Marvell Technology, Inc. (MRVL) Q1 2024 Earnings Report, Transcript and Summary

Good afternoon, and welcome to Marvell Technology Inc.’s First Quarter of Fiscal Year 2024 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. Please note, this event is being recorded today. 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 2024 earnings call. Joining me today are Matt Murphy, Marvell's President 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 measure is available in the Investor Relations section of our website. With that, I'll turn the call over to Matt for his comments on our performance. Matt?

Thanks Ashish, and good afternoon everyone. For the first quarter of fiscal 2024, Marvell's revenue was 1.322 billion, above the midpoint of guidance. Higher revenue drove our non-GAAP earnings per share to $0.31, $0.02 above the mid-point. We were guiding revenue for the second quarter to go to 133 billion at the mid-point and expect sequential revenue growth will accelerate in the second half of the fiscal year. Before we get to our results for each end market, let me start by discussing the tremendous opportunity that AI represents for Marvell. In the past, we considered AI to be one of many applications within cloud, but its importance and therefore the opportunity has increased dramatically. Generative AI is rapidly driving new applications and changing the investment priorities for our cloud customers. Today's AI workloads require truly massive datasets. To efficiently process this data, the architecture for AI data centers is significantly different than standard cloud infrastructure. Rather than dual socket servers at the core element in Iraq, the primary building block in AI is a system containing multiple accelerators such as GPUs. In large deployments, thousands of these systems are interconnected to form a data center sized AI cluster, and what's required to interconnect these systems is orders of magnitude higher than in standard cloud infrastructure. To give you an idea, the latest dual CPU server in the cloud data center today can drive up to 200 gigabits per second of IO and contains the network interfaces to support that bandwidth. In contrast, an example of an advanced AI system containing 8 accelerators can drive close to 30 terabits of full duplex bandwidth. As hundreds of times more bandwidth required to connect these systems together, keep in mind, [meeting cloud data] [ph] centers connect thousands of these systems in a single cluster to provide maximum scalability for their customers with each of these systems capable of driving tens of terabits of network traffic. And in order to create the largest possible cluster sizes at data center scale, these connections need to be able to operate over increasingly long distances. These clusters require a staggering amount of high bandwidth connectivity, all of which needs to be provided at ultra-low latency and high reliability. And within a reasonable power outlook. This connectivity is best provided by fully optically connected infrastructure, utilizing digital signal processing and low latency high capacity fabric switches. This is why we see AI as a strong growth driver for our PAM4 optical DSP platform. And it is important to note that these DSPs are compatible with a variety of network protocols such as Ethernet, InfiniBand, and other proprietary solutions for maximum breadth and flexibility. Going forward, we see this trend only accelerating. While today's most advanced AI systems are already using the highest bandwidth interfaces available, it might surprise you to learn that the performance scale of current AI implementations are still constrained by network capacity. Take the [8 accelerator] [ph] AI system I discussed earlier, for example. Those systems today typically contain four 800 gigabit per second optical interfaces for external connectivity, which provide an aggregate of 3.2 terabits per second of bandwidth. But that is in a system capable of driving close to 10x that bandwidth. To bridge this gap, we expect that the number of optical interfaces per AI system to continue to grow as these clusters scale. And the next generation of accelerators are expected to have even more compute capability and higher bandwidth requirements. Given the speed at which AI infrastructure is advancing, the technology refresh rate is happening at 18 months to 24 months versus 4 plus years in standard infrastructure. Altogether, we expect a massive amount of connectivity in these AI clusters, increasing adoption of higher speed optical interfaces, and faster refresh rates to be a major demand drivers for our PAM4 DSP platform. In fact, in our last earnings call, we indicated that the ramp in our industry leading 800 gig DSP platform was driven almost entirely by AI applications. We have also announced the industry's first 1.6 terabit PAM4 DSP platform, doubling the throughput from the current generation, and we expect AI to drive the initial adoption of these products as well. In addition, as inference is deployed at multiple regional data centers, they need to be connected by high bandwidth low latency optical links over tens of kilometers. This technology has noticed data center interconnect or DCI, and Marvell has been a pioneer in this market. We created the industry's first pluggable module for DCI, and we are now providing 400 gigabits per second in our latest DCI product line. We already seen that AI cloud data centers are driving a significant increase in demand for 400 ZR solution. Another demand driver for our DCI products is that the next generation AI implementations are planning on clustering accelerators across different sites. AI is also a key growth driver of demand for switching inside the data center. Marvell has a growing position in the market for low latency high capacity switches, and we are seeing strong demand for our products. We recently announced our next generation 51.2T Teralynx 10 ethernet switching platform. Platform is based on the low latency architecture we acquired from Innovium and is built on Marvell's leading 5 nanometer technology platform. We are seeing strong interest for this product. We expect AI to lead the industry's transition from today's 12.8T switches to 51.2T enabling a quadrupling and network bandwidth. We expect 51.2T adoption will be a strong growth driver for the networking semiconductor market. Putting it all together, Marvell has built