $97 million, growing 9% sequentially. Looking ahead to the fourth quarter, we expect revenue from the consumer end market to decline sequentially in the mid-teens on a percentage basis.

This is due to seasonality and gaming demand, which typically weakens in our fourth quarter, bottoms out in our first fiscal quarter, and then begins to rebound in the second quarter. Turning to our automotive and industrial end market, revenue in the third quarter was $83 million, growing 9% sequentially as we started to see a recovery in this end market. Looking ahead to the fourth fiscal quarter, we are projecting revenue from the auto and industrial end market to grow sequentially in the low- to mid-single digits on a percentage basis. In summary, the Marvell team delivered excellent results in the third fiscal quarter, achieving 19% sequential top-line growth and delivering both revenue and non-GAAP earnings per share well above the midpoint of guidance. For the fourth quarter, we are forecasting consolidated revenue to again grow 19% sequentially at the midpoint of guidance.

AI continues to lead the way, enabling our data center revenue to almost double year-over-year in the third quarter, and we expect it to continue driving strong growth in the fourth quarter. With three quarters of strong AI results under our belt for this fiscal year and an even stronger fourth quarter forecast, we are clearly set to significantly exceed the full-year AI revenue target of $1.5 billion outlined earlier this year at our AI event. Over the past several years, Marvell has strategically invested in technology, both organically and through acquisitions, to become a critical enabler of accelerated infrastructure. We have in place a full suite of solutions across data center interconnect, switching, and compute, and the ability to uniquely stitch these together into a unified platform.

Marvell's data center end market has grown to account for 73% of our consolidated revenue in the third quarter, driven by AI, and we expect this percentage to increase again in the fourth quarter. Marvell has rapidly transformed into an AI-first data center semiconductor company, and we are completely focused on taking full advantage of our strong position in the AI supercycle. In the third quarter, we made decisions to further solidify and purposefully redirect our investments towards data center relative to our other end markets. These actions resulted in a restructuring charge in the third quarter, which Willem will discuss in his section. The goal of these actions is to increase our R&D intensity towards the data center, our largest and fastest-growing opportunity, while continuing to drive significant operating leverage going forward. AI technology is advancing at a tremendous pace, and the opportunity is expanding rapidly.

We are continuing to enhance all aspects of our comprehensive technology platform, including electrical and optical SerDes, high-speed energy-efficient 2D and 3D, die-to-die interconnects, advanced packaging, and silicon photonics. In addition, we are optimizing interfaces for high-bandwidth memory, SoCs, and compute fabrics. Our 2nm platform is also progressing very well as we continue to lead the industry in cutting-edge process technology. Marvell's 2nm platform includes our broad suite of internally developed best-in-class IP to enhance performance, energy efficiency, density, and design flexibility. We are seeing tremendous interest from customers for next-generation 2nm designs. Turning to our non-data center multi-market businesses, which include carrier and enterprise networking, we are encouraged to see the recovery starting to gain momentum. As you may remember, we had invested heavily in these end markets over a long period to successfully gain share and have built an industry-leading portfolio of products.

We plan to continue investing in a targeted manner to grow revenue in these multi-market businesses. The Marvell team is firing on all cylinders, and we see a very favorable setup to significantly scale up the company. In addition to strong revenue attainment, the Marvell team is also driving outstanding financial results. This fiscal year, our revenue has grown by 31% from the first quarter to the third quarter. Over that same time period, we have demonstrated tremendous operating leverage, growing our non-GAAP EPS by 79%, which is 2.5x our top-line growth rate. We have driven strong operating cash flows, enabling us to step up our stock repurchases throughout the year. This fiscal year, we have cumulatively bought back $525 million through the third quarter and have plenty of remaining authorization.

As you may recall, earlier this year, our board authorized a $3 billion addition to our existing stock repurchase program. We are also focused on reducing our stock-based compensation expenses to 1% of revenue, and we expect significant improvement in this metric going forward. Given the strong revenue outlook for this fourth quarter and our expectations for robust growth in fiscal 2026, we believe we are well-positioned to deliver outstanding financial returns to our stockholders. Before I turn the call over to Willem, I would like to express my heartfelt thanks to Loi, a key member of my team and co-founder of Inphi. After a long and distinguished career in the semiconductor industry, Loi has announced his decision to retire in April of next year. Loi has made incredible contributions to Marvell over the past few years, including building a world-class team and deep bench of leadership talent.

He was instrumental in the successful integration of Inphi into Marvell in 2021. With his characteristic integrity and thoughtfulness, Loi has already engaged in succession planning and ensuring a smooth transition. We are also looking forward to Loi staying connected with Marvell after he retires so we can continue to benefit from his insights and expertise. We wish him the very best in his well-deserved retirement, during which he looks forward to spending more quality time with his family. And with that, I'll turn the call over to Willem for more detail on our recent results and outlook.

Thanks, Matt, and good afternoon, everyone. Let me start with a summary of Marvell's financial results for the third quarter of fiscal 2025. Revenue in the third quarter was $1.516 billion, well above the midpoint of our guidance, growing 7% year-over-year and 19% sequentially.

Data center was our largest in-market, driving 73% of total revenue. The next largest was enterprise networking with 10%, followed by consumer and carrier infrastructure at 6% each and auto industrial at 5%. As Matt mentioned in his prepared remarks, in the third quarter, we made additional decisions to further redirect investments towards the data center. This resulted in an aggregate restructuring charge of $715 million, which is reflected in our GAAP results for the third quarter. The two largest components were impairment charges for acquired intangible assets and certain purchased technology licenses and their future contractual obligations. I would also note that approximately three-quarters of these restructuring charges are non-cash in nature and that the aggregate restructuring charges are now largely behind us.

These charges are a reflection of the fact that we have invested significantly in updating our enterprise and carrier product portfolios over several years, and we plan on more targeted investments in these end markets going forward. Continuing to our results, GAAP gross margin was 23%. Non-GAAP gross margin was 60.5%, slightly below our guidance as we saw higher-than-forecast revenue from custom silicon. Moving on to operating expenses, GAAP operating expenses were $1.052 billion, including restructuring costs, stock-based compensation, and amortization of acquired intangible assets. Non-GAAP operating expenses were $467 million, in line with our guidance. GAAP operating margin was negative 46.4%, while non-GAAP operating margin was 29.7%. For the third quarter, GAAP loss per diluted share was $0.78. Non-GAAP income per diluted share was $0.43, three cents above the midpoint of guidance. Non-GAAP EPS grew by 43% sequentially, illustrative of the leverage in our business model.

Now turning to our cash flow and balance sheet. Cash flow from operations in the third quarter was $536 million, growing by a substantial $230 million from the prior quarter. Our inventory at the end of the third quarter was $859 million, increasing by $41 million from the prior quarter to support the significant growth we are seeing in our data center end market. We returned $52 million to our shareholders through cash dividends. In addition, we repurchased $200 million of our stock during the third quarter, an increase of $25 million from the prior quarter. Our total debt was $4.1 billion. Our gross debt-to-EBITDA ratio was 2.23 x, and net debt-to-EBITDA ratio was 1.76 x. As of the end of the third fiscal quarter, our cash and cash equivalents were $868 million, increasing by $59 million from the prior quarter.

Turning to our guidance for Marvell's fourth quarter of fiscal 2025, we are forecasting revenue to be in the range of $1.8 billion, ± 5%. We expect our GAAP gross margin to be approximately 50%. We expect our non-GAAP gross margin to be approximately 60%. For the fourth quarter, we project our GAAP operating expenses to be approximately $710 million. We anticipate our non-GAAP operating expenses to be approximately $480 million. For the fourth quarter, we expect other income and expense, including interest on our debt, to be approximately $46 million. We expect a non-GAAP tax rate of 7% for the fourth quarter. Please note that we forecast our non-GAAP tax rate in fiscal 2026 to step up to be in the range of 10% - 11%, in anticipation of a meaningful year-over-year increase in our operating income.

We expect our basic weighted average shares outstanding to be $867 million and our diluted weighted average shares outstanding to be $877 million. We anticipate GAAP income per diluted share in the range of $0.11-$0.21. We expect non-GAAP income per diluted share in the range of $0.54-$0.64. Marvell delivered strong third-quarter results, and we are guiding for significant acceleration in our year-over-year revenue growth in the fourth quarter. We see a strong setup for next fiscal year as well. We remain focused on continuing to drive strong operating leverage, expanding our operating margins, bringing down stock-based compensation as a percentage of revenue, and efficient cash flow generation to continue to return meaningful cash to shareholders. I'm also pleased with our guidance to return to GAAP profitability in the fourth quarter, and we are looking forward to continue to drive improvement in this metric.

Operator, please open the line and announce Q&A instructions. Thank you.

We will now begin the question-and-answer session. To ask a question, you may press star, then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. In the interest of time, please restrict yourself to one question only. If you have additional questions, please rejoin the queue. At this time, we will pause momentarily to assemble our roster. Your first question comes from Vivek Arya with Bank of America. Your line is now open.

Thanks for taking my question. Matt, I was hoping you could help quantify the AI revenues for fiscal 2025 overall, and then how we should start thinking about fiscal 2026 given the upside in fiscal 2025. And when you look at that fiscal 2026 funnel, what is that determined by? Is it demand visibility? Is it supply? So just more kind of quantification and color on these metrics would be very helpful. Thank you.

Yeah, hey, Vivek, thanks for the question. So just to calibrate everybody, we had our AI Day back several months back in April. We talked about $1.5 billion this year for AI and $2.5 billion for next year. Last quarter, we updated that and said we were tracking ahead. And as you can see from our third-quarter results and fourth-quarter guide, for this year, we're tracking significantly ahead now, both for this year and for next year. And this is for this year on the order of hundreds of millions of dollars. So the business has done fantastic. It's actually had stronger-than-expected results, I think, every quarter this year.

And so again, a very strong outlook for next year. And to your question about the funnel and what's driving it, it's demand. I mean, on the supply side, we've done a great job of aligning with our partners. We're extremely well-positioned to capture the plan we have and upside to that. And the team is all in to drive and support what our customers need next year, which at the moment looks very, very strong, both on the custom AI side, but as well as our optical interconnect portfolio and switching as well on a year-over-year basis. So firing on all cylinders, Vivek. Thanks.

Your next question comes from Ross Seymore with Deutsche Bank. Your line is now open.

Hi, guys. Thanks for asking the question. I guess first, congratulations to Loi on the retirement. And then if I may, just a clarification and then the question. I guess the clarification is, Matt, obviously, you've been very successful at Marvell, but that seemingly is getting noticed in the press with some other management opportunities. So I'll ask both questions at once, but could you comment at all on kind of your commitment to Marvell or looking elsewhere? And then my second question is more on the customer diversification. How do we think that the business diversifies, whether it's by multiple products in the custom compute or by customers as we go through calendar 2025 and 2026? Is it still the same timetable that you talked about at your AI Day, or have things moved around?

Yeah, thanks, Ross. And always appreciate your direct and frank nature of your questions. So a couple of thoughts. The first is, I've been CEO at Marvell now for eight years. And when I started here, this was a massive turnaround situation.

Many of you remember this. The enterprise value at that time, I think, had sunk to about $3 billion, and over the last eight years, me and my team have worked tirelessly, all out, to transform, drive growth, and position Marvell for what is now the biggest single TAM opportunity I've seen in my career, which is the AI supercycle and data center opportunity. I am all in, okay, on Marvell. We've got the best team at this company of people. The company's outstanding. The technology is best in class. I can't think of a better place to work than Marvell. Just let me be clear on this topic, Ross, for you and everyone that's listening. As the Chairman and CEO of this company, I am 100% focused on Marvell. Okay. With that said, customer diversification. Yeah, we're actually in great shape here.

If you go back to the AI Day and you look, we presented actually a range of design wins we had, both on AI accelerators and compute, as well as a variety of other custom opportunities. So the breadth is very good across multiple customers, across all of them, actually, with custom solutions. And we have multiple large volume opportunities driving us right now, both, and we called these out the AI Day, both on the accelerator side as well as the compute side. Both are tracking well with two different customers. There's other programs going into production next year. And then we have our third large customer coming in the future. So that's, again, another proof point or data point that gives us a lot of confidence in our ability to drive our long-term ambitions in custom silicon. So everything's tracking well.

The final thing I would say is on the technology front. I said in my prepared remarks, but very, very good progress on our 2nm platform, extremely complex and broad suite of IP that's best in class. That's also getting a lot of attention from our customers about not just the current sort of designs they're thinking of, but even beyond. Thank you.

Thanks, Matt.

Your next question comes from Harlan Sur with JPMorgan. Your line is now open.

Hey, good afternoon, and congratulations on the strong results and outlook. Matt, great to see the strong ramp in execution on your 5nm AI training custom solution at your large cloud customer. This customer has been articulating for several months now, right, the strong deployment strategy for these ASICs.

That same customer today announced its next-generation custom solution at 3 nm, which would be ramping, according to them, end of next year, so calendar 2025. Amazon, like many others, they're pulling in their AI program. So given what appears to be strong execution of your 5nm program and the total ramp by Marvell team, the multi-year agreement with this customer that was announced a few days ago, your characterization of sort of multi-generational roadmap with them, is it fair to assume that you will be the ASIC vendor supporting your customer on this next-gen 3nm training ASIC targeted to ramp late next year? The only reason why I ask is because there just continues to be a lot of competitive noise out there around this 3nm program.

Yeah, thanks for the question, Harlan. So first, we're very excited to see the role that custom silicon is playing. It's obviously in the news all the time. It's gained tremendous momentum, I'd say, even since our AI Day in terms of where we think that can go. So we see that as a validation of our strategy that we started many years ago, and it continues to be in full swing.

For everybody on the call, at our AI Day, we called a total TAM of $75 billion for data center, $40 billion of that being in custom silicon, and we set and the team set a 20% market share target on that $40 billion, so that's $8 billion. For context, we had said for this year, as part of our AI numbers, about $500 million from custom going to $1 billion next year, and of course, we're overshooting on those two right now.

So the way I would think about this is take your $500 million + this year, take your $1 billion + next year, draw a line to that bogey of 20% market share in the future. That's what we're driving. And the announcement we made with AWS is very significant for both companies. For us as a supplier to them, as you pointed out, first of all, it's a five-year agreement. It covers AI custom products as well as a broad range of networking products. It's significant in the revenue that it's going to drive for us. And most importantly, it is multi-generational in nature. So with this agreement and with these kinds of relationships that we're building with these customers, we have even more confidence than before to achieve our goals that we're driving. Thanks.

Yep. Great insights. Thank you.

Yep.

Your next question comes from Toshiya Hari with Goldman Sachs. Your line is now open.

Hi. Thank you so much for taking the question. Matt, I had a two-part question on your electro-optics business within the context of AI. I'm curious how you would characterize customer inventory levels of optical DSPs in the marketplace today. And I ask the question because I think some investors are a little worried about inventory build at your customer sites, particularly with tariff fears coming up. And then part B is if you can kind of speak to the 1.6T transition over the coming quarters and years and what that means for your content or your ASP expansion going forward. Thanks so much.

Thanks. Yeah. On the inventory side, look, the dynamic right now is we continue to have very strong demand, very strong bookings and order visibility, and a large quantity of orders continue to come in inside lead time. We built, through the pandemic and to today, a very robust supply chain capability, and so we're able to drive and meet the upsides of our customers. Look, on the overall picture, we always are mindful as best we can about optical module inventory, and this was even a concern if you go back a year ago as AI started to ramp, what was going to happen? Were people getting ahead of their skis, etc., so we continue to be diligent here and monitor, but as it appears right now, demand is strong, bookings continue to be strong, visibility is great. We expect that business to grow significantly for us next year.

On the 1.6T, as it relates to that, that will be part of the growth we see next year. We're shipping that product now into production. It'll be a contributor next year. But I don't want to take away from the very strong 800GB cycle that will continue to be driven through our fiscal 2026 next year. So far, so good.

Thank you.

Your next question comes from Blayne Curtis with Jefferies. Your line is now open.

Hey, thanks for taking my question and congrats on a great quarter. I actually want to ask on the enterprise and carrier. You've talked in the past, I think, about getting back to maybe $2 billion + run rate. I mean, carriers have been up, I guess, with the guidance now. You're looking at double digits two quarters in a row. So I'm just curious how broad-based that recovery is and if you can kind of how quickly do you think you can get back to that $2 billion+ run rate annually?

Yeah, thanks, Blayne. Yeah, we're going to get back to the $2 billion run rate. The question is when. And certainly, we're very encouraged to see that combined enterprise and carrier up 4% in Q3. But then if you think about Q4, we've got it at up mid-teens, which, a quarter back, we were sort of talking about double digits. So net-net between sort of in the second half, both those end markets together have recovered and grown faster than we thought, albeit still shipping below end market consumption, which is your question. And so that's going to continue through next year, that recovery, as both inventory is corrected, some end market growth resumes.

But also, we have some of our own unique drivers, which really is more pronounced in carrier than it is in enterprise. Enterprise would be more broad-based. In the carrier side, we're not really counting on a huge market recovery. It's really our own product cycles and specifically in base stations where we have a new socket that's ramping as a layer two processor. It's an incremental new socket. It's something we won a few years ago. It took a little bit longer than we thought to get into production, but it's in production now. So that's going to be a contributor, Blayne. And so between the two, we're just going to keep marching along and keep driving that business up. And really, as it recovers, it's really just a tailwind for us in terms of operating income and profitability and top line. And so we'll see how it goes.

We'll keep updating everybody on a quarterly basis there. But so far, so good, especially the plus mid-teens on the Q4 guide.

Thanks, Matt.

Yep.

Your next question comes from Tom O'Malley with Barclays. Your line is now open.

Hey, Matt. Thanks for taking the question. Congrats on the great results. I wanted to ask on some of the parts of the Amazon announcement. So AEC was mentioned, PCIe retimers, switching products. So you're hearing just a lot from other smaller companies that are seeing some big, robust revenue ramps. Could you just do your best to maybe size how significant those are for you today? And then when you look out kind of over the next 12 months, what area of those non-optical DSP businesses are going to be the most significant for you? Just generally, where are you going to see the most growth outside of that core optical DSP business?

Thanks, Tom. Yeah, so as part of the agreement, both the custom side and the networking side are extremely important. It's not massively swayed between the two. So on the networking side, all those product areas are in our wheelhouse, and they're all in various stages of maturity. Look, on the switching front, we had a great acquisition with Innovium. We announced our TL10 5nm 51.2T switch. That's gone into production. Interest is very, very strong in that product. More to come there, and also our roadmap, which we think is very compelling, and our team there has done an excellent job.

So that one, we think, has not only growth heading to next year, but on a long-term basis, we see that as being a very strong area for us. AECs is definitely a bright spot. That's an area that we're ramping now through our module partners. And we, again, see very strong take-up of Marvell Solutions into next year. And then some of the other more emerging categories are still to come, but those are areas we're investing in. So I think the way to think about it is as a five-year type of arrangement. There's just a lot of opportunity to drive innovation together, to drive new solutions, sometimes things we haven't even thought of. We're just very excited about what the two companies can do together.

And then with us as a customer of theirs, we've just seen great success in using AWS as our supplier for EDA cloud services. And it's allowed us to complete some very complex designs in very, very short time to market with very good burst capacity and performance. So the whole relationship is really a win-win. And it's really an honor for us to be associated with them. And the final thing I would say is I think it's also a testament to the all-in data center-first strategy that Marvell has put together. And to see that get recognized with a type of landmark agreement like this, I think, is really a good sign for us and for the team and for our investors. Thanks.

Your next question comes from Mark Lipacis with Evercore. Your line is now open.

Hi. Thanks for taking my question.

I also had a clarification and a question, if I may. I think, Matt, did you suggest $40 billion of custom AI TAM out of $75 billion? So does that suggest you believe custom is about half of the market, roughly speaking? And then the question is, how would you characterize the landscape, the competitive landscape for what you're doing on the custom side? How many companies can do what you guys do on the custom side? And maybe as part of that, can you help us understand why this is happening, why the custom silicon is becoming a thing? It seems just like five years ago, everything was run on a standard, every workload was run on a standard x86 server chip. And now you're helping your customers do custom silicon. NVIDIA has a whole bunch of different SKUs for Blackwell. Why is custom becoming a thing? Thank you.

Yeah. Thanks, Mark. So to refer back to the AI Day, so what we called out was a $40 billion custom TAM. Okay. And then of that, our goal is to drive 20% market share kind of plus. Okay. So that's the numbers. And then within that, we really see ourselves and one other very large, highly scaled-up competitor who can do these types of solutions. Now, there's going to be a lot of different ways that people are going to try to get there in terms of some of these custom approaches. There's already been a lot of noise in the system around these types of opportunities and applications.

Our strong view is that in the end, what's actually going to ship and represent the vast majority and bulk of the volume of shipments in custom silicon for accelerators is going to be from scaled-up companies like Marvell, the companies that have the IP, the combination of the IP roadmap internally, including SerDes and HBM PHYs and the Compute Interconnect and packaging. I can go on and on, but the capabilities is first. The second is a team, a team that's experienced enough to execute the design with A0 quality. What A0 means is first-pass silicon, which is incredibly hard to do when you're talking about 100-billion-type of transistor designs in the most advanced nodes.

The third part of that is you got to have the manufacturing capacity and capability and know-how to drive yield, to drive quality, and then be able to service the products once they get into the field to meet the dynamic needs that these customers have in terms of the supply chain. So when you stack all that up, the barrier to entry to actually ship one of these products is very high. And we know firsthand because we've done several of them now. So that's still the view we have on the competitive landscape despite what's out there. And then on the why, it really comes down to TCO. And it's not a zero-sum game. It doesn't mean that if somebody implements a custom silicon design, it's going to just completely usurp and take over whatever the merchant offering is.

These are going to coexist where there's workloads that are big enough that are going to get the bang for the buck on the optimization. It makes a ton of sense to go to custom from a TCO basis, and TCO is obviously the cost of the product and what it takes to implement it, as well as the performance you get, and the other factor is when you're doing a custom silicon chip. It's not just the chip. It's also our customer's network and the way they implement the solution and the way that they know better than anyone else how to get the maximum performance out of their system with the accelerator being one piece of it.

We try to be helpful to come in and not only be the partner of choice for the custom chips, but also come in with our point of view and our help around the interconnect and higher layer switching and ways to think about how to drive total cost of ownership at the lowest possible power. And so those are the dynamics, Mark, we see today. And we'll keep you updated, but it's only moving in this direction. And I think just based on the announcements this week and you can see in our revenues, the custom Trainium is definitely happening.

Next question.

Thank you.

Yeah, thanks.

Your next question comes from Tore Svanberg with Stifel. Your line is now open.

Yes. Thanks, Matt. Congratulations on the strong execution and also congratulations to Loi on his retirement. So you announced the Ara 3nm 1.6T DSP today. I think it's only about 18 months ago since you announced the Nova 5nm. So I was a little bit surprised about the timing there. Am I reading into too much in there, or is there something going on in the marketplace where there's a big push now towards 3nm and lower power? Any more color you can add on the timing of Ara would be great.

Yeah. I think what you're seeing is obviously the need for lower power consumption solutions for all the reasons you can see if you look all the way back up to the data center level and the power consumption of the data centers themselves. But the reality is, Tore, we need to move at hyperscale speed.

I mean, the beat rate that we think we need to be at to be competitive and to lead the market means we have to be faster and faster on our time to market, and I've been doing this for 30 years, okay, in the semiconductor industry, and I can tell you when you enter an inflection in a growth market, the company with the best and leading technology that's available, you can sample it, it works, is going to win. It's that simple, and so our team, which is the best in the world at what they do, is heads down, focused on driving the best possible solutions, the best TCO, the best power, and highest performance in the latest process node, and you're going to see that continue across Marvell, but particularly in this area of DSPs and broadband analog and the chipsets that we sell.

We intend to maintain our market share leadership and extend that and be the supplier of choice. It's as simple as that. We're going faster.

Perfect. Thank you.

Yep.

Your next question comes from CJ Muse with Cisco. Your line is now open.

Cisco? Cantor Fitzgerald, thank you for taking the question. Matt, I would add a question on overall custom silicon. I was hoping you could level set us. Where are we in terms of the total business versus just AI custom silicon? And is there any way to kind of size the total and the percentage for calendar 2025? And I know to an earlier question, you didn't want to give a growth rate for the AI portion, but perhaps you could speak to what kind of growth you foresee in calendar 2025 and 2026 for the non-AI part of the business.

Yeah. Hey, thanks, CJ. Yeah, I'm pretty sure you didn't go to Cisco since I think you just got a new job, which you're doing great at. So congratulations on that. On the - sorry. On your question about - sorry, I lost the question. I was trying to make a joke there. Tell me your question again one more time.

Total custom silicon versus AI.

Yeah, yeah. yeah. Got it. Yeah. Sorry. Look, for this year, we said this at the AI Day too, custom silicon this year and next year, it's largely driven by AI. It's the vast majority. But the other programs have come in, okay? So they're just - and what really happened is we have a number of programs. They've done well, but the magnitude of the AI and kind of the upside we've seen relative to the others has just been higher.

So vast majority is AI for this year, vast majority is AI for next year. But I wouldn't, and we said at the AI Day, I wouldn't sort of write off the other design wins we have because some of those, like we showed off a custom NIC with Meta as an example. That was, I think, a really good showcase we did at OCP. Those types of solutions are also going to come into the market and help drive our growth. And then on the non-AI, AI kind of custom, non-custom for this year and next year, I'm not really breaking that out.

I just say that by default, the growth rate is going to be higher on the custom side because it is a lower base and it has been ramping kind of in the second half, whereas optics and switching in those other areas has already been in the revenue line. But both are going to grow quite a bit next year and drive the top line.

Thank you.

Your next question comes from Chris Caso with Wolfe Research. Your line is now open.

Yes, thank you. Good evening. The question is on margins, and if you could help to level set us on the expectation for gross margins as we go into next year as that custom business ramps. And then I guess just as importantly on operating leverage as you go into next year. And I guess what you said in the past is that the custom business is very good on the operating margin side. How does that flow through the numbers as we go into next year?

Yeah. Great. I'll let Willem take that one. Willem, go ahead.

Yeah. Thanks, Matt. Hey, Chris. So let me just start by saying the team's done a great job driving gross margin at or above 60% here in the second half, even as we've been ramping the custom programs very significantly, right? And so when we look at next year, clearly the gross margin will continue to be dependent on mix. But we continue to see very strong optics growth next year, the recovery in our non-data center businesses, the leverage that we're getting from better overhead absorption on higher revenue on the manufacturing side.

And so when you add all that together, we do see a path to continue to be about 60% through next year. Now, obviously, if custom upsides even significantly more from what we're seeing today, that answer would be different. In terms of the leverage, when you look at our Q3 results, we came in at around 30% OM. And even with gross margin guide down about 0.5%, our operating margin is actually up to 33%, so up by 3%. And so when you look at our OpEx control, you should expect us to continue to have a very significant focus on leverage through next year with the top line outgrowing our OpEx right through next year. And so really should see a very nice increase in our operating margin through next year, really starting to approach the bottom end of our long-term range towards the end of next year.

Very helpful. Thank you.

Thank you.

Your next question comes from Atif Malik with Citi. Your line is now open.

Hi. Thank you for taking my question. Congratulations on hitting the next growth phase. Matt, I was listening to the other Matt Garman, AWS CEO at re:Invent today, and he mentioned that the Trainium chip can do both training and inference. So my question to you is, has your thinking about the sales contribution mix from the two programs that this customer ramp changed from 90 days ago?

No. No. I think we've been able to plan our business together very well with our key customers in this area, especially custom where you have to do that.

And so I would really defer to Matt and the team to talk about their dynamics, but we're prepared to completely support whatever they need. And we've got that in our manufacturing and supply plan, and we're going to go do it. That's probably all I can say. I usually stay away from any more detail about my customer's plan, so to speak. But thanks for the question. Appreciate it.

Thanks.

Your next question comes from Srini Pajjuri with Raymond James. Your line is now open.

Thank you. Hi, Matt. My question is also on the ASIC side. The Analyst Day you talked about 1/3, I think you called customer C ramping sometime in 2026. And I think you alluded to that opportunity being larger, potentially larger than customer A and customer B combined. And obviously, customer B seems to be doing quite well. So I'm just curious if there's any update on customer C, how the progress has been, and if you still expect that opportunity to be larger than the other two customers. Thank you.

Yeah. The short answer is yes. It continues to be the largest opportunity of the three. It's tracking well. There's great support from both teams, and we're executing. And unchanged from AI Day, other than I'd say just the whole, in general, custom silicon opportunity set just seems to have continued to gain momentum as each quarter goes on. And so we're very optimistic about what we can go achieve with that customer and also our other two customers we have and then their next-generation concepts. A lot to go do and go execute on, Srini. Thanks.

Thanks, Matt.

There are no further questions at this time. I will now turn the call over to Matt Murphy, CEO, for closing remarks.

Great. Thank you so much. And look, everybody, really appreciate all the thoughtful questions. Closing remarks. So as we finish the year here, we're very optimistic about our fiscal 2026. As we talked about, we have a full-year ramp of custom happening. You've got optics continuing to have a lot of momentum. Our switching business is growing, and then new areas like AECs are kind of just going into real volume production for the first time. We're also seeing a very strong recovery even in our fourth quarter and our multi-market kind of core base business. That's very encouraging in terms of profitability and top line and EPS contributions. We have a very targeted investment plan, and we're 100% focused on this AI supercycle opportunity and then really the capital allocation framework to support it.

I'm excited to have the Investor Day mid-next year to update all of you comprehensively with our updated long-term model given the sort of new era that we're entering into. As I said in the Q&A, me and the team are all in to drive outstanding service and support for our customers and also extremely strong financial returns for our stockholders. So I want to wish everybody on the call and who's listening a very happy holidays, and I look forward to seeing you all in the new year. Thanks, everybody. Take care.

Thank you for attending today's presentation. You may now disconnect.

Good afternoon, and welcome to Marvell Technology Inc.'s Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Mr. Ashish Saran, Senior Vice President of Investor Relations. Please go ahead.

Thank you, and good afternoon, everyone. Welcome to Marvell's fourth quarter and fiscal year 2025 earnings call. Joining me today are Matt Murphy, Marvell's Chairman and CEO, and Willem Meintjes, our CFO. 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 10-K and 10-Q filings. We do not intend to update our forward-looking statements. During our call today, we will refer to certain non-GAAP financial measures. A reconciliation between our GAAP and non-GAAP financial measures is also available in our earnings press release.

Let me now turn the call over to Matt for his comments on the quarter. Matt.

Thanks, Ashish, and good afternoon, everyone. For the fourth quarter of fiscal 2025, Marvell delivered record revenue of $1.817 billion, above the midpoint of guidance, growing 20% sequentially and 27% year-over-year. Our data center and market was the primary growth driver, fueled by strong AI demand and execution. In addition, we saw continued demand recovery across our multi-market businesses, including carrier, enterprise, networking, and automotive and industrial. I am pleased to report that we achieved GAAP profitability in the fourth quarter and expect this to continue in fiscal 2026. Our record non-GAAP earnings per share of $0.60 exceeded the midpoint of guidance, growing 40% sequentially. This earnings growth rate, double our top-line growth rate, underscores the substantial operating leverage in our business model. For the full fiscal year 2025, we delivered $5.77 billion in aggregate revenue, with our data center revenue growing 88% year-over-year.

We ended the year with our AI revenue substantially above our $1.5 billion target from April 2024's AI Day, and we also expect to very significantly exceed our $2.5 billion target in fiscal 2026. Our overall revenue growth accelerated in the second half of the year, driven by our custom silicon program ramps, along with continued strong growth in electrical optics. In fiscal 2025, we also drove a record $1.68 billion in operating cash flow and significantly increased capital returns to our stockholders through stock repurchases and dividends, totaling $933 million in aggregate. I'm extremely pleased with our fiscal 2025 results and even more excited about our outlook for robust year-over-year revenue growth in fiscal 2026. We are poised for a strong start to the new year, forecasting revenue growth of over 60% year-over-year in the first quarter at the midpoint of guidance.

Let me now discuss our results and expectations for each of our end markets. In our data center end market for the fourth quarter, we achieved record revenue of $1.37 billion, growing 78% year-over-year and 24% sequentially. These strong results were driven by our custom AI silicon programs ramping to high-volume production. Additionally, we benefited from strong shipments of our electrical optics products and Teralynx Ethernet switches, with revenue from both product lines growing double digits sequentially on a percentage basis. Within our electrical optics franchises, we continue to see strong demand for our market-leading 800G PAM products and our 400ZR DCI products. We also began shipments of the industry's first 1.6T PAM DSP and 5nm process technology. To further optimize AI interconnect performance, we accelerated the cadence of next-generation products by introducing the industry's first 3nm 1.6T DSP, featuring 200G per lane electrical and optical interfaces.

This new Marvell DSP enables customers to reduce 1.6T optical module power consumption by more than 20% compared to its predecessor, and we expect to go into production in the second half of this year as 1.6T adoption accelerates. While tremendous focus remains on GPUs and XPUs, the distributed nature of compute and AI makes connectivity just as critical as the individual processors. As a result, the design of the next generation of accelerated infrastructure is inexorably tied to how efficiently data can be moved on and off the accelerators and throughout the cluster. This increase in the role of high-speed networking and AI data centers is perfectly aligned to our strength as an industry leader and just like compute, hyperscalers are also customizing networking, and we are seeing similar momentum for flash-based storage, HBM, and CXL-based DRAM pooling.

We'd announced the design win at Meta for a custom NIC at OCP last October, and we are seeing hyperscalers more broadly adopting similar strategies. This is evident in our recent design wins, which now include multiple custom NICs as well as a follow-on custom CXL memory solution. We are also enabling new interconnect technologies such as CPO and LPO for scale-up fabrics and Coherent-lite DSPs for emerging campus-wide large-scale AI data centers. Earlier this year, we announced Marvell's breakthrough co-package optics architecture for custom XPUs, enabling customers to integrate optics into future custom accelerators. First demonstrated at OFC 2024, the heart of Marvell's CPO platform is our 6.4T 3D silicon photonics engine. It integrates hundreds of active and passive components in a single unified device and builds on multiple generations of silicon photonics innovations that we have been shipping in high volume in our DCI modules for several years.

