Marvell Technology, Inc. Q3 FY2025 earnings call

Key Points

• Revenue in Q3 was $1.516 billion, 19% sequentially higher, with non-GAAP EPS $0.43. Fourth quarter revenue expected to grow 26% YOY at midpoint.
• Strong AI demand drove data center revenue almost doubling YOY in Q3, with confidence in exceeding full-year AI revenue target of $1.5 billion.
• Stronger-than-forecasted ramp in custom silicon contributed to operating leverage. Announced multi-generational agreement with AWS for data center semiconductors.
• Electro-optics had record revenue growth, with shipments of 1.6T PAM DSP and 5-nanometer tech, and announced 3-nanometer 1.6T DSP.
• Restructuring charge of $750M in Q3 to redirect investments towards data center.

In the third quarter of fiscal 2025, Marvell's revenue was $1.516 billion. The data center end market was the largest, achieving record revenue of $1.1 billion, growing 98% year-over-year and 25% sequentially, accounting for 73% of consolidated revenue. Enterprise networking revenue was $151 million, carrier revenue was $85 million, consumer revenue was $97 million (expected to decline mid-teens sequentially in Q4), and automotive and industrial revenue was $83 million (expected to grow low-to-mid single digits sequentially in Q4).

Fourth Quarter 2025

• Revenue expected $1.8B ±5%, GAAP EPS $0.11-$0.21, non-GAAP EPS $0.54-$0.64.

Fiscal 2026

• Non-GAAP tax rate expected 10%-11% due to increased operating income.

Risks

• Uncertainties in AI demand, supply chain constraints, and competitive landscape in custom silicon.

Q: Quantify AI revenues for fiscal '25 and '26, and funnel drivers A: Tracking ahead of $1.5B AI revenue target for '25, with strong demand and supply alignment driving '26 growth.

Q: Commitment to Marvell and customer diversification A: Matt is 100% focused on Marvell, with strong customer diversification across multiple custom solutions.

Q: Marvell's role in customer's 3-nanometer ASIC A: Confident in continuing as ASIC vendor, aligning with multi-generational agreement with AWS.

Q: Electro-optics inventory and 1.6T transition A: Strong demand, bookings, and ramp of 1.6T products, with 800-gig cycle continuing.

Q: Enterprise and carrier recovery to $2B run rate A: Encouraged by recovery, with mid-teens growth in Q4, and carrier product cycles driving growth.

Q: Custom silicon TAM and competitive landscape A: $40B custom AI TAM, high barrier to entry for custom silicon due to IP, team, and manufacturing capabilities.

Q: Margins and operating leverage A: Gross margins expected ~60% next year, with operating leverage from top-line growth outpacing OpEx.

Q: Customer C progress for custom silicon A: Tracking well, largest opportunity, with momentum in custom silicon