both a leading position and network connectivity for AI. We expect tremendous growth for our PAM4 optics DCI and Ethernet switching solutions fueled by the growing investment in AI. Perhaps even more exciting is Marvell's opportunity to address compute in AI through our cloud optimized silicon platform. As you heard earlier, the architecture of an AI data center is fundamentally different. In standard cloud infrastructure, the bulk of the compute is performed by CPUs, while accelerators are primarily used for off-load tasks, such as networking and security. In contrast in AI infrastructure, accelerators like GPUs are the primary compute engines, while CPUs are used for control purposes, a 180 degree reversal from standard cloud infrastructure. Fundamental difference results in a higher ratio of accelerators to CPUs and AI with accelerators now to dominate compute opportunity. This combined with the sharp increase in AI investment is driving a higher proportion of the incremental compute [PAM] [ph] in cloud data centers towards accelerators. Today, we see cloud customers enhancing their AI offerings by building custom accelerators of their own designed to address their specific needs. This is a core part of Marvell's cloud optimized silicon strategy, and we now see a much larger and faster growing opportunity for custom compute and AI infrastructure. When we previously discussed our cloud optimized silicon opportunities and revenue ramp expectations at our Investor Day in October 2021, we projected revenue from the first set of design wins to grow to $800 million annually once all the programs were in production. These designs included a variety of accelerated computing applications including AI, security, storage, and video along with several networking applications. When we look today at the same set of design wins, driven by AI, our total lifetime revenue expectations from these have increased significantly. Same time, the relative proportion of projected lifetime revenue from AI has increased from approximately 20% in our prior forecast to well over half today. As a result, computing and AI applications has now grown to become the single largest revenue driver and opportunity for Marvell's cloud optimized silicon platform. The continuing increase in demand from AI, we see annual revenue from those same set of cloud optimized design wins, well exceeding the prior 800 million projection as these programs ramp over time. In fact, we have a number of custom silicon products tied to AI expected to ramp into volume production next year. As an example for one of these programs, initial samples are already up and running at our customer's lab and qualification is proceeding well. And in other case, we expect to take out this quarter and deliver first silicon before the end of the calendar year. As you can see, in addition to our strong position in network connectivity for AI, we believe we are well-positioned to address the compute opportunity. Over the last few months, we have taken time and carefully map our revenue from AI so we can track its progress over time. Given the tremendous progress we've made, including the recent demand increases from our customers, we are expecting our revenue driven by AI applications to grow at an accelerated pace. In fiscal 2023, we estimate that our AI revenue was approximately 200 million, up dramatically from the prior year. This revenue was primarily from our PAM4 optics and 400ZR DCI products. Since our last earnings call in early March, bookings for these products have increased very significantly. As a result, we expect Marvell's overall AI revenue to at least double in fiscal 2024. Looking to fiscal 2025, we expect robust growth to continue from AI for network connectivity. Layering on top of this is the growth we expect from the ramp of the cloud optimized programs we discussed earlier in the call. In aggregate, we foresee our overall AI revenue to at least double again next year. In other words, we are forecasting an AI revenue growth CAGR over 100% over the fiscal 2023 to 2025 time frame. In the future, we expect generative AI implementations involving video and images to provide a tailwind to overall storage and exabyte growth, both in HDD and Flash. However, it is difficult to accurately allocate revenue from our storage business specifically to AI. So, the AI revenue forecast I just discussed does not include any storage contributions. In addition, we expect the increase in network traffic from AI will also provide a tailwind for our broader networking portfolio over time, which we have not yet captured in our AI revenue forecast. We've seen rapid shifts in our cloud customers plan to spending on AI infrastructures becoming a much bigger portion of their CapEx. We believe that Marvell is one of a scarce few semiconductor companies positioned to enable this trend and is uniquely able to participate in all three aspects of AI systems, networking, compute, and storage. We set out in 2016 to pivot Marvell to data infrastructure and have successfully executed that strategy, forming the right team, technology, and customer relationships to lead in this market. With AI becoming the ultimate data infrastructure application, Marvell is at the center of this incredible transformation. We are confident that we will be one of the most relied on semiconductor companies to help our customers achieve their vision. We look forward to sharing our continued progress in AI in the future. Let me move on now to reviewing our results and expectations by end market starting with data center. In our data center end market, revenue for the first quarter was 436 million, declining 32% year-over-year and 12% sequentially. Our overall data center revenue in the first quarter was higher than guidance driven by cloud where we saw stronger demand for our optical data center interconnect products from expanding AI deployments. As expected, storage was responsible for the majority of the overall sequential decline in our data center revenue in the first quarter, although we are forecasting sequential growth to start in the second quarter and our data center storage business continue to grow in the second half. Looking ahead to the second quarter for our overall data center end market, we expect cloud revenue to grow over 10% sequentially. However, we are expecting the enterprise on-premise portion of our data center end market to decline an