Co-packaged optics can enable an increase in the size and scale of AI servers, which currently rely on passive copper interconnects. We expect this transition from copper to optical interconnects will significantly expand Marvell's interconnect revenue and market opportunities. We are engaged with customers to evaluate this advanced technology, and we anticipate a multi-year period of trial system development ahead of wide-scale industry adoption for CPO. Let me now turn to our current custom silicon programs. Marvell has successfully ramped highly complex 100 billion-plus transistor XPUs and CPUs from initial samples to high-volume production on first-pass silicon. Our custom business continues to gain momentum as customers increasingly rely on Marvell to help them achieve their custom silicon ambitions. As I mentioned, our two leading AI custom programs are in high-volume production, and we expect growth to continue.

One of these is a custom ARM CPU, which we expect will see expanding adoption in our customers' data centers. The second program is for a custom AI XPU, which is also performing extremely well, with significant volume production ahead. In parallel, we are fully engaged with this customer on the follow-on generation of this XPU and planning for a production ramp once it completes its sampling and qualification cycles. As a result, we expect our revenue from custom XPUs for this customer to not only grow this year, fiscal 2026, but continue to grow next year, fiscal 2027, and beyond. Additionally, we are making tremendous progress with the new design win announced at our AI Day in April 2024 for a custom AI XPU with an additional U.S. hyperscaler.

Marvell's engineering team, in close partnership with the customer, has successfully completed a number of key technical milestones during the joint development process. As a result, we believe we are well on track to meet our customers' desired schedule to start production in calendar 2026. This engagement is also multi-generational, and we expect it to result in a very significant amount of incremental revenue for Marvell over the next several years. I'm very pleased with our custom revenue achievement for fiscal 2025, driven by multiple program ramps. This success, coupled with strong progress on upcoming custom programs, gives us even greater confidence in our ability to achieve our long-term market share targets for custom revenue. We are continuing to invest in all aspects of our technology platform, including advanced process nodes, electrical and optical SerDes, high-speed die-to-die interconnects, embedded memory, custom HBM, 2.5D and 3D packaging, and silicon photonics.

This week, we announced the demonstration of the industry's first 2nm silicon IP for next-generation AI and cloud infrastructure. Produced on TSMC's 2nm process, this working silicon is a critical part of the Marvell platform for developing custom XPUs, CPUs, switches, and other technology critical for next-generation accelerated workloads. Now, let me turn to our outlook for our data center end market for the first quarter of fiscal 2026. We forecast that the cloud and AI portion of this end market will continue to drive sequential double-digit revenue growth. For the on-premise portion of our data center end market, we expect a seasonal sequential decline in revenue to partially offset growth from cloud and AI. As a result, we expect our overall data center revenue to grow sequentially in the mid-single digits on a percentage basis. Now, let me turn to Marvell's enterprise networking and carrier infrastructure end markets.

In the fourth quarter, enterprise networking revenue was $171 million, and carrier infrastructure revenue totaled $106 million. In the fourth quarter, we saw a continued recovery in both of these end markets, with revenue collectively growing 18% sequentially. Looking ahead to the first quarter of fiscal 2026, we expect aggregate revenue from enterprise networking and carrier infrastructure to grow sequentially by approximately 10%. We are pleased with the continued recovery in these two end markets, although this forecast still anticipates Marvell products shipping below end market consumption. In the consumer end market, revenue in the fourth quarter was $89 million, declining 8% sequentially. For the first quarter of fiscal 2026, consistent with our prior comments, we expect seasonality in gaming demand to drive a sequential decline in revenue from our consumer end market of approximately 35%.

Over the next several years, we continue to anticipate our revenue from the consumer end market to be approximately $300 million on an annual basis. Turning to our automotive and industrial end market, fourth quarter revenue was $86 million, growing 3% sequentially as we continue to see a modest recovery in this end market. Looking ahead to the first quarter of fiscal 2026, we anticipate continued sequential growth in the automotive end market. However, we expect this to be more than offset by a decline in revenue from our industrial end market, where order patterns can be lumpy in any given quarter. As a result, we project our overall revenue from the auto and industrial end market to decline sequentially in the high single digits on a percentage basis.

In summary, we drove tremendous revenue growth throughout fiscal 2025, significantly scaling the company from an annualized revenue run rate of $4.6 billion in the first quarter to over $7.2 billion by the fourth quarter. Building on this expanded base, we anticipate strong year-over-year revenue growth in fiscal 2026. Our AI-driven data center end market is expected to remain a key contributor, further supported by the ongoing recovery in our multi-market businesses. Marvell's data center end market accounted for 75% of consolidated revenue in the fourth quarter. Reflecting this rapid transformation during fiscal 2025, we purposefully redirected our investments towards data center relative to our other end markets to fully capitalize on the massive opportunity created by AI. We recently evolved our organizational structure to fully enable this strategic transformation.

All products focused on hyperscale customers are now managed by a single cloud data center group led by Raghib Hussain, our President of Products and Technologies. We have merged the rest of our end markets into a single multi-market business group led by Chris Koopmans, our Chief Operating Officer. Marvell has solidified its position as a leading provider of data infrastructure semiconductors with a unique business model spanning full custom to full merchant solutions. We are seeing strong investment in accelerated infrastructure from both established hyperscalers and a number of well-funded new market entrants as they race to build million XPU training clusters. These customers are highly incentivized to increasingly use custom infrastructure to augment their merchant solutions. Recent developments in the AI market, such as the advent of reasoning models, are also expected to continue to drive strong demand for compute, networking, and storage semiconductors.

As a result, we remain very optimistic about both our short and long-term growth prospects and our role in enabling accelerated infrastructure. We look forward to updating investors on our business model and the significant opportunities ahead of us at our investor day on June 10th in New York. With that, I'll turn the call over to Willem for more detail on our recent results and outlook.

Thanks, Matt, and good afternoon, everyone. Let me start by summarizing our full fiscal year results. In fiscal 2025, Marvell delivered $5.767 billion in revenue, with strong 37% growth in second-half revenue compared to the first half. This growth was primarily driven by our AI programs in the data center end market, as well as continuing recovery in our other end markets. For the full year, on a GAAP basis, our gross margin was 41.3%.

Operating margin was negative 12.5%, and loss per diluted share was $1.02. On a non-GAAP basis, our gross margin was 61%, operating margin was 28.9%, and earnings per diluted share was $1.57. We delivered over a thousand basis point improvement in our non-GAAP operating margin through fiscal 2025, from 23.3% in the first quarter to 33.7% in the fourth quarter. We also drove a record $1.68 billion in operating cash flow and significantly increased capital returns to our stockholders, returning $933 million through dividends and buybacks. Moving on to our financial results for the fourth quarter of fiscal 2025. Revenue in the fourth quarter was $1.817 billion, exceeding the midpoint of our guidance, growing 27% year-over-year and 20% sequentially. Data center was our largest end market, contributing 75% of total revenue. GAAP gross margin was 50.5%. Non-GAAP gross margin was 60.1%. Moving on to operating expenses.

GAAP operating expenses were $682 million, including stock-based compensation, amortization of acquired intangible assets, restructuring costs, and acquisition-related costs. Non-GAAP operating expenses came in at $479 million, in line with our guidance. Our GAAP operating margin was 12.9%, while non-GAAP operating margin was 33.7%. For the fourth quarter, GAAP earnings per diluted share was $0.23. Non-GAAP income per diluted share was $0.60, reflecting sequential growth of 40%, which is double the pace of revenue growth, demonstrating the significant operating leverage in our model. Now, turning to our cash flow and balance sheet. Cash flow from operations in the fourth quarter was $514 million. Our inventory at the end of the fourth quarter was $1.03 billion, an increase of $170 million from the prior quarter, to support the strong growth we are experiencing in our business. Our DSO was 51 days, decreasing by nine days from the prior quarter.

We returned $52 million to shareholders through cash dividends. In addition, we repurchased $200 million of our stock during the fourth quarter. Our total debt was $4.06 billion, with a gross debt-to-EBITDA ratio of 2.06 times and a net debt-to-EBITDA ratio of 1.58 times. We have seen continuous improvement in our debt ratios as we have driven an increase in our EBITDA through fiscal 2025. We were pleased to receive an upgrade to our investment-grade credit rating from Fitch in January, citing their positive outlook on Marvell's strong operating momentum from robust data center demand, structurally improved leverage metrics, strong market position, and strengthened cash flow profile. As of the end of the fourth fiscal quarter, our cash and cash equivalents were $948 million, increasing by $80 million from the prior quarter.

Turning to our guidance for the first quarter of fiscal 2026, we are forecasting revenue to be in the range of $1.875 billion, plus or minus 5%. We expect our GAAP gross margin to be approximately 50.5%. We expect our non-GAAP gross margin to be approximately 60%. Looking forward, we anticipate that the overall level of revenue and product mix will remain key determinants of our gross margin in any given quarter. For the first quarter, we project our GAAP operating expenses to be approximately $712 million. We anticipate our non-GAAP operating expenses to be approximately $490 million, a modest increase of approximately 2% from the prior quarter. It is worth noting that this step up in OpEx is lower than what we would normally expect due to the typical seasonality in payroll taxes and employee salary merit increases in the first quarter.

This is because we expect more leverage from our custom model and expect higher NRE in the first quarter on a sequential basis. As a reminder, NRE is treated as contra-OpEx. For the first quarter, we expect other income and expense, including interest on our debt, to be approximately $43 million. We expect a non-GAAP tax rate of 10% for the first quarter. We expect our basic weighted average shares outstanding to be 867 million and our diluted weighted average shares outstanding to be 818 million. We anticipate GAAP earnings per diluted share in the range of $0.14-$0.24. We expect non-GAAP earnings per diluted share in the range of $0.56-$0.66. I am very pleased with Marvell's execution on all our key financial metrics throughout fiscal 2025.

As we enter fiscal 2026, we intend to continue driving strong operating leverage and expect to make significant progress towards our long-term non-GAAP operating margin target of 38%-40%. We will also remain focused on generating strong cash flow and returning capital to our stockholders. I'm very excited about our future prospects and look forward to strong year-over-year revenue growth in fiscal 2026. With that, we are ready to start our Q&A session. Operator, please open the line and announce Q&A instructions. Thank you.

We will now begin the question and answer session. To ask a question, you may press Star, then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press Star, then 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. Your first question comes from Ross Seymore with Deutsche Bank. Your line is now open.

Hey, guys. Thanks for letting me ask a question. Matt, I want to go back to the comments you had in your script about the confidence in growing with your lead XPU customer, not only this year but next year. There's, as I'm sure you appreciate, a ton of debate about a competitor taking sockets, etc., market share. How would you suggest we reconcile your confidence and their confidence simultaneously? It doesn't seem like both sides can be direct.

Yeah, hey, Ross, thanks for the question, and I very much understand the debate that's out there, and I appreciate a lot the significant interest from the analyst community and our investors on this topic.

Let me try to be as helpful as I can, given the constraints we've got around customer confidentiality and their concerns about their own programs and their confidentiality. Okay, so we're very pleased with the ramp of our current lead XPU program. We delivered this with first-pass silicon success. We see significant volume production on the current generation in front of us, and you can already see the ramp in our numbers starting in Q4. In parallel, we have been deeply engaged on the next generation of this AI XPU with this customer. I said this in my prepared remarks, but I'll just go over it again. We're planning for a production ramp once it completes its sampling and qualification cycles.

So to be crystal clear, we do expect revenue from these custom XPUs with this customer not only to grow in fiscal 26, which is the year we're in, but to grow in fiscal 27 and beyond. And I just want to also note that I'm not including revenue here that would be from other products, such as networking or connectivity. That would be incremental to custom, and certainly, we've got a great setup, I think, overall with this account relative to the opportunity set, but it's really on both. And then with respect to the question that our customer may be working with someone other than Marvell on a next-generation XPU, it's just something we can't comment on. What I can comment on is visibility for the products that we will be building for the customer.

And as I said, this extends to the next generation of our current AI XPU program.

Thank you.

Yeah.

Your next question comes from Vivek Arya with Bank of America. Your line is now open.

Thank you for taking my question. Matt, just one clarification. If you could help quantify the mix between AI and non-AI in your data center for Q4 and Q1, is it like two-thirds, one-third? So any quantification there would be helpful. And then a little more generic question, which is that when we look at Q4 and Q1 data center and AI, they are very strong on a year-over-year basis, but the extent of the beats is somewhat modest when we contrast that with the very strong spending at your largest customer. So any commentary there would be very helpful. Is it a supply issue? Is it just early days of the ramp?

So any commentary there would be helpful. Thank you.

Yeah, thanks, Vivek. Maybe I'll answer the second part first, just on the overall setup. If you look at it, we've seen very strong growth the last few quarters, I think, really, really actually above overall market. I think we were up data center revenues 25% sequentially Q2 to Q3, 25% Q3 to Q4. As I said in the prepared remarks, our AI and cloud revenue, that portion of the data center business is up double digits from Q4 to Q1. So these are all sequential numbers, by the way. And of course, on the year-over-year, if you look at Q4, we're like up 77% or something in data center, and I think Q1 we're up pretty similar. So we're very pleased with the trajectory of this business in terms of just the sequential and year-over-year growth rates.

I think that's tracking really well. On the AI side and how we think about it is, and I'll just give you kind of a maybe a flashpoint just as we sort of exit the year, but a good overall proxy. So today, AI is more than half the revenue. So it's now the majority. It's crossed over. And I think as we go forward, that's going to just continue to increase. And so because overall, Marvell is now 75% of our revenue kind of plus going forward in data center, that's going to end up being a really good proxy.

Underneath that, about half of that is, if you just look at overall data center now, just to provide a little more color, about half of that is in electrical optics, and custom now has grown to about 25%, about a quarter, a little bit more of the data center revenue. And then the balance is made up of everything else. So again, it's a nice trajectory here. We've got AI that's sort of outgrown the total. It's the majority driving the business. Data center is now a significant total portion of overall Marvell. And then the mix continues to grow nicely with custom really ramping. So hopefully, some of those data points are helpful, but we're very pleased overall with the trajectory of the business.

Thanks, Matt.

Yeah.

Can we get the next question, please? Operator. I'm checking. Folks, please hold while we get the operator back online.

Your next question comes from the line of Timothy Arcuri from UBS. Your line is now open.

Thanks a lot. Matt, I wanted to clarify the answer you just gave on the breakdown of AI revenue. You said more than half is AI, which I get of data center. And then you said half of data center is optics. Did you mean half of AI is optics? So that the AI breakdown is basically roughly half is optics and then half is custom ASIC. Is that what you meant?

Yeah, yeah, sorry. Yeah, Tim, thanks for the clarification. To be precise, it's overall data center are those numbers I gave you.

Okay. And then you had guided AI to $2.5 billion this year. I think you said you used the word very significantly. You're going to exceed that in fiscal 2026. What does that mean?

I guess most of the sell side is thinking like $3.5 billion. So that certainly would qualify as very significantly. But is that what you mean when you say very significantly by like a billion dollars? Is that the type of thing that would qualify as that? Thanks.

Yeah, Tim, thanks for the question. Yeah, we're definitely leaving this year open-ended in terms of what we can go do. Last year, we had talked about $1.5 billion. We blew through that. This year, again, we anticipate being substantially above that. I'm not putting a number on it just yet. I think that there's a lot to go here in terms of the momentum in the business and the opportunity set in front of us.

And so right now, we're kind of keying off the last update we did, which was in the AI day from last year, and then we'll find the right appropriate time in the future. But right now, we're trending extremely well. And you can really start to see it in the numbers. As I mentioned earlier, at some point, this data center revenue is now 75% of Marvell. And I gave you the AI percent. So you can start using that as, I think, a really good proxy for where things are going.

Okay, Matt. Thanks.

Yeah.

Your next question comes from the line of Harsh Kumar from Piper Sandler. Your line is now open.

Yeah, hi. Thanks for letting me ask a question. Matt, I think you mentioned that you have three kind of custom ASIC customers for you.

I wanted some color on the stickiness of these customers. Kind of, what are some of the triggers that might cause some of these customers to go look for another design partner? Is it price, or is it just 100% performance if you can't produce or start looking? And what is the second part of the question? What is the possibility of you being able to attach your networking products to some of these custom ASIC players? Or if you do, could you just help us understand what's being attached today?

Yeah, thanks for the question. I think the first is that we actually have custom engagements with all four of the major hyperscalers, and then two of them in compute with a third coming, just to clarify. And look, these are very complex chips.

Our view is consistent with sort of what we've been saying, which is when you look at the TAM that's out there, which is, I mean, we sized back in April of last year for Marvell at like a $75 billion data center TAM, which has probably, if anything, just gotten stronger, and a big portion of that coming from custom. The reality is to service that, the customer base is really looking for partners with a couple of key attributes. The first is technology leadership and technology investment and IP. We just announced, as an example, just a couple of days ago, our working two-nanometer platform. We've got a very competitive offering on custom HBM, die-to-die, advanced packaging. So that's part of it.

The second is to have the manufacturing scale, the ability to go drive the right design methodology in terms of first-pass silicon success, and be able to actually ramp these highly complex, upwards of 100 billion transistor type of chips into production. And they're also looking for partners that have the relationships with their suppliers, like at Marvell, as an example. We've invested heavily in the supply chain. And then finally, partners that are flexible in their business model that can look at different approaches to different chips, all the way from traditional ASIC services to full-blown build-to-spec type of solutions. And we provide all those. So in the end, those are the types of different things. And when you sort of add all that up, really our view still is that it's ourselves and one other very large competitor of ours that can service that market.

So these sockets are very sticky. At the same time, each generation, you've got to go bid, and you've got to go compete. But we've been very successful since we started winning these big custom silicon programs back in 2021, getting awarded those, and now taking those into production, and then looking at the next generation. We're very comfortable with where we stand. And so there is a high degree of stickiness. There's a high barrier to entry. But at the same time, you got to win them each time. And then the final thing I'd say is just from a design opportunity perspective, that pipeline just continues to expand. And within that, we continue to close very significant designs, as recently even as our fourth quarter. So those are the dynamics we still see. And it's competitive, and everybody's in a race.

But we feel like we're in the best position we've ever been in, quite frankly, relative to the technology, the platform, and our ability to go really drive in a very, very focused manner the execution around what I think is the biggest opportunity I've seen in a very long time in the semiconductor industry, which is the AI supercycle that's still in front of us.

Thanks, Matt. And then for my follow-up, I was curious if you could expand on your comment around you said, "I think growth in data center, cloud plus AI will be double digits. On-prem will be down." Can you help us think about what you mean by that? What is double digits? Is it teens or higher than that? Just because investors are super sensitive to growth rate in your cloud and AI business.

Yeah.

I mean, we're getting a little more precise, and certainly, this is the guide. But double digits is double digits, and it's not 20% or something. I mean, it's above 10%, and that's the way you should think about it. And clearly, we'll see where the quarter lands, but that's what we're seeing at the moment. You also asked me about attaching networking, so I just wanted to cover that real quick, and we'll go to the next question. Yeah, that has proven to be extremely sticky, obviously. And that is probably the other leg that goes hand in hand with the custom designs is that I said some of this in my prepared remarks, but the value of the solution now is really moved just beyond who can do the best sort of individual compute piece of silicon.

I mean, that's critical, and you got to have the right sort of performance, and you got to take advantage of Moore's Law and all those things. But the way to get ultimately outsized performance in the solution is you've got to couple that with the networking and the connectivity. And I think the I/O from scale-up to scale-out to all the various different interconnect type of solutions we have is proving to be a very compelling reason for customers to use us because we can co-architect those together. And we actually get with the compute custom silicon opportunities. And when we do that, by the way, and especially when we engage on something like an accelerator or CPU, we get very early information and perspective on the customer architecture.

Again, not just the piece of compute, but then all the I/O that's required, and then we drive our solutions around that. So this is all by design in terms of how we've formulated our technology platform approach. But it is a much more compelling value prop for our customers versus maybe competitors of ours that only have one of those pieces.

Very helpful, Matt. Thank you. Yeah.

Thanks.

Your next question comes from the line of Aaron Rakers from Wells Fargo. Your line is now open.

Yeah. Thanks for taking the question. I'm going to stick with the AI question as well. Matt, you had mentioned that you had four customers in the hyperscalers where you engaged, and you mentioned two in compute and third one coming.

The fourth, I just want to be clear, is that also a compute opportunity, or is that referring to the NIC, custom NIC opportunity that you're currently engaged in? And then also in that same narrative, how do you think about the custom logic opportunity around HBM4 and the timing of when that might be impactful for Marvell? Thank you.

Yeah. Thanks, Aaron. And great, two questions. So yeah, on the first one, I think you got it right. You actually nailed it. And that opportunity is bigger than just that product as an example. But yeah, the fourth customer, we have, we're in production, and we publicly announced with a custom NIC in that area. And then on custom HBM, yeah, that continues to be actually a critical IP for us, and I think a critical part of what we see the customer roadmaps aligning around.

And so we're very engaged right now, both with the key memory partners of ours who we work with jointly with our hyperscale customers. And the benefits are quite significant that we're able to propose in terms of the beachfront area reduction on the logic die, the ability for our customers to get significantly more compute packed into that die, and then also improving the throughput between the HBM and the compute, and then actually being able to have a higher density memory solution wrapped around our customer's compute die. So all those are still very valid, and I think that's going to be a significant sort of industry trend that we're going to see in the next generation of these high-end accelerator products. Thanks.

Thanks.

Your next question comes from the line of Tom O'Malley from Barclays. Your line is now open.

Hey, guys. Thanks for taking the question.

Appreciate it. So I kind of wanted to pivot a little bit to the technology side. So Matt, in the script, you talked about increasingly optical connections taking over areas where electrical connections were today. So I kind of wanted to get your opinion. When you look at the world of just optics in general, and particularly co-packaged optics, do you see that at first happening kind of inside of the rack, or do you see that kind of happening in the aggregation layer? And then what does that mean for your DSP business? Obviously, your share of the optical world is a little bit different than your share of the switching world. I just would love your commentary on where you see kind of co-packaged optics coming first, and then kind of as it relates to your product set, where you feel like you have some strength.

Yeah. Great.

Hey, thanks, Tom. So yeah, maybe some perspective. So I think the first is in the history of CPO, and this is really prior to this sea change in the last few years of the growth in accelerated computing. The holy grail that's been out there for a decade plus, maybe close to 20 years, is that the aggregation layer or the scale-out could go to CPO. And there's been a lot of POCs in this area. There's been a lot of different efforts in the industry. I mean, I was at OFC last year, and that's kind of where a lot of the air really did come out of the balloon. I think not just from us, but our big cloud customers sort of have said that's a very long-term type of opportunity.

That's been our view too, by the way, that it's something that we're paying attention to. We've got some investment there. What's really happened in the last and by the way, the same thing sort of happened with LPO, which was linear pluggable optics. 2023, there was a ton of noise on this topic that that would be able to replace DSP-based pluggables. That has not happened. What's emerged, as I mentioned in my prepared remarks, is that in the scale-up and the connectivity in the rack and between accelerators and inside the cluster, that's where there's a lot of opportunity to go active and accelerated in terms of the connectivity and to go optical from passive. That could be accomplished a couple of different ways. Co-packaged optics is a very interesting and compelling way to do that.

We demoed our 6.4T product a year ago at OFC. We're definitely investing in this area, and we have a lot of traction here relative to us presenting that as a solution as part of our ASIC platform. And then also with LPO, same thing. I think that may find a home in some of these connection points, again, within the rack. But these will be important applications, especially in closed systems. There's a lot of technology that needs to get developed and a lot of work to do. But we're very much investing here, and we will be in this business to compete with best-in-class technology. The question is, when does it want to get adopted? What is the qualification process? What are all the manufacturing and yield issues we're going to have to deal with?

So it's complex, Tom, but this is not something that we're backing off of. In fact, we think it's a critical part of our long-term technology investment to not only have best-in-class DSPs and pluggables, best-in-class AECs as an example, retimers, a whole suite of connectivity solutions, but also investing in the next generation where we can enable significant breakthroughs in power and performance. We just have to balance those off with the reality of this is very complex, new, and not traditional sort of basic CMOS technologies. These are more complex. So you'll see more from us at OFC on this, and certainly, this is an area to watch. But we think it's going to take some time for it to finally work its way through industry-wide into real high-volume production. Thanks.

Super helpful.

And then just on the near term, obviously, on the optical side, it sounds like things are better there. But there's been noise, as there is about many things these days in relation to AI, about potentially some headwinds in terms of inventory at 800 gig or the pricing dynamic as you move to 1.6. Could you maybe comment on the health of both of those nodes and kind of what you're seeing in terms of the growth trajectory for the 800 gig world this year and just the health of pricing, etc., just because there's been a lot of noise there? Thank you, Matt.

Yeah. Yeah. No, we feel really good. Optics has been very, very strong for us. We saw a big uptick in the second half of last year in terms of orders. We've been fulfilling those.

We see demand very strong this year, particularly in 800 gig, very healthy demand. We do see 1.6T transition happening, but quite frankly, 800 gig continues to be the workhorse, and we'll be ready to support both our 5-nanometer 1.6T device, but we're very excited about our 3-nanometer product. It's getting a lot of great traction because of the power savings. I mean, it's 20% per link, so it really adds up when you talk about the massive scale and the number of interconnect points in these massive clusters that are being built, so all that looks very positive, Tom, and of course, there's always noise in the system. This is a very hot area. I'm saying AI overall, but from a Marvell perspective, sharing what we see, we see very healthy, strong demand continuing.

Your next question comes from the line of Harlan Sur from JPMorgan.

Your line is now open.

Hey, good afternoon, guys. Thanks for taking my question. Great to see that you captured the follow-on AI XPU program after your current XPU program, which is ramping now with your major cloud and hyperscale customer. Matt, just to clarify, so is the new follow-on XPU program a training XPU as well? Is that a calendar 2026 ramp? And is that at 5-nanometer or 3-nanometer? Any more color there would be helpful. And then for Willem, your inventories were up 20% sequentially, which in a strong demand and product cycle environment typically implies strong future growth. But you compare that to the 3% sequential total revenue guide for April, there seems to be some disconnect. So the way to interpret this is that the 20% sequential growth in inventories is more reflective of the AI strong growth profile ahead for the team?

Yeah.

I'll start off, Harlan. So yeah, so a couple of things. So again, given the confidentiality wrapper we've got, here we go. The first is you should assume this is a very high-volume program, and it's a continuation of what we're doing. On the time, and you should assume just in general on every next generation type of device, you're going to see no transitions and technology advancements as you go forward. So you should assume that. And then also on a timing perspective, all I can say there is we'll be ready to ramp when it's time, and we'll manage that transition. We're very confident in our ability to manage that transition successfully with our customer, but that timing is something that we're just going to have to see when that's ready, and we'll time it around that.

And I can't really comment on what my customer plans are in this kind of detail. They just don't like it, and I don't blame them. And I won't take the inventory question. Thanks.

Yeah. Yeah. Thank you.

Hey, Harlan. On inventory, that's really in support of continuing growth in our custom programs that we see over this year, as well as very strong growth on the optics side. So it's really those two dynamics driving inventory. But if you look at it on a days', it's actually flat quarter- over- quarter.

Got it. Thanks for the input, guys.

Yep.

Your next question comes from the line of Mark Lipacis from Evercore ISI. Your line is now open.

Great. Thanks for taking the question. Matt, I think there's always a concern in the market around this risk of a deceleration in spending or maybe even a digestion period.

You seem to express confidence in the visibility as you go through this year. I wonder if you can help us understand the tells that you look for on your dashboard that tell you that there's this risk of a digestion period. I think maybe as part of that, I guess I've always thought of Marvell as like a comms IC company. Now you just have this processor business that's really ramping. I wonder if you kind of try to deconstruct that risk assessment. Do you think about those two businesses differently?

Yeah. Okay. Yeah. I'll break it into the two pieces. We do a lot of triangulation, Mark, as a company relative to how we forecast our data center business in particular. We do take a lot of the top-down data into account in terms of CapEx trends and things like that.

But ultimately, we're so joined at the hip because of the key nature of these programs. And ultimately, our products, and especially where they're just completely sole sourced, being a potential gate for our customers, we plan our supply chains very carefully together. And I think you can see the evidence of that over the last two years as we've ramped with sort of the advent of ChatGPT. And it's amazing to think of where we were. I actually go back to this call two years ago, and the big breakthrough was we were saying we were going to do $200 million in AI revenue in calendar 2023 and $400 million in 2024. And now we just finished 2024, and we're talking about blowing through $1.5 billion and doing $2.5 billion plus. So just as a quick side note, it's just kind of remarkable.

But we scaled right along with our customers and generally continue to sort of exceed expectations and be able to ramp with what they need. So when we look to the rest of the year, and even quite frankly, on a multi-year view, it's a very strong outlook. And some of that is our own specific things because we have new programs, let's say, in the custom area that are ramping, that are incremental. We also have now we just have additional sockets. We have customers transitioning from a technology perspective, let's say, an interconnect. So we have a lot of positive tailwinds. Now we're monitoring, and certainly the supply chain, it needs constant review.

But at the moment, again, we see a very strong setup for strong growth in our fiscal 2026 and our fiscal 2027, driven by both the custom programs ramping as well as continued growth and strength in connectivity and in higher layer networking and in things like storage coming back. So all these look like a positive setup at the moment.

Great. Thank you. Very helpful.

Yep.

Your next question comes from the line of Ben Reitzes from Melius Research. Your line is now open.

Hey, guys. Thanks for the question, and thanks for the intermission there in the middle. That was a nice break. The question that I have is with regard to sequential growth, Matt, and then a long-term question. Did you clarify that AI revenue could grow sequentially through the year? And did when Tim asked his question earlier? And if so, what's your confidence?

Then if you could just kind of step back also, Matt, a lot of noise due to the speculation around that customer and content there. But when you step back, you have a goal of $15 billion for the data center long-term by calendar year 2028. Are you seeing the progress in your custom business still to hit that number? Because nobody on the street is even close to that. Thanks.

Yeah, Ben, thanks for the questions. So yeah, on the AI assumptions through the year, yeah, I think what I said was in Q1, our data center business, ex the on-prem stuff, was going to be up double digits coming off of overall data center, like 25% a quarter sequentially. So I didn't comment throughout the whole year, but you should just assume it's not a bad assumption, right?

Or it'd be a fair assumption to think that it's obviously going to continue given the strength in the business and the momentum that we're seeing and just from what we're looking at from a year-over-year perspective. On the long term, I think we're tracking extremely well to our 20% market share number. When we look back to kind of calendar 2023 and then 2024 and 2025, and you start bouncing it up against what we said at the AI day, I think it looks very favorable. We're definitely gaining share from 2023 to 2024, and we'll definitely gain more share from 2024 to 2025. And so to get to that revenue target, you got to get there both ways. You got to grow the share, right, from kind of 10%, let's call it to 20%. And then the market's got to develop, right?

Obviously, you got to get to the sort of $75 billion TAM. But both of those are trending in a very positive direction. In fact, certainly in 2024 and even in 2025, it's just kind of big round numbers. It looks like both the market and our growth, if you just bounce it up against sort of what's the compounded growth rate you needed from 2023 to 2028, it's actually growing above that right now. So now we're in ramp phase, but that's going to continue. So I think we're in very good shape in terms of where we're tracking from a market share perspective. And certainly, if the market, by the way, is bigger, I mean, remember, we gave that point of view in April of last year.

And the world has changed, Ben, since then in terms of the absolute CapEx that's being deployed, certainly even in recent months, all of the various programs from all the different key players and the potential of what's out there, sovereign programs, government programs, programs from new entrants. So we just see this, quite frankly, the TAM and the opportunity for Marvell, if anything, being way larger than it was when we looked at it almost a year ago. So all those make me feel very good about the market size developing and then certainly our progression on the market share. And you're right. That would be an absolute home run to get there.

And that's what me and my team are absolutely driving in this company day in and day out, is drive the market share and help create the market, help make the TAM happen and execute like crazy and do it in a very focused manner, which is also why we reorganized the company with a dedicated data center engineering and business group to drive it. So I think the setup's really good. Thanks.

Thanks, Matt.

Your last question comes from the line of Christopher Rolland from Susquehanna. Your line is now open.

Hey, thanks for squeezing me in. And some of this was addressed, but scale up. You guys have a lot of opportunities here. Some of this could be optical. Some of it could be co-packaged. Some of it could be active copper. I think you might even have some UAL or NVLink-like alternatives, DSP throughout the system.

I guess as we see changes in architecture, either GPU or XPU, where do you think your biggest opportunities are? And when might we see some of these wins? Thanks, Matt.

Yeah. Excellent, Chris. And great question to end the session. So first of all, you've done your homework. And I think the key message is we are planning on participating and enabling all of the things you mentioned. We have programs underway and developments in all those different areas. The key thing I want to stress to you and to the investors on the call is this is incremental TAM. The scale-up opportunity, we flagged it a few different times as ripe for sort of a TAM expansion. And it looks like that's what's going to play out at some point here. So that is all incremental.

That's not, "Hey, if that happens, then all of a sudden, Marvell's DSP revenue goes down or something." Then the scale-up and this type of connectivity, that is a revenue upside, market upside type of opportunity. So that one, I think, we're very excited about. And I think you're going to hear a lot more about that from us, certainly at things like OFC and our investor day and so forth. But yeah, big opportunity there. No question.

Thanks, guys.

Yep. Thanks, Chris.

Let me now turn the call over to Mr. Murphy for closing comments.

Yeah. Thank you, Operator. And first of all, I appreciate everybody joining the call. I apologize for the gap there. Hope everybody enjoyed a quick coffee break, and we'll certainly figure out what happened. But appreciate the interest in the company.

I want to thank everybody for their interest and just kind of reflect on a few things. I think the first is we had really strong progress in fiscal 2025. We started off at a $4 billion-ish, $4.2-$4.3 billion type of run rate in the first half. We're now at the $1.875 billion kind of guide, well above $7.5 billion kind of a run rate. So that's, I think, really strong trajectory for the company heading into the year and a big change. We're also getting leverage in the model and the operating leverage, cash flow generation, operating margin expansion. And you can even see it in things like our Q4 to Q1 OpEx, which normally would go up, as Willem said, more than we're forecasting. But we're starting to see the benefit of these custom silicon programs kicking in and the NRE contribution.

And so we're seeing it both on the top-line revenue growth, but also on the expense line as well. And that is a great setup. We were GAAP profitable as well in Q4, which was great. We're going to keep driving that. It wasn't just AI. Our standard cloud infrastructure side of things in data center also had a very strong year. The programs that maybe there was some concern about going back a year ago, can you ramp? These products are going to get qualified. What's going to happen? I think our team, and I want to thank the Marvell team, did an excellent job of ramping these very complex devices into full-volume production, supporting our customers. Tom had a question about electrical optics. We had a banner year for our electrical optics business, and it looks very strong heading into next year.