offset growth from cloud. As a result, we expect revenue from our overall data center end market to be flat sequentially in the second quarter. Turning to our carrier infrastructure end market, revenue for the first quarter was 290 million growing 15% year-over-year and 5% sequentially. We saw strong demand for our wireless products, as 5G adoption continued to expand in new geographic regions along with our customer specific product ramps. This resulted in approximate 25% sequential growth in wireless revenue. Partially offsetting our wireless growth was the start of inventory digestion in our wired end market. Moving on to our outlook for the next quarter, we expect revenue from our overall carrier end market to decline in the mid-single-digits sequentially, due to continued inventory digestion in our wired end market. Moving on to our enterprise networking end market. Revenue for the first quarter was 365 million, growing 27% year-over-year and flat sequentially, which is better than our guidance. Our first quarter enterprise networking results reflected a strong ramp in custom ASICs offset by our planned reduction in channel and customer inventory of our merchant products. Looking ahead to the second quarter of fiscal 2024, we project our enterprise networking revenue to decline by more than 10% sequentially, due to inventory corrections in this end market. Turning to our automotive and industrial end market, revenue in the first quarter was 89 million, flat year-over-year and declining 10% sequentially. While our automotive business continues to deliver strong growth both year-over-year and sequentially, these gains were offset by a decline in our industrial business. Looking to the second quarter of fiscal 2024, we project revenue from our auto and industrial end market to grow sequentially in the low teens on a percentage basis. Moving on to our consumer end market, revenue for the first quarter was 142 million below our guidance declining 20% year-over-year and 21% sequentially. Looking ahead to the second quarter, we are forecasting revenue to grow sequentially in the mid-30% range, driven by strong seasonal growth in demand for our custom SSD controllers. In addition, we are expecting growth from our ACD controllers as we start shipping closer to end market consumption. In summary, we are guiding sequential growth to resume starting with the second quarter and we expect growth will accelerate in the second half of the fiscal year. Few markets remain choppy and we expect revenue from our wired and enterprise end markets to continue to trend down due to macroeconomic uncertainty and inventory corrections. We expect revenue from our wireless end market to step-up in the third quarter before taking a pause and declining in the fourth quarter. We see many positive signs in our data center end markets. We are forecasting our data center storage revenue to resume growth in the second quarter and continue to improve as we start shipping closer to end market demand. Putting aside storage, we expect cloud to be the key growth driver for our data center revenue. We are guiding our cloud revenue to grow over 10% sequentially in the second quarter, and we are seeing a significant increase in demand from AI for the rest of the year. In addition, we expect our cloud optimized silicon programs to ramp more meaningfully as the year progresses, in-line with the revised expectations we outlined during last quarter's call. As a result, we are confident in our expectations for higher growth for the company in the second half of the year. We also expect to drive significant margin improvement going forward. We anticipate that inventory corrections will be mostly behind us by the end of this year, and we are excited about the resumption of revenue growth driven by Marvell's specific product ramps. We have been laser focused on a number of cost improvement actions to improve gross margin. As a result, we have confidence in our forecast for our non-GAAP gross margin to return to at least the low-end of our target range in the fourth quarter of this fiscal year. We've been in extensive discussions with our customers and have a clear view of their current road maps. While some programs have been pushed out, others have been accelerated. We are aggressively reprioritizing our investments, aligning to the highest ROI opportunities in front of us. We are also focused on driving additional efficiency to further reduce our operating expenses. We are making strategic road map adjustments and combining some of our businesses to reflect changes in the market. As an example, resulting from our customers' growing needs for custom compute, we've combined our custom ASIC and processor product groups into a single organization. Other teams are also working on efficiency improvements. As a result, we expect our OpEx to exit at a lower run rate than previously communicated. This discipline on expenses is expected to carry into fiscal 2025 and help us to deliver strong operating leverage going forward. Willem will provide more details in his commentary. Before closing, I'd like to express my appreciation to Rick Hill, who will be retiring from the Marvell Board at the end of his current term. Rick joined Marvell a little over 7 years ago as Chairman of the Board and acting CEO during a very difficult time. He moved quickly to stabilize the company, personally reassuring customers, employees, and shareholders. He helped establish a world-class board of directors and was instrumental in the recruiting of the first key group of executives. I joined Marvell in large part because of Rick. It is very rare to find an individual who is willing to contribute their time and energy and impart their wisdom to others for the satisfaction of seeing a company thrive and the next generation leaders succeed. At the most critical moments over the past 7 years, Rick always had the Marvell teams back and his belief in the team enabled us to take bold steps to transform the company. Without his leadership and mentorship, Marvell would not be where it is today. I'm truly grateful to Rick for his exceptional contributions to Marvell, and it's an honor for me to succeed him as Board Chair. Additionally, I would like to express my appreciation to Dr. Ed Frank, who joined us from the Cavium Board in 2018. Ed has been an outstanding director and will be retiring for the Marvell Board when his term expires in June. I'm grateful to Ed for his years of dedicated service to Marvell. Finally, I want to thank our dedicated team of employees. Together, we are moving forward with confidence that Marvell's best days are yet to come. 