Also, the multi-market businesses, that was a source of concern over the past year, the enterprise and carrier and things like that. You're seeing very strong sequential growth now, sequential growth out of those businesses as they recover, and they sort of trend back towards their, at least the enterprise and carrier, their $2 billion run rate. And look, we had a beat and raise. We're guiding revenue and earnings growth to continue in the first quarter. Customer engagements really strong, as I mentioned, very strong design wins in the last year, great execution by our sales team and business units to win those key designs that are going to drive our future growth. And we're very optimistic about where this heads. So I appreciate everybody's interest. I look forward to seeing all of you in various investor meetings coming up and continue the discussion. So thanks, everybody.

I appreciate it.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Good afternoon, and welcome to Marvell Technology, Inc. first quarter of fiscal year 2026 earnings conference call. Note that all participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Mr. Ashish Saran, Senior Vice President of Investor Relations. Please go ahead, sir.

Thank you, and good afternoon, everyone. Welcome to Marvell's first quarter fiscal year 2026 earnings call. Joining me today are Matt Murphy, Marvell's Chairman and CEO, and Willem Meintjes, our CFO. 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 10-K and 10-Q filings. We do not intend to update our forward-looking statements. During our call today, we will refer to certain non-GAAP financial measures. A reconciliation between our GAAP and non-GAAP financial measures is also available in our earnings press release.

Let me now turn the call over to Matt for his comments on the quarter. Matt.

Thanks, Ashish, and good afternoon, everyone. For the first quarter of fiscal 2026, Marvell delivered record revenue of $1.895 billion, above the midpoint of guidance, reflecting a 4% sequential increase and strong 63% year-over-year growth. Data center and market continued to deliver strong growth, driven by robust AI demand. In addition, we were pleased to see ongoing revenue recovery in our carrier infrastructure and enterprise networking and markets. Higher revenue versus our forecast also resulted in record non-GAAP earnings per share, which came in above the midpoint of guidance. In addition, we significantly increased our stock repurchases in the first quarter, buying back $340 million, a substantial step up from the $200 million repurchased in the prior quarter. During the first quarter, we announced the sale of our automotive Ethernet business to Infineon in an all-cash transaction valued at $2.5 billion.

We are extremely proud of the progress we have made in organically building and expanding this business, which we expect will deliver a compelling financial outcome for Marvell stockholders. The closing of this transaction, which we expect within calendar 2025, will provide us with additional flexibility in our capital allocation strategy. We started our new fiscal year on a strong note, with Q1 results ahead of plan, and are forecasting second quarter revenue of $2 billion at the midpoint of guidance. This represents 57% year-over-year growth and would set another record revenue level for Marvell. Let me now discuss our results and expectations for each of our end markets. In our data center end market, we achieved record revenue of $1.44 billion in the first quarter, growing 5% sequentially and 76% year-over-year.

Looking ahead to the second quarter, we expect this momentum to continue, with data center revenue projected to grow sequentially in the mid-single-digit range on a percentage basis, while maintaining strong year-over-year growth. These strong results, along with our second quarter guidance, are being driven by the rapid scaling of our custom AI silicon programs to high-volume production, along with robust shipments of our electro-optics products for AI and cloud applications. We continue to expand the capabilities of our advanced technology platform to enable our customers to build full rack-level custom infrastructure, including innovative technologies such as custom high-bandwidth memory and co-package optics. Marvell's custom HBM compute architecture enhances XPUs by optimizing the I/O interfaces between accelerator silicon and the memory embedded in the package. This enables AI custom compute accelerators with much more efficient integration of main memory, which can increase performance and reduce runtimes, resulting in increased utilization.

We continue to see strong interest from multiple customers who are targeting the highest performance and optimized TCO for their upcoming AI solutions that leverage the most advanced HBMs. Marvell's breakthrough co-package optics platform enables customers to integrate our silicon photonics light engine into future custom AI accelerators. Co-package optics can drive a transition from copper interconnects to optical fiber for scale-up AI clusters. This technology will enable larger AI servers with significantly higher total system memory capacity and processing capability, which we expect will provide the scaling headroom required for the next wave of AI models. We expect this transition from copper, which does not contain any active silicon, to optical interconnects to significantly expand Marvell's interconnect revenue and market opportunities. Earlier this month, we announced two new additions to our custom platform.

First, we announced a partnership with NVIDIA, adding their NVLink Fusion technology to our expanding custom platform. Marvell custom silicon with NVLink Fusion provides our customers with an accelerated path to custom scale-up solutions, offering greater flexibility and choice in developing next-generation AI infrastructure. This announcement further validates the proliferation of custom XPUs as a strong complement to merchant solutions. In addition, earlier today, we announced Marvell's new multi-die packaging platform, the first of many advanced packaging innovations we are bringing to the market. The solution is already qualified and has entered production in support of a customer-specific XPU program. The platform enables customers to realize multi-die architectures utilizing differentiated Marvell design interposer technology. This approach can enable more efficient die-to-die interconnect, lower power consumption, increase yields, and lower product cost. Marvell's solution offers a compelling alternative to traditional silicon interposers for custom cloud applications.

We expect to continue to proliferate this technology more broadly in next-generation designs. Moving on to the progress we are making in our custom business, we are benefiting from revenue contributions across multiple programs, including XPUs and other accelerators. Our lead XPU program for a large U.S. hyperscale data center customer is doing extremely well and has become a key revenue driver for our custom business. I'm incredibly proud of our team and the close collaboration with this customer to drive this program to volume production with A0 silicon and meet the customer's steep ramp. As I mentioned last quarter, we are fully engaged with this customer on the follow-on generation, and I'm pleased to report that we have now secured 3 nm wafer and advanced packaging capacity and expect to start production in calendar 2026.

At the same time, our architecture team is working with the customer to support the definition of the generation after that. This is all consistent with the multi-generational nature of these engagements, reflecting the benefit of working with Marvell over the long term. As a result, we anticipate that our revenue from custom AI XPUs for this customer will continue to grow next year, fiscal 2027, and beyond. At our AI Day last year, we also announced a significant design win for a custom AI XPU with another U.S. hyperscale. Joint development on this program continues to progress well, and we are already engaged with this same customer on the architecture for the follow-on generation of this AI XPU program. I'm very pleased with the strong progress we are making across both our current and upcoming custom programs.

This momentum reinforces our confidence in achieving our long-term goals for customer revenue. We will be highlighting our broad and expanding range of opportunities at our custom AI investor event on June 17th. I will share more details about this event in a moment. Turning to our interconnect portfolio, our PAM and DCI franchises continue to lead the industry in enabling the build-out of AI and cloud infrastructure. At this year's Optical Fiber Conference, we showcased a broad range of products, technologies, and ecosystem initiatives designed to power the next generation of scale-up and scale-out AI deployments, including the industry's first 400 gig per lane PAM technology, a critical step towards 3.2T optical interconnects, enabling pluggable transceiver modules to remain the dominant solution for scale-out connectivity for the foreseeable future. Co-package optics and co-package copper technologies providing greater interconnect densities and longer reach for scale-up networking.

Silicon photonics light engines scaling up to 6.4T, consolidating hundreds of components into compact modules optimized for both pluggable and CPO applications. 1.6T linear drive pluggable optical modules using Marvell's silicon photonics light engine. The industry's first 3 nm 1.6T PAM4 DSP, featuring 200 gig per lane electrical and optical interfaces, enabling customers to reduce module power consumption by more than 20% compared to its predecessor. Next-generation 800 gig DCI modules supporting data transmission over distances up to 1,000 km. Production-ready 1.6T AEC DSPs for emerging 200 gig per lane accelerated infrastructure. Coherent light DSPs enabling power and performance-optimized solutions for the emerging market of distributed campus data center interconnects, spanning distances up to 20 km. PCIe Gen 6 and PCIe Gen 7 SerDes for end-to-end connectivity over optics.

We received highly positive feedback from customers, partners, and industry analysts during the event, making OFC 2025 another home run for the Marvell team. Now, let me turn to Marvell's enterprise networking and carrier infrastructure and markets. In the first quarter, enterprise networking revenue was $178 million, while carrier infrastructure revenue totaled $138 million. Collectively, revenue grew by 14% sequentially, exceeding the midpoint of our forecast and reflecting the ongoing recovery in both end markets. Looking ahead to the second quarter of fiscal 2026, we expect aggregate revenue from enterprise networking and carrier infrastructure to grow sequentially in the mid-single-digit range on a percentage basis. In the consumer end market, first quarter revenue was $63 million, representing a 29% sequential decline. Looking ahead to the second quarter, we expect consumer revenue to grow by approximately 50% sequentially.

These sequential changes are largely driven by seasonality and gaming demand, which continues to be the primary factor driving our consumer business. Turning to our automotive and industrial end market, first quarter revenue was $76 million, declining by 12% sequentially. While we saw sequential growth in our automotive end market, this was more than offset by a decline in our industrial end market, where order patterns can be lumpy in any given quarter. Looking ahead to the second quarter of fiscal 2026, we anticipate overall revenue from the auto and industrial end market to be flat on a sequential basis. In summary, in the first quarter of fiscal 2026, we continue to deliver operating margin expansion, earnings per share growth, and new revenue records. These results reflect strong contributions from our AI-driven data center end market and ongoing recovery in our enterprise networking and carrier infrastructure end markets.

While there are ongoing macroeconomic uncertainties, we are guiding for continued growth in the second fiscal quarter. We continue to closely monitor the broader environment to assess potential long-term impacts. As I mentioned during our March earnings call, AI now represents the majority of our data center revenue, and we expect the relative proportion of AI-related revenue to grow further in the coming years, driven in large part by our custom silicon business. We have made tremendous progress since our AI era event last year, and in light of this momentum, we are hosting a dedicated forum on June 17th for investors to gain deeper insight into Marvell's unique position in the custom silicon market.

This event will be broadcast live and provide an ideal setting to showcase our differentiated technology platform and provide an opportunity to hear directly from me and a broad cross-section of Marvell's engineering leadership and members of my direct staff. Presentations will be followed by a Q&A session, providing investors and analysts an opportunity to ask questions. During the event, we will highlight our expertise in system and semiconductor design, our advanced process and package roadmap, and our comprehensive portfolio of semiconductor platform solutions and IP. Complementing this technical deep dive, the agenda will include a market-focused section with updates on the expanding market opportunity for custom silicon, a robust design win pipeline, and the growing role of custom silicon and AI infrastructure.

We will also share our progress towards the market share goals we set at our AI era event last year, along with our vision for significant growth in the years ahead. We are excited to share more details about this incredible custom silicon opportunity on June 17th. Looking more broadly, we continue to see strong tailwinds in AI, including robust capital expenditure plans from hyperscalers, an increasing number of sovereign data center announcements, and an emerging group of hyperscalers further expanding the market. These fast-growing markets present us with a diverse set of opportunities, increasing our confidence in the long-term potential of our data center business. In addition, we are seeing an encouraging recovery in carrier infrastructure and enterprise networking, their second quarter forecast representing the fifth straight quarter of sequential revenue growth for these combined end markets.

With that, I'll turn the call over to Willem for more detail on our recent results and outlook.

Thanks, Matt, and good afternoon, everyone. Let me start with a summary of financial results for the first quarter of fiscal 2026. Revenue in the first quarter was $1.895 billion, exceeding the midpoint of our guidance, growing 63% year over year and 4% sequentially. Data center was our largest end market, contributing 76% of total revenue. GAAP gross margin was 50.3%. Non-GAAP gross margin was 59.8%. Moving on to operating expenses. GAAP operating expenses were $682 million, including stock-based compensation, amortization of acquired intangible assets, restructuring costs, and acquisition-related costs. Non-GAAP operating expenses came in at $486 million, slightly below guidance. Our GAAP operating margin was 14.3%, while Non-GAAP operating margin was 34.2%. For the first quarter, GAAP earnings per diluted share was $0.20.

Non-GAAP earnings per diluted share was $0.62, reflecting year-over-year growth of 158%, which is more than double the pace of revenue growth, demonstrating the significant operating leverage in our model. Now, turning to our cash flow and balance sheet. Cash flow from operations in the first quarter was $333 million. Our inventory at the end of the first quarter was $1.07 billion, an increase of $42 million from the prior quarter to support the growth in our business. We returned $52 million to shareholders through cash dividends. In addition, reflecting our strong belief in Marvell's future prospects, we significantly increased repurchases in the first quarter, buying back $340 million of our stock, stepping up from the $200 million we repurchased in the prior quarter. Our total debt was $4.2 billion, with a gross debt-to-EBITDA ratio of 1.8 times and a net debt-to-EBITDA ratio of 1.42 times.

Our debt ratios have continued to improve as we have driven an increase in our EBITDA. As of the end of the first fiscal quarter, our cash and cash equivalents were $886 million. Turning to our guidance for the second quarter of fiscal 2026, we are forecasting revenue to be in the range of $2 billion, + or - 5%. We expect our GAAP gross margin to be between 50% and 51%. We expect our Non-GAAP gross margin to be between 59% and 60%. Looking forward, we anticipate that the overall level of revenue and product mix will remain key determinants of our gross margin in any given quarter. For the second quarter, we project our GAAP operating expenses to be approximately $735 million. We anticipate our Non-GAAP operating expenses to be approximately $495 million.

For the second quarter, we expect other income and expense, including interest on our debt, to be approximately $49 million. We expect a Non-GAAP tax rate of 10% for the second quarter. We expect our basic weighted average shares outstanding to be $864 million and our diluted weighted average shares outstanding to be $874 million. We anticipate GAAP earnings per diluted share in the range of $0.16-$0.26. We expect Non-GAAP earnings per diluted share in the range of $0.62-$0.72. In summary, we continue to drive strong revenue growth, expand our operating margins, generate strong cash flow, and return increasing amounts of capital to our stockholders. We are looking forward to completing the sale of our automotive Ethernet business to Infineon, which will provide us with even more flexibility to execute on our capital allocation strategy. With that, we are ready to start our Q&A session.

Operator, please open the line and announce Q&A instructions. Thank you.

Thank you, sir. We will now begin the question and answer session. To ask a question, you may press star, then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. In the interest of time, please restrict yourself to one question only. If you have additional questions, please rejoin the queue. At this time, we will pause momentarily to assemble our roster. Our first question comes from Vivek Arya at Bank of America. Please go ahead.

Thank you. Thanks, Matt, for clarifying that you have that 3 nm program at your large XPU customer and have the follow-on program at the other large customer, just given all the Asia supply chain noise.

I guess I have two related questions. One is, what is the direction of content in these next-generation programs? Is it up, down, down flat? And number two, are you exclusive on these three-nanometer XPUs, or do you expect to share that program, given that your competition also seems to be convinced that they have the program? So just comments on content and exclusivity. Thank you.

Yeah, hey, Vivek, thanks for the question. First, yeah, I'm glad you said it. I can certainly appreciate the challenge for investors, given the news flow that is coming out on seemingly a weekly basis here. The fact is that these Asia supply chain sources have an incomplete view. We run a very tight ship here at Marvell. We don't share customer confidential information, and we treat that with the highest priority.

They simply have no idea what we're doing for our customer. Let me state the facts as they exist today. We're the incumbent shipping the current generation of this AI XPU. As I've detailed, we've had a very successful and rapid ramp on this program from A0, which is first-time success, to high-volume production. I've talked about this for a couple of quarters. We've been engaged with this customer on the follow-on generation of this XPU. This next-generation program has continued to move forward. In this quarter, we have secured three-nanometer wafer and advanced packaging capacity. That is for 2026, where we expect to start production. That would be subject to the typical completion of our customer's qualification cycles, which we now have some experience with.

Assuming AI CapEx continues to grow, we expect our custom silicon revenue to continue to grow next year through program transitions at this customer. Look, our customers have relationships with many partners, and they do that to build out their whole silicon portfolio. The key point is that irrespective of any of these relationships, we expect our revenue to continue to grow on a multi-year, multi-generational basis with this customer. Given the volumes that have materialized for XPUs, it is certainly possible and likely that customers and our customer may be pursuing multiple paths to meet their requirements. Thank you for asking this important question, Vivek. I think my answer is as clear as it could be. Thanks.

Thank you, Matt.

Thank you. Next question will be from Ross Seymore at Deutsche Bank. Please go ahead. Hi, Matt. Thanks for that color.

Following on Vivek's question, one of your primary XPU competitors has talked about engagements at additional customers, and not necessarily to front-run anything you may or may not say on June 17th. How do you see Marvell's ability to support a broader customer base beyond the initial, I guess, three/four that you have, depending upon if we're talking XPUs or connectivity?

Yeah, thanks, Ross. Yeah, we'll cover this certainly at the AI investor event we'll be holding. Just to give you some color, we absolutely have the capacity engineering-wise to expand our portfolio and expand our engagements. If you look at Marvell's R&D spend over the last few years through cycle, we've made increases there. Within that, as part of our capital allocation strategy, we've aggressively repurposed and reallocated our talent and our teams to this massive data center and AI opportunity.

If you look at just the raw R&D spending, the investments we're making in next-generation technologies, and again, we're going to cover all this at the AI day, we are extremely well-positioned to support and are supporting multiple increased engagements across a number of programs that we'll detail and we'll talk about and we'll frame at the AI investor event. I think we're very well-positioned to support designs that can really grow the company to even a much larger scale and level. I would say also, by the way, it's not just the top sort of four. I think there's been a really interesting emergence over the last year or so of the next wave of hyperscale kind of class customers that can benefit from our technology relative to going custom. We're going to talk about all that just a couple of weeks out here.

Look forward to talking to you then.

Thank you.

Next question will be from Torsten Umbenhauer at Stifel. Please go ahead.

Yes, thank you, and congrats on the results. Matt, maybe in the spirit of clarifying things, there's a lot of debate out there about your SerDes technology, especially for 200 gig SerDes. Maybe you could talk a little bit about Marvell's positioning there. Maybe related to that, how this relationship with NVIDIA is going to work out. I'm sure there's a lot you can't share with us, but I tried anyway.

Yeah, sure. Yeah, on the first topic, and we'll actually be showcasing this at our AI event, our SerDes technology remains best in class, both from a performance standpoint as well as a time-to-market standpoint. If you recall, we've had now leadership announcements and production, by the way, on 200 gig. It's performing extremely well.

We just showed off at OFC the first and only 400 gig per lane demonstrations with a very aggressive roadmap there. That is in great shape, our technology across the board, both electrical and optical SerDes. Tell me your second question.

Yeah, with the NVLink Fusion and how that's going to work out.

Yeah. We're excited about that partnership. I think it's a sign that kind of demonstrates how, one, we're deeply engaged in the ecosystem, Tori, with key partners. The second, I think it's some validation as well that from a market standpoint, there is a complementary role for custom, even as acknowledged by NVIDIA, who can leverage sort of the R&D investment they've already put in in their rack scale solutions, but with people that want to do their own XPUs.

We're part of that discussion, and we're going to help enable that if that's the direction our customers want to go. We just view it as another key piece to the whole portfolio that we offer to customers kind of end-to-end. I detailed some of those in my prepared remarks as well around things like custom HBM, co-package optics, advanced packaging, and others. These are really just, it's really part of a suite of technologies to give the broadest offerings to our customers with the best-in-class technology.

Thanks for all that color, Matt.

Yep.

Next question will be from Timothy Arcuri at UBS. Please go ahead.

Thanks a lot. Matt, I was wondering if you can break down data center revenue a little bit. I think last quarter you said that AI was about 55% of data center.

I wonder if it was in the same range. I assume maybe custom silicon grew a little faster because the gross margin was a little bit lower. I guess that's the first part of the question. Obviously you're running way above this $2.5 billion number this year for AI revenue. Can you give us just a sense of where it's tracking for the year? Are we talking like $3 billion, $5 billion, to $4 billion? Maybe you'll talk about this at the day here in a few weeks, but I'm wondering if you can sort of add some color to this for us. Thanks.

Yeah, thanks, Tim. Yeah, we didn't give an exact number when we talked about it relative to our Q4 was the data point we gave.

We did say that at that time that within data center, AI had crossed and was now the majority of our data center revenue. I think the way to think about it is, because we're not going to break it out on a sort of quarter-by-quarter basis, but as I've prepared for the call and been looking at the trajectory of the business, and I say this with also you got to factor in that we anticipate the mass market and the core business to continue to recover. We see a path here in the not too distant future where AI is not only the majority of the data center and market, but it becomes the majority of whole co. Where that line is exactly, we're not calling it, but that's the trajectory.

I think the mental shift is not sort of figuring out how within data center what that exact number is, but you can do your own models. You guys are very, very capable there, drawing a line between here and when it can actually cross as a 50% contributor of the whole company. That's coming.

I guess then, is that why? Did the custom basic business grow a little faster, Matt? That's why the gross margin was a little lower?

Oh, yeah, on that side of things. Yeah, there's mix within the quarter. Clearly, the custom business we have does run at a fundamentally lower gross margin. That is going to modulate our gross margins on a quarterly basis, and you've seen the impact. We've also had, I think, strong recovery in some of the other businesses as well.

That has always been fundamentally the custom business, a lower than company average gross margin.

Yeah, maybe I can add quickly. When you look at our Q2 guide, certainly custom continues to grow really strongly, and that is what you are seeing reflected in that. When we look forward to the second half, clearly we are optimistic on custom demand. That interplay between that and the rest of the business is really going to drive what gross margin will be in the second half. I mean, right now, probably expected to be in a similar range as what we guided for Q2.

Okay, thank you, Willem.

Yeah, thanks, Tim.

Next question will be from Chris Caso at Wolf Research. Please go ahead.

Yes, thank you. Good evening. I guess the question is regarding the second half of the year.

I'm sure you're not ready to provide that guidance right now, but could you give us some puts and takes on what your expectations may be? Do you expect the custom business to continue to grow in the second half of the year? What do you expect with regard to the carrying enterprise businesses? Is this kind of a kind of slow, steady ramp in those businesses? Any kind of color in the second half, please.

Yeah, thanks, Chris. Maybe just at a higher level. I said this in some of my prepared remarks, but we are monitoring the macro and the various dynamics going on out there. That's always a factor. At the moment, we see a couple of things happening. The first is, and just even recently as yesterday, you see strong numbers out of NVIDIA and other announcements leading up to that.

We see the AI demand continuing and the data center demand continuing. On top of that, we have this nice recovery, strong recovery, actually, we've been driving in our core business, in particular, enterprise networking and carriers. We expect that to continue to recover and grow throughout the rest of the year as well. We're not calling on a quarter-by-quarter basis, but right now we expect growth kind of across the board through the year with, I think, what can be a really nice setup for fiscal 2027 with some of the growth drivers we've articulated before. That's where we're at right now, and I feel good about it. Thanks.

Thank you.

Next question will be from Harsh Kumar at Piper Sandler. Please go ahead.

Yeah, hey, Matt. Congratulations on solid results.

When we talk to investors, Matt, we find that there's a desire on the part of investors for the data center business to grow faster than, let's say, what you've been putting up mid-single in the April quarter and then also the guidance. I know that in the last quarter, Matt, you had some moving parts with on-prem, etc. I was hoping that you could clarify the growth of your AI business versus some of the non-AI pieces like on-prem or some other things that might be moving around and just help us understand how fast maybe your AI business is growing.

Yeah, thanks, Harsh. Yeah, and I think the way to think about it is helpful is to contextualize. It's not a one-quarter snapshot.

If you look at the last few quarters, we had a very dramatic step up from Q3 to Q4, 20%+ in the data center business. It grew four. We're guiding it up mid-single. I just kind of gave some indication that it'll keep growing. If you look at the year, that's one way to think about it is we did have a significant step up. Q2, as signaled, is looking like it's going to grow slightly faster than Q1. That's a good sign. I'd point you to the fact that, look, a year ago, we were in a very strong position relative to our data center and how it was growing. The comparables are also telling, right?

When you're talking about data center year-over-year revenues for a company at our scale growing 70%+ on a year-over-year basis, we feel good about that. I think with that setup, if you look at just the last two, three quarters and you look at year-over-year, we feel really good about the trajectory of the business. AI continues to be the fastest portion of that in terms of our data center business. As I said earlier, to answer Tim's question, at some point, that'll just flip over and become half of whole co. I think that's the context I can give you at the moment. Thanks. When you're talking about data center year-over-year revenues for a company at our scale growing 70%+ on a year-over-year basis, we feel good about that. I think with that setup, if you look at just the last two, three quarters and you look at year-over-year, we feel really good about the trajectory of the business. AI continues to be the fastest portion of that in terms of our data center business. As I said earlier, to answer Tim's question, at some point, that'll just flip over and become half of whole co. I think that's the context I can give you at the moment. Thanks. When you're talking about data center year-over-year revenues for a company at our scale growing 70%+ on a year-over-year basis, we feel good about that. I think with that setup, if you look at just the last two, three quarters and you look at year-over-year, we feel really good about the trajectory of the business. AI continues to be the fastest portion of that in terms of our data center business. As I said earlier, to answer Tim's question, at some point, that'll just flip over and become half of whole co. I think that's the context I can give you at the moment. Thanks. When you're talking about data center year-over-year revenues for a company at our scale growing 70%+ on a year-over-year basis, we feel good about that. I think with that setup, if you look at just the last two, three quarters and you look at year-over-year, we feel really good about the trajectory of the business. AI continues to be the fastest portion of that in terms of our data center business. As I said earlier, to answer Tim's question, at some point, that'll just flip over and become half of whole co. I think that's the context I can give you at the moment. Thanks. When you're talking about data center year-over-year revenues for a company at our scale growing 70%+ on a year-over-year basis, we feel good about that. I think with that setup, if you look at just the last two, three quarters and you look at year-over-year, we feel really good about the trajectory of the business. AI continues to be the fastest portion of that in terms of our data center business. As I said earlier, to answer Tim's question, at some point, that'll just flip over and become half of whole co. I think that's the context I can give you at the moment. Thanks. When you're talking about data center year-over-year revenues for a company at our scale growing 70%+ on a year-over-year basis, we feel good about that. I think with that setup, if you look at just the last two, three quarters and you look at year-over-year, we feel really good about the trajectory of the business. AI continues to be the fastest portion of that in terms of our data center business. As I said earlier, to answer Tim's question, at some point, that'll just flip over and become half of whole co. I think that's the context I can give you at the moment. Thanks.

Matt, hopefully, you can talk about the on-prem piece if possible or other parts that are moving.

Yeah, the on-prem is pretty small at this point.

It has some effect, and it's always continued to be a little bit of a drag. The overall data center revenue is driven primarily by AI, and the other stuff's performing pretty much in line. I don't think it's a drag going forward. If you're worried about where does it land in the next few quarters, it's not as big a contributor as it used to be. It's probably where it is. Maybe it comes back a little bit, but the spending has shifted just so dramatically, right, in the data center. The enterprise on-prem piece is just not getting the spend anymore. I think it was down a little bit in Q1, but it's relatively stable. Yeah.

Thank you. Thank you Thank you so much.

Yep.

Next question will be from Tom O'Malley at Barclays. Please go ahead.

Hey, guys. Thanks for taking my questions.

I have two quick ones. First one's for Willem. You are guiding data center at mid-single digits into the alcorter, and you're saying custom silicon is growing quite strongly. Is there something going on with optical? Is that flattening out a bit? Is there anything going on? Could you give us an update on the health of optical and what you're embedded in your guide? And then the second is, Matt, in your announcement with Amazon, you talked about a bunch of other products other than custom silicon that you guys were engaging with over the next couple of years, PCIe cables, PCIe retimers, AEC. Could you maybe try to size what that impact is right now? Some of your competitors in that space are putting up some bigger numbers. We'd love to see how significant that is for you guys. Thank you.

Yeah, thanks, Tom.

Maybe I'll take the second part first. Yeah, I think those engagements are going very well. You're right in our broader agreement. There was actually a lot of different exciting opportunities on the networking connectivity side. Those are progressing, but no major updates there. With respect to how the optics business is doing, it's done quite well. In fact, we see that business growing throughout the year this year. We see both growth from custom as well as optics, and again on the Amazon agreement progressing well. I would say just at a high level too, we have in some of these new emerging categories, we do have AECs ramping this year. I wanted to note that, as well as continued revenue growth in switching. A lot of good things happening there, Tom.

Yeah, coming up.

I'll just add quickly in terms of the puts and takes on gross margin. The other one to take into account there is the strong snapback on consumer. That's seasonal and expected. That's another area that's typically slightly below average when you look at the overall. Maybe you have the next question, please?

From Harlan Sur at JPMorgan.

Hey, good afternoon. Nice job on the quarterly execution, guys. The lead AI GPU vendor, I think, is getting ready to commence shipments of their next-generation platform. In parallel, they're rolling out their next-gen X800 InfiniBand and Ethernet scale-out solutions that support 1.6T optical connectivity. Typically, the optics start to ship ahead of the GPUs and RAP scale platforms. Do you anticipate a strong ramp of your 1.6T solution starting now? More importantly, your 5 nm solution, I think, is already qualified with this customer.

Are you guys going to be ramping your 3 nm DSP solution into this next-generation networking platform?

Yeah, thanks, Harlan. You're right about the sequencing. We have commenced shipments on 1.6T at 5 nm. We have very strong demand for three, and we've executed very well on that product development so far. I think from a 1.6T kind of lifespan perspective, that's where the volume is going to be. I think that's going to be a much stronger ramp next year. Some of that, I say too, because the 800 gig has continued to be so strong kind of across the board that just as a percentage of the total, it's still largely dominated this entire year by 800 gig. Yeah, we're shipping now.

The part works well, but there's just a lot of demand to initial ramps, and customers will be on 5 nm. There's a big push in the ecosystem to drive it to 3 nm given the compelling power savings and the performance of our product. All that's going well. We're well positioned for the 1.6T ramp and ecosystem expansion.

Thanks for the update, Matt.

Yeah, thanks, Harlan.

Next question will be from Blayne Curtis at Jefferies. Please go ahead.

Hey, good afternoon. Thanks for your question, and thanks for clarifying all that ASIC stuff. I just kind of wanted to ask, going back to the gross margin. I think there's been a lot of discussions about what an ASIC vendor can charge for and not charge, whether they can charge for memory.

I think you guys kind of put a line in the sand at a certain gross margin for ASIC. I'm curious if that's still the right level. When you look at these next generations, I'm glad you're involved with all those. How should we think about sustainable AI ASIC gross margins? Is it still in the original range you were looking at?

Yeah, thanks, Blayne. Yeah, when we look at our overall custom business as a whole, we've been able to manage the gross margins even with these ramps in the range we've talked about. Within custom, there is a range. It's like the old adage in semiconductors. The higher the volume, you're going to see lower gross margins, but you're going to see a lot more operating income. That's what we see.

I wouldn't say that the percent change is really any different relative to how it stacks up on the opportunity set. Things that are a lot more Marvell contribution, as an example, where we leverage a lot of the IP and maybe more outside the XPU, those tend to be a little higher. Of course, they don't grab the limelight, but we're going to talk about those at the AI day because they actually, in aggregate, add up to a very nice revenue pipeline for us and opportunity set with also that same multi-generational aspect to it. From a percent standpoint, we're managing the business fine, and the AI portion, the XPU is always going to be lower. It's just that as the XPU, depending on the magnitude of that, that may move that mix around.

There is a certain range for these programs and projects, and we have not really seen that change. The magnitude of the volume has changed. I would say that is across the board, by the way. Not only have the XPUs that we have going in flight or in production increased a lot from when we won them, but now these other types of accelerators or custom networking or custom NICs or things of that nature, those have also, quite frankly, those are a lot more volume than we had anticipated, and those carry a little bit higher margin. I hope that context is helpful, but we are still managing the business in the same way. Thanks, Matt.

Yeah, Blayne, maybe one additional add is just on operating margin. I think the one thing that is consistent across all these programs is that we are driving a creative operating margin to our model.

Clearly, there is a range. But as you scale those programs, it's a finite investment. You've seen that leverage in our model over the last couple of quarters here.

Yeah, I mean, I think you're seeing it in operating margin dollars flowing in, Blayne, and also in EPS, right, which still continues to grow twice the rate of revenue at this point. We do not see that changing relative to the leverage we get on these big programs. Very operating margin rich in terms of just the dollars.

Thanks, guys.

Yeah, thanks.

Next question will be from Quinn Bolton at Needham & Company. Please go ahead.

Hey, thanks for taking my question, Matt. I wanted to follow up on the next question or maybe just a clarification on whether these ASIC programs could potentially be dual-sourced.

I think towards the end of your answer, you said that there could be multiple paths, and I'm not sure if you're sort of suggesting there might be different versions of an XPU or whether they could actually be dual-sourced. To the extent that they're dual-sourced, you spent a couple of years designing these programs. Do you guys have guarantees that you don't get blanked at the end of the year if they take the other path?

Yeah. No, Quinn, I appreciate the question. I was quite lengthy in my prepared remarks and even my, I think, Vivek answer in terms of the perspective I can offer you on that. I think I've said it, and if I wasn't clear, I did say that given the volumes, it's certainly possible that there are multiple paths pursued.

For us in our business, and what I said in the prepared remarks as well, is we feel very confident and very good about our revenue continuity on the initial program and the revenue ramp on our additional program. We're planning production. We're tracking. We're doing that. I see the noise coming in, but I also just need to kind of focus on what I'm hearing from my customer and what we need to go do to execute to be good.

Yeah. Second question is just a follow-up on the NVIDIA Fusion. Are you guys, NVIDIA, sort of open up their NVLink, and you design your SerDes to be compatible with that, and you offer that out as an IP block to your ASIC customers? Or is there an IP transfer from NVIDIA to yourselves involved in that NVLink Fusion offering?

Yeah. Yeah.

The initial intent is it's planned as a chiplet solution. For example, we could work with the customer, do the XPU design with them, and then through I/O chiplets, take die-to-die interface between the XPU and the NVLink chiplet, and then that interfaces to the scale-out network. There are probably other models that can exist. I think the higher-level notion that Jensen and the team are driving is really trying to open up and make sure that customers can take advantage of the investment they've made in their infrastructure, even if they have unique needs down at a more granular level like at the XPU. We will see how that all evolves, but we were very happy to be asked to participate and be a partner. We've already received a whole bunch of interest from customers on what this engagement might look like.

We'll see where it goes, but I think that the high-level concept is what is important.

Got it. Thank you.

Next question will be from Srini Pajjuri at Raymond James. Please go ahead.