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 2024. Revenue in the first quarter was 1.322 billion, exceeding the midpoint of our guidance declining 9% year-over-year and 7% sequentially. Data center was our largest end market driving 33% of total revenue. Enterprise networking was the next largest with 27% of total revenue followed by carrier infrastructure at 22%, consumer at 11%, and auto industrial at 7%. GAAP gross margin was 42.2%. Non-GAAP gross margin was 60% in-line with guidance. Our gross margin results reflected the adverse revenue mix we had forecasted for this first quarter. GAAP operating expenses were 740 million, including share based compensation, amortization of acquired intangible assets, restructuring costs related to headcount reductions, and acquisition related costs. Non-GAAP operating expenses were 459 million, slightly below guidance. First quarter operating expenses reflected the step-up from the prior quarter, due to typical seasonality and payroll taxes and employee salary merit increases. GAAP operating margin was negative 13.8%. Non-GAAP operating margin was 25.3%. For the first quarter, GAAP loss per diluted share was $0.20. Non-GAAP income per diluted share was $0.31, $0.02 above the midpoint of guidance. Now, turning to our cash flow and balance sheet. During the quarter, cash flow from operations was 208 million. This included 40 million in payments for previously committed long-term capacity payments. Looking ahead, we are currently anticipating minimal additional payments for capacity for the rest of fiscal 2024 and beyond. As a result, we expect a much reduced headwind to operating cash flow as compared to fiscal 2023, where payments for long-term capacity totaled approximately 250 million. Inventory at the end of the first quarter was 1.03 billion, decreasing by 42 million sequentially. Our days sales outstanding was 69 days, a decrease of 7 days from the prior quarter. We returned 51 million to shareholders through cash dividends. As of the end of the fiscal first quarter, our cash and cash equivalents were 1.03 billion, almost all of which is held in systemically important banks. Our total debt was 4.68 billion, which included a drawdown of 200 million from our revolving line of credit. Our gross debt to EBITDA ratio was 2.1x and net debt-to-EBITDA ratio was 1.6x. Before I provide specific guidance for the second quarter, let me describe our plan for gross margin, operating expenses, and capital allocation for the rest of the year. As you are aware, significant inventory corrections in certain businesses caused an adverse revenue mix, which impacted our gross margin. We are optimistic that inventory corrections will be largely done by the fourth quarter and that we will be shipping closer to end demand at that time. We have also put in place multiple cost reduction efforts to improve gross margin. Internally, we are optimizing headcount and further streamlining operations. Externally, we continue to partner with our strategic suppliers to drive more efficiency in the supply chain. We are confident that as a result of mix improvement and our cost reduction efforts, our non-GAAP gross margin will start to improve. We expect modest improvement in the third quarter and by the fourth quarter, we can return to at least the low-end of our target range of 64% to 66%. As Matt told you, we are making strategic road map adjustments and driving additional efficiencies all whilst maintaining our long-term growth outlook. As a result, we expect to reduce our non-GAAP operating expense in the fourth quarter to be approximately 430 million. The fourth quarter of fiscal 2024 is a 14-week quarter. So, included in this forecast is approximately 10 million in expenses for the extra week. Therefore, on a normalized 13-week basis, we expect the run rate for our non-GAAP OpEx exiting this year to be 420 million. As we look ahead to fiscal 2025, we expect that typical seasonality and payroll taxes and employee salary merit increases in the first quarter will cause OpEx to step-up sequentially. As a result, we are modeling first quarter fiscal 2025 OpEx to increase sequentially by mid-to-high single-digits on a percentage basis from the normalized 13-week exit rate of 420 million in the prior quarter. We are confident that this sets us up to drive tremendous operating leverage next year. In terms of capital allocation, we have 500 million of our total debt due in January 2023 that we are planning on paying off using our cash balance and free cash flow. This will improve our gross leverage meaningfully going forward. Following this payoff, we expect to resume our buyback program in the third quarter. Turning to our guidance for the second quarter of fiscal 2024. We are forecasting revenue to be in the range of 1.33 billion, plus or minus 5%. We expect our GAAP gross margin will be in the range of 44.3% to 46.8%. We project our non-GAAP gross margin will be in the range of 60% to 61%. We project our GAAP operating expenses to be approximately 694 million. We anticipate our non-GAAP operating expenses to be approximately 455 million. We expect other income and expense, including interest on our debt to be approximately 51 million. For the second quarter, we expect a non-GAAP tax rate of 7%. We expect our basic weighted average shares outstanding will be 861 million, and our diluted weighted average shares outstanding will be 865 million. As a result, we anticipate GAAP earnings per share in the range of a loss of $0.16 per share on the low-end to an income of $0.05 per diluted share on the high-end. We expect non-GAAP income per diluted share in the range of $0.27 to $0.37. In summary, as we move forward through this fiscal year, we project our revenue to continue to grow sequentially, gross margin to improve significantly in the fourth quarter, and operating expenses to continue to step down. Our DSO and inventory have already shown signs of improvement. As a result, we are looking forward to driving tremendous operating leverage and significant improvement in cash flow generation over this year, while setting up a strong platform for growth next year. Operator, please open the line and announce Q&A instructions. Thank you.

Thank you. [Operator Instructions] Today's first question comes from Ross Seymore with Deutsche Bank. Please go ahead.

Hi guys. Thanks for letting me ask a question. It sounds like things have changed significantly since your last call, Matt. You went through the AI side in great details and then the cyclical side sounds like it's bottoming. I just wanted to have you dive into a little bit about the customer behavior. Is it just the cycle side that you find the bottom on finally? Is it the AI side that's really accelerating? Just talk about how that behavior has changed over the course of your quarter if you could, please?

Yes. Hey, Ross. Thanks for the question. Yes, I think it's encouraging to see revenue growth in the second quarter. So overall, with the total company revenue bottoming and then encouraging to see cloud pick back up, growing sequentially in Q2, you know, 10%, kind of plus, and that's driven by AI. So that's certainly been a positive. I think, maybe I'll just talk about the rest of the business. There's a number of moving pieces. A lot of it barely pretty much came in line in terms of things like carrier, automotive, etcetera. So, we haven't seen a ton of behavior change there. Really the biggest change, I would say is that, the – I think two things related to AI. The first is just the level of bookings, backlog, forecast increase, particularly for our optical products has increased significantly. That's a positive. The second is that we really took the time between last quarter and this quarter to, in a very detailed manner, quantify our AI revenue stream, where it was coming from, what's driving it. We now have it actually embedded in our system as a separate end market that we can filter by. So, we have a good view of the history, a good view of the future. And we definitely wanted to take the time so that when we communicated numbers, they were rock solid. And what you're seeing is a really positive story, which is basically, you know, around a $200 million level of revenue for AI last year. And then, you know, at least what we see is doubling this year and then at least doubling again next year. So, that's probably been the single biggest change. I'd say, just the uptick in AI, which was a little bit behind some of the announcements maybe going on last quarter, but it's definitely here for us. And I'd say the broader cloud infrastructure side, non-AI is also picking up and will also grow in the second quarter and grow throughout the year and actually has a great set-up for next year as well. So, those are some of the things that have gone on. And just one final note on the AI stuff, we – I said in my prepared remarks, but just for everybody on the call, we deliberately don't include storage at this time in AI. We found it pretty difficult to map that particular set of products, you know, directly to AI systems or not. Clearly, there's going to be a tailwind for that business over time just given the amount of data that's going to need to get stored. But so really what you're seeing is, I think a very clean and very exciting AI number.

Thank you.

The next question comes from Timothy Arcuri with UBS. Please go ahead.

Hi, thanks. I'm kind of wondering if you can frame, Matt, how much you think revenue is going to start to grow in the back half of the year. There's kind of a lot of moving parts wired and enterprise business are still digesting inventory. Data center is going to be up in the back half of the year. It sounds like that's due to cloud and there is some storage coming back as well. But many of the big networking OEMs are still sitting on record inventories, Cisco, Arista, you know Juniper. So, can you just sort of frame how much you think revenue can grow as you get into fiscal Q3 and fiscal Q4? Is it reasonable to expect, kind of mid-single digits or even better for each of those quarters? Thanks.

Yeah. Hey, Tim. So, I’d just give you some data, sort of what way to think about it. I think first is, we just start with the second quarter. Okay. So, we're seeing sequential growth. And again, when you look at the data center piece. The cloud growth is being offset by continued weakness in on-prem enterprise. And as you've noted, that's clearly been an issue for, kind of the overall server market the last probably five quarters, if you kind of take the read-through to enterprise networking, same thing. There's a lot of inventory on the customer balance sheet. So, we have signaled for some time. We expect that that continues to correct throughout the year. I think what I'd really point you to is, the company has inflected back-up in terms of growth in Q2. And as we look out, you know, even beyond the second half. I mean, if you just kind of look into the next year, we have the AI doubling again, you know, at least in our fiscal 2025. We see strong continued growth in our cloud infrastructure. So, non-AI the cloud, also driving meaningful growth. That's both growth and optics, as well as storage coming back, as well as some cloud optimized programs. So, that's a positive. Automotive continues to grow next year. And then as you as you indicated, you know, storage is still very low. It's come off the bottom in our guide for Q2, but should be back, you know, next year. So, lot of very strong growth drivers. So, you need to kind of draw a line between the first half now and next year. And I think the way you're thinking about it is the right, which is some of the markets are going to be choppier like enterprise. And we also said that in carrier, we've had this incredible run in our 5G wireless business over the last several years. We actually see that continue in Q2 and Q3, but probably in the fourth quarter is where that will drop off after a long run. It just – we've got our own product cycles going, but that gets more than offset, obviously, by all the growth in data center. So, great set-up for the second half. Really Cloud AI driven and would more than offset any, kind of comprehensive weakness or choppiness in some of the other end markets. Hopefully, that's helpful.

Thanks, Matt. So, I guess, you don't you don't want to put a number on it. So, like, mid-single-digits, you don't…

We don't, yeah. We’re not yet. And the bottom line is, we're not – like most companies, we're not going to guide the second half specifically at this point, but clearly going to accelerate off of where we are today.

Perfect. Okay, Matt. Thanks.