Thank you, Matt. My question is on the optical side. I know you said your expectation for this year is for the optical business to grow. Obviously, you have the 1.6T ahead of you, and you also said 800 gig demand is quite strong. A couple of questions we get from investors. One, can you speak to your market share as we go from 800 gig to 1.6T and also the potential impact from any technology transition such as LPO? The second question is, can you speak to the extent you have visibility, what is the current inventory that you see at your customers?

Because that question keeps coming up given how strong this cycle has been so far. Thank you.

Yeah, thanks. Yeah, we see we've maintained very strong market share in the 800 gig wave. We led it. A few others have come in, but we still have a very, very strong commanding position there. We were first to market at 1.6T, 5 nm, first to market at 1.6T 3 nm. We're driving 400 gig I/O, which is going to enable 3.2T based on PAM. I don't see any fundamental shift at all in the market share. Quite frankly, the faster we execute and the faster we ramp, these ramp, the better because of the lead we have. We feel good about that. Any adoption, I should say, not impact of new technologies like LPO, I view this as very incremental.

Those would be for things like scale-up, and we will participate in those. We have solutions based on our broadband analog technology, and we'll participate in LPO. When it happens, our view still is that's going to be a smaller portion of the market, but we will be there, and we're engaged right now. I think your last question was just about the broader inventory at our customers. Yeah. That looks pretty good. I mean, we service this business direct. We serve it through a number of channels, but key data points like distribution inventory and things like that, that's very low. We had strong sell-through last quarter. We're looking at the whole year, and it still looks like a good year. We got to wait and see.

We're only doing one quarter at a time here, but high level this year and next year, especially with the 1.6T transition, we see continued strong growth in our optics business.

Got it. Thank you.

We will take our last question from Josh Bixler at TD Cowen. Please go ahead.

Hey, guys. Thank you for taking my question. I wanted to follow up on a couple of previous ones. Can you maybe elaborate on what you would expect to see from a potential customer who's exploring multiple tracks? Is that generally a performance skew and efficient skew, or could you see instances where your hyperscale customers are engaged on completely different ASIC programs for completely different workloads? Thank you.

Yeah, thanks. And nice to meet you. Yeah.

I think I've covered kind of as much as I'm going to on the topics from today, but I do think there'll be some discussion probably at the AI day around some of the different business models that are out there and different things customers are looking for. At the moment, I think I've given kind of the max color we're going to do on this. I appreciate the question. Thank you.

Thank you. This concludes our question and answer session. I will now turn the call over to Matt Murphy, Marvell's CEO, for closing remark.

Great. Thank you, operator. I'd just like to thank everybody for your interest in Marvell and for joining the call. We're off to a great start with our first quarter in fiscal 2026.

I'm very excited to be guiding a $2 billion quarter for the second quarter and seeing that all the effort that the Marvell team has put in is coming to fruition relative to ramping some of these key programs and executing to meet our customer needs. I'm looking forward to connecting with everybody at the Custom Silicon event for investors in a couple of weeks and giving a deeper dive into this quite large opportunity in front of us. Thanks, everybody, and we'll talk soon. Bye.

Thank you, sir. Ladies and gentlemen, this does indeed conclude our conference call for today. Once again, thank you for attending. At this time, we do ask that you please disconnect your lines.

Good afternoon and welcome to Marvell Technology Inc's Second Quarter of Fiscal Year 2026 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 the formal presentation. Please note this event is being recorded. I will now turn the conference over to Mr. Ashish Saran, Senior Vice President of Investor Relations. Thank you. You may begin.

Thank you and good afternoon, everyone. Welcome to Marvell's Second Quarter Fiscal Year 2026 Earnings Call. Joining me today are Matt Murphy, Marvell's Chairman and CEO, Willem Meintjes, CFO, Chris Koopmans, President and COO, and Sandeep Bharathi, President, Data Center Group. Let me remind everyone that certain comments made today include forward-looking statements, which are subject to significant risk 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 10-K and 10-Q filing. We do not intend to update our forward-looking statements. 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.

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

Thanks, Ashish, and good afternoon, everyone. For the second quarter of fiscal 2026, Marvell delivered record revenue of $2.006 billion, reflecting a 6% sequential increase and strong 58% year-over-year growth. Our data center end market continued its strong momentum, growing 69% year-over-year, fueled by robust AI demand. We also saw a solid recovery in our enterprise networking and carrier infrastructure end markets, which collectively grew 43% year-over-year. We expanded our non-GAAP operating margin by 870 basis points year-over-year to 34.8% and delivered record non-GAAP earnings per share of $0.67, up 123% year-over-year. We also delivered $462 million in operating cash flow, up significantly from the $333 million in the first quarter. Robust cash flow generation is enabling us to continue to return significant capital to our stockholders. We have repurchased $540 million of stock through the first half of the fiscal year, with approximately $2 billion remaining in our authorization.

At the beginning of the third quarter, we completed the divestiture of our Automotive Ethernet business in a $2.5 billion all-cash transaction at a very compelling valuation. I'm pleased with our team's execution in closing this transaction ahead of schedule. The proceeds from this transaction provide us flexibility to continue to drive our ongoing stock repurchase program and deploy capital to further bolster our technology platform. The auto divestiture aligns with our strategy to focus the company on what we expect to continue to be a massive AI opportunity in front of us, by purposefully redirecting our investments towards data center relative to our other end markets. That strategy has been very successful, with data center alone now driving three-quarters of our total revenue. The auto divestiture further reduces the relative proportion of revenue from our non-data center end markets.

As a result, starting in the third quarter, we will consolidate our non-data center end markets into a new single communications and other end market. Willem will cover this in more detail in his prepared remarks. During the quarter, we hosted a highly successful custom silicon investor event in June, where we outlined an expanded $94 billion data center TAM for calendar 2028, a 26% increase from our prior view. We also unveiled a new fast-growing custom silicon product category of XPU attach, updated our custom design win board to 18 multi-generational XPU and XPU attach sockets, and highlighted over 50 new pipeline opportunities with an estimated $75 billion of lifetime revenue potential.

Based on the sockets we have already won, we concluded with our plan to grow our data center market share from 13% of a $33 billion TAM in calendar 2024 to 20% of a $94 billion TAM in calendar 2028. Let me now take a moment to share how we are enhancing our leadership structure to further capitalize on significant opportunities in the large and fast-moving AI and cloud markets. We have promoted two exceptional leaders, Chris Koopmans to President and COO, and Sandeep Bharathi to President, Data Center Group, and consolidated substantial parts of the organization under their leadership. Their proven track record of innovation, execution, and results positions them to accelerate Marvell's growth. Chris joined Marvell nine years ago, and he has been a key enabler of our transformation to a leader in the data center market.

He has successfully led sales, our networking business, and most recently, global business operations and marketing. I'm pleased to see Chris take on sales again, along with managing our non-data center businesses and corporate development. His expanded role now encompasses end-to-end revenue execution, from go-to-market strategy and customer engagement to operations and long-term strategic planning. Sandeep joined us in early 2019 to lead our central engineering team and accelerate development of our technology platform. He was instrumental in driving Marvell's leap to 5 nm process technology, leadership, and integrating Avera, the custom business we acquired that has since become our largest growth opportunity. Under Sandeep's guidance, our engineering teams have successfully delivered multiple highly complex custom XPU and XPU attach projects into high-volume production with first-time silicon success.

With this promotion, Sandeep now has overall responsibility for our data center business, in addition to his continued leadership of data center engineering and central engineering. This unifies full ownership of our largest and most important business under a single leader, spanning the entire product lifecycle, from technology platform, IP, and roadmap to customer engagement, product definition, and chip development. Let me now discuss our results and expectations for each of our end markets. In our data center end market, we achieved record revenue of $1.49 billion in the second quarter, growing 3% sequentially and 69% year-over-year. The strong performance was led by our custom XPU and XPU attach products, as well as our electro-optics interconnect portfolio. AI and cloud continue to be the primary drivers, accounting for over 90% of our data center revenue, with the remainder coming from the on-premise portion of our data center end market.

We expect on-premise revenue to remain stable at an annualized revenue run rate of approximately $500 million. Looking ahead to the third quarter, we expect revenue from our electro-optics products to grow double digits sequentially on a percentage basis, as we continue to benefit from our market-leading position in AI interconnect. Our custom business is also performing well and remains on track to grow in the second half of the fiscal year compared to the first. However, we expect growth to be non-linear in the custom business, with the fourth quarter substantially stronger than the third. As a result, we expect overall data center revenue in the third quarter to be flat sequentially, with electro-optics strength offset by lower custom revenue. On a year-over-year basis, we expect data center revenue to continue to deliver strong growth in the mid-30% range in the third quarter.

We are very pleased with the progress of our 18 XPU and XPU attach sockets, several of which are already in volume production. We are making excellent progress on development of the remaining sockets, with all of them expected to ramp over the next couple of years. The success of our initial wave of custom programs, combined with rapidly growing industry interest in custom silicon, has expanded our design win pipeline to over 50 new opportunities. As next-generation XPU and XPU attach products increase in complexity, we believe it will become even more critical for customers to partner with a full-service custom silicon provider like Marvell. Since our event in June, our team has won additional sockets, adding to the 18 sockets we had already discussed.

Collectively, these new wins represent multi-billion dollar lifetime revenue potential, and we remain deeply engaged in advanced architectural discussions of many of the opportunities still in the funnel. As next-generation AI data centers evolve, scale-up networks are becoming essential to tightly interconnect tens, hundreds, and eventually thousands of XPUs within and across racks. These require ultra-low latency and multi-terabit bandwidth to meet the demands of training and inference workloads. Marvell's multi-generational custom engagements with the hyperscalers give us unique visibility into upcoming XPU architectures, enabling us to design scale-up switches, supporting both open standard Ethernet and UALink fabrics purpose-built for AI. Combined with Marvell's leadership in Ethernet switching and proprietary high-speed, low-power, low-latency SerDes IP, we are strongly positioned to lead this market inflection. We are investing in developing scale-up switches tailored to each customer's protocol of choice and look forward to updating you on our progress.

Beyond switching, our interconnect portfolio extends the opportunity. While copper dominates the scale-up links today, as networks expand and bandwidth grows, optics adoption will follow. This represents a large opportunity for Marvell's full suite of interconnect products and technologies, including DSPs for active electrical cables, or AECs, and active optical cables, or AOCs, retimers for PCIe, Ethernet, and UALink, and silicon photonics for near-packaged and co-packaged XPU optics. Our AEC and AOC DSPs are already in the market, and our retimers are in customer evaluation. We have demonstrated our 6.4 Tbps silicon photonics light engines and expect our technology to be a key enabler of NPO and CPO implementations once the industry is ready to adopt. Collectively, between switching and interconnect, we see a massive scale-up opportunity for Marvell over time.

Turning to our electro-optics interconnect portfolio, our PAM and DCI franchises continue to lead the industry in enabling the build-out of AI and cloud infrastructure. Demand for 800 Gbps PAM DSPs remains strong, with a long lifecycle still ahead. We have also begun volume shipments of our next-generation 200 Gbps per lane 1.6 Tbps PAM DSPs to multiple customers, and we expect adoption to accelerate in the next several quarters. Looking further ahead, we are driving the next optical technology transition. At this year's Optical Fiber Conference, we demonstrated our 400 Gbps per lane PAM technology, a critical innovation and step towards enabling 3.2 Tbps optical interconnects. This milestone underscores Marvell's leadership in pushing the boundaries of next-generation optical connectivity. Our data center interconnect business also continues to expand, with adoption proliferating across large hyperscalers.

Collectively, the custom and electro-optics product line that I just described now accounts for over three-quarters of our total data center revenue. The balance comes primarily from our data center storage, switching, and security portfolios, each of which is showing solid progress. Our data center storage revenue has improved significantly, reflecting a return to health in both the SSD and HDD markets. In AI and cloud switching, our 12.8 Tbps products continue to ship in high volume, while our next-generation 51.2 Tbps switches are now ramping. Adoption is accelerating, and we expect these products to be a major driver of switch revenue growth in the next fiscal year. In the security market, we recently expanded our collaboration with Microsoft Azure on our hardware security modules, building on a longstanding and trusted relationship with this customer. Now, let me turn to our enterprise networking and carrier infrastructure end markets.

In the second quarter, enterprise networking revenue was $194 million, and carrier infrastructure revenue totaled $130 million. Combined revenue for these end markets grew 2% sequentially and 43% year-over-year. Looking ahead to the third quarter of fiscal 2026, we expect aggregate revenue from enterprise networking and carrier infrastructure to grow sequentially by approximately 30%. This growth is driven by normalizing customer inventory levels and strong adoption of our refreshed product portfolio. As a reminder, we recently migrated these products to advanced process nodes, an investment we expect to yield benefits for many years to come, given the long product life cycles in these markets. In the consumer end market, second quarter revenue was $116 million, up 84% sequentially and 30% year-over-year. Gaming demand and its seasonality continue to be the primary driver of this business.

For the third quarter, we expect consumer revenue to be down sequentially in the low single digits on a percentage basis. Turning to our automotive and industrial end market, second quarter revenue was $76 million, flat both sequentially and year-over-year. For the third quarter of fiscal 2026, reflecting the divestiture of our Automotive Ethernet business, we anticipate overall revenue of approximately $35 million from this end market. This includes a mid-single-digit million-dollar contribution from our Automotive Ethernet business prior to the transaction closing. In summary, in the second quarter of fiscal 2026, we continue to deliver operating margin expansion, earnings per share growth, and new revenue records. Looking ahead, we expect momentum to continue in the third quarter, with total company revenue forecast at $2.06 billion at the midpoint, representing 36% year-over-year growth.

Excluding revenue from Automotive Ethernet, the implied revenue growth for Marvell's go-forward business would be closer to 40% year-over-year at the midpoint of our forecast for the third quarter. We also expect to continue driving operating leverage, with non-GAAP earnings per share forecast to grow 10% sequentially at the midpoint of guidance, more than double our projected revenue growth rate. Our second quarter results and third quarter guidance reflect robust contributions from our AI-driven data center end market, complemented by strong recovery in our enterprise networking and carrier infrastructure end markets. At the same time, our custom AI design engagements are at an all-time high, with customers showing very strong interest in our broad range of differentiated technologies.

As I discussed earlier, our team continues to accumulate new wins, and we are pleased with the strong progress across both current and next-generation custom programs, which reinforces our confidence that we can achieve our long-term custom revenue goals. In addition, our market-leading electro-optics franchises continue to see strong demand for both current and next-generation solutions, and our scale-out switching platforms are positioned for strong growth. Over time, the emergence of scale-up networking for AI infrastructure should provide another strong tailwind for Marvell. With that, I'll turn the call over to Willem for more detail on our recent results and outlook.

Thank you, Matt, and good afternoon, everyone. Let me start with a summary of financial results for the second quarter of fiscal 2026. Revenue in the second quarter was $2.006 billion, growing 58% year-over-year and 6% sequentially. Data center was our largest end market, contributing 74% of total revenue. GAAP gross margin was 50.4%. Non-GAAP gross margin was 59.4%. Moving on to operating expenses. GAAP operating expenses were $721 million, including stock-based compensation, amortization of acquired intangible assets, restructuring costs, and acquisition-related costs. Non-GAAP operating expenses came in at $493 million, slightly below our guidance. Our GAAP operating margin was 14.5%, while non-GAAP operating margin was 34.8%. For the second quarter, GAAP earnings per diluted share was $0.22. Non-GAAP earnings per diluted share was $0.67, reflecting year-over-year growth of 123%, which is more than double the pace of revenue growth, demonstrating the significant operating leverage in our model.

Now, turning to our cash flow and balance sheet. Cash flow from operations in the second quarter was approximately $462 million, growing by $129 million from the prior quarter. Our inventory at the end of the second quarter was $1.05 billion, a decrease of $20 million from the prior quarter. We returned $52 million to shareholders through cash dividends. In addition, we repurchased $200 million of our stock in the second quarter. In June, we completed the public offering of notes totaling $1 billion and used most of the proceeds to repay existing debt. As of the end of the second quarter, our total debt was $4.5 billion, with our gross debt-to-EBITDA ratio of 1.63x and a net debt-to-EBITDA ratio of 1.19x. Our debt ratios have continued to improve as we have driven an increase in our EBITDA.

As of the end of the second fiscal quarter, our cash and cash equivalents were $1.2 billion. We recently completed the divestiture of our Automotive Ethernet business in a $2.5 billion all-cash transaction. Proceeds from this sale give us flexibility to continue to drive our ongoing stock repurchase program, as well as invest further in our technology capabilities. Turning to our guidance for the third quarter of fiscal 2026, we are forecasting revenue to be in the range of $2.06 billion, ± 5%. As a reminder, this forecast includes revenue in the mid-single-digit millions of dollars from the Automotive Ethernet business before the completion of the divestiture. If the divestiture had not taken place and we had operated the Automotive Ethernet business for the full quarter, we would have added approximately $60 million to our guidance. We expect our GAAP gross margin to be between 51.5% and 52%.

We expect our non-GAAP gross margin to be between 59.5% and 60%. Looking forward, we anticipate that the overall level of revenue and product mix will remain key determinants of our gross margin in any given quarter. For the third quarter, we project our GAAP operating expenses to be approximately $719 million. We anticipate our non-GAAP operating expenses to be approximately $485 million. For the third quarter, we expect GAAP other income and expense, including interest on our debt and the gain from the divestiture of our Automotive Ethernet business, to be an income of approximately $1.8 billion. Non-GAAP other income and expense, including interest on our debt, is expected to be an expense of approximately $33 million. We expect a non-GAAP tax rate of 10% for the third quarter.

We do not expect the recently passed tax bill act to have a material effect on our current year's non-GAAP tax rate. We expect our basic weighted average shares outstanding to be 863 million and our diluted weighted average shares outstanding to be 870 million. We anticipate GAAP earnings per diluted share in the range of $1.98 - $2.08. We expect non-GAAP earnings per diluted share in the range of $0.69 - $0.79. As Matt mentioned, we plan on updating our revenue by end market classification beginning next quarter. Over the past several years, our strategic focus on expanding revenue in the data center market has delivered strong results, driving significant growth in this end market.

On a relative basis, data center revenue has more than doubled as a percentage of total company revenue, from 34% in the second quarter of fiscal 2024 to 74% in the second quarter of fiscal 2026. As a result, in our most recent quarter, our four other end markets collectively represented only 26% of total company revenue. The divestiture of our Automotive Ethernet business further reduces the relative contribution of our non-data center end markets. Looking ahead, we expect data center to continue outpacing all other end markets in both size and growth rate. As a result, our fiscal Q3 results will be the last quarter with the current classification, and our Q4 guide will reflect the streamlined revenue reporting. Results will be reported in two categories: data center and communications and other. The composition of our data center end market will remain unchanged.

The new communications and other end market will consolidate revenue currently reported separately from our enterprise networking, carrier infrastructure, consumer, and auto industrial end markets. We will continue to provide qualitative commentary in our earnings discussions, highlighting notable developments within sub-markets in the consolidated communications and other end market. We expect most of the revenue in the new communications and other end markets to come from our current enterprise networking and carrier infrastructure end markets, which have both continued to recover. On a combined basis for these two end markets, our guidance for the third quarter of this fiscal year implies an annualized revenue run rate of approximately $1.7 billion, compared to the low point we saw in the first quarter of fiscal 2025 of approximately $900 million. Consistent with prior comments, we expect these two end markets to collectively generate approximately $2 billion in annual revenue over time.

Additionally, as we have stated previously, we anticipate annual revenue of approximately $300 million from our consumer end market and, following the divestiture of our Automotive Ethernet business, approximately $100 million from our industrial end market. In conclusion, we are executing on our strategy, driving strong revenue growth, and expanding our operating margins towards our long-term target. In addition, our balance sheet has continued to strengthen and provides a solid foundation to support our growth opportunities. With that, we are ready to start our Q&A session. Operator, please open the line and announce Q&A instructions. Thank you.

Thank you. We'll now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd 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. Thank you. Our first question is from Ross Seymore with Deutsche Bank.

Hi guys, thanks for letting me ask a question. I want to dive into the guidance for the custom business, Matt. I appreciate the lumpiness of it, but could you give any more color on what the headwinds are in the third quarter, and then what gives you the confidence and any sort of magnitudes on the increase in the fiscal fourth quarter?

Yeah, thanks, Ross, and I think you captured the right phrase, which is lumpiness. I think this is normal to see, particularly with the large hyperscale builds that happen, especially as you ramp them into production, which we've done this year on a number of programs. This is not unusual. Fortunately, our optics business is quite strong in the coming quarter, and that's growing double digits. As I said in the prepared remarks, we see a demand increase again in custom. There's nothing unique there, Ross, other than we've spent the last couple of years ramping these into production, and we've got kind of a one-quarter digestion with the recovery in Q4. I will say that overall, we expect custom to be up in the second half over the first half, and you should expect a strong fourth quarter for custom. Thanks.

Thank you.

Our next question is from Tore Svanberg with Stifel.

Yes, good afternoon. This is Jeremy calling for Tore. Maybe if you could provide a little bit more clarity on the design wins that you're seeing. You know, how much of your custom products revenue that you expect in the second half is coming from some of these new programs, and how much is coming from some of your existing design wins? Any kind of color or clarity you can provide would be very helpful.

Yeah, hey, thanks, Jeremy. Good to hear from you. I'll actually turn this one over to Chris to talk about the design win momentum we're seeing and the opportunity set as it relates to your question. Thanks. Go ahead, Chris.

Yeah, thanks, Matt. It's truly an exciting time to be in the custom silicon business for data center. We have a tremendous amount of design activity, more than I've ever seen in my nine years at Marvell. Ultimately, we're seeing that across XPU, XPU attach, emerging and existing hyperscalers. I should say that, even since our event in June, where we said that the XPU attach opportunities were in the sort of several hundred million dollar design win lifetime, that's grown from there. Some of the ones we're chasing now are much, much larger than that, just as these hyperscalers build out these rack scale infrastructures. Since June, the design wins that we've added, these are very meaningful. Think in the billions of dollars for the new design wins.

If you put it all together, it just gives us even more confidence in our 20% share target in this incredibly fast-growing market.

Great, thank you. Maybe a follow-up in terms of, you know, is there any impact you're seeing from supply constraints anywhere along the supply chain? Any impact from tariffs that you can see from your end? Thank you.

Yeah, great. You know, Chris runs our global operations, so I'll have him cover that. Willem, maybe you can make a quick comment on the tariffs, and I'll add if needed.

Sure, yeah. Certainly, the supply chain is very tight, requires very tight coordination with our customers, and very strong execution by our team. I'm very proud of our team to have met this ramp over the last year and very confident in our ability going forward. We've really been able to meet everything that our customers have needed. It is tight, and we have very strong coordination and execution.

Yeah, and Jeremy, on tariffs, it remains a very dynamic environment, but really, we haven't seen any impact on our business to date. We keep tracking it very, very closely. As we look across all the different end markets that we're addressing, we really haven't seen any significant impact.

Thanks, Jeremy.

Thank you very much.

Thank you.

Our next question is from Aaron Rakers with Wells Fargo.

Yeah, thanks for taking the question. Kind of building on the earlier question, just to level set, as we think about the lumpiness in the custom XPU business, I'm curious, you've had obviously a very talked-about lead customer. I'm curious, as you're looking at the business today, how concentrated are you amongst your lead customer? If we look out, let's say six months or even 12 months from now, how do we expect to see some of these additional design wins start to fold into the XPU revenue stream? I'm just trying to gauge the timing of some of these additional opportunities.

Yeah, thanks, Aaron. I think you said it right. We had started a few, just a few years back, a couple of AI Days ago, really talking about a handful of sockets that were going to be kind of our initial lead, and those have now ramped and are ramping, albeit lumpiness, we're seeing in the short term. Those are happening. On top of it, the 18 we talked about just a couple of months ago at the AI Day, those are all either starting now, next year, really in the next sort of, I'd call it between now and the next 18 - 24 months, those will all start to layer in. As Chris Koopmans mentioned, we've actually secured some incremental wins. Think of it as kind of 18 +. There's a journey there from a handful to 18 + to beyond.

That's really what we're focused on, driving our market share from where we were just a couple of years back at 10% share in 2023, 13% the year after, and driving to 20% over time. We're certainly getting a lot of confidence in that with just the recent design activity that Chris talked about. It's kind of unprecedented. It's almost episodic right now. Thanks.

Yep. As a quick follow-up, I know NVIDIA this week talked about scale out or scale across networks. I'm curious how Marvell sees this opportunity, moving from just not scale out and scale up, but scale across DCI. Any framing of how big of an opportunity that might represent for Marvell?

Yeah, maybe I'll comment and Sandeep will comment. It's certainly something we're aware of. There's a number of different opportunities that keep layering in that would leverage our networking and our connectivity technology. Sandeep, I don't know if you have any additional thoughts. This is something that is relatively new. Sandeep, go ahead if you've got some thoughts.

Yeah, thank you, Matt. In terms of scale-up opportunities, there is certainly, aside from, you know, the lead GPU player who has its own proprietary scale-up fabric, a huge demand for Ethernet and purpose-built fabrics such as the UALink. We see a lot of traction over the next couple of years for the scale-up requirements. We are investing heavily to bring our scale-up switches to the market, and we see momentum in the next couple of years. We will have standard products using our state-of-the-art low latency scale-up switching IP portfolio, some of which we acquired from Innovium, which has been a great asset for us. We are very confident of scale-up switches being a key growth driver for us in the next couple of years.

Yeah, more to come in the future, Aaron, on the other type of opportunities. Thanks for covering that, Sandeep. Appreciate it.

Our next question is from Vivek Arya with Bank of America.

Thanks for taking my question. Just a near and longer-term question on your custom business. Just near term, Matt, do you think Q4 your data center growth can accelerate year on year from the Q3 levels that you gave, just so that we kind of level set our models? As we look at 2026, you know, one of your XPU competitors has suggested their business can grow 60%. I think yesterday Jensen kind of threw a 50% or so. Whatever industry growth rate seems to be in this 50% or so zip code for next year, do you think Marvell has the visibility today around, you know, timing and magnitude of your large projects to kind of say that, you know, your business can sort of grow in line with what industry expectations are, or are there other puts and takes we should keep in mind? Thank you.

Yeah, thanks, Vivek. Yeah, a couple of things. I think one is our custom. You know, we don't do an annual guide. We typically just guide, you know, a quarter at a time. I'll get to Q4 in a minute, but just as a baseline. I would say on the annual stuff, we've only done that very, very rarely, and that's typically been later in the year as we have more visibility. Just to set the stage, I think the overall momentum in the business has been very strong for several quarters now. I think I gave you some of the data points, which is that, you know, custom would be up in the second half versus the first half. You can look at our optics performance, you know, Q2, Q3, especially the Q3 up double digits.

Obviously, when you look at the big picture, we're very pleased, which no one's asked a question about yet, but it layers into the big picture on overall Marvell performance, is the very strong recovery in the core business and enterprise networking and carrier. Just for reference on that business, you know, we hit a low point during the inventory recovery cycle at about a $900 million annualized run rate. Implied in our Q3 guide, this business goes back up at like a $1.7 billion run rate. Very, very strong recovery both on inventory as well as on new programs that are kicking in and new products that are in the next technology node. That's all a positive in terms of the setup for Q3 and Q4.

Thank you.

Thanks.

Our next question is from Tom O'Malley with Barclays.

Hey guys, thanks for taking my question. Matt, I'm going to hit on the ASIC topic again, so apologies, just want to dive in for a little more clarity. When you look at what the digestion that's occurring in the October quarter is, is that one project winding down while another is then winding back up in the fourth quarter? Is that just a temporary pause? Any color on what's happening there? Is that just traditionally you see certain pockets where customers take product and then they stop? Is there anything to do with a product transition there as well? Any help there would be useful.

Yeah, thanks Tom. No problem for the question. Yeah, no, at a high level, these are existing programs and it's really just a timing issue in terms of how we deliver the product and when the customers' builds are occurring and when they want the product from us. Given that this is, you know, as I said earlier, we're in the early stages of custom, this is really our first big, first year with the handful of sockets that will translate over to many more. It's really just a timing issue between the quarters. It's just more apparent. Now over time, we do see, you know, a lot more diversity in this part of the business in Marvell as additional programs ramp, but obviously we were starting from a pretty low base just a couple of years back. Thanks.

Helpful. Just as a follow-up on the optical business, you're going to double-digit growth in the October quarter. You've heard others during this earnings period talk about supply constraints, particularly on the laser side. You're obviously a component provider that's going into these modules, but in terms of the ecosystem, are you seeing any stops and starts there in terms of product ramps as well? Are you hearing about any component issues or are you relatively immune from that in your ramp?

Yeah, I'll lead off and I'll let Chris comment if it's appropriate. I mean, look, I think we've ramped this optics business just massively over the last few years and very successfully, by the way. I want to just echo what Chris said. Our business unit team, sales team, and operations team have done a great job. We have deep partnerships up and down the supply chain and with the key module companies to really plan our business together. There seems like there's always something going on, but I think we've been able to just manage through it and continue to grow quite dramatically if you look at the ramp over the last few years. I think there's always noise in the system, Tom, relative to different pieces of it, but I'd say overall we're tracking really well. Chris, do you have anything to add or did I capture that?

I think you captured it. Just very strong partnerships with our customers and trying to stay one step ahead of all the changes and executing very well.

Our next question is from Timothy Arcuri with UBS.

Thanks a lot. Matt, you're guiding data center flat and optics is up double digits. Since you're guiding optics up double digits, can you give us a sense of what the baseline is for the optics business? I know you did provide that the AI revenue would cross over half of the total company revenue. Is that happening as soon as fiscal Q3? Is optics plus custom at 50% of the total company revenue? I'm just kind of wondering because you're guiding optical, I'd like to see if you can give us some sense of what the baseline was coming off fiscal Q2.

Yeah, let me just start off real quick and I'll see if Willem wants to add. I mean, we haven't updated that number, I don't think, since Q4 where optics was about half, custom was about a quarter, and then other was about 25%. Obviously, optics and custom have both come up since then, but we haven't exactly put a bead on that and updated that exact mix. Willem, anything, and any commentary that would be helpful? It's obviously something, Tim, we're probably not going to update on a quarterly basis. I totally get the question, but Willem, anything to add?

No, that's the right framework and exactly what Matt said, right? Take that guidance we gave in Q4 and, you know, you can apply your growth rates and, you know, it's just not a number we're going to be sharing every quarter. That should give you a good sense of what it is.

Okay, is the total, just because Matt, you did say last quarter that the total AI number would be half the company before the end of the fiscal year. I mean, can you at least provide a sort of a milepost that is that happening in fiscal Q3 or will that happen more in fiscal Q4?

I think I'd have to give you a follow-up, Tim. I don't have the spreadsheet right in front of me on that. It's clearly, I mean, with the puts and takes, custom up second half over first, strong optics, I don't have that number right at the tip of my fingers. It's definitely trending the same way. I wouldn't say there's any directional change there.

Yeah, okay. Awesome. Thank you.

Yeah, thanks.

Our next question is from Harsh Kumar with Piper Sandler.

Yeah, hey guys, I had a question on the scale of the AI business. I think you mentioned you had 18 wins before you might have picked up. I think you suggested a couple of more wins. I wanted to understand, of all the custom and attached chips that Marvell is working on, how many of them are actually producing revenues today? I want to understand kind of like where we are today because we understand that you are aiming for 20% of $94 billion by 2028. I'm trying to understand where we stand today and kind of, you know, knowing where we're headed to.

Yeah, thanks, Harsh. Chris, you want to give some commentary on that one?

Sure. Yeah, certainly there are multiple, you know, several that are in production today and have been since late last year. Of those 18, they're all either sort of, they're all either going to production now or have gone to production this year or into next year. What you're seeing is pretty much every quarter you're seeing new parts of those programs moving into production. Ultimately, we see that just continuing to grow over time.

Okay, maybe broadly, very broadly, help us understand, and I'm not asking for any customer-specific customer, if most of your wins or all of your wins, largely speaking, are on track. The reason why I'm asking is when we talk to clients, investors, there's just a lot of controversy. Any kind of statement that you can make would be helpful.

There is always controversy. I mean, I think that's why, at the end of the day, that was a big motivation for us with respect to you guys and the broader investor community around our AI Day, really trying to frame where we're driving the business, what the technology differentiation is, what the opportunity set is, breaking it down actually in a lot more granularity than I think we've done before relative to hyperscale versus emerging XPU, XPU attach, the relative size of those opportunities. We gave some commentary today just that we're tracking against those and have now closed some. That is going to be the focus of how we think about the go-forward. Given the design win momentum we're seeing, clearly we're continuing to garner new incremental business from really across the board, the traditional big hyperscalers as well as the emerging generation. Hopefully that's helpful. Thanks, Harsh.

Yeah, thanks man of course.

Our next question is from Jim Schneider with Goldman Sachs.

Good afternoon, thanks for taking my question. I was wondering if you could maybe address capital allocation from a high level for a moment. If you look at your Automotive Ethernet business, that's a very attractive price you're able to get from that. Maybe you can talk a little bit about the intended use of the proceeds, whether your bias is more towards tuck-in acquisitions that allow you to pursue the AI strategy even faster or buybacks. More broadly, are you open to the potential sale of other components of the business at the right price, whether that be carrier, consumer, or otherwise? Thank you.

Yeah, thanks, Jim. It's a thoughtful question and I'll up-level it just for a second. This is a driving force, our capital allocation framework on how we run the company and it, you know, the automotive divestiture and then the proceeds are just kind of an output of that. In a minute, I'll just have Willem comment on that. As a background, you know, we have run since August 2016, so basically, you know, six weeks after I became CEO, we implemented a strategy process, which was really our capital allocation framework on how we think about investing our R&D dollars primarily. At that time, too, there were some opportunities around buybacks and so forth, given where Marvell was at that time. Primarily, we drive it from the strategy first. Our vision since, and by the way, we just completed our 10th strategic review a couple of weeks ago.

We've been doing this kind of year in and year out. What you've hopefully seen is that over time, we've continued to evolve the company from really a consumer enterprise kind of focused company to a data center AI-first company. I'd say even in the last few years, as we made the pivot, we've now got our R&D spending, you know, well north of 80% of our total spending in AI and data center. That number has come up probably from, I don't know, 60% just a few years ago. Way back when, it was almost nothing because we had no business there. Around your question then, you know, when we looked at automotive as an example, it was just, it was a great business. We had built it up from scratch. It continued to stay a small portion of our total revenue.

As the AI thing took off, it became even smaller. We had this opportunity to give it a great new home in Infineon, which they found. For Marvell, we obviously got significant and compelling valuation for that. We have the proceeds. Now we're looking at, you know, how to deploy those. I think it's going to be some, you know, it's not decided at the moment. We just closed this. By the way, great job to the team. I think this was, we had said end of the year and we closed it in early August. That was a huge, huge win for everybody involved. I'll let Willem comment in a moment, but I think the answer is probably some of both. We're definitely going to keep looking at our organic investments to figure out how to differentiate and win in AI.

If there are tuck-ins and things we can do, that's obviously on the table. We've been consistent, really since, for probably the last four or five years, which was, you know, we invested early and heavy in M&A to build the portfolio we wanted. We've done a lot organically to build up our capability. We're in great shape there, but we're always going to look. Willem, maybe a little bit to add to this. I know it's a long answer, but I think it's helpful for investors to know how we think. Willem, anything to add?

I'll just add a couple and also call out to the team for doing a phenomenal job on getting this deal closed in effectively four months. A deal of this size and complexity is just a phenomenal job. When you look back at the last couple of quarters here, we've really driven an increased level of buybacks, really through much more consistent execution in our free cash flow. As a basis, you should expect for us to continue to drive that and having a focus on very consistent free cash flow execution, driving a higher level of buybacks. As Matt mentioned, I think this additional cash flow really gives us a lot of flexibility around being opportunistic on doing more buybacks.

At the same time, we're at this historic moment in terms of the size of the AI market and where we do see tuck-ins that can accelerate our roadmap towards addressing that. We'll take advantage of that.

Our next question is from Harlan Sur with JP Morgan.

Good afternoon, guys. Thanks for taking my question. This goes back to one of the previous questions. The noise level out of Asia on your lead customers' follow-on 3 nm XPU program continues at a deafening pace, right? With your Asia competitor, they're essentially claiming victory on 3 nm. What's the update with Marvell's 3 nm XPU follow-on program with your lead customer? I think last earnings call, Matt, you talked about securing 3 nm wafer capacity, packaging capacity for production in calendar 2026. Is this program still tracking? What's the confidence level on this program still driving growth next year? Maybe just an update on your third XPU customer win at 3 nm, which was supposed to ramp back half of calendar 2026. How is this program tracking as well?

Yeah, thanks, Harlan. I appreciate the question. I understand the noise. As I said in my answer to the earlier question, we're at a point where the initial programs and wins we have are ramping. We've increased our opportunity set pretty significantly to, you know, from a handful of sockets to this 18 +. We're really driving to the market share targets in the future. Given the massive sort of focus in this area and sensitivity, commenting on just the individual sockets at this point is only probably increasing the noise level. What we're really focused on is winning incremental designs, executing on the ones we've got, and driving the business forward, ultimately trying to get 20% of a $90+ billion TAM in the future. That's where that's at.

Thank you. Our last question is from Quinn Bolton with Needham & Company.

Hey guys, thanks for squeezing me in. Matt, I wanted to follow up just kind of on the scale-up switch fabric opportunity. It seems like it's, you know, a bigger part of the XPU attach market and, you know, there are different flavors, Ethernet, UALink. Just wondering, can you give us a sense when Marvell may have its first products, you know, ramping to revenue? Is that a calendar 2026 event or is it going to be more UALink-based and more likely a calendar 2027 event? I've got to follow up.

Yeah, thanks, Quinn. I think maybe I'll have Sandeep add a little bit more, but I think he did a good job framing it. I will just say, to maybe up-level it for a second, I think on the scale-up, it really is a great combination of key Marvell IPs all into one, especially our low latency switching IP, our SerDes, and just the ecosystem we're living in relative to XPUs. This being a key XPU attach, that's fundamentally almost a chipset type of a decision. Sandeep, anything else to add on that? I think we haven't really articulated a lot yet publicly on what we're doing, but there's a huge amount of momentum here and we're engaged very broadly in this area. Sandeep, any thoughts and closing remarks on this one?

Thank you, Matt. We are definitely investing to bring UALink and Ethernet-based products as we engage with our customers and working very closely with our customers' timeline. What I would say is product introductions in the UALink and Ethernet space for scale-up specifically will be in the next two years. Certainly with the assets that we have, not only are we looking at UALink-based products in interconnect, we're already starting to see the use of AECs in the near term and AOCs, which is active electrical cables and active optical cables, positioning us to participate in these markets. For UALink and Ethernet-based specifically, it'll be in the next two years.

Got it. Thank you. I just wanted to ask, you know, you guys obviously have a very substantial business in the DSP-based optical modules. A few of your peers have started to note that I believe three hyperscalers are beginning to ramp LPO modules. Can you just kind of frame for us, do you think that the, you know, are there substantial LPO developments beginning to occur? Are they pretty niche applications? I mean, just any sense of LPO penetration of the overall optical transceiver market? Is it, you know, likely to stay in the low single-digit percentage? Do you see it getting bigger than that over a couple of years? Just, you know, like to hear your thoughts since you guys are obviously the incumbent.

Yeah, thanks, Quinn. It's happening at a smaller scale. By the way, we're in some of those too. We have active, you know, wins and we're going to production in those types of modules as well. Just given the sheer scale of the DSP-based plugables, it just ends up being a very small number and more of a niche use case, but a valuable one if the customer really needs it and can implement it and get it working in production, it can be a benefit. The vast majority we see today still is, and for the foreseeable future, is plugables.

Got it. Thanks, Matt.

Yep, cool. All right, operator, I think that's it. I'm just going to make some closing remarks. Okay, so anyway, thanks everyone for joining. I appreciate all of your interest in Marvell and joining the call and listening in. Just a couple of points. I think the first is, as I indicated and Chris and also Sandeep talked about, the design win momentum in custom has been very, very strong even since the AI Day. I feel really good about that $75 billion pipeline that we're really bringing to close some of those key opportunities within that. I think that pipeline, by the way, from what we can see, is probably going to just keep growing. By the way, this is across XPU, XPU attach. It's at the large hyperscalers and then continuing to increase around the emerging. Optics continues to be very strong.

We're managing the execution quite well and growing the business there. The core business, which was a point of consternation in the past about when would that come back and what would that ramp look like, it's nice to see in Q3 the strong sequential in enterprise networking and carrier. I think it's like 30% sequential and 80%+ year -over -year. Very strong recovery there. Finally, it's showing up in the numbers. We're getting a lot of leverage here. I looked at Q2 EPS, it's up like 123% year -over -year. In Q3, if you look at the guide, EPS would be up like 70%. Much faster than revenue. Same thing on the sequential. Overall, we're very pleased with the performance of the company. We see a massive opportunity ahead. I appreciate everybody's interest in Marvell. We'll talk to you all soon. Thank you so much.

Ladies and gentlemen, thank you for your participation. This does conclude today's conference. Please disconnect your lines and have a wonderful day.

Good afternoon and welcome to the Marvell Technology Inc.'s third quarter of fiscal year 2026 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 the formal presentation. Please note this event is being recorded. I will now turn the conference over to Mr. Ashish Saran, Senior Vice President of Investor Relations. Thank you. You may begin.

Thank you and good afternoon, everyone. Welcome to Marvell's third quarter of fiscal year 2026 earnings call. Joining me today are Matt Murphy, Marvell's Chairman and CEO, Willem Meintjes, CFO, Chris Koopmans, President and COO, and Sandeep Bharathi, President, 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 filed by us 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.

A reconciliation between our GAAP and non-GAAP financial measures is available in our earnings press release. As we discussed in our second quarter earnings call, going forward, we are consolidating our non-data center end markets into a single new communications and other end market. The composition of our data center end market remains unchanged. Our earnings press release for the third quarter reports revenue by end market in both the prior format as well as the new go-forward format. Please note that today's call will be longer than typical as we will be discussing the acquisition announced today in addition to a number of extensive updates on our business. You may also find additional details on this transaction in the press release and Form 8-K filed with the SEC today, and a presentation posted on our website on the investor relations page.

Let me now turn the call over to Matt for his comments on the quarter. Matt.

Yeah, hey, thanks, Ashish. And good afternoon, everyone. Settle in, okay? We have a lot of good stuff to talk about today. For the third quarter of fiscal 2026, Marvell delivered record revenue of $2.075 billion, reflecting a 3% sequential increase and strong 37% year-over-year growth. Revenue was above the midpoint of guidance driven by stronger-than-forecast demand in our data center end market. As a result, non-GAAP earnings per share of $0.76 exceeded the midpoint of guidance by $0.02. Excluding revenue from the divested automotive Ethernet business, the implied revenue growth for Marvell's go-forward business was approximately 6% sequentially and 41% year-over-year. Momentum in our data center business remained strong, with revenue growing 38% year-over-year, fueled by robust AI demand. We also saw a strong recovery in our communications and other end market, where revenue grew 34% year-over-year as reported and nearly 50% year-over-year, excluding the automotive Ethernet business.

We expect growth to continue in the fourth quarter, with total company revenue forecast at $2.2 billion at the midpoint. We expect this momentum to continue throughout next fiscal year and beyond. I will provide more context on our numerous growth drivers later in the call. Before discussing our end markets, I'm excited to share details on the strategic acquisition we announced today of Celestial AI, which brings an entirely new disruptive technology, a photonic fabric platform purpose-built for next-generation scale-up interconnect. This acquisition is the latest in a series of decisive moves to further strengthen our data center portfolio. Since 2019, we have continued to increase our focus on data center, divesting our Wi-Fi business and acquiring Avera, Aquantia, Inphi, and Innovium. These transactions have driven significant revenue growth and scale and have each proven to be an absolute home run.

This year, following the divestiture of our automotive Ethernet business, we are continuing to double down on data center with the acquisition of Celestial AI. This positions us to further capitalize on the massive opportunity and accelerated infrastructure. The acquisition is expected to close in the first quarter of next year, subject to customary closing conditions, including regulatory reviews in the United States, and will remain a separate independent company through the regulatory process. AI is reshaping data center architecture at an unprecedented speed. Next-generation accelerated systems are no longer confined to a single rack. They are evolving into multi-rack scale-up fabrics that connect hundreds of XPUs in a high-bandwidth, ultra-low-latency any-to-any fashion. These advanced fabrics demand purpose-built switches and interconnects engineered to deliver the performance and efficiency required at scale, creating a new TAM for companies like Marvell.

Industry analysts are forecasting the merchant portion of the scale-up switch market to approach $6 billion in revenue in 2030. On the interconnect side, we are seeing the dollar content for optics of the same magnitude as a scale-up switch. As the optical interconnect attaches to both the XPU and the switch, the opportunity actually doubles, meaning over $10 billion. These are both very large and exciting incremental opportunities for Marvell. As we first evaluated Celestial AI, it reminded us of our early look at Inphi and the promise we saw in their PAM technology to transform the scale-out interconnect market. We see even greater potential for Celestial AI's photonic fabric to transform the scale-up interconnect market. Interconnect technology is as critical as switching and scale-up networks to enable hundreds of XPUs to be tightly coupled together.

This is driving a massive increase in the number of links in the network and overall system bandwidth, therefore creating the need for a fabric which can span across racks. Copper-based interconnects used in today's scale-up systems are approaching their fundamental limits in reach and bandwidth, creating a compelling need for optical solutions. Celestial AI's Photonic Fabric technology platform was purpose-built for this inflection. It enables large AI clusters that scale both within and across racks using a high bandwidth, low latency, low power, and cost-effective optical fabric. This breakthrough enables a true optical solution with greater than two times the power efficiency of copper interconnects, but with far longer reach and significantly higher bandwidth. In addition to exceptionally low power consumption, Celestial AI's solution provides nanosecond-class latency and excellent thermal stability, which enables deeper levels of optical interconnectivity into XPUs and switch systems.

The thermal stability of Celestial AI's photonic fabric technology is a significant competitive differentiator. It enables reliable operation in the extreme thermal environments created by large, multi-kilowatt XPUs. This allows the photonics technology to be co-packaged vertically with the high-power XPUs and switches in a 3D package, enabling the photonic connection to be made directly into the XPU rather than from the edge of the die. This stands in sharp contrast to many other CPO implementations, where the photonics engine sits adjacent to the XPU and must connect at the die edge. Celestial AI's approach results in a more compact and integrated solution, freeing up highly valuable die edge beachfront, which can be repurposed to significantly increase the amount of HBM within the XPU package. Eliminating beachfront I/O constraints also significantly increases the amount of package bandwidth possible for XPUs and switch systems.

Celestial AI's first-generation product is a photonic fabric chiplet, or PF chiplet, which integrates all the required electrical and optical components, including drivers, TIAs, equalizers, SerDes, microcontrollers, modulators, photodiodes, and waveguides, all into a compact form factor. This is the industry's first scale-up optical solution delivering an unprecedented 16 TB per second of bandwidth in a single chiplet, 10 times the capacity of today's state-of-the-art 1.6T ports used in scale-out applications. Its compact form factor allows multiple PF chiplets to be co-packaged with XPUs and the scale-up switches on the other side of the link to further increase total bandwidth. Celestial AI is deeply engaged with multiple hyperscalers and ecosystem partners who recognize the disruptive potential of this technology. Notably, Celestial AI has already secured a major design win with one of the world's largest hyperscalers, who plans to use Celestial AI's PF chiplets in its next-generation scale-up architecture.

These PF chiplets will be co-packaged into both the hyperscaler's custom XPUs and the scale-up switches providing connectivity. This is expected to be the industry's first large-scale commercial deployment of optical interconnects for scale-up connectivity. Beyond connecting XPUs and scale-up networks, the photonic fabric technology platform can enable a wide range of transformational applications over time. First is a pooled memory appliance that uses Celestial AI's photonic fabric to optically connect multiple XPUs to large shared external disaggregated memory banks. A second use case for Celestial AI's photonic fabric is to replace traditional electrical die-to-die connections in multi-die packages. This is just the beginning of a broad set of new applications which can be enabled from this technology. After close, we expect meaningful revenue contributions from Celestial AI to begin in the second half of fiscal 2028.

Our base case forecast shows Celestial AI's revenue reaching a $500 million annualized run rate in the fourth quarter of fiscal 2028, doubling to a $1 billion run rate by the fourth quarter of fiscal 2029. Following the close of the transaction, we look forward to welcoming the Celestial AI team to Marvell. Celestial AI brings one of the industry's strongest photonic interconnect engineering groups with deep expertise in optics, advanced packaging, and high-speed interconnect architecture and systems. In addition, the CEO, founders, and key executives from Celestial AI will assume leadership roles at Marvell, continuing our successful integration blueprint from prior acquisitions. These leaders have been at the forefront of innovation in scale-up switching and photonic interconnects, and their technical depth and strategic insight will play an important role in shaping Marvell's next phase of growth. Okay, now let me transition back to Marvell's current business and outlook.

As you may recall, on September 24th, I hosted a virtual call with investors where I outlined a framework for Marvell's revenue growth for fiscal 2027. At that time, we indexed our data center growth potential to Cloud CapEx, which was expected to grow 18% next year. Since then, Cloud CapEx growth expectations have increased to over 30%. Additionally, we have seen strong demand increases for our products for next year. As a result, our outlook for next fiscal year is even stronger than the expectations we discussed in September. We expect our interconnect business, which is roughly half our overall data center revenue, to continue growing faster than Cloud CapEx next year, even with the higher outlook. We expect our custom business, roughly a quarter of our overall data center revenue, to grow by at least 20% next year, also from higher than prior expectations.

As a reminder, in the near term, this business remains tied to a few specific sockets. We expect custom growth next fiscal year to be higher in the second half and do not expect any air pockets in custom revenue. Next year's custom revenue forecast comprehends a transition to a next-generation XPU at a large customer, and I would note that we already have purchase orders for the entirety of next fiscal year's current forecast for this next-generation program. Our revenue forecast for this program remains consistent with our prior expectations. As we look beyond fiscal 2027, we have several high-volume custom designs in development, meaningful revenue expected from these programs in fiscal 2028, consistent with our prior communications.

For the remaining quarter of our data center business, which includes storage, switching, and other products, we now expect revenue to grow by at least 15% next year, up from our prior expectation of 10% growth, driven in particular from increased demand for our switching products. Adding all of this up, we now expect Marvell's data center revenue to grow year-over-year by more than 25% next fiscal year. Please note that this forecast does not include any revenue from the pending acquisition of Celestial AI. And for our communications and other end market, we continue to expect 10% revenue growth next year. Putting it all together, we are looking forward to a strong fiscal 2027. Let me provide more details for each of our end markets. In our data center end market, we delivered record third-quarter revenue of $1.52 billion, representing 2% sequential growth and 38% year-over-year growth.

Revenue exceeded our guidance for flat sequential performance, driven by increased demand across our networking portfolio. Our industry-leading PAM DSPs, TIAs, and drivers continue to see strong demand, with revenue from our optical interconnect businesses growing by double digits sequentially on a percentage basis. Our data center storage and switch businesses also posted double-digit sequential revenue growth on a percentage basis. As expected, this strength was partially offset by a sequential decline in our custom revenue due to lumpiness in demand. Looking ahead to the fourth quarter, we expect revenue growth from our data center end market to accelerate, growing sequentially in the high single digits on a percentage basis and approximately 20% year-over-year. This growth is expected to be driven by a rebound in custom and continued growth in interconnect, switching, and storage.

Let me now highlight broader trends we are seeing in both our established data center businesses and our newer growth initiatives. I'll start with our interconnect business, where we offer the industry's broadest and most comprehensive high-speed connectivity portfolio. As our PAM DSP products enter into their fifth year of 800-gig production, demand for our solutions continues to accelerate, underscoring the strength of the platform we have built through more than a decade of sustained investment in core technology. Our playbook is simple: first to market, first to ramp, with timely follow-up, optimized solutions to maintain leadership. We did this at 400-gig, 800-gig, and now at 1.6T, where we established early leadership with our first 5-nanometer solution, which sampled in February 2024. We then accelerated the launch of our optimized 1.6T solution and sampled our 3-nanometer product just one year later in February 2025.

As a result, we are enabling volume production of pluggable 1.6T transceivers across the industry. We began shipping our 1.6T products in the second half of this fiscal year and are seeing exceptionally strong demand heading into next year. This consistent execution enables us to secure qualifications at major customers well ahead of competitors, reinforcing market leadership. While 1.6T has a long lifecycle ahead, we have already demonstrated at the Optical Fiber Conference this past April 400-gig per lane technology to drive the next industry transition to 3.2T. The demonstration was on 3-nanometer technology, but we expect production deployments, which are expected in calendar 2028, to require 2-nanometer solutions to optimize module power. In addition to our PAM portfolio, we are also enabling longer-reach connectivity with our coherent light solutions to support campus-wide data centers in the era of million GPU AI clusters.

We introduced our 1.6T Coherent Light solution last year. We expect to start shipping next year, and we are on track to deliver our 3.2T solution the year after. Now, complementing our DSPs, our high-performance analog TIAs and drivers remain foundational to our electro-optics leadership. Our TIAs have a significant performance lead at 1.6T, and we are seeing strong broad-based demand for our products, which are enabling the entire ecosystem. We have also secured several LPO sockets across multiple hyperscalers and are leading this emerging category as well, although deployments remain relatively small today in the context of a very large transceiver market. Turning to two of our newer interconnect growth drivers, AECs and retimers. Both markets are undergoing a shift to high-speed PAM-based solutions, an inflection point that is perfectly aligned to Marvell's strengths.

For the past year, we have been collaborating closely with the cable ecosystem to enable 100 and 200-gig per lane AECs, and we are now on the cusp of substantial product ramps. We have secured design wins with significant share positions at two Tier 1 U.S. hyperscalers, along with multiple wins at emerging hyperscalers. We are seeing strong demand for our AEC DSPs, and we expect our share to continue to grow as PAM-based 100 and 200-gig technology becomes dominant. Our PCIe Gen 6 retimers are also gaining broad traction. We are currently engaged with more than 30 customers and partners, including hyperscalers, cable partners, and system OEMs and ODMs. We are already designed into more than 10 sockets, and we expect to enter production in the second half of next year with full revenue contribution in fiscal 2028.

We expect our AEC and retimer revenue in aggregate to more than double from this year to next year. Turning to our data center switching business, which continues to gain momentum, we expect revenue to exceed $300 million this fiscal year. We expect strong sustained demand for our 12.8T products, reflecting our key customers' plans to rely on 12.8T as a workhorse in their scale-out networks for several more years. In parallel, we've begun shipping our next-generation 51.2T products with a strong ramp expected next year. As a result, we now expect our data center switch revenue to surpass $500 million next fiscal year, faster than what I had indicated last quarter. We will also introduce our 100T products next year as we continue to execute our long-term roadmap. We are also accelerating our scale-up switch efforts.

These next-generation solutions are as complex as 100T scale-out switches, with high radix supporting up to 576 ports. We are fast-tracking our scale-up switch development by leveraging our in-house, high-speed, low-power SerDes and experience in developing extremely large reticle-sized chips. We are deeply engaged with key customers and partners and are on track to sample our UALink 115T and 57T solutions in the second half of fiscal 2027, with volume production expected in fiscal 2028. In parallel with our UALink development, we are also collaborating closely with key customers under CXL solutions, completing our scale-up roadmap to address both standards. Turning to our custom business, we expect accelerated growth over the next several years, fueled by our growing portfolio of design wins. At our custom event in June, we disclosed a total of 18 XPU and XPU-attached socket design wins.

Several of these are already in volume production, with the remainder on track to ramp over the next couple of years. Since that event, our team has secured additional custom sockets, which represent more than 10% of the $75 billion lifetime revenue opportunity funnel we outlined in June. These new wins include multiple XPU-attached sockets, an XPU win at an emerging hyperscaler, and most recently, a design win for an electrical I/O chiplet inside an XPU. This is a new trend we see emerging where customers and partners are partnering with Marvell to gain access to our high-performance networking technology to be integrated along with their core compute engines within multi-die packages, which are becoming more prevalent in a reticle-sized constrained world. This provides Marvell another avenue for custom growth and sockets, which were otherwise not available to us as full XPUs.

Now, let me provide additional perspective on the rapidly developing XPU-attached market. These attached devices offload specific functions such as network I/O, memory expansion, and security from XPUs, GPUs, and CPUs, freeing them up to exclusively focus scarce compute resources on the primary AI workload. We now have more than 15 XPU-attached wins, and today, let me highlight two major use cases emerging across multiple hyperscalers as they architect their next-generation custom accelerated infrastructure. The first use case is for custom foundational and smart NICs, and Marvell has already secured multiple design wins across several hyperscalers. Our customers plan to attach these NICs not only to their custom accelerators, but increasingly to their broader AI server fleets, which at large hyperscalers can exceed 1 million units or more annually.

The second use case we are seeing emerge in the XPU-attached market is for CXL-based products that enable memory expansion and acceleration to overcome the memory wall challenge. We made early strategic investments in CXL several years ago, and we have now secured five unique sockets across two Tier 1 hyperscalers, U.S. hyperscalers, and are deeply engaged with the third. The first custom CXL design win started shipping already in the first quarter of this year and is entering volume production now. A second socket focused on near-memory compute is expected to enter production a year from now. The remaining CXL design wins are slated for production in calendar 2027. Our solution's technical advantages include support for both DDR4 and DDR5, larger memory capacity and compression, along with deep partnerships with the leading memory and CPU providers.

While our initial win centered on offloading from CPUs, more recent wins attached directly to XPUs, which are deployed in far greater numbers. For several upcoming high-volume CXL production ramps, Marvell is leading the transition to next-generation memory architectures. We expect the XPU-attached market to continue to evolve at a rapid pace, and we are very encouraged to see the attach rate of our solutions exceeding our initial expectations. Now, based on designs we have already won just for the NIC and CXL use cases, we have line of sight to revenue exceeding $2 billion by fiscal 2029 and a significantly higher forecast in the following years. This is why we are so excited about our data center business.

Interconnect, switch, XPU, XPU-attached, storage, scale-up, scale-out, we are everywhere in the AI rack, and we are just getting started with what we expect to be a massive TAM ahead of us. All right, let me now move to our communications end market, where we delivered $557 million in third-quarter revenue, which grew 8% sequentially and 34% year-over-year. Excluding revenue from the divested automotive Ethernet business, the implied revenue growth for Marvell's communications end market for the third quarter would be closer to 20% sequentially and 50% year-over-year. These strong results were driven by normalizing customer inventory levels and strong adoption of our refreshed product portfolio at both our enterprise networking and carrier infrastructure customers.

Looking ahead to the fourth quarter, we expect revenue from our communications end market to grow sequentially in the low single digits on a percentage basis, with year-over-year growth of approximately 25% as reported and closer to 40% year-over-year, excluding our former automotive Ethernet business. We expect strong sequential growth from carrier and ongoing growth from enterprise to be partially offset by steep seasonal declines in our consumer business. We expect the enterprise networking portion of our communications end market to reach an annualized revenue run rate of approximately $1 billion in the fourth quarter, which would reflect the complete normalization of customer inventory levels in that business. Going forward from this $1 billion annualized revenue run rate, we expect this business to grow in line with enterprise IT spending.

While our carrier business has also been recovering and our fourth-quarter guidance implies this business to almost double from the year-ago quarter, we see continued recovery until this business also settles into its long-term growth trajectory, which would be in line with carrier CapEx. So, in summary, during the third quarter of fiscal 2026, we continue to expand operating margins, grow earnings per share, and set new revenue records. We executed our $1 billion accelerated stock repurchase program in addition to repurchasing $300 million of stock through our ongoing buyback program funded by our growing operating cash flow. Looking ahead, we expect momentum to continue in the fourth quarter, with total company revenue forecast at $2.2 billion at the midpoint, representing 6% sequential and 21% year-over-year growth.

Excluding revenue from our former automotive Ethernet business, implied year-over-year revenue growth from Marvell's go-forward business would be approximately 24% at the midpoint of our forecast for the fourth quarter. As I noted in my opening remarks, we are seeing robust demand signals and strong bookings across our entire portfolio, positioning us for a strong fiscal 2027 and even faster growth in fiscal 2028. Customers are planning to add substantial AI capacity over the next several years and are partnering closely with us on long-term technology roadmaps and coordinated capacity planning. In addition to benefiting from rapid market expansion, we have several of our own unique growth drivers. Taken together, we expect strong market tailwinds and new product cycles to drive significant growth inflections ahead of us.

As a result, we see a path for our data center revenue growth in fiscal 2028 to accelerate meaningfully above the 25% growth we expect in fiscal 2027, so look, we covered a lot of ground today, and so before I close, let me just quickly highlight a few key takeaways. First, we have activated Marvell's M&A playbook and expect to close the transformational acquisition of Celestial AI in the first quarter of next fiscal year, enabling us to fully capitalize on the massive scale-up opportunity. Second, our interconnect business is firing on all cylinders. Our electro-optic interconnect platforms continue to lead the market with world-class roadmaps across the board and accelerating demand. Finally, when you put it all together, we are positioned for several years of exceptional performance, building on this fiscal year's projected revenue growth of more than 40%.

I look forward to updating you on our progress over the coming quarters, and with all of that, I'll turn the call over to Willem for more detail on our recent results and outlook.

Thank you, Matt, and good afternoon, everyone. Let me start with a summary of financial results for the third quarter of fiscal 2026. Revenue in the third quarter was $2.075 billion, growing 37% year-over-year and 3% sequentially. Data centers were our largest end market, contributing 73% of total revenue. Our communications and other end market contributed the remaining 27% of revenue. GAAP gross margin was 51.6%. Non-GAAP gross margin was 59.7%, an increase of 30 basis points sequentially. Moving on to operating expenses. GAAP operating expenses were $712 million, including stock-based compensation, amortization of acquired intangible assets, restructuring costs, and acquisition-related costs. Non-GAAP operating expenses came in at $485 million, in line with our guidance.

Our GAAP operating margin was 17.2%, while our Non-GAAP operating margin was 36.3%. I'm pleased that we drove a 150 basis point sequential increase in Non-GAAP operating margin. For the third quarter, GAAP earnings per diluted share was $2.20, including the gain from the divestiture of the automotive Ethernet business. Non-GAAP earnings per diluted share was $0.76, reflecting year-over-year growth of 77%, which is more than double the pace of revenue growth, demonstrating the significant operating leverage in our model. Non-GAAP earnings per diluted share increased 13% sequentially. Now, turning to our cash flow and balance sheet. Cash flow from operations in the third quarter was a record $582 million, growing approximately $121 million from the prior quarter. Our inventory at the end of the third quarter was $1.01 billion, a decrease of $37 million from the prior quarter. During the quarter, we executed our $1 billion accelerated repurchase program.

In addition, we repurchased $300 million of our stock through our ongoing capital return program and returned $51 million to shareholders through cash dividends in the quarter. As of the end of the third quarter, our total debt was $4.5 billion, with a gross debt-to-EBITDA ratio of 1.47 times and a net debt-to-EBITDA ratio of 0.58 times. Our debt ratios have continued to improve as we have driven an increase in our EBITDA. As of the end of the third fiscal quarter, our cash and cash equivalents were $2.7 billion, an increase of $1.5 billion from last quarter, reflecting the addition of proceeds from the divestiture of our automotive Ethernet business and ongoing cash generation from operations, offset by our capital return of $1.35 billion between stock repurchases and dividends.

Turning to our guidance for the fourth quarter of fiscal 2026, we're forecasting revenue to be in the range of $2.2 billion, plus or minus 5%. We expect our GAAP gross margin to be between 51.1% and 52.1%. We expect our Non-GAAP gross margin to be between 58.5% and 59.5%. Looking forward, we anticipate that the overall level of revenue and product mix will remain key determinants of our gross margin in any given quarter. For the fourth quarter, we project our GAAP operating expenses to be approximately $741 million. We anticipate our Non-GAAP operating expenses to be approximately $515 million, growing from the prior quarter as we continue to invest in the business and anticipate higher employee bonus payouts reflecting a strong expected finish to the fiscal year.

For the fourth quarter, we expect GAAP and Non-GAAP other income and expense, including interest on our debt, to be approximately $30 million. We expect our Non-GAAP tax rate of 10% for the fourth quarter. We expect our basic weighted average shares outstanding to be 850 million and our diluted weighted average shares outstanding to be 857 million. We anticipate GAAP earnings per diluted share in the range of $0.31-$0.41. We expect Non-GAAP earnings per diluted share in the range of $0.74-$0.84. Looking ahead to fiscal 2027, Matt already provided an update on our strong revenue growth expectations. We intend to continue to invest in growing our business while driving operating leverage and expect our Non-GAAP operating expenses to increase at roughly half the rate of the revenue growth next fiscal year.

Keep in mind that we typically see a mid-single-digit sequential increase in OpEx on a percentage basis in the first quarter. This forecast for next year's OpEx does not include any additions from the acquisition we announced today. I will provide that forecast separately. Regarding taxes, we expect our Non-GAAP tax rate to move to approximately 12% next fiscal year. Turning to the acquisition we announced today, post-closing, we expect the addition of Celestial AI to add approximately $50 million in annual operating expenses. We expect Celestial AI to start generating meaningful revenue in the second half of fiscal 2028, at which point it is expected to become accretive to our Non-GAAP earnings. We plan to fund the acquisition through a combination of stock and cash on hand and do not intend to take on additional debt. We have a strong balance sheet and are generating robust operating cash flow.

As a result, in parallel with paying for the acquisition, we plan on continuing to return capital to stockholders through dividends and buybacks. In summary, we're executing on our strategy to drive strong revenue growth while delivering operating leverage. In addition to organic investments, we are actively deploying our strong balance sheet to acquire a transformational asset that we expect to further strengthen our capabilities and increase our addressable market. With that, we're ready to start our Q&A session. Operator, please open the line and announce Q&A instructions. 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. The confirmation tone will indicate your line is in the question queue. You may press star two 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'll pause momentarily to assemble our roster. Thank you. Our first question is from Ross Seymore with Deutsche Bank.

Hi guys, thanks for letting me ask a question. Matt, I appreciate all the details you gave about how to think about next year. If I run through those numbers, basically, it sounds like you're implying somewhere around $10 billion in revenue for next year. So I guess, first of all, is that in the right ballpark? And then back in June, you gave a longer-term target for fiscal 2029 for your business, especially on the AI side of things. How does what you're looking for next year get you aligned to those long-term targets?

Yeah, hey, thanks, Ross. I think that's actually a great way to tee up the Q&A here. So yeah, a couple of things.

I think you're absolutely in the ballpark when you add up the numbers I gave you on $10 billion for next year. I think that's a great target, actually, by the way, that is motivational for us as a team to go drive. Just as a reminder, this is just based on the Marvell organic plan, no M&A contribution. A couple of things about next year, and then I'll actually give you some commentary on how you think about that slope we're on. For next year, another thing I would note. I didn't say in my prepared remarks, but we do expect sequential revenue growth next year every quarter, so year-over-year. We see a nice growth throughout the year. I would say the second half of the year is stronger than the first and with, I think, a really compelling exit rate to fiscal 2027.

Now, it's a little far out to go all the way to 2029, let's say, but let me just give you a path sort of on where we're headed and how we think about fiscal 2028 and how we build on that strong second half we see next year. So a couple of things, maybe to talk about those same businesses. So first, on custom, and just as a reminder, I mean, basically, we quadrupled that business from calendar 2023 to 2024. We doubled it from calendar 2024 to 2025. We're saying it's going to be up about 20% this next year. But then when I look at the year after, with all this goodness from XPU Attach, plus a new meaningful XPU socket ramping and the other programs continuing, we see the custom business actually in fiscal 2028 doubling off of 2027.

We see a re-acceleration big time in that year. And that puts us on a nice trajectory towards our growth targets in fiscal 2029 in custom, coming off strong second half next year and then in fiscal 2028. On interconnect, look, it's early, but we do expect that business should continue to outgrow CapEx. It's done that for a long time. Look, if you just said, "Hey, 20% CapEx growth in fiscal 2028," and nobody knows what that number is, but just peg that in there for now, we'll definitely grow above that. And I would say our customer forecasts support a much higher number than that. But just as a base case, just assume CapEx is 20% that year and so OpEx would grow faster. And then for storage switch and the other part of data center, just assume 10% growth in fiscal 2028 over 2027.

I think that's a reasonable set of assumptions to use based on what we see. And so when you actually add all that together, you come up with a number bottoms up, which looks more like 40% growth in data center in fiscal 2028. So that's what I was talking about in my lead-in, which was strong data center, 45% growth basically this year in data center, targeting 25% next year, and then 40% the year after. And if you actually look at it over the cycle where we started back in calendar 2023, that's like a 50% kind of compounded growth rate we'll be growing our data center business. So the 2028 numbers I'm laying out for you are not totally crazy.

And then just for reference, if you just sort of plug in comms and other growing at GDP for fiscal 2028, just to keep it simple, again, it's too far out, you basically get Marvell growing like another 30% in fiscal 2028, which would be above where we're looking for 2027. So kind of a long answer, but maybe what's been on a lot of investors' mind is how do you get from where we are to where we're going. But certainly, we're very optimistic about our outlook over the next couple of years. And then things like Celestial AI and some of these other big growth drivers, those are going to kick in starting in fiscal 2028, but then really in 2029 and 2030 and beyond. And I think through the end of the decade, it's looking very bright for Marvell. Thanks for the question.

Thank you.

Our next question is from Harlan Sur with JP Morgan.

Yeah, good afternoon. Thanks for taking my question and congrats on the Celestial acquisition. Today, Matt, your lead AI customer announced their next-generation 3-nanometer AI XPU product. And I think you just said you have secured purchase orders for this progra m for the entirety of next year. But your lead customer also pre-announced their next-generation 2-nanometer XPU product today as well, which we believe you're also involved with, especially now with the Celestial team. I remember at the June custom AI event that the team talked about concurrent design programs. In other words, at the same time, you're towards the tail end of your customer's 3-nanometer design. You're already starting to work with customers on their next-generation 2-nanometer designs. During our fireside chat in September, you talked about the team being heads-down focused on 2-nanometer designs.

You even talked about next-generation A16 and A14 technologies. Can you just give us an update on your sub-3-nanometer design win pipeline? Does it include both XPU, XPU-attach programs, and what's the timeline for these programs to ramp into production?

Yeah, thanks, Harlan, for the question. And yeah, just in the spirit of the customer confidentiality and details, you can't go into too much. But what I would say, which is incorporated into our numbers, is that our product transition from where we are today with our lead XPU customer to the next one is baked into all the numbers I gave you. And I got the backlog, and I got the orders, and we got great visibility there. On the 2-nanometer, very exciting. I mean, there's a number of programs that we're working on in this area, and that's going to be a workhorse process technology for us.

But yeah, same as I said, and I would just say that the design funnel keeps increasing there, and the power benefits you see are compelling. And I think that'll continue. I mean, that's really where AI has sort of kicked in to keep the Moore's Law train running is really just the power savings are worth real OpEx dollars when you can save power dissipation from one generation to the other. So nothing really new to report there other than just heads-down execution. And we do see strong product ramps coming over this time period I gave you, especially into fiscal 2028, where you'll start seeing some of the 2-nanometer products ramp. And my team internally, just to give them a shout-out, is executing extremely well.

The whole team you saw that got up there at the AI investor event in June by engineering leadership, executing extremely well across the board on the core IP, the nodes, the packaging, you name it. So we're really firing on all cylinders internally. Thanks, Harlan.

No, good execution. Thank you.

Yep, thanks.

Our next question is from Tore Svanberg with Stifel.

Yes, thank you, and congratulations on the acquisition. I had a question on Celestial AI, Matt. So when you gave those $500 million and $1 billion targets, would that be for the PFLink products only, or would that also include some of the potential businesses with memory?

Yeah, yeah, a couple of things to note maybe at the highest level. The first is, yeah, the revenue targets and also the earnout that we're all going to drive for is all based on Celestial AI in totality.

Now, the reality is, from a lead perspective, the PF chiplet is sort of what's going to go first. But everything's on the table, and there's just tremendous activity that that team has driven, punching way above their weight in the industry in terms of the engagements they have. So those are all-in numbers, but clearly going to be driven more from the PF chiplet side in terms of the revenue build in end of fiscal 2028 and then the end of fiscal 2029.

Great, thank you.

Yeah.

Our next question is from Chris Caso with Wolfe Research.

Yes, thank you. Also a question about Celestial. And with that revenue ramp that you're expecting at the end of fiscal 2028, beginning of fiscal 2029, can you talk about the breadth of that?

And obviously, I'm sure you're not willing to name the customers right now, but is it a fairly narrow customer base? What's the, and going over time, how diversified is that revenue strea m?

Yeah, no, great question, Chris. I think the engagement is certainly broad, but remember, there's a bold effort across the industry to really bring this product into volume-stable production. And it's going to take real big companies and a few of them to do that. And so yeah, we have strong engagement across the board, but there will be, and we're fortunate with this that we have, as I said on the call, we have one tier-one hyperscaler that we're engaged with on this that I think is a great partner and a great teaching customer and a great customer to collaborate with to really go make this happen.

It's very exciting to see Celestial come into Marvell because just as a reminder, we have an incredibly strong internal silicon photonics organization. I mean, this team that we got from Inphi pioneered this technology. We drove it into high-volume production and market leadership in the 100 and then 400 gig ZR business, now 800 gig. All the DCI stuff they enabled, that's on the back of very, very innovative silicon photonics technology. We have a ton of know-how here. When we bring in Celestial, we're all going to benefit from that common set of learnings. Having a lead customer pulling us through is very exciting. I think this is just the first phase here, Chris, that you're going to see. Certainly, the interest is there across the industry.

This is just so evident to us over the last couple of years and really pronounced at the last strategic review. It's a process I run every year where we do our capital allocation review with everybody. And that was a couple of months back. And we're just staring at this just giant transition to photonics inside the data center and that TAM. And we looked at, can we do it ourselves? Can we do it with a partner? And we just concluded this is a home run to bring them in with our internal team, plus really a lead customer to pull us through the first wave. But beyond that, we see very broad adoption beyond that timeframe.

Thank you.

Yep.

Our next question is from Harsh Kumar with Piper.

Yeah, hey, guys. Congratulations, Matt and the team, and a lot of good things happening.

Matt, I had two, so I'll just ask them both together. The first one is on custom. You specifically mentioned at least 20% growth for next year. Seems like you've got a lot of good things happening, a lot of good stuff ramping. And I was hoping that you could bookend that number for us. So at least 20% to me seems like that's what's in the bag. But maybe you could give us a sense of what, if everything worked out right for you, what could be a normalized 2027 FY growth rate for custom? And then the second question was, you gave us a lot of color all the way to FY 2028. And this is kind of not the norm on Wall Street. Most companies go out of quarter, as you well know.

So my question is, and this we've been getting from a lot of investors already, is what is your comfort level and what is the visibility on some of this long-term revenue materializing that you're talking about?

Yeah, sure. A lot in there, but let me unpack it. I think the first is you should definitely model the 20. And I think that's a-that is a good number. That's a good safe base case number. And remember, it's a handful of programs today. So I think I would just go for that for now. Clearly, we're going to be ready if people want to do more. But I am also mindful of some of the history on this custom business where either people got ahead of themselves or there's a lot of noise in the system. And it's just, look, we've got strong backlog. We got that covered. That's great.

If we do better later, we'll definitely update you guys, but we got a very, very good outlook for next year in that business, and then obviously, the year after it really builds, and kind of part of your question is it's not 20% sort of linearly, meaning the second half, especially in custom and the exit rate, is much higher than where we are now, and that's simply because we're building all this momentum into fiscal 2028, and then, yeah, on the sort of guide quarter at a time, that's definitely been our MO historically. I think given the multi-year cycles we're looking at now in the AI infrastructure build, and also, quite frankly, just being sensitive to investor feedback about looking at some pretty ambitious targets we've set for the company several years out, and then wondering, well, how do you see yourselves getting there?

And I just view it as it's incumbent on me to paint the picture for folks and share what I see as kind of base case assumptions, as I mentioned. I mean, these are what I view as the base case, not dream the dream, not putting anything in that is sort of a maybe. I think it's very rational how we came up with our fiscal 2027 outlook. And even our fiscal 2028, if you just look at it bottoms up on the custom, we should definitely be able to do that because we know those programs. I mean, if I say CapEx is growing 20%, it certainly may do better. And our optics businesses are growing way above CapEx. So that has some legs to it. And then, look, even in a quarter, that other category in switching and storage and other has also floated up.

So there's still a lot of goodness out there. But I think just from a modeling perspective, that's what you should think about. And I would say finally, it really, though, is tied to our customer planning. I mean, they're realizing to go get all this build to happen. They've got to provide visibility several years out. That's giving us increased confidence in our outlook because we're having to plan around that. Our R&D schedules, our capacity, our ramps, all that stuff has got to go kind of six to eight quarters out now to really be ready. So that's also part of why I felt it was worth sharing this perspective for investors. And again, I think it's timed well as well with Celestial because then that thing just kicks in beyond the timeframe I'm talking about, fiscal 2029.

I mean, some of it in 2020 and fiscal 2028, but then really 2029, 2030, and beyond. So hopefully that was helpful. Thank you so much for the question.

No, very helpful. Thank you, Matt.

Our next question is from Blayne Curtis with Jefferies.

Hey, guys. Thanks for taking my question. I wanted to ask you, Matt, I know it's always tough to talk about customers, but you did file an 8-K, and it says you granted Amazon a warrant for a million shares to buy photonic fabric. So I guess one very simply is that your lead customer. And if you can maybe talk about that expanding relationship, obviously, there's been a lot of back and forth, your status of that customer, but this seems like a positive in terms of your engagement for the next generation.

Yeah, and great job. Check out the EDGAR website, Blaine.

You're always one step ahead. Yeah, I think it's great. So first, we did file a Form 8-K talking about really an extension, if you think about it, to the warrant agreement we have, which is effectively adding a new swim lane. And if you can believe it, it was only one year ago that we announced with AWS a warrant and strategic arrangement with them. Back then, a year ago, it was really bucketed between AI, custom products, and then networking products. And so think of this as just adding another swim lane of photonic fabric products to the mix. And all in, the potential of each of these is quite significant. So that's a positive on the first one that's out there. Also pleased to get a very, very strong support in our press release for the acquisition from AWS. That was positive.

When you sort of look at all the things we're saying and all the data that's out there, you can sort of figure out where we're headed with this and who is helping drive this technology forward. We're very, very excited about where we can go with this technology, especially with our lead tier-one hyperscaler, but then also the rest of the market, which I think will be shortly behind them once we can really put the full force of Marvell behind this. Thanks for catching that and giving me a chance to talk about it. It's pretty exciting to see. Really, if you think about it, we've got the warrant agreement. We've got an aggressive earnout that the team is driving, which is a $2 billion number, by the way, through the end of fiscal 2029.

So all this adds up to just a great sort of set of incentives for everybody to go execute like crazy and bring this into production. Thanks, Blaine.

T hanks, Matt.

Our next question is from Vivek Arya with Bank of America.

Thanks for taking my question. Matt, I had two kind of questions on the data center, one on optics and one on custom. So on optics, why correlate it to cloud CapEx? Why not to growth of AI accelerators, which is expected to be much faster than the 30%? And then on the custom side, you mentioned 20% as the baseline growth. Is that because the second customer is supposed to come on board, or is it because you will grow with that first customer? And I ask about the second customer because they don't have a history of ramping big ASIC programs.

So I just wanted to get your overall views on optics and why correlate it to CapEx. And then on the custom side, just kind of puts and takes of the second customer that's supposed to come on board. Thank you.

Yeah, hey, thanks, Vivek. Yeah. So on your first question, I mean, just the rationale was just to give just a broad proxy to the investment community about how to think about our business off sort of a very common metric, which is CapEx. I agree with you. The optics business is fundamentally driven by AI and AI acceleration, and that's why it's been growing so far above CapEx each year. But I think this was just in the interest of providing some pretty broad brushstrokes. But you should certainly assume that the optics piece is tied to AI, which is growing faster than CapEx.

So that's a fair assumption. But just this was really in the spirit of making this a proxy. And then on the growth next year, yeah, that's all still driven by the way to think about it is mostly our current business today. So there's a product transition with our lead customer from one generation to another in there. There's some XPU attached that's kicking in in the second half that's going to lead to the 2028 and 2029 revenues I was talking about. But the next bigger XPU customer we have, not much of that really you should count on for next year. It's really the year after. And that's captured in the doubling from fiscal 2027 to 2028. But I think we've got a very rational base plan for that that we think is achievable.

Then, obviously, if things improve or get better, then we would up those numbers. I think what we're trying to do right now, Vivek, is just paint a very rational, clear picture for people. Then we'll obviously update along the way more on a granular basis as we go forward.

Thank you, Matt.

Yeah.

Our next question is from Christopher Rolland with Susquehanna.

Thanks for the question and congrats on the results. I think your main competitor in ASIC has moved to providing racks, not just silicon. With this acquisition and kind of given the increasing complexity we're seeing out there, might you be moving to systems and then perhaps even rack-level solutions as well? And do you have the capabilities to do that? Thanks so much, Matt.

Yeah. Hey, thanks, Chris, for the question.

I would sort of answer the second part, which is we are very much looking at this as a rack-level solution in totality. That is all the various flavors of optical interconnect. I rattled through a bunch of those. We're the one-stop shop, right, from AECs, traditional DSPs, retimers, LPOs, photonic fabrics, and then scale-up and scale-out switching and XPU-attached sockets and circuits to go make all this work. Then working closely with our customers with that vision on how we enable that entire end-to-end and enable them to do that. That's our current strategy. Most of the people we're working with have that capability themselves today. They're very good at it. But we also add quite a bit of value in how to think about how to pull it all together. We absolutely have a rack-scale vision.

And this is where Celestial AI really fits in. But we don't have any system-level revenues comprehended in anything I've talked to you about over the next two years. But certainly, from a strategic standpoint, it's imperative, right, that we go to market in a very comprehensive way, Chris, and not in a point-solution way, but rather be able to provide all the fundamental pieces right from the biggest XPU chip all the way down to a retimer on the board.

Fantastic. Thank you, Matt, and congrats.

Yeah. Thank you.

This was our final question for the evening. I'd now like to hand the call back over to management for any closing comments.

Yeah, fantastic. And thanks for all the great questions. And appreciate everybody listening. I know it was a lot. I think this was the world record for the longest prepared remarks I've ever done.

But, like I said at the beginning, settle in because there's a lot of good stuff. And there really is a lot of great things happening with Marvell. I'm just really pleased with how our team has executed. I want to say thank you to all of them. We have a phenomenal setup for next year, as I indicated. And even through the next year, we just have very good visibility. Programs are on track. We are playing offense in this company, okay? We're out doing strategic acquisitions like Celestial AI. And we're thrilled to welcome them to the Marvell team. And I think our future is very bright where we're headed. So appreciate everybody's interest. I look forward to the follow-up conversations and appreciate all the investor interest in following Marvell and our journey. Thank you, everybody. Have a great day.

Thank you. This concludes today's conference.

You may disconnect your lines at this time. Thank you again for your participation.

Good afternoon, and welcome to Marvell Technology, Inc. fourth quarter and fiscal year 2026 earnings conference call. At this time, all participants are in 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 the formal presentation. Please note that this event is being recorded. I will now turn the conference over to Mr. Ashish Saran, Senior Vice President of Investor Relations. Thank you. You may begin.

Good afternoon, everyone. Welcome to Marvell's fourth quarter and fiscal year 2026 earnings call. Joining me today are Matt Murphy, Marvell's Chairman and CEO, Willem Meintjes, CFO, Chris Koopmans, President and COO, and Sandeep Bharathi, President, 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 the most recent Form 8-K, Form 10-K, Form 10-Q and other documents filed by us 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.

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

Thanks, Ashish, and good afternoon, everyone. Let me begin by extending a warm welcome to the Celestial AI and Xconn teams. We recently closed both acquisitions and the teams are working closely together with joint product roadmap discussions in full swing with customers. These highly strategic additions further strengthen our technology platform and significantly enhance Marvell's position in the rapidly emerging AI scale-up networking market. I'll provide additional detail on these acquisitions later in today's call. Now, turning to our results and business outlook. For the fourth quarter of fiscal 2026, Marvell delivered record revenue of $2.219 billion, reflecting 7% sequential growth. Revenue exceeded the midpoint of guidance driven by our strong demand in our data center end market. As a result, Non-GAAP earnings per share of $0.80 exceeded the midpoint of guidance by $0.01.

Turning to our full year results, fiscal 2026 was an exceptional year for Marvell. Revenue grew 42% year-over-year to approximately $8.2 billion as reported and approximately 45% year-over-year, excluding the divested automotive Ethernet business. Our Data Center revenue surpassed $6 billion, growing 46% year-over-year. This performance was driven by robust demand for our interconnect, switching and storage products, along with a strong ramp in our custom business, which doubled in fiscal 2026. As we begin fiscal 2027, we are seeing very strong demand across our entire Data Center portfolio, with bookings accelerating at a record pace. This robust demand is reflected in our guidance for the first quarter of fiscal 2027, with total company revenue forecasted now to grow 8% sequentially at the midpoint to $2.4 billion.

Looking ahead, we expect to grow revenue every quarter this fiscal year at a similarly strong sequential rate, which would result in Q4 revenue exceeding $3 billion exiting this year. This forecast also implies that our year-over-year revenue growth rate will accelerate each quarter throughout fiscal 2027. We now expect overall Marvell revenue in fiscal 2027 to grow more than 30% year-over-year, approaching $11 billion. Notably, this outlook is meaningfully higher than what we communicated in our prior updates. Some of you may recall in September 2025, during an investor call hosted by JP Morgan, we provided a fiscal 2027 revenue outlook of approximately $9.5 billion, which at that time was received positively as it was significantly higher than the market expectations.

In our December 2025 earnings call, as CapEx growth forecasts continued to increase, we updated our fiscal 2027 revenue forecast to approximately $10 billion. Today's outlook approaching $11 billion raises our forecast by almost another $1 billion. Importantly, this outlook is driven by Marvell's organic businesses as the recently closed acquisitions are not expected to contribute meaningfully until fiscal 2028. The increase in our overall revenue outlook is all being driven by our data center business. Since December 2025, cloud CapEx expectations have continued to increase. We have seen our bookings continue to accelerate. As a result, we now see our fiscal 2027 data center revenue growing by 40% year-over-year. We expect all our key product lines in data center to be stronger than our prior outlook.

Notably, we expect our interconnect business to grow more than 50% year-over-year, well above our prior expectation of 30% growth. For our communications and other end market, we expect 10% revenue growth in fiscal 2027. Looking ahead to fiscal 2028, while we assume the rate of CapEx growth moderates from the current fiscal year, we expect continued robust data center revenue growth for Marvell. We expect our interconnect business to significantly outpace cloud CapEx growth, our custom business to at least double year-over-year and our Ethernet switching business to continue to ramp meaningfully. In addition, we expect Celestial AI and Xconn to contribute approximately $250 million in aggregate revenue in fiscal 2028.

As a result, we expect data center revenue in fiscal 2028 to grow close to 50% year-over-year. Achievement of our forecast would result in 3 straight years of data center revenue growth compounding at well over 40%. For our communications end market, we continue to expect low single-digit percentage revenue growth in fiscal 2028, consistent with our prior view. In aggregate, we expect Marvell's overall revenue in fiscal 2028 to grow close to 40% year-over-year, reaching approximately $15 billion, roughly $2 billion higher than the outlook we provided in our December earnings call and driving our Non-GAAP EPS to well over $5. This outlook is based on demand we are seeing now and designs that are already in execution.

As we progress through the fiscal year, we plan on remaining closely aligned with our customers as we expect them to continue to invest in AI infrastructure. With that, I'll provide more context on our numerous growth drivers across our end markets, beginning with Data Center. In our Data Center end market, we delivered record fourth quarter revenue of $1.65 billion, representing 9% sequential growth and 21% year-over-year growth. Revenue exceeded our guidance, driven by increased demand across our interconnect portfolio. We achieved sequential growth across all key product lines, including optical interconnects, custom silicon, switching, and storage. Looking ahead to the first quarter, we expect our Data Center revenue to grow approximately 10% sequentially, including a seasonal sequential decline in on-premise Data Center revenue.

Let me now highlight the broader trends across both our established data center businesses and our newer growth initiatives, including recent acquisitions. I'll organize the discussion into three categories: interconnect, switching, and custom. I'll begin with interconnect, where we offer the industry's broadest and most comprehensive high-speed connectivity portfolio, addressing scale-out, scale-across, and scale-up networking. In our scale-out PAM franchise, demand remains robust for our 800G products. We are also seeing very strong bookings from multiple tier 1 customers for our 1.6T solutions, which entered production in the second half of fiscal 2026. Reflecting this demand and our first to market technology leadership, we expect our 1.6T revenue to ramp very rapidly in fiscal 2027, with substantial additional growth projected in fiscal 2028.

As a result, we expect to continue to maintain leadership in the PAM market at 1.6T, just like we have at every PAM generation. Marvell is the first company to productize 200G per lane technology, enabling the 1.6T transition now underway. While this generation is expected to continue to grow through the end of the decade, Marvell has already demonstrated 400G per lane technology. We expect that this will position us to enable the industry's subsequent transition to 3.2T once 1.6T reaches full maturity. To support campus-wide data centers requiring longer reach than traditional PAM solutions, Marvell has introduced Coherent Light, optimized for 2-kilometer- 20-kilometer applications within a highly power-efficient envelope.

We have already begun shipping first-generation 1.6T Coherent Light products and are now introducing a second generation with integrated MACsec security. Turning to scale across interconnects, a technology we pioneered with our 100 Gig DCI modules, we continue to lead the market with coherent 400 Gig and newer 800 Gig solutions. We are winning new customers and expect to supply DCI modules to all five major U.S. hyperscalers this year. We see significant long-term growth in this market as the global data center footprint expands and bandwidth requirements between data centers continues to increase. Industry forecasts project the DCI pluggable TAM to grow by more than 5x by calendar 2030, with speeds doubling each generation and feature complexity increasing, including the integration of MACsec.

To that end, earlier today, we announced our latest innovations in scale across interconnects, including the industry's first secure 1.6T ZR and ZR+ DCI modules powered by our new 2nm coherent DSP. We also introduced a new 2nm 800G DSP, which enables second generation lower power 800G DCI modules. DCI modules powered by these 2nm MACsec-enabled DSPs are expected to begin sampling later this year. This positions Marvell to maintain technology leadership, supported by our proven expertise in large-scale manufacturing of these highly specialized and complex modules. Now let's move to scale up interconnects, which is an entirely new and rapidly emerging market. We are very excited about what we believe to be a massive opportunity unlocked by Celestial AI's Photonic Fabric, or PF technology, as well as growing customer traction for our AEC and retimer solutions.

As discussed last quarter, Celestial AI's PF technology is expected to enable large-scale commercial deployment of CPO for scale-up connectivity starting next year. Our chiplets will be co-packaged into both custom XPUs and the scale-up switches connecting them together on both sides of the link. With the acquisition now complete, Marvell's engineering and operations teams are fully engaged in bringing Celestial's first-generation chiplet into high-volume manufacturing. We remain on track for our forecast for our CPO revenue from Celestial to reach a $500 million annualized run rate in the fourth quarter of fiscal 2028, doubling to a $1 billion annualized run rate by the fourth quarter of fiscal 2029. We have seen strong interest from a broad range of customers in Celestial's Photonic Fabric technology following the deal announcement.

We look forward to updating you on our progress in the scale-up interconnect market, which we believe could exceed $10 billion by 2030. In the AEC market, we have secured design wins with three Tier 1 U.S. hyperscalers and several additional customers, including model builders and hardware OEMs. We are also seeing strong traction for our retimers. As a result, we expect combined AEC and retimer revenue to more than double year-over-year in fiscal 2027. We continue to innovate through our Golden Cable initiative, a strategic program that delivers a complete solution, including industry-leading software and validated reference designs, enabling ecosystem partners to rapidly design and deploy AEC products at scale. Hyperscale customers benefit from access to multiple high volume cable OEMs offering fully compatible AECs, both on the same high-performance Marvell DSP and reference design.

Data Center switching, we delivered strong growth in fiscal 2026, with revenue exceeding $300 million, driven entirely by scale-out applications. Given sustained demand for our current 12.8T products and a strong ramp of next generation 51.2T products, we now expect Data Center switch revenue in fiscal 2027 to surpass $600 million, up from the $500 million we had indicated last quarter. We are seeing strong engagement from both existing and new customers for our 51.2T platform and our upcoming 100T platform, which we expect to begin sampling in the first half of this fiscal year. Our 100T switch delivers industry-leading power efficiency and lower latency, attributes that are especially critical for AI applications.

In scale-up switching, the combination of Marvell and Xconn creates a significantly larger team to address rapidly emerging UAL and Ethernet-based opportunities. UALink builds on decades of PCIe ecosystem development and incorporates high-speed interface innovations from Ethernet to meet the bandwidth, latency, and reach requirements of next-generation accelerated infrastructure. Xconn expands Marvell's switch team with deep PCIe switching expertise, enabling comprehensive support to customers building next-generation AI platforms. We are fast-tracking our scale-up switch roadmap by leveraging our extensive experience in developing large radical size scale-out switch chips and best-in-class in-house high-performance SerDes. We remain on track to sample our UALink 115T solutions in the second half of this fiscal year, with volume production expected in fiscal 2028. In parallel, we continue to advance the Ethernet-based roadmap with key customers.

We are able to further enhance our scale-up roadmap by enabling integration of our CPO technology from Celestial directly with our switches, delivering a purpose-built, fully optimized end-to-end optical scale-up platform. Xconn also adds advanced PCIe and CXL switch solutions, another completely incremental TAM from Marvell. Their PCIe 6.0 and CXL 3.1 solution is based on a monolithic switch architecture supporting up to 256 lanes, delivering the industry's highest radix and lowest latency. PCIe switching remains foundational in standard compute architectures connecting CPUs to peripherals, and increasingly in AI infrastructure to connect CPUs to XPUs. In parallel with next generation protocols like UALink, PCIe is also adopted for XPU to XPU connectivity, particularly in AI inference systems and small to medium-sized clusters. CXL is rapidly becoming essential for memory disaggregation in modern data centers.

We have been investing in CXL for several years, and Xconn switching portfolio, combined with Marvell CXL memory expanders, create the industry's most comprehensive CXL platform. Xconn was already engaged with more than 20 customers prior to the acquisition. As part of Marvell, Xconn now benefits from our global sales and marketing reach and strong presence in the data center. As a result, we expect to drive strong growth in both the PCIe and CXL switch markets over the next several years. Turning now to our custom business. This remains one of the most compelling growth drivers for Marvell. In just a few years, we have scaled from zero revenue to $1.5 billion in fiscal 2026. As you may recall, the first meaningful ramp began in the second half of fiscal 2025.

Fiscal 2026 marked the first full year of production for those programs. As a result, we doubled our customer revenue year-over-year. We expect customer revenue to grow more than 20% year-over-year in fiscal 2027, higher than our prior view. We continue to see growth from our lead XPU program this year, including a transition to its next generation. As I noted last quarter, we have purchase orders covering the entirety of this fiscal year's forecast for this next generation program and are now ramping production. We are expecting growth to continue in fiscal 2028 from this program. We are also deeply engaged on the follow-on generation of this XPU. Several XPU attach programs are ramping in fiscal 2027, including our initial CXL and NIC products.

CXL demand is accelerating, partly driven by tight memory supply. Our custom CXL expanders enable customers to reuse prior generation DRAM with new XPUs, GPUs, and CPUs, while also supporting near memory compute operations. A recent white paper from a leading hyperscaler on next-generation LLM inference architectures highlighted near memory processing as a key opportunity to improve model performance. They cited Marvell's Structera A processor as an example of a CXL-enabled solution that improves programmability and simplifies system integration. This all provides a great setup for fiscal 2028, where we continue to expect custom revenue to at least double year-over-year from three primary drivers. First, continued growth from our existing custom programs. Second, multiple XPU attach programs reaching high volume, particularly in custom NIC and CXL applications.

As I mentioned last quarter, we have line of sight to revenue exceeding $2 billion by fiscal 2029 from just these two use cases, and we expect to make significant progress towards that outlook through fiscal 2028. Third, our new Tier 1 XPU program ramping into high volume production. This program has continued to progress very well through development, and we have firm volume requirements for all of next year and are planning for high volume manufacturing. Beyond programs already won, we are encouraged by strong new design engagements with both existing and new customers. Custom compute is proliferating across the hyperscale ecosystem, with inference-optimized hardware becoming increasingly important. We are seeing an unprecedented level of activity across multiple new engagements as hyperscalers increase their cadence of custom chip development.

We are engaged in deep technical discussions on innovative new architectures and are seeing a massive opportunity on 2nm and below process technologies. Okay, turning to our communications and other end market. We delivered fourth quarter revenue of $567 million, up 2% sequentially and 26% year-over-year. For the first quarter, we expect low single digit sequential growth on a percentage basis and approximately 30% year-over-year. In summary, we concluded fiscal 2026 on a strong note, with revenue growing 42% year-over-year and Non-GAAP EPS increasing 81%, roughly twice the rate of revenue growth, demonstrating the strong operating leverage in our business model.

Fiscal 2026, we were very active on the M&A front, divesting our automotive Ethernet business for a double-digit revenue multiple and rapidly redeploying the proceeds into two highly strategic acquisitions. These position Marvell at the forefront of the large and incremental AI scale-up networking market. At the same time, we continue to execute our capital return program, returning $2.245 billion to stockholders through share repurchases and dividends. Far in fiscal 2027, we are seeing strong bookings across our entire data center portfolio, with customers signaling robust demand not only for this year but for the next several years. We believe we are still in the early stages of a strong multiyear growth cycle for Marvell.

Our first quarter fiscal 2027 guidance represents 27% year-over-year growth at the midpoint, re-accelerating from 22% in the prior quarter. We expect year-over-year growth to accelerate each quarter throughout fiscal 2027, with revenue exiting the fiscal year at over $3 billion in the fourth quarter. We have raised our fiscal 2027 forecast meaningfully, and in fact, the revenue growth rate we are projecting today for fiscal 2027 is roughly double the outlook we provided just a few months ago in September. This is an exciting moment for Marvell.

I want to take a moment to thank our global team for staying focused despite the external noise and delivering consistent execution, which has enabled record results and positioned us to capitalize on what we expect will be a massive AI opportunity ahead. I look forward to updating you on our progress in the coming quarters. I'll turn the call over to Willem for more detail on our recent results and outlook.

Thank you, Matt. Good afternoon, everyone. Let me start by summarizing our full fiscal year 2026 results, which were very robust across the board. In fiscal 2026, Marvell delivered $8.195 billion in revenue, growing 42% year-over-year. This growth was primarily driven by AI demand in our data center end market, as well as the continuing recovery in our communications and other end market. For the full year, on a GAAP basis, our gross margin was 51%. Operating margin was 16.1% and earnings per diluted share was $3.07. On a Non-GAAP basis, our gross margin was 59.5%.

Operating margin was 35.3%, expanding by 640 basis points year-over-year, and earnings by per diluted share was $2.84, growing 81% year-over-year. We also significantly increased capital returns to our stockholders, returning $2.245 billion through share purchases and dividends in fiscal 2026, an increase of approximately $1.3 billion from the prior year. Moving on to our financial results for the fourth quarter of fiscal 2026. Revenue in the fourth quarter was $2.219 billion, growing 22% year-over-year and 7% sequentially. Our data center end market was 74% of total revenue, with our communications and other end market contributing the remaining 26%. GAAP growth margin was 51.7%. Non-GAAP growth margin was 59%.

Moving on to operating expenses. GAAP operating expenses were $744 million, including stock-based compensation, amortization of acquired intangible assets, restructuring costs and acquisition-related costs. Non-GAAP operating expenses came in at $517 million in line with guidance. Our GAAP operating margin was 18.2%, while our Non-GAAP operating margin was 35.7%. For the fourth quarter, GAAP earnings per diluted share was $0.46. Non-GAAP earnings per diluted share was $0.80 above the midpoint of guidance, reflecting year-over-year growth of 33%. Turning to our cash flow and balance sheet. In the fourth quarter, cash flow from operations was $374 million. Our inventory at the end of the fourth quarter was $1.39 billion, growing $374 million from the prior quarter.

Our working capital has increased to support the significant revenue growth we are driving. During the quarter, we repurchased $200 million of our stock through our ongoing capital return program and returned $51 million to shareholders through cash dividends in the quarter. We expect to continue to return capital through repurchases and dividends. As of the end of the fourth quarter, our total debt was $4.47 billion, with a gross debt to EBITDA ratio of 1.38x and a net debt to EBITDA ratio of 0.57x. Our debt ratios have continued to improve as we have driven an increase in our EBITDA. Turning to our guidance for the first quarter of fiscal 2027, we're forecasting revenue to be in the range of $2.4 billion ±5%.

We expect our GAAP gross margin to be between 51.4% and 52.4%. We expect our Non-GAAP gross margin to be between 58.25% and 59.25%. Looking forward, we anticipate that the overall level of revenue and product mix will remain key determinants of our gross margin in any given quarter. We project our GAAP operating expenses to be approximately $872 million. We anticipate our Non-GAAP operating expenses to be approximately $575 million in the first quarter. This is stepping up from the prior quarter due to the typical seasonality in payroll taxes and employee salary merit increases, as well as the addition of Celestial AI and Xconn. The two acquisitions in aggregate are expected to add approximately $75 million to our fiscal 2027 annual Non-GAAP operating expenses.

We expect our GAAP other income and expense, including interest on our debt, to be an expense of approximately $51 million. We expect our Non-GAAP other income and expense, including interest on our debt, to be an expense of approximately $48 million. We expect a Non-GAAP tax rate of 11%. We expect our basic weighted average shares outstanding to be 876 million and our diluted weighted average shares outstanding to be 883 million. We anticipate GAAP earnings per diluted share in the range of $0.26-$0.36. We expect Non-GAAP earnings per diluted share in the range of $0.74-$0.84. As we look ahead to the rest of fiscal 2027, we will continue to invest in growing our business while driving operating leverage.

On a sequential basis, we expect Non-GAAP OpEx to remain flat in the second quarter and then grow in the low to mid-single digits on a percentage basis in each of the third and fourth quarters, well below the rate of revenue growth Matt provided in his remarks. We are seeing strong growth from our existing franchises in scale-out and scale-across AI, as well as custom, and we are investing to drive new revenue streams from the rapidly emerging AI scale-up market. We have entered a robust multiyear growth period and are looking forward to delivering strong earnings growth to our stockholders. With that, we are ready to start our Q&A session. Operator, please open the line and announce Q&A instructions. Thank you.

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. A confirmation tone will indicate that your line is in the question queue. You may press star two 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. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Your first question comes from Ross Seymore with Deutsche Bank. Please state your question.

Hi, guys. Thanks for asking a question. Matt, thanks for all the updates on the out year, and, well, fiscal year, both this and next. Beyond the magnitudes of the revenue growth, can you just talk about the profile of it? Is the customer base broadening? People are always worried, especially in your custom business, about the concentration of it. I just wanted to get a little bit more color on the shape of the demand from a customer perspective.