Yes.

The next question is from Vivek Arya with Bank of America Securities. Please go ahead.

Thanks for the question. Matt, I just wanted to understand what specifically is included in AI this year. I think you're suggesting about 400 million or so in terms of a double from last year. How much of that is your electro optics, are you including the Innovium switches and that, what about your cloud optimized silicon, where I think the number was 200 million for this year? So, what exactly is included in AI for this year? And when you spoke about the potential for it to double again next year, of those three pieces, are all three going to double, is one going to grow more? So, just if you could give us a little more clarity around what exactly is included in AI for this year and among that, what will grow next year?

Yeah. Great question, Vivek. So, when you think about this year, it's – we said it's, you know, at least doubling. So, think of it as 400 plus and it wants to be more, by the way, and we're working on that. That is almost, you know, almost completely driven by our PAM4 optics, PAM4 DSP, as well as some of the DCI stuff that's driving a lot of AI traffic and regional data center. So, think of it as mostly driven by optics. Some networking as you point out and probably a little bit of cloud optimized, but think of it as mostly just really strong 800 gig ramp that we're seeing in PAM4. That continues into next year, but then we layer in the cloud optimized ramps as well. And so both of those contribute to the incremental growth and the, sort of over doubling into the next year. And as we get through the year Vivek, we'll be able to quantify this a little bit more. I mean, you can imagine how fast things are moving in this area. It's incredibly dynamic, it's incredibly exciting, and positive. And I'd say almost on a daily or every other day basis, there's, sort of new positive incremental updates. So, as we go forward, we'll share more, but think of it really this year as the PAM4 train running very strong into next year, and then we start layering and the cloud optimized on top of it. And as we said in the prepared remarks, I think what's really exciting is those wins we articulated several years ago, right at our 2021 Analyst Day. So, these are products we've been working on for some time now. And, you know, normally, products take about 18 months to 24 months to develop and then a period of time to ramp. So, next year, the timing looks really good.

Sorry, Matt. On this cloud optimize, is it still 200 million for this year, so partially in AI? And then what is the number for cloud optimized for next year?

Sure. So, what we said, what I said, and there was a lot in the detail, but we reconfirmed we're tracking to the number we gave you guys last time, which was the 200 million. I'd say, it is potentially higher, but I think that's a safe number. And then at a high level, I think, just given how dynamic the situation is, we're not guiding a specific number for next year. But what we did say is, the original, sort of estimate back in, when we gave it at the at the Analyst Day in 2021 it was that you have, you know, 800 million and kind of the fiscal 2025 to 2026 time frame. And then what I updated on the call was that that peak revenue was actually going to exceed the 800 million, just given that the total lifetime volume now of those same design wins has actually increased pretty significantly. And then the percentage of those has moved meaningfully towards AI. So, it's all tracking in the right direction for this year and then for next year we'll see how it goes. You know, I really don't want to cap it quite frankly, and it's too early to even call a number.

Understood. Thank you, Matt.

The next question is from Ambrish Srivastava with BMO. Please go ahead.

Hi. Thank you very much. That's a lot of very helpful details there, Matt. I actually wanted to turn on to Willem on the gross margin side. So, what are the assumptions for the fourth quarter, because you guys sound very, I don't know if it’s the right word, convicted about hitting that in the fourth quarter? So, just kind of help us understand the assumptions, how much of it is – some of it has to be based on the top line recovery as well, right? So, just give us confidence on that, please.

Yes. Ambrish, thanks for the question. So, yes, we're very confident on getting back to the bottom end of our range in Q4. Some of the main drivers, I think, as Matt pointed out, that wireless carrier, we expect that to continue to be really strong through the third quarter and then really to take a step down in Q4. We've seen the storage recovery starting, and we expect that to continue through the fourth quarter. And then, I'd also point to the optical products and by AI. We're seeing that strength pick up through the year. And all of those are very much accretive to our gross margin. But then in addition to that, all the OpEx reduction initiatives that we're driving internally, as well as the work that we're doing with our supply chain. We expect all that to really more meaningfully impact our P&L in Q4. So, that gives us confidence. Hopefully, that would clarify. Thank you.

Yes. So, just a clarification because tied to that, you said the inventory would be largely over excess inventory. So, it sounds like on the cloud side that is behind us. And is it fair to assume that networking is where the vestiges remain towards the end of the year? Matt, is that the right way to think about it in terms of excess inventory?

Yes. I think I would – well, let me clarify one thing. I'd say, we're not completely out of the woods yet on cloud. So, I'd say the – think of it as the 10% sequential growth, which is really positive, by the way. We're happy to see that inflect back up. The way to kind of think about it is the AI portion of it is moving up quite dramatically, as you can imagine. But the traditional infrastructure side is also going up, but it’s still got a little bit to clear. So, actually, I'd say there's a little bit more tailwind there in terms of inventory digestion on the cloud side, which would be, kind of additional stuff. So that would kick in. And then storage is still – we're still way under shipping demand. So that will be a positive exiting the year. And then, yes, you're right, like we took some actions in enterprise on our own, some in Q1 that didn't quite get it all done. So, we're getting it all – the rest of it done in Q2. These are more us driving it in terms of working inventory down, so that when we exit the year, it's more rebalanced. So, there's a few pockets where there's still some inventory overhang, obviously, something like an AI is not, and then wireless 5G, I mean that just stepped up 25% sequentially. So, we've been shipping pretty hard on that one. But yes, there's a few pieces. But when you kind of add it all up, we see across the board, we should be in pretty good shape in terms of shipping back to what normalized demand would be. And that was really Willem's point, it’s just some of these product lines that just when they come back to normal shipping to demand run rate, it's definitely a tailwind for gross margin. And then, of course, on top of that, we have our own programs we're driving to ensure our success to get the gross margins back up.

Got it. Thank you. Super helpful.

The next question is from Blayne Curtis with Barclays. Please go ahead.

Thanks for taking the question. Matt, I just wanted to go to some of your AI comments, I thought it was super interesting. You talked about the mix of lifetime revenue moving from 20% to 50%. And you also gave us that extra year. But I'm just trying to understand, have you seen an influx of new projects that you've started that would then come out then? I mean you're giving us an extra view, so maybe some of this was in the works before? And then I guess, kind of just conceptually why that mix kind of shifted so much? I mean, it would suggest a pretty high percentage of your out-year there. So, just kind of curious how all this unfolds over the last quarter?

Yes. Well, I think, Blayne, there's kind of a couple of pieces to that. So, the first is, we had an initial set of design wins that we sized and articulated at the October 2021 Investor Day. And that was this $400 million going to $800 million. And as you pointed out, roughly 20% of that lifetime revenue at the time was for AI, 80% was sort of for traditional cloud infrastructure. And then now we've seen, sort of the AI piece really take-off in terms of expectations for it. So, that – just to clarify, that is just going apples-to-apples with what we communicated two years ago. I mean – and those are the projects now that are coming to fruition. But I mean, just to be very clear, since that time, we have layered in a significant number of incremental new design wins. And those are – many of those are now underway, probably not as much revenue from those next year, but then those would be, sort of the year after. And I would just also add that our design win funnel, and this is data I was just reviewing at the company level, who's just expanded dramatically with the biggest portion of that coming from our cloud design win funnel. And then of the cloud, you can imagine the AI portion has become very significant versus where it was 2 or 3 years ago. So, I'd say on a number of aspects, wins we claimed 2 years ago go into production. Incremental activity and wins since then, so that would indicate long-term even a higher number in terms of our AI potential. And then the funnel looks extremely robust. And so that all leads to a, I think, a very bright outlook in terms of where this can go over the next 5 to 7 years depending on how long it takes to, sort of flow all these through. So, we're in the very early innings here, Blayne, I think, as you can imagine.

Thanks for that. I just want to follow up on the carrier side. I think in the past, you talked about maybe India would be that source of growth. I think you're now saying after a bunch of quarters of growth, maybe it would be down a bit. I’m just trying to understand, did something change in your expectation for that India rollout or is it just the softness in the inventory with the other regions?

Yes, I think, Blayne, the way to think about it is, generally, I'd say, this has been our story for 5G as it's unfolded over the last, call it, 3 years. It's grown virtually almost every quarter. And if you look at where we were coming off of last year, we were pretty excited, right? We hit kind of the $600 million bogey we had talked about. And then we had to step up big time in Q1 of 25% sequential off of Q4, which we said is going to continue actually in Q2 and probably remain strong through Q3. So, at some point, this base station market is pretty lumpy, especially the deployment. There's a lot of concern around CapEx out there. Some people have already, sort of seen it, but given that we're mostly in new products, and we don't have a lot of 4G overhang, we've been able to power through. But yes, I think the India stuff is definitely comprehended in this 25% step-up we already took and then really three very strong quarters this year before we see a drop off in Q4. And then sometime in next year, we'll have some growth again at some point. But it's been running pretty hot. And I think we've been pretty much way outperforming in terms of what other people are seeing in the telecom market.

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

Yes, thank you and congrats on turning around the ship here. I had a question about storage, Matt. So, I know it's hard for you to identify how much was related to AI and you, kind of don't want to give a number going forward either. But as we start to think about CXL, especially because now that there's, you know AI is driving some pull-in on some of these next-generation technologies, I would think that that could be already an opportunity for you next year. So, any color you can give us on how big the storage business could be in AI over the next few years?