Yeah. Thanks, Ross. Well, first of all, we're deeply engaged across the entire ecosystem, extremely strong position with the top four U.S. hyperscalers and then the next level. Each of them, we have a different, you know, concentration and revenue mix. Just to be super clear, if you look at this year and you look at us driving the company to $11 billion, then you unpack things like custom, it's not that big a % of the total. That's not what's driving our concentration. I mean, by design, because the top four U.S. hyperscalers are spending the bulk of the CapEx, that's where the dollars are gonna go. We're quite diversified across each of them. Some of them we sell, you know, a different mix, obviously, of product to.

In the case of all four, within our portfolio, which I just went through, you know, the laundry list of all the different types of products that we provide, we're highly diversified within each of these customers. Yes, custom is something that gets a lot of attention, but if you just look at the numbers I gave you and the context I set, it's a piece of the equation, but not all of it. Over time, even on the custom business, as you look out through fiscal 2028 and fiscal 2029, remember, we've got, you know, 20+ design wins or products now, sockets that are either in production or going into production that's gonna layer in across all those companies as well. The diversification is only gonna get better over time.

We're very unique in sort of the breadth, I think, of the products that we offer and the product lines we have to really serve end-to-end, the needs of all of our key hyperscalers. The last two M&As we just did really round that out nicely in terms of adding PCIe, beefing up the UAL, and then also adding, you know, key silicon photonics capabilities.

Thank you.

Your next question comes from Harlan Sur with JP Morgan. Please state your question.

Good afternoon, guys, and congratulations on the strong results and execution. Matt, you know, on your custom XPU and XPU attached sub-segment, you know, OpenAI recently inked a partnership with your lead XPU customer to consume, I think something like 2 gigawatts worth of your lead customers next-gen and next-gen XPU. It feels like the overall demand for AI compute continues to accelerate. On top of that, like you said, you're ramping 15 XPU-20 XPU attached custom programs this year and next year. Within your better outlook for custom this year and with you already starting to ramp your lead customers next-gen XPU program, do you still anticipate a stronger second half step up of this XPU program, or is it more of a linear ramp through the year now?

I think you previously thought that you would exit this year with custom driving about a $2 billion sort of annualized growth rate. What does that exit runway look like today?

Yeah. Thanks, Harlan. I think the first part of your question is absolutely seeing strong validation in the market for the AI compute spend and the fact that, you know, a significant portion of that continues to go to companies that are building their own XPUs. That's a positive trend. We certainly see it. You're right, even where we don't necessarily have the XPU, where we have XPU attached, all the XPU attached is going with XPUs that in customers where we're not even participating. We participate across every one of those large companies and more on XPU attached.

That's a very positive trend for us that's driving our positive outlook for sure, you know, through this year, which we said custom was gonna grow faster than we thought, but more meaningfully into fiscal 2028 and 2029. Then from a linearity perspective, under the hood, we kind of give you a view of what the sequentials would look like throughout the year. Yes, custom, we have said was gonna be a stronger second half due to a program transition. That's still the case. That the type of exit rate you're talking about is certainly still intact and probably has an upward bias to it. If you look at the exit rate we're talking about for the whole company now, we're looking at north of $3 billion.

Within that, you know, custom continues to have some real upside to it. But that's gonna, you know, improve meaningfully, and the revenue growth is gonna continue into fiscal 2028, which is basically those programs from the second half now having a full year, so that's gonna provide some nice growth.

Yeah.

Content increase, layering in the XPU attach, layering in our new program with a new tier one hyperscaler, which is in its early stages, just even the rough plug we have for them is significantly lower than actually the wafers that we're planning on starting and the material and the production plan we have with our manufacturing supply chain. I think it's a very reasonable setup for next year with a lot of upward bias, depending on if these trends continue.

Well, appreciate that, Matt. Thank you.

Your next question comes from Aaron Rakers with Wells Fargo. Please go ahead.

Yeah. Thanks for taking the question. I guess my first question is on the optics, the electro-optics business. I know, Matt, you've talked about in the past that your ability to kinda outgrow the pace of what we're seeing in CapEx spend. I guess my question is, you know, we've seen some massive upward revisions in CapEx. I think most people look at that and say, "Hey, we're looking at like 60%+ growth this year." Do you think you can grow at that level? How do you think about the durability of that growth as we move into fiscal 2027 or fiscal 2028, sorry. Thank you.

Yeah. Aaron, your observation is absolutely correct, and that's why, you know, even as we look at the upward momentum we see in the business for this year, a big part of that change is in that electro-optics portfolio. You know, we had been calling it kind of closer to CapEx, you know, as we were, as we were modeling what we thought we could do this year, you know, back in the September call and then even in my December call. But now it's clearly, you know, growing not more like accelerator growth and more like this sort of accelerated CapEx growth. Yeah, it's growing like 50%+ this year now. That momentum is gonna continue, okay, into fiscal 2028. A couple things are happening there.

The, the first is that as new XPU, GPU, et cetera, generations are released, we are seeing some increased concentration on the attach rate of optics, so that's a positive. You get more 1.6T, which has, you know, just by because of its performance, commands higher ASP, so that's gonna roll in. Then we have, we just have some pretty new exciting programs happening in that area. That business has been growing at like 50% a year-ish. You can give it + or -. I can get the exact data. It's been at that rate for some time since we acquired Inphi and the data center stuff really took off. We see that continuing not only through fiscal 2028, but, you know, that momentum should continue beyond that.

Maybe it's not the exact same magnitude, but it's significant. We have a real head of steam on the electro-optics business at Marvell.

Thank you.

Yep.

Your next question comes from Blayne Curtis with Jefferies. Please go ahead.

Hey, guys. Thanks for taking my question. Matt, you know, I think, you know, you feel very confident about the trajectory. I'm just kinda curious, one, can you just help us with 2026? 'Cause, I mean, you give us, you know, the big broad swaths, but I mean, is that custom business growing 30% this year? I I just wanna figure out the base that you're gonna double. Can you talk about that second major XPU customer? I mean, to kind of give this type of guidance, like what kind of confidence do you have in the timing of that program?

Sure. Yeah. I think you're talking about, just to be clear, calendar 2026, fiscal 2027 on custom, kind of what numbers are we talking? Is that the first question?

Yeah. Sorry.

Yeah.

Your fiscal year, but yeah.

No, it's okay.

Fiscal 2027, is it around 30%?

Yeah.

Just your confidence level on that second major XPU customer and timing as we try to layer that in to get to that double?

Yeah, great. By the way, don't feel bad. I've been in this job for 10 years, I still have to translate every day between my fiscal year and my calendar year, don't feel bad. For fiscal 2027, yeah, we had been indicating, you know, after the double from last year, it would grow 20% this year. We're just saying that's north of that, I can't give you the exact number now, but it's biased upwards. It's just... Just take what I read before. Was that 20? You know, you can make an estimate, but higher, but not significant enough where I would, like, give you a new number. Just say it's biased higher. In the ballpark, but higher.

Next year obviously gets a little bigger than we thought. The reason we're confident is, you know, we have line of sight in terms of... First of all, we have history, right? We've built these large scale custom programs before. We've done these ramps before. We have a good sense of, you know, when the product is gonna go through its key milestones through NPI. We have had very detailed discussions and alignment around the manufacturing plan, and we've aligned up a corridor for fiscal 2028 for production on this that would be a lot higher than what I'm indicating to you. I think we're budgeting at the moment for, you know, is there a delay? Does it take longer, you know, et cetera.

Plus, I think at the moment, it seems like a lot of folks aren't really believing it's maybe gonna do anything. I think our plug is very, very reasonable for next year, Blayne, in terms of what's there, and I think it would buy us quite a bit higher if we could just achieve what we're planning on reserving in terms of capacity. More to come there, I think, you know, we try to call the ball as best we can, and in general, we've done a pretty good job over the years of trying to size and judge things in advance, and then usually we're pretty good, and then they buy us upwards. We'll see where it lands.

I think it's not a big stretch for this custom business to double next year.

Appreciate it. Thank you.

Your next question comes from Ben Reitzes with Melius Research. Please proceed with your question.

Hey, guys. Matt, nice to see the beat and raise. Thanks for taking the question. You know, I wanted to ask the question about what got better in a different way. I mean, if you could just unpack since December, the $2 billion, especially, you know, how fiscal 2028 got $2 billion better since December. If we can unpack that and what exactly got better and then potentially, you know, I'm gonna be a little greedy, you know, what can carry into the next year as well, you know, calendar 2028, of those signs?

Yeah.

that you saw since then? Thanks.

Thanks, Ben, and great to hear from you. A long time. I think, one is you Just kinda look at it as progression. I mean, it's the first point I'd make is, you know, we try to give a view for investors to be helpful because there's a lot of concern and angst back at the end of last year. In September, we talked about %9.4-ish billion, you know, for this year. You know, that's now... In December, we said that looks more like $10 billion, and now I'm saying it's more like $11 billion. Some of that is just the progression in terms of time and getting better visibility and more concrete. That just ripples into I'll use calendar for a second. Calendar 2027.

On top of that, I mean, one, we've now got very firm, you know, requirements and understand the profile, in particular the interconnect business. That is, I think we had called it very conservatively, to be frank. You know, I think even a few analysts last quarter kinda dinged us saying, "Well, you're plugging your interconnect business at CapEx, but it really looks more like it should be tied to GPU, XPU." That's really the case. I think we're seeing that now in terms of the forecast. That's come up quite a bit, which then again, the upward revisions we're seeing for this year then ripple into next year.

I'd just say this is all underwritten, Ben, by extremely strong bookings and backlog layering in, and then the detailed conversations with our customers around supply planning. It's just given us a much more concrete view. By the way, the other reason I think it's important and why we felt it was important to continue to update on this metric is that we set targets back in April 2024 for calendar 2028. We did that around some assumptions around data center market share of 20%. Those numbers looked enormous at the time we talked about it. I think you guys were there. You know, we were doing low billions a quarter per, you know, in revenue at that time. You know.

I think we had guided $11 billion or $12 billion, we put out this number that was like $15 billion in data center revenue in four years, and I think everyone thought we were nuts. At our June AI investor event, we said the TAM went up, so that data center revenue bogey kinda moved up to, like, if you just did the math, moved up to more like $18 billion and change. Now you kinda look at it and you see where we're landing in calendar 2026 and now where we're sitting here in 2027, I mean, it's, we're very much on track actually to those targets that we had set, Ben.

In a way, yes, it's some upward revisions and that's part of it is just because we have more data, but it actually is also validating, I think the plan we set actually four years ago about what we thought we could go off and do, which were very lofty ambitions, and we're not there yet, and we have to go execute like crazy, me and the whole team. We're very encouraged by what we're seeing, and the proof is in the pudding that we're getting in terms of the backlog forecasts and alignment with our entire supply chain to be ready to go make that happen both this year, next year, and in calendar 2028.

Hey, thanks a lot, Matt.

You're welcome.

Your next question comes from Thomas O'Malley with Barclays. Please go ahead.

Hey, guys. Thanks for taking my question. I think in the preamble, Matt, you talked about AEC and retimers more than doubling in the fiscal year. Could you maybe give us some perspective on the base there? Then you've been really helpful in the next few years kind of giving the contributing factors of what is a pretty impressive growth profile. Maybe talk a little bit about how much that can contribute in this broader overview? Thank you.

Hey, Tom. This is still a merging area for us. You know, we're say- it's, you know, doubling, over doubling this year, but it's probably in the $200 million range is what I would say. I mean, we actually, I think based on some of the things we're looking at, you know, maybe that goes higher, but that just gives you a sense of the magnitude. It's gonna keep going from there. I mean, we've seen this in a lot of our emerging product areas when we get into them. Once they start doubling, they kinda keep doubling. You know, you know this market quite well.

There's quite a bit of room, I think for a bunch of people to participate. Yeah, we're very encouraged by what we see, based on the traction we have on our products, especially in product leadership. We leverage a lot of our DSP and PAM technology in this area. We inflected when both on the retimer side and AECs moved from NRZ to PAM, and that was our kind of conscious decision to do that. We're earlier in this cycle 'cause we're coming in in later generations than some of the existing sockets, but we intend to really invest here in a significant way and participate. Over the long term, you know, we see that as complemented. You know, there's a place in the market for this, and we're gonna participate.

Obviously we made the bet when you go back to even the Inphi acquisition five years ago on optics and pluggable optics in particular, and then now with Celestial also on CPO on the scale-up side. There's a period of time we're gonna participate. I think it's gonna be great, and the business is gonna do well, and it leverages what we have. I think it's gonna be just part of our goal to be the end-to-end provider for our customers of all of these types of solutions, from electrical to optical to silicon photonics, various reaches, various distances, various form factors. That's what our customers are looking for, okay?

They wanna have an interconnect partner that can be the one-stop shop and do it all and have high amounts of leverage on the IT so they can trust it because we do it ourselves. Also on the firmware and the software and the system implementations, they also wanna make sure that they have reusability. It's been a virtuous cycle here. Just the scale-up part relative to the scale out is smaller, but growing rapidly. Thank you.

Thanks, Matt.

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

Thanks for taking my question. Matt, I just wanted to first clarify what your XPU attach was last year and what contribution you expect in 2027 and 2028. Kind of my more strategic question is, when we look at the pattern of your first large XPU program, right, you had a very strong start followed by competition from another supplier. How would you handicap kind of your exclusivity at the large new XPU customer you plan to start at next year? Thank you.

Yeah. Hey, thanks, Vivek. Maybe I'll answer the second one first. Yeah, I think you're asking specifically about our newer program that would ramp next year, and we feel very good about our position. These are, you know, very deep engagements we have with our customers. We're two hands on the steering wheel on this. This is multi-generational in nature. Given the rate of innovation and the pace with the technology is moving at, it's really in everybody's best interest to plan not just the, you know, one generation out, but even farther. We've really been able to do that, I think, across the board with our customers. We feel really good about our position there and the sustainability of that.

It still needs to ramp, obviously, but certainly the CapEx envelope is out there to really consume a lot of product, and we're very encouraged by what we see from a roadmap perspective. We're investing heavily as a company to be there across the board on all of the key attributes that these big XPU customers care about. I think more to come on that as well as future opportunities on XPU for the company. We feel very good about our position the next few years in terms of line of sight to hitting the revenue targets that we talked about over the last couple of years, and then growing beyond that. Oh, yeah, I'm sorry. On the XPU. Excuse me.

On the XPU attach, you know, I can give the exact numbers, but just maybe, you know, big round numbers. Maybe we'll first start with the line of sight just on the NIC and CXL I gave you, which was, you know, kinda $2 billion out in 2028, and then you layer more on that. And by the way, just, you know, we had sized for everybody on the call, the XPU attached TAM in the future at about $15 billion in calendar 2028. We didn't break it out exactly, but we had a total market share goal of about 20% in that timeframe. Let's just call that $3 billion. You know, we're driving in that area. Let's take a step back now. You know, XPU attached probably in the $200 million ballpark.

you know, let's say, like, this last year, you know, doubling this year, you know, maybe over doubling again the year after. I think, I think by next year, you know, this thing's probably, you know, a billion-dollar type business. We'll see how it all shakes out. It's all gonna happen under the hood of our custom business with that. Just to give you a sense, it's on a massive trajectory upward, and it's in that category of kind of double plus each year.

Okay. Thank you, Matt.

Yep.

Your next question comes from Tore Svanberg with Stifel. Please state your question.

Yes, thank you, and congrats on the record quarter. Matt, I was hoping you could give us a bit of an update on the mix of the Opto electronics business. You talked about 1.6T already shipping, but you know, my understanding is that 800 Gig is definitely gonna be the bigger volumes this year. Any sense for what the mix is gonna look like for fiscal 2027 between 1.6T and I guess 800 Gig and even some 400 Gig?

Yeah. Well, I think you got it right, first of all. We had been saying this for a while that 800 Gig was gonna be sort of stronger for longer, and I think that was our mantra even last year, and that's still the case for sure. As I mentioned in the prepared remarks, you know, we had significant shipments actually of 1.6T at the end of last year, and it's gonna ramp, you know, again, pretty hard this year. 800 Gig will still be the majority. I think it's gonna take probably through... I mean, even next year, 800 Gig is still gonna be strong. I can't give you the exact breakout at the moment, Tore.

You know, part of the, I think the uplift as well in terms of just our outlook for interconnect for the year was also based on kind of all of our customers revising up in terms of what they were gonna need, but maybe a little bit more pronounced in 1.6T, and it's really ramping strong with those initial customers we had, and more will layer on throughout the year and next year. Yeah, maybe more on that later, Tore, but I'd probably not in a position to give you the exact number. Also I'd say the reason why too is it's been moving around a lot. I mean, this has been very dynamic in terms of the bookings environment and the demand environment.

I think the mix will have a better view, you know, of what that looks like as we progress throughout the year.

Very helpful. Thank you.

Yep.

Your next question comes from Joseph Moore with Morgan Stanley. Please proceed with your question.

Great. Thank you. With all the growth that you're looking at here, I wonder if you see anything on the supply chain that could be challenging for you. My sense is you've come a long way in terms of supply chain management since a couple of years ago, but just any updates there would be great.

Yeah. Hey, Joe. Great to hear from you. I'm gonna have Chris answer that, our COO. He's been knee-deep and had that job for about five years, and he's knee-deep in the supply. Chris, go ahead.

Yeah, thanks, Joe. Look, we've been in a tight supply environment for anything that touches AI, you know, advanced wave fabrication, advanced packaging, large body substrates since the launch of ChatGPT. Against that backdrop, to your point, we were still able to grow the company north of 40% in total revenue last year. We clearly have very, very good relationships with our suppliers. I would argue that really what helps is we've been forecasting this growth for quite some time. You know, by giving them, you know, multiple years of visibility, of what we're gonna need and ramping into these numbers is really helping us. I'm very confident we've secured the supply that we need for all the growth that Matt outlined this year, next year, and beyond.

Yeah. We're in good shape, Joe.

Very helpful. Thank you.

Yep.

Thank you.

Yep.

Your next question comes from James Schneider with Goldman Sachs. Please state your question.

Good afternoon. Thanks for taking my question. It was great to hear the increased visibility on you have in the business into next year. You know, if I think about the guidance for $15 billion of revenue next year and $5 of earnings, you know, roughly speaking, that's about 15% to where I see the street consensus being for next year's revenue, but only about half that on the earnings side. Can you maybe unpack a little bit, what are the moving pieces below the top line, whether that's gross margin mix or increased investments to sort of get to that, or is the $5 number just relatively conservative?

Oh.

Thank you.

Yeah, yeah. Hey, Jim. Yeah, yeah. That's like just a floor. Like it's $5+. I mean, you can run the your own pro forma, you know, income statement. Just to give you a sense of how to think about it. On the top line, you know, we gave you a framework. Then you can also take basically where we're gonna exit this year, you could use whatever number you want to model finally in your model. We're saying, you know, put in $3 or a bit more.

Then if you actually just kind of roll through some of the guidance we've given you already for this year on OpEx and the moving pieces on gross margin, you know, we actually start to get to our target operating model, margin model, exiting the year. You know, that, you know, probably continues through the next year is a safe assumption. The number, if you put in $15 billion and you put in that, it floats above $5. That was not a prescriptive number or a firm number. It was just a $5+. People are gonna have their own estimates, and you guys will sort of come up with your own view. Yeah, no, I'm not making any comment about any kinda margin changes or dilution or losing leverage at all.

We're gonna get leverage. You know, we're in the mid-30s op margins right now, if you kinda look at where we were last quarter and what we're guiding, that should float up throughout the year. You know, not calling it exactly for next year, but it probably would be consistent with our, certainly our exit rate of this year. That's the simple way to think about it. That would pop out a number, you know, above $5.

Thanks so much for that.

Yeah.

Our next question is from Christopher Rolland with Susquehanna International Group. Please state your question.

Hey, Matt, thanks for answering the question. Mine is around kind of big picture like this CPO scale-up world. Perhaps if you could describe what it looks like for Marvell. Also in your prepared remarks, you talked about integrating Celestial, it sounds like into the Innovium platform. I was wondering, you know, are there potentially like UALink switch trays that you might be able to integrate this into as well? Just the timing around such products would be cool.

Yeah. Great. Thanks. On, the initial plan on Celestial, and just by the way, on the big picture side, you know, our view pretty consistently for some time now has been that the deployment of CPO and scale-out would be, you know, relatively limited, relative to the amount of pluggable transceivers that were gonna get deployed. You can go back many, many OFCs ago, and that's been our view, and that's been the case to today for sure. I think on the go forward, you know, relatively wise, it's still the case. Although you may see some in the industry.

That's not our current plan today, although we could absolutely do that and do that integration with the Celestial technology and our Innovium Teralynx products. We've done POCs, and we've done some work there, but we'll be ready to react to the market there, Chris, when it's needed. On the scale up, and you mentioned UAL, that's a perfect use case where that is where we see that CPO technology inflecting in a pretty big way. Celestial, you know, brought us a pretty significant, you know, design win and engagement in that area. That's what we're trying to drive for next year.

When we ramp it next year, at the end of next year, the, that would be serving the scale-up application, and it would be both an integration of the Photonic Fabric chiplet into the XPU as well as on the switch side. That's the first one. There'll be a whole bunch of shipments on scale-up switching that will be copper-based, and that's gonna exist for some time too. We're seeing very, very strong interest across the board for kinda beyond the next few years of where the CPO for scale-up really starts to inflect. That's sort of been our recognition over the last year or two, is that's where that's gonna happen, and that's why we did the M&A, and we brought the team on.

To sum it all up, we'll be, you know, we'll be shipping next year, you know, CPO for scale-up at 1 large customer, and then the rest of those deployments would be still copper-based.

Very exciting. Thanks, Matt.

Yeah. I think we'll do one more question, and then I think we'll wrap it.

Thank you. Okay, our last question then will come from Mark Lipacis with Evercore ISI. Please state your question.

Great. Thanks for taking my question and congrats on the great quarter. Matt, I'm wondering, when you look at these AI systems that your customers are building, it sounds like the way you're talking about it, that there's a bigger bottleneck on the connectivity side than the processor side. That would be like the part one of the question. If you agree with that, what's the argument for, you know, why not shift your processor resources to focus more on connectivity? It seems like your lead is a lot more obvious on the connectivity side. It's a higher margin business. If that's where the bottleneck is, then seems like there's a higher chance to add more value, get paid for that value.

By contrast, the processor side sounds like it's quite noisy on the competitive front. You know, I think you guys probably get dinged on your multiple because of that noise. What's the rationale for not doing something like that? Thank you.

Yeah. Thanks, Mark. It's a valid question. First of all, on the interconnect side, Well, on your first part of your question, I'm not sure what's more of the bottleneck or not. I know for sure the interconnect is a bottleneck, but you could also argue industry-wide, you know, there's a lot more to do on the processing side. Just to be clear, we are absolutely investing to win on interconnect. Like we're not sort of trading anything off there. I mean, we're going all in to make sure that we're the leader here, and that's why you can even see when we did our M&A moves last year, you know, we put all that towards that market.

I would say though at the same time, we're in the custom business. The, you gotta break it into two pieces. On the XPU attach side obviously, that is more margin-rich, and leverages a lot of the Marvell IP and technology we have, and those typically are our chips that we do. We've made a quite a nice business out of that. Then on the XPU side, you know, we wanna be a big time supplier to our customers. We do get strategic advantage, okay, in being in that market though, Mark, which was actually even a reason looking all the way back to Avera when we acquired it out of IBM or, sorry, out of GlobalFoundries back in 2019.

One of the reasons that I wanted to do that acquisition and get Marvell into custom, I mean, I never envisioned it would be this significant a business for us. Okay, let's be clear. Back in 2019, we weren't thinking that we were gonna buy an asset for $650 million and it was gonna open up a $50 billion TAM, but it did. One of the strategic rationales that I had for that deal was that it would put Marvell in a product area where we had to be at the bleeding edge. We had to be at the bleeding edge on nodes, packaging, IP development, and it was a tip-of-the-spear type of product line that I felt would be really good for us to really have a driving force to keep Marvell best in class on technology.

'Cause at that time, we were making the move from fast follower to trying to be a technology leader. Now we're in that business. I agree with you, it's got a lot of noise around it, and it's got, you know, a lot of controversies over the last year and all the different things that have gone on, and maybe it's affected our multiple. The fact of the matter is, we're in that business. Our customers are counting on us. We've grown that business from $0 billion- $1.5 billion. It's gonna grow again this year. It's gonna double the year after. It's gonna be a significant revenue growth driver for Marvell. I'm not compromising anything on the rest of the portfolio to be in that business.

Remember as well, that business also gets significant funding and contribution from our customers who pay us NRE and put their commitment in to make sure that those programs are successful. We do get underwritten in terms of the support to go do them. I'm gonna keep... You know, at this point, you know, I'm in, I'm in the AI market. I have the full portfolio. I'm gonna follow what my customers want me to do, and I'm gonna ignore the noise. I mean, if you actually look at last year and all the different things that came out and all the different noise that was out there, it was all wrong. I mean, you had actually analysts retracting notes. You had articles that weren't even accurate at all. I mean, you had...

Honestly, it was all noise. Look at our results that we're guiding. Look at our outlook for this year. Look at our outlook for next year. Do you see me blinking? You don't. Yes, we're in the business. We're gonna be in the business. Our customers want me to be in this business, and we're gonna drive a major significant revenue company at Marvell. I'm very fired up on this topic. Thank you, Mark.

Thanks. Thanks, Pat.

You're welcome. All right. Ashish, wrap it?

Go for it.

I got a couple closing statements. That wasn't it, by the way, everybody. All right. First, thank you everybody for joining the call. Appreciate the interest in the company. It's, it's always fun. Look, our business is on a very strong trajectory, okay? I mentioned in our prepared results, we had record design wins over the past year. Team did a great job. We're seeing record demand. We're on track to grow our data center revenue at or above 40% for the third straight year. By the way, if I go back four years, five years, 10 years, this business has been growing at like 35%, 40%, 45% for a very, very long time, and it's gonna continue to do that.

For next year, we're looking at that growth accelerating, you know, closer to 50% next year. You know, we're driving the company to try to get this company to $15 billion in revenue next year. it's, you know, I've been doing this job for 10 years, the team's been incredibly dedicated, and we got this massive opportunity in front of us. As I said to Ben, who asked one of the great questions, you know, we set some very ambitious targets for the company for calendar 2028, fiscal 2029, almost two years ago. It looked crazy. We're on track. We're on track to achieve the goals that we set. This is the start of it. We're gonna continue to update you guys on the progress of the company.

I wanna end by just thanking all the Marvell employees for your focus, your commitment, and your commitment to our customers to drive the execution they're looking for. You know, our goal is to make Marvell one of the big winners in this once in a lifetime episodic AI infrastructure build-out. Thanks everybody for your interest in the company. I'll see a bunch of you guys on the East Coast in New York next week.

Thank you. Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. Please disconnect your lines and have a wonderful day.

Please note this event is being recorded. I would now like to turn the conference over to Mr. Ashish Saran, Senior Vice President of Investor Relations. Thank you. You may begin.

Thank you. Good afternoon, everyone. Welcome to Marvell's first fiscal quarter 2027 earnings call. Joining me today are Matt Murphy, Marvell's Chairman and CEO, Willem Meintjes, CFO, Chris Koopmans, President and COO, and Sandeep Bharathi, President, 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 filed by us 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.

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?

Thanks, Ashish, good afternoon, everyone. For the first quarter of fiscal 2027, Marvell delivered record revenue of $2.418 billion, reflecting 9% sequential and 28% year-over-year growth. Revenue exceeded the midpoint of guidance, as a result, non-GAAP earnings per share of $0.80 exceeded the midpoint of guidance by $0.01. We are seeing strong demand and exceptional bookings across our entire data center portfolio. This robust demand is reflected in our guidance for the second quarter of fiscal 2027, where we expect total company revenue to grow 12% sequentially and 35% year-over-year at the midpoint to $2.7 billion. On our earnings call last quarter, we indicated that beginning in Q2, we expected quarterly revenue growth throughout fiscal 2027 to trend in the high single-digit range sequentially on a percentage basis. Q4 revenue exiting the fiscal year at approximately $3 billion.

We are now guiding Q2 revenue to grow double digits sequentially, and we expect Q3 and Q4 revenue to also grow by at least 10% sequentially. As a result, we now expect $3 billion in quarterly revenue in Q3, one full quarter ahead of our prior outlook. We also continue to expect year-over-year revenue growth rate to accelerate each quarter throughout fiscal 2027, reaching approximately 50% by Q4. As a result, we now expect overall Marvell Technology revenue in fiscal 2027 to grow approximately 40% year-over-year to nearly $11.5 billion. The increase in our revenue outlook continues to be driven by our data center business, which we now expect to grow approximately 50% this fiscal year. Notably, we expect our interconnect business to grow more than 70% year-over-year, well above our prior expectation of 50% growth. I will provide additional color on our interconnect business later in today's call.

For our communications and other end market, we continue to expect revenue growth of approximately 10% in fiscal 2027. Looking ahead to fiscal 2028, while we are planning for the rate of cloud CapEx growth to moderate into the 30%+ range, we expect strong data center revenue growth for Marvell to continue. We expect our interconnect business to continue to outpace cloud CapEx growth, reflecting strong 1.6 T demand from scale-out networking and more meaningful contributions from scale-up and scale-across networking. We now expect our custom business to more than double year-over-year in fiscal 2028, higher than our prior outlook, and expect our Ethernet switching business to continue ramping. As a result, we expect data center revenue in fiscal 2028 to grow approximately 55% year-over-year, accelerating from fiscal 2027's projected growth rate.

For our communications end market, we continue to expect low single-digit percentage revenue growth in fiscal 2028, consistent with our prior view. In aggregate, we now expect overall company revenue to grow approximately 45% in fiscal 2028, off a higher fiscal 2027 base. As a result, we now expect Marvell's fiscal 2028 revenue to reach approximately $16.5 billion, roughly $1.5 billion higher than the outlook we provided on our earnings call last quarter. This outlook is supported by demand trends we are seeing today and by programs already in execution. Our investments in securing supply are paying off, enabling us to scale the business every quarter. As we move through the fiscal year, we expect to remain closely aligned with our customers as they continue investing aggressively in AI infrastructure.

Now let me turn to the expanded partnership we announced with NVIDIA, which reflects the growing importance of high-speed connectivity, optical interconnect, and accelerated infrastructure in scaling AI. The collaboration connects Marvell's custom silicon and optical networking capabilities directly into the massive NVIDIA ecosystem to help build scalable, highly efficient AI data centers and telecommunications networks. There are three core pillars of this exciting announcement. First is our optics partnership. Marvell has long been a key supplier of DSPs, TIAs, and drivers, and we are now extending this relationship to collaborate on silicon photonics technology, which is expected to be a key enabler of scale-up networking. Second, NVLink Fusion integration. This allows Marvell to build custom chips and networking semiconductors that can seamlessly interface with NVIDIA infrastructure.

It increases choice for hyperscalers who will now have complete flexibility to mix and match custom and merchant capabilities across their platforms, with Marvell uniquely providing the bridge between these two architectures. We expect this to create new market opportunities for both Marvell and NVIDIA going forward. Third is AI RAN. Marvell will enhance its existing OCTEON base station processors to work directly with NVIDIA GPUs, integrating AI with wireless infrastructure on a single software-defined computing platform. This will enable telecommunications operators to run both 5G and 6G radio workloads and high-performance AI applications concurrently on the same hardware. Since the announcement, both teams are off to the races, and we are working closely together to realize the benefits of this collaboration. We deeply appreciate the partnership and the investment from NVIDIA. Okay, let me provide more color on our current business, beginning with data center.

In our data center end market, we delivered record first quarter revenue of $1.83 billion, representing 11% sequential growth and 27% year-over-year growth. We achieved sequential and year-over-year growth across multiple product lines, including optical interconnect, custom silicon, and switching. Looking ahead to the second quarter, we expect data center revenue growth to accelerate into the mid to high teens sequentially on a percentage basis and into the mid 40% range year-over-year. Our networking products, including interconnect and switching, are driving strong revenue growth as networking becomes increasingly critical with each new generation of AI infrastructure. In the early stages of generative AI, the primary focus was on addressing compute and memory bottlenecks.

As more complex architectures such as reasoning models and mixture of experts have begun to deploy, the role of networking has become significantly more important and is the key driver of the increased demand we are seeing today for our scale-out networking products. What is completely in front of us is the massive expansion expected in scale-up networks as these domains become significantly larger, requiring high radix, low latency switches, as well as high bandwidth optical interconnects. In addition, these new AI models are also driving innovation in memory architecture, which we expect will benefit our XPU attach business. We expect the emergence of agentic AI to further supercharge demand for our scale-out, scale-up and XPU attach businesses. In agentic AI, a single user request may require agents to query AI models many times rather than just once, as in traditional one-shot inferencing.

These queries may also be routed to different parts of the AI cluster to complete a single task. This substantially increases the volume of data traffic that must be transmitted and switched with very low latency across longer reaches, as well as the amount of memory required. Agentic AI is also expected to drive a significant increase in the number of CPUs deployed in AI infrastructure. More CPUs require more NICs, PCIe switches and retimers, as well as greater bandwidth and CPU-centric front-end networks. As a result, we believe agentic AI can provide another significant tailwind for our interconnect switching and XPU attach franchises. It is increasingly clear that optics is the future of data center connectivity, and we continue to invest aggressively in our technology platform to extend our leadership in this rapidly expanding market.

Our latest addition is the acquisition of Polariton, a developer of high-speed, low-power plasmonics-based silicon photonics devices. Plasmonics offer meaningful advantages over traditional silicon photonics by enabling substantially higher modulator bandwidth, which is critical for supporting faster optical transmission speeds. Polariton has already demonstrated plasmonic modulator bandwidth exceeding 1 THz, up to 10x higher than current silicon photonics and thin-film lithium niobate-based solutions. We are excited to incorporate this breakthrough technology into our DCI and coherent -lite roadmaps, extending our technology platform to 3.2 T and beyond. Let me now pivot back to the near-term and discuss trends we are seeing across both our established data center businesses and our newer growth initiatives. I'll organize the discussion into three categories: interconnect, switching, and custom. I'll start with interconnect, which represents the largest portion of our data center business.

Demand for our interconnect products continues to accelerate, and as a result, we have increased our fiscal 2027 revenue growth expectations for this business to more than 70% year-over-year. Interconnect is also a major driver of the higher fiscal 2028 company revenue outlook we provided today. We are benefiting from our leadership position across the industry's broadest portfolio of high speed connectivity solutions, spanning scale-out, scale-across, and scale-up networking. Within our scale-out PAM franchise, demand continues to strengthen for our 800 G products, while our 200 G per lane 1.6 T solutions are ramping quickly this fiscal year, following their production launch in the second half of fiscal 2026. We expect 1.6 T revenue to take another substantial step up in fiscal 2028. We continue to benefit from the first to market cadence we have maintained across successive PAM4 generations.

We also expect to maintain leadership into the next PAM4 generation with 400 G per lane technology, which we demonstrated first at the Optical Fiber Conference in April 2025. In addition to our DSP franchise, we have also built a formidable position in broadband, analog, TIAs and drivers. This business is scaling rapidly, and we expect quarterly revenue from TIAs and drivers to exceed a $1 billion annualized run rate in the next few quarters. To support campus-wide data center architectures requiring longer reach than traditional PAM solutions, we were the first to introduce coherent light products to the market. These solutions are optimized for applications spanning 2- 20 km within an extremely low power envelope as compared to traditional coherent DSPs. Over time, as speeds continue to rise, we expect coherent light to penetrate deeper inside data centers, complementing PAM-based solutions for shorter reach applications.

We've already begun shipping the first generation of our coherent light 200 G per lane 1.6 T products. We are now introducing next generation coherent light products featuring integrated MACsec security as well as higher speed capabilities. Turning to DCI, this market is undergoing a major architectural transition driven by the emergence of scale-across networks, which we believe will significantly expand the opportunity for pluggable DCI modules over the next several years. Marvell pioneered the pluggable DCI market, where the original use case was driven by hyperscalers replacing public WAN connections for intersite connectivity using pluggable modules, with traffic between data centers originating primarily from traditional front-end networks. This has become a highly successful business for Marvell, and today we ship DCI solutions to all five major U.S. hyperscalers.

What is now changing is the push to build significantly larger AI clusters, which increasingly must span multiple data centers due to power and space constraints. In these architectures, the back-end AI network must also extend between the data centers, creating the scale-across use case, where massive amounts of data move continuously between XPUs during AI workload processing. Aggregate bandwidth requirements for scale-across networks are projected to be more than 10x higher than those of current front-end DCI networks. As a result, industry forecasts project the pluggable DCI TAM to grow significantly by rapidly increasing speeds and rising feature complexity, including integrated MACsec security. While traditional DCI networks today primarily deploy 400 G solutions and are now transitioning to 800 G, scale-across architectures are expected to rapidly adopt 1.6 T connectivity.

Marvell is exceptionally well positioned to lead this transition with the industry's first secure 1.6 T ZR and ZR+ DCI modules, powered by our new 2 nm coherent DSP announced earlier this year. These modules are expected to begin sampling this year. This positions Marvell to extend our technology leadership into the emerging scale-across market, supported by our proven expertise in high volume manufacturing of these highly specialized and complex modules. Our leadership position here is translating into strong revenue momentum for our DCI module business, giving us line of sight to a $1 billion annualized revenue during fiscal 2028. This would represent approximately double the revenue we achieved in fiscal 2026, when the business generated roughly $500 million in revenue. As scale-across deployments become a larger portion of the market, we expect growth in our DCI business to accelerate further. Let me now transition to scale-up optics.

Scale-up interconnect represents one of the newest and most strategically important opportunities emerging in AI infrastructure. Marvell is uniquely positioned to enable both NPO and CPO implementations with a broad silicon photonics platform spanning all three mainstream modulator technologies, including MZM, EAM, and MRM, fully supported by our market-leading broadband analog TIAs and drivers. We are also investing in emerging approaches such as microLED and microVCSEL-based solutions. Marvell has already shipped more than 1 million DCI modules powered by our silicon photonics over the past decade. Across four generations of silicon photonics deployments, we have accumulated more than 15 billion hours of field data with demonstrated world-class reliability. We have leveraged this experience in developing our silicon photonics-based light engines, and we are deeply engaged with multiple Tier 1 customers with our third generation 6.4 T light engine for NPO and CPO implementations.

Our acquisition of Celestial AI added photonic fabric technology, including EAM modulators and the industry's leading low power analog SerDes. The solution has already been selected by a Tier 1 hyperscaler for its next generation of XPU scale-up networks. The full strength of Marvell's engineering and operations organization is focused on bringing Celestial's first generation chiplet into high volume manufacturing. We are also making significant progress with MRM-based scale-up interconnect solutions. We completed our MRM device demonstrations last year and continue to collaborate closely with TSMC on its CoWoS platform. We believe scale-up interconnect represents a massive new TAM that will likely be served by multiple photonic technologies and architectures, and we are investing aggressively to establish leadership across all of them.

We are seeing market adoption accelerate from multiple CPO and NPO engagements, as a result, we expect our scale-up optics business to ramp significantly next fiscal year, with revenue forecasted to more than double our prior outlook of approximately $150 million, which was based at that time solely on Celestial AI. Turning to data center switching, we continue to benefit from sustained demand for our 12.8 T and strong ramp of our next generation 51.2 T switches for scale-out networking. We are seeing strong engagement for both existing and new customers for our 51.2 T platform, as well as our new 100 T platform, which we believe delivers industry-leading power efficiency and low latency, attributes that are increasingly critical for AI infrastructure. Our engineering teams are already executing the roadmap towards 200 T Ethernet switching and beyond.

Given this momentum, we expect scale-out switch revenue in fiscal 2027 to exceed $600 million, doubling from fiscal 2026, and we currently see the business tracking to more than $1 billion in annualized revenue in fiscal 2028. Scale-up switching is an emerging market where we have significantly increased our investment, both organically and through the acquisition of XConn. We substantially expanded our team and capabilities. While some customers are currently deploying PCIe switches for their current generation of scale-up networking, the radix and bandwidth limitations of PCIe are expected to drive a rapid transition towards purpose-built, large radix, high bandwidth UALink, ESUN, and NVLink solutions. Marvell is uniquely positioned to support all of these scale-up protocols through our internally developed UALink and ESUN switches, as well as our expanded partnership with NVIDIA around NVLink Fusion. We currently have multiple engagements with Tier 1 customers for our scale-up switch portfolio.

Given the size of the scale-up TAM, each of these engagements represents a multi-billion dollar lifetime revenue opportunity. We believe we are exceptionally well-positioned in this market, leveraging decades of extensive experience developing large reticle size switch silicon, as well as our in-house best in class high performance SerDes technology. Now let me touch on a few additional growth opportunities in data center. In the AEC market, we are seeing strong interest in our Golden Cable program, and we have already secured design wins with three Tier 1 U.S. hyperscalers, along with several other customers. We are also seeing strong traction for our retimer products. Both AECs and retimers are now ramping, and we expect combined revenue to more than double year-over-year in fiscal 2027 and continue growing rapidly in fiscal 2028.

The acquisition of XConn also advanced PCIe and CXL switch solutions to our portfolio, and we are seeing strong interest in our PCIe Gen 6 and CXL 3.1 solutions. Marvell is well-positioned in both of these markets to provide customers with complete end-to-end solutions and reference designs consisting of our PCIe switches paired with retimers, as well as our CXL switches paired with our memory expanders. Okay, turning now to our custom business. Custom revenue remains on track to grow more than 20% year-over-year in fiscal 2027, led by our flagship XPU program, which we expect to drive multiple years of growth across multiple generations. Several XPU attach programs are also ramping in fiscal 2027, including our CXL and NIC products. Looking ahead to fiscal 2028, we now expect custom revenue to more than double year-over-year, which is higher than our prior outlook.

The growth is expected to be driven by three primary factors, including, first, continued growth from our existing custom programs, including our flagship XPU. Second, over 10 XPU attach programs reaching higher production volumes, with demand continuing to exceed prior forecasts, particularly in NIC and CXL memory attach use cases, driven by increasing inference KV caching requirements. Third, the ramp of our new Tier 1 XPU program into volume production. This program continues to progress very well through development, and we already have firm requirements in place for all of next fiscal year. Since last quarter, we have won several new designs as customers continue to expand their adoption of custom silicon. We expect these new sockets to begin contributing incremental revenue following their typical development cycle of approximately two years.

The level of custom engagement with key customers remains unprecedented, and we continue to be deeply involved in a broad set of significant additional opportunities. We remain confident in achieving our target model for our custom business to deliver on over $10 billion in revenue in fiscal 2029. Turning to our communications and other end market. We delivered first quarter revenue of $585 million, up 3% sequentially and 29% year-over-year. For the second quarter, we expect revenue to decline in the mid-single digit range sequentially on a percentage basis, while growing in the high single digit range year-over-year on a percentage basis. The communications and other end market has now largely recovered from inventory corrections at our customers, and going forward, we expect revenue in this end market to broadly reflect the underlying trends in our enterprise networking carrier and consumer businesses.

In summary, our business continues to accelerate and we have increased our revenue outlook multiple times over the past several quarters. Today, we are again raising our outlook, increasing our fiscal 2027 revenue forecast by more than $500 million and our fiscal 2028 outlook by approximately $1.5 billion, versus the projections we provided last quarter. Our data center revenue grew 46% year-over-year in fiscal 2026, and we are now projecting growth to accelerate to approximately 50% in fiscal 2027 and accelerate again to 55% in fiscal 2028. Our customers continue to signal robust demand, not only for this year, but for the next several years. Our results and outlook reinforce our confidence that Marvell is in a strong multi-year growth cycle with substantial runway ahead. Today, we sit here in a unique position to simultaneously, one, drive incredibly strong top-line growth.

Two, increase R&D investment strategically in the highest growth AI opportunities while continuing to drive operating leverage. Three, make necessary capacity investments to fuel the next wave of growth. Four, continue strong capital returns to shareholders. The Marvell team is firing on all cylinders with strong momentum expected to continue across the business. We have built a well-diversified company anchored by multiple large existing franchises and complemented by several emerging growth engines. I look forward to updating you on our progress as we continue this exciting journey as a key enabler of next generation AI infrastructure. With that, I'll turn the call over to Willem for more details on our recent results and outlook.

Thank you, Matt, good afternoon, everyone. Let me start with our financial results for the first quarter of fiscal 2027. Revenue was $2.418 billion, growing 28% year-over-year and 9% sequentially. Data center was our largest end market, contributing 76% of total revenue. GAAP gross margin was 52.1%. Non-GAAP gross margin was 58.9%. Moving on to operating expenses. GAAP operating expenses were $921 million, including stock-based compensation, amortization of acquired intangible assets, restructuring costs, and acquisition-related costs. Non-GAAP operating expenses came in at $577 million. Our GAAP operating margin was 14%, while our non-GAAP operating margin was 35%. For the first quarter, GAAP earnings per diluted share was $0.04, lower than our guidance, reflecting the impact of purchase accounting for the Celestial AI and Xconn acquisitions and the related earn-out obligation.

We expect this to normalize in the second quarter, as reflected in our strong GAAP net income guide. We have now delivered six consecutive quarters of positive GAAP net income and expect to continue to drive strong GAAP profitability going forward. Non-GAAP earnings per diluted share was $0.80, above the midpoint of guidance, reflecting year-over-year growth of 29%. Turning to our cash flow and balance sheet. In the first quarter, cash flow from operations was a record $639 million. Our inventory at the end of the fourth quarter was $1.4 billion, almost flat from the prior quarter. During the quarter, we repurchased $200 million of our stock through our ongoing capital return program and returned $54 million to shareholders through cash dividends in the quarter.

As of the end of the first quarter, our total debt was $4.96 billion, with a gross debt-to-EBITDA ratio of 1.44x and a net debt-to-EBITDA ratio of 0.32 x. Turning to our guidance for the second quarter of fiscal 2027. We are forecasting revenue to be in the range of $2.7 billion ±5%. We expect our GAAP gross margin to be between 52.1% and 53.1%. We expect our non-GAAP gross margin to be between 58.25% and 59.25%. Looking forward, we anticipate that the overall level of revenue and product mix will remain key determinants of our gross margin in any given quarter. We project our GAAP operating expenses to be approximately $960 million. We anticipate our non-GAAP operating expenses to be approximately $600 million in the second quarter.

We expect our GAAP other income expense, including interest on our debt, to be an expense of approximately $68 million. We expect our non-GAAP other income and expense, including interest on our debt, to be an expense of approximately $35 million. We expect a non-GAAP tax rate of 11%. We expect our basic weighted average shares outstanding to be 899 million and our diluted weighted average shares outstanding to be 915 million. The increase from the prior quarter reflects the full impact of shares issued for the Celestial AI and XConn acquisitions, as well as the shares issued as part of the NVIDIA investment. We anticipate GAAP earnings per diluted share in the range of $0.32-$0.42. We expect non-GAAP earnings per diluted share in the range of $0.88-$0.98.

As we look ahead, we intend to continue to invest in growing our business while driving operating leverage. For fiscal 2027, we expect non-GAAP operating expense of approximately $2.45 billion, which includes the acquisition of Celestial AI and XConn, both of which close in the first quarter of this fiscal year. For fiscal 2028, we expect non-GAAP operating expense to grow year-over-year approximately in the mid to high teens on a percentage basis. This is significantly below the 45% revenue growth outlook Matt provided in his remarks for that year. As a result, we expect to achieve the upper end of our target operating margin model of 38%-40% as we progress through fiscal 2028. Based on the design wins we have secured and our confidence in sustained customer demand, we are aggressively locking in additional capacity to ensure our growth.

We are following the same successful playbook we established during the last major supply crunch, which includes sharing our long-term demand outlook with key suppliers and making strategic prepayments to ensure capacity. This approach has served us well, enabling Marvell to scale revenue significantly during a period when the broader industry has remained supply constrained. We are forecasting approximately $1 billion in prepayments during this fiscal year, with the first payments beginning in the second quarter. These prepayments will be applied against future material purchases. We expect to fund these prepayments through our strong balance sheet and robust operating cash flow generation. In parallel, we plan to continue to repurchase shares to manage dilution. I am very pleased with our execution, driving strong revenue growth and operating leverage, as well as robust cash flow generation and ongoing stock buybacks.

We are looking forward to continuing to deliver strong earnings growth to our stockholders. With that, we are ready to start our Q&A session. Operator, please open the line and announce Q&A instructions. Thank you.

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. A confirmation tone will indicate your line is in the question queue. You may press star two 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'll pause momentarily to assemble our roster. Participants who use a speaker equipment, it may be necessary to pickup your handset before pressing the star keys. Thank you. Our first question comes from the line of Vivek Arya with Bank of America Securities. Please proceed.

Thank you for taking my question. Matt, towards the end of your presentation, you mentioned something along the lines of your custom XPU is on target to hit $10 billion in fiscal 2029. I just wanted to make sure that we heard that correctly, because that would mean that fiscal 2028, if your XPU is a little over $4 billion and then it gets to $10 billion, that's an increase of at least $5 billion-$6 billion year-over-year in sales. I just wanted to make sure that I heard that. Then, Matt, at what point will you feel more comfortable talking about that large customer and the progress in this new program? Do you expect to be exclusive in this? Because they have a really large CapEx profile.

When do you think investors should start to give Marvell more credit for that new XPU program that should start next year?

Yeah, thanks, Vivek. Yeah, you heard it right. Just for context on the $10 billion+ for fiscal 2029, the context for that is, back in April 2024, we set long-term targets out through calendar 2028, which would be our fiscal 2029. At that time, we had identified a data center custom overall market, overall custom silicon market, which would generate about $8 billion in revenue for us, was sort of what you if you assume 20% of our market sizing at that time for fiscal 2029. At our custom silicon event last summer in June of 2025, we then said basically the TAM is bigger. The implied, again, if we achieved our share targets in fiscal 2029, would indicate something over $10 billion. It was like a $55 billion TAM. Take 20% on that's $11 billion. Call it in that range.

Yeah, we're still tracking to it. That's a key part of our assumption. Two years ago, it looked like a very steep hill to climb. We're clearly making progress there. Yeah, between our existing programs, our new ramp, and just a plethora of XPU attach programs, all of which have sized up significantly since we won them. We definitely see line of sight to hit those targets. Again, this is just updating investors along the way about how we're progressing. On your second question, program remains on track. I think we're hitting all of our milestones. We see for next year, I think it's stated in my prepared remarks, kind of across the board on all of the custom programs we have, we're seeing indications of greater need for demand. We had judged that one down pretty significantly.

I think as we progress through the year, to answer your questions, I think we'll all gain confidence in the magnitude of that ramp. It's on track, and it's a key part of our plan for next year. It's not the only piece. It's probably still about 1/3 of the total growth we're expecting in our custom business next year. Yeah, it's on a very strong trajectory, Vivek, from fiscal 2027 to 2028 to 2029 and beyond on the custom side overall, which includes XPU and XPU attach. Thanks.

Thank you. Our next question comes from the line of Harlan Sur with JP Morgan. Please proceed.

Good afternoon. Thanks for taking my question. Matt, with the aggressive evolution of inferencing compute workloads, this has really opened up a lot of opportunity for these XPU offload engines like an LPU processor, an STX processor, right? That's what motivated NVIDIA, for example, to acquire that startup Groq, right? That has this unique SRAM-based memory architecture that's enabled them to design a very efficient sort of low latency inferencing engine called LPU. I seem to recall that the Marvell team actually co-designed the startup's first generation LPU inferencing chip. We all know that Marvell has always focused on memory and in particular SRAM-based IP, like highest density, lowest power. In fact, I think you guys brought the industry's first 2 nm SRAM IP to the market last year. Is the Marvell team leveraging this differentiation?

Are you seeing more interest in SRAM-based XPU offload ASICs, and do you already have XPU attached design wins for SRAM-based offload architectures?

Thanks for the question, Harlan. First, you definitely pay attention. We talked about this actually quite extensively in June of 2025 at our custom silicon event. We had a whole dedicated presentation actually on our best-in-class SRAM design capability and IP. That's, by the way, a legacy and a history investment area that goes all the way back to the Avera acquisition and prior to that, the team being in GlobalFoundries and IBM. There's a long legacy there. That technology has evolved from networking products into AI products, and you can see that trend in the market as inferencing is happening. That continues to be a key part of our IP portfolio for sure as we go win designs, and it's one of the reasons why we are winning our designs in XPU attach.

It's part of the bigger strategy really, which is, I think having the full suite of solutions, right, from advanced packaging, best-in-class high speed I/O, and just the ability to really dive in and get to develop these solutions with our customers in very aggressive time to market time frames, leveraging our manufacturing expertise and our capacity, et cetera. It's one piece of the puzzle, but it is an important piece for sure, and we definitely see that as a trend out there, Harlan. We'll keep you updated.

Thanks.

Thank you. Our next question comes from the line of Timothy Arcuri with UBS. Please proceed.

Thanks a lot. Matt, I wanted to ask about the breadth of the customer base. I know we've talked about the existing XPU you have. There's this new customer on the XPU, and then you do have some XPU attach with a third customer as well. There's some speculation that you actually might be moving into the compute TAM, and that's by far the biggest custom compute wallet out there. Is that included in the forecast, or would that be incremental to this? I guess I'm just trying to ask about the breadth of the customer base, because I know you mentioned about the engagements broadening. Wondering if you could talk about that. Thanks.

Well, I think a couple of things. The first is, we've said this for some time, we have custom engagements across the board at all the U.S. hyperscalers, and we've had that for some time. Some XPU, some XPU and XPU attach, some just XPU attach. That's part of the AI custom silicon event we did last summer, is indicating that broad pipeline of opportunities and sockets. Everything we've laid out, which is the greater than 20% growth this year, more than doubling next year, then still having line of sight to our long-term targets. That's all based on the designs we've already won and locked and even going back, really, the last summer.

If some of these programs, again, the timing on them, the newer ones we've won since last summer, if you can get them done in a two-year timeframe, then you might get some contribution from that in fiscal 2029, but that's not needed. Think of that as like an insurance policy. Great, if some of those hit, then if you're worried about some of the existing programs not quite getting there. When we look at the whole picture net-net, we feel very comfortable with the trajectory of our custom business, and it's not requiring anything incremental. I would just say broadly across the board, our technology platform is very competitive, and we're out there competing every day for the most important sockets in the world. Again, those would contribute later.

At our 2 nm platform and then beyond, our roadmap is very compelling, and it's only strengthened since our custom silicon event last summer. This business is inflecting, and it's definitely on the right track. Again, I highlighted a number of reasons why that is with Harlan's question, but I'll just tell you that what we've really seen, and it's been pretty pronounced, I would say, in the last six months or so, is that the performance of our high-speed I/O, our SerDes performance, our die-to-die, and our ability to integrate that very densely in XPU switching applications, XPU attach applications, is the amount of activity we're seeing on demand for that, I think people realizing that really it's us and just maybe a couple other people that can do this at the level that's needed for this level of performance integration.

It's driving a whole new set of opportunities, quite frankly. Again, design activity is through the roof at Marvell across the board, but including on custom silicon.

Thank you. Our next question comes from the line of Aaron Rakers with Wells Fargo. Please proceed.

Hi, guys. This is Michael Tsvetanov on behalf of Aaron. Thank you for the question. I think you mentioned in your script that you had a few, I think, new XPU or custom, I guess, socket wins. Could you just provide any additional color on, I guess, those XPUs or XPU attach or maybe the type accelerator or just type of chip? That'd be really helpful. Thank you.

Yeah, no additional details at this time. I think it's just another data point we're trying to give people that based on the 50+ type of opportunities we outlined last June, we continue to close on those. That opportunity pipeline continues to grow in terms of sockets and dollars, by the way. I think every program we looked at a year ago is larger when we look a year later. No additional details at this time. At the right time, we'll do a more comprehensive look back and update you on our progress. Right now, at least from the current business we have, the revenue line is definitely moving in the right direction and strong validation for the capabilities that we have.

Thanks.

Thank you. Our next question comes to the line of Blayne Curtis with Jefferies. Please proceed.

Hey, guys. Thanks for taking my question. Matt, I wanted to ask about specifically the CXL opportunity alongside accelerators. How real is that opportunity? Is there a way to think about the content for accelerator for that?

Well, yeah, it's a very real opportunity. One, is we engaged in this business actually a few years back, and this was when the applications were really driven by traditional server dynamics for x86 compute, and that's obviously vectored over into AI. I think we had a plan in this area, which we've talked about, getting that sort of custom line item of XPU attach alone over $1 billion in revenue in the next couple of years. That continues to expand both because we continue to expand the customer base, which is very compelling. Also, I think the concerns around the memory cycle we're in are driving additional adoption of CXL-based design. It's sort of no secret at this point that I think the memory architectures are endemic and critical on how people think about deploying their next generation infrastructure.

I think us coming in with these very proven solutions now for CXL are really playing in our favor. I think it's just the trend line continues and just it continues to size up both because of the CapEx, higher penetration due to some of the memory issues, and then just more and more of these solutions moving into inferencing. Those are some of the trends that we're seeing, Blayne.

Thank you. Our next question comes from the line of Chris Caso with Wolfe Research. Please proceed.

Yes, thank you. Good evening. Question is about some more color on how you're addressing capacity constraints right now. You spoke about some of the prepayments. First part of the question is how you're managing to get that additional capacity. As a follow-on to that, with the increase in guidance, is that a function of you managing to get more capacity out of your supply base, or is it really more of a factor of becoming more comfortable with the forecast your customers already given you and know that you didn't guide us to everything your customers had put in their forecast in the first place?

Yeah, thanks. Hey, I'll hand this one over to Chris, who's been knee-deep in this. Just to give a shout-out to our team, our supply chain operation's been doing an outstanding job, and our suppliers have been doing an outstanding job continuing to react to the changes upward in demand. We've been very pleased with that, we are in great shape overall to deliver on what we just talked about. I'll have Chris give some more color on how we're going about that.

Sure. Thanks, Matt. Yeah, I think as Matt mentioned, I've been dealing with the operations side since 2020, 2021, and I don't think we've been in an unconstrained environment since then. Everything that touches AI has been constrained basically since the beginning of this. Ultimately, the way we've been able to manage this is by building very tight relationships with a small number of key suppliers, giving them a five-year forecast of what we need and hitting what we need each time along the way and doing what we said we were going to do. That goes a long ways towards getting what you need when you take everything that you need as you go along. We work very closely with all of our key customers and with our key suppliers to give them that forecast.

Yeah, there's really only a handful of companies that are driving this AI infrastructure TAM build-out. In order to do that, part of that is the prepayments that Willem mentioned that we're making with our suppliers to back our forecast with confidence and cash. Ultimately, that's what helps us deliver the revenue capabilities we have.

Thank you. Our next question comes from the line of Ross Seymore with Deutsche Bank. Please proceed.

Hi, guys. Thanks, Matt. Question, I wanted to go to the interconnect side of things. Matt, you talked about the growth rate going to, I think, over 70% this year. If I recall right, it was the beginning of this year, 30%, then 50%, and now 70%, so it's clearly accelerating. I guess the question is why would you think, other than just conservatism, that that would slow to kind of closer to, but still above the hyperscaler CapEx rate next year? Is that just conservatism or because everything that you rattled off before about the DCI side of things, AEC, 1.6 T, the scale up, et cetera, all sounds like those are still very, very strong tailwinds. I just wanted to get a little more color as to what you're thinking in fiscal 2028 for that business.

I think the fact is this is where we are right now, Ross, and very encouraged to see as we've progressed, as you mentioned, from where we were starting probably around last September to now with the growth rate continuing to inch up as CapEx has gone up and also the attach rate of our interconnect products have gone up. The new initiatives, those businesses are ramping. We've had a lot of success across the board here, but this has been the star of the show here. I think when you look out to next year, I think this is where we are today. If you start building a bottoms-up model, you can see that there's definitely a possibility for a lot of upward bias because our traditional business in DSPs, obviously we talked about a big step up next year in 1.6 T. That's higher content.

You have DCI ramping. You have the new initiatives, things like retimers and AECs, but also you have scale-up optics, which we're effectively calling at this point to be about $300 million, which is true NPO and CPO-based solutions. This is like the beginning of a major growth cycle for us. I think there's a lot of optionality is what I would say at the moment, Ross. I think today, net -net, you look overall $1`6.5 billion is where we're comfortable overall, but I think there's upward bias for sure. The trends continue.

Thank you. Our next question comes from the line of Tore Svanberg with Stifel. Please proceed.

Yes. Thank you, and congrats on the record quarter. Matt, I was hoping to zoom in a little bit more on the interconnect business and specifically scale -up. Obviously, a lot of that is in front of you. There's also a lot of different dynamics there, right? Whether it's copper, optical, MPO, CPO, copper. What has been surprising to you the last few months as far as what two or three products are you seeing the bigger upside from? Because obviously, it's a very dynamic market. Given your new growth forecast here, there must be a few that are worth highlighting. Thank you.

Yeah. Well, I'll start at the top. The good news is, as you said, you just rattled off a number of different technologies and there's an equal number more you didn't mention. We're in all of them. I think that's one of the unique advantages that we bring to the table is we have the absolute broadest range of connectivity and scale -up and scale-out solutions for interconnect in the industry. I think as I was indicating to Ross, I think everything's got an upward bias to it. The area where I think the most intense activity has sort of emerged is, and I think it's been just a home run getting the Celestial team in here and combining them with our own very, very strong and capable optics team.

That combined team, we're able to go into customers now and outline full end-to-end solutions from XPU to switch with any type of interface and optical or copper connection between that the customer can envision and really optimize around that. That's why we mentioned we're seeing for next year not just the Celestial products ramping on scale-up optics, but also Marvell products as well. I think that's an area that could bias upward. That's in the context of us presenting a very comprehensive total system solution. In the end, especially for this first generation, you're going to want to have these solutions bookended, Tore, and you're going to want to have the XPU integrate the same photonic element as the switch side.

We are able to walk in and show our capability on switches, our ability to integrate into XPUs or build the XPU, and then all the optics in between. It's a very, very powerful combination, and I think the end-to-end is getting a lot of attention. The fact is, we have the proven technology. It's not a PowerPoint. It's not a concept. I mean, we have 15 billion hours as an example of device data on four generations of silicon photonics already. We have 224 G SerDes in production. We have die-to-die in production. We built switches for multiple generations that are reticle sized with high yield. This is like the most complex stuff you're going to do in the semiconductor industry, and we're able to simultaneously do it all and bring it to our customers.

If I were to point out a trend, which is kind of what you're getting at, it's that trend right now is how do we help our customers enable their scale up network for the future? This is like Gen 1, ground zero. I mean, there's a lot of room to go here. That's what I'd say the most sort of intense discussions we're having in. We're very much investing to win here. That's why you see us, in some cases, betting on multiple standards or multiple technologies. We don't want to miss out, and we will pivot at the right time.

We'll follow our customers, we'll follow the market, but today we have a little bit of a blank sheet, and it's very refreshing to our customers because we don't just go in there with our agenda based on the one piece that we have and say, well, this is what we have. This is what we can offer you. We go in with, here's the technology that you need. It's real engineering. It's real proven silicon. It's real proof of concept that we can show. I think more to come on this one.

Thank you. Our next question comes from the line of Srini Pajjuri with RBC Capital Markets. Please proceed.

Thank you. Matt, I want to zoom in on the switching side. I think you talked about scale-out switching doubling this year and potentially reaching $1 billion annualized run rate next year. I know it's a large market and you have relatively small share in that market. As you go from scale-out to scale -up, you mentioned three different, I guess, ESUN, NVLink, and also UALink. It seems to me that could be even larger market and obviously it's all greenfield market for you. I'm just curious as to how you're thinking about that opportunity in 2028 and beyond. Thank you.

Thanks, Srini. You're right on the scale-out side. It's a large and established market. We're an emerging company there. I would just say though, I think it's a huge milestone to look out to next year and have line of sight to $1 billion of revenue here when if I go back five years ago when we were able to bring the Innovium team in, it was effectively a pre-revenue company or very little with, at that time, line of sight to $100 million, $150 million of revenue. That's gone really well if you look over the last five years, right? Just where we're heading. A lot of those assets and capabilities that we got from that are now directly being leveraged into scale-up networking, particularly obviously on the Ethernet side, on ESUN.

That, in our mind is a bigger opportunity from the standpoint that the market share isn't established yet. That's what I was referring to earlier in Tore's question. There's so many important architectural discussions going on, it's not just the switch, it really requires a very broad set of capabilities and track record for customers to bet on you here. I think the stakes are higher because we do continue to see the adoption of CPO and NPO technologies being much more robust and sticky inside the scale-up networks, which is just a lot more TAM for Marvell as well. You've got switch ASPs that are roughly the same, you've got a whole new emerging market segment where nobody's quite established the leadership position there. We think based on our set of assets and our strategy, we should do really well there.

All the numbers I've rattled off to everybody here, which is a lot, I get it, the concept is trying to give people visibility onto the different pieces of Marvell that you might not think of. On the scale up and on the switching side, that is not really in any numbers I'm talking about right now. Very little, nothing in the $16.5 billion. Then the year after, we'll probably get some contribution, but that's never showed up in an Analyst Day we've done or any kind of discussion. That's all in front of us, and that's all upside, and I think it can be very meaningful over time. We'll see. Operator, we'll do one more question, and then I'll give some closing remarks, and we'll end the call.

Sounds good. Our last question comes from the line of Simon Leopold with Raymond James. Please proceed.

Thank you very much for taking the question. I am wondering, if we look at the fiscal 2028 outlook for the custom to double and the three drivers that you outlined, can you give us a little bit more color as to which of these is the biggest, or how to think about the contributions between existing customer expansion, the XPU attach, and then the new Tier 1? Just trying to get a sense of relative size of each. Thanks.

Yeah. No problem. Thanks for the question. Last quarter, when we talked about it was about 1/3, 1/3, 1/3 in those different buckets, the existing programs, XPU attach, and our new program. It's about the same. What's happened is what we said, it's going to more than double. All of those have sized up. I think across the board, I would say, all of our different custom programs, which again, I mentioned was quite a few when you add the XPU attach in there, every one of those has sized up and wants to be bigger for next year. It's a double plus, which is great, and I'd say it's roughly the same ratio. We'll know more, obviously, as we get through the year here and lock the production plan for next year and our allocation.

At the moment, everything wants to be more, and we will do that. We'll more than double the business from this year to next year in about the same increments in terms of growth. Thanks for the question. Operator, do you want to give some closing comments? You want to close the call first, then I'll do it? How do you want to do it?

No. I'll just close it out once you're finished.

Excellent. Okay. Thanks for your help today. All right, thanks everybody for joining. I appreciate it, appreciate the interest in the company. Marvell is in the middle of really an incredible growth period. We're seeing record demand, we're seeing record bookings the last few quarters. Our data center business is on fire, we're projecting accelerating revenue growth for this year and next year, already from a strong base. Basically, we were 46% data center growth last year. This year is 50%, next year is looking like 55%. It's only getting better. Team is doing an excellent job winning new designs, we can keep the growth engine humming for the foreseeable future. This is a company that was put together and purpose-built and going back almost 10 years, actually, in the making to get to this point.

We've had a lot of high-profile M&A and integrated that well, incredibly strong organic investment by Marvell engineers as well to build really a best-in-class leading portfolio across the board. This came up in some of the questions, I'll just touch on it. What really is resonating with our customers is we have all the pieces. We have the pieces that can help our customers architect their fully optimized AI infrastructure, that can be built on Marvell end-to-end technology. Having custom under one roof, high-speed optical interconnect, switching, leading edge SerDes and I/O, all the things we talked about earlier in terms of our capacity, our scale, our ability to manufacture and yield in high volume, customers' ability to trust us to do that. Very exciting time for the company. It's been a little roller coaster over the last year.

The revenue's been up and to the right. There's been ups and downs along the way, and we have a very dedicated and loyal and committed employee base in this company. I want to thank all the Marvell employees that are listening and all the engineers in this company and everybody in every function who's working your butts off every day to get to where we've gotten to. Your focus and commitment is highly appreciated. Look, we're well on the way to be one of the big winners in this AI cycle. We know what we're good at, and we're going to keep doing that, keep our head down, keep executing, and keep driving it forward. We look forward to seeing all of you. I know there's a whole bunch of different investor events, bus tours, huge amount of people coming through here at Marvell.

I'll be in a lot of those meetings, but you'll also get a chance to see Chris and Willem, Sandeep, Ashish, and me. With that, I want to conclude the call. Thanks, operator, and thanks everybody for your interest in Marvell. Take care.

Thank you. Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. Please disconnect your lines and have a wonderful day.