Got it. Yes. Tore, you bring up a very good point. So, when I referred to storage earlier, it was really on the existing product lines we have, which is primarily hard disk drive controllers, preamplifiers, and flash controllers. And that one, we just – we tried. We spent a lot of time on it over the last 3 months, trying to map it and ultimately, we just said, let's keep it out for now. But you have a very good point in that, something I haven't talked about, which is there's going to be a tremendous demand for CXL in these large systems, especially as the DRAM and the memory really needs to scale pretty dramatically. And we are seeing strong pull from customers on those solutions and kind of the lead product we're doing is under a lot of scheduled pressure to get it out because of the need. So, I think that's another leg to the stool. That's not really in our, kind of comprehended in our next year numbers per se, but it's definitely out there. And I think that's going to drive a whole other segment for us. I'd also say there's things like AECs, which is another product category that we've invested in that's getting extremely strong traction, very happy with the progress there. That's something that can layer in again over time. So, there's a few other shots on goal we have that really leverage the core DSP and analog mixed signal capability we have inside of Marvell. And we're going to continue to try to leverage those and really be as broad-based as a supplier as we can. And again, and if you think about, sort of all the [hops] [ph], all the data hops that are coming in and out of these systems, we want to be the lead company that our customers go to for these solutions, whether it's CXL, ACs, PAM4 DSP, optics, DCI. And then, of course, the more exciting, not more but has exciting opportunity in the custom silicon area. So, a lot of stuff going on.

Great perspective. Thank you.

The next question comes from C.J. Muse with Evercore. Please go ahead.

Yes. Good afternoon and thank you for taking the question. A follow-up question on storage and really trying to think through the ramp in the second half, both for data center and consumer. For data center, I think that business was probably down $150 million peak to trough, just for the controller side. And so, curious how we should think about that step-up into October and January? And then the same thing on the consumer side, that business is up, I think, implied about $50 million sequentially in July. Is that sustainable into the second half of the year? Thanks so much.

Sure. Let me take it in two pieces. So, on the data center side, it did bottom out in Q1. So, it will be up a little bit in Q2, but more – it will kind of grow throughout the year, but really I don't think it recovers – and even if it doesn't recover all the way, it recovers mostly probably by the fourth quarter, C.J., the January quarter, not the third quarter. But it will – think of Q1 and Q2 as being very, very low. And then it comes back in the second half step-up in Q3 and then in Q4. And we're really not modeling it at this point even in Q4 getting back up to like 100% of where it was. I think, we're probably at 75% to 80%, just in our own models, just to be conservative. But certainly, over time, that should normalize. So that's the data center one. The good news is, it's come off the bottom and it's growing in Q2 and will get better in the second half. On the consumer side, yes, this is not a super strategic end market for us. There's some moving pieces. Q1, if you looked at, it was a little bit low, Q2 has got this kind of funky 30% growth. That's on the flash side, kind of normalize those two. It's probably in the range of where it should be. Just the way to think about overall consumer is, it's actually outperformed if you went back to, kind of our Investor Day model a few years ago, it’s seen a lot of strength. But at some point, it's going to – and our model was always to trend down over time. I would say that probably starts in the second half and continues through next year. And look, if we get a bluebird, that's great. You never know, we got a lot of bluebirds over the last few years. But just given we don't put a lot of R&D behind it, the way to think about consumer is you got Q1 and Q2, just assume the second half is probably lower and then it just trends down over time, more in-line with what we talked about at the Investor Day model. Hopefully, that's helpful.

Great. Thank you.

The next question comes from Karl Ackerman with BNP Paribas. Please go ahead.

Thank you. Gentlemen, I was wondering how much of the uptick in your data center business outlook is coming from the expanded TAM opportunity from a competitor exiting investment of their networking ASIC division where your Innovium business competes quite well?

Oh, I see. Yes, you're talking about the switching portfolio, Karl?

Correct.

Yes. Okay. No, I would say, definitely aware of that repositioning going on by one of the other companies. We hadn't really seen that solution very much out there. I mean maybe that's one of the reasons why they've sort of reprioritized, but we see a lot of traction for that product line. I mean, the way you can think about it is – and maybe I'll just use this, Karl, just to take a second just to answer, kind of a bigger question that some investors have, which is, hey, if you've got all this CapEx shifting to AI, then what happens to the traditional cloud infrastructure side? Does Marvell get impacted by that? Do things like switches, right, as an example, or networking get less spend or do the optics get less spend? And how do you think about that? So, I'd say, one, first of all, we definitely see the AI trend that's obvious that the CapEx is going to move there. But we still see very strong growth for our portfolio in the traditional infrastructure, which includes our switching platforms, which, by the way, some of those will also go back into AI as well. But if you just sort of think about that the spend that's left is going to be – the dollars are going to be badly needed to make sure that the entire front-end network and the connections between data centers and all of the bandwidth that's required to actually move vast amounts of data inside and out of the data centers, that all needs to still get upgraded. So, I think we still see our traditional cloud infrastructure portfolio growing very strongly second half of this year and next year and the switching portfolio was part of it. We've really doubled down in this area, Karl. We've taken the Innovium product line. We've combined it with our switching broader switching organization. We brought in a new general manager reporting directly to me who is managing all of our higher layer networking technology. We're leveraging that with our optics and long-term, even co-packaged optics road map. So, a lot of investment, a lot of excitement, and we're very happy with how our first product looks in 5-nanometer, which is at 51.2T, we announced it recently, and now it's back. So, all that's going well, Karl. We don't see any real impact from the competitor exiting. We look at more that there's just a growing market, a large opportunity for, I think, people who provide high-performance, higher layer networking technologies to all growth and the market is going to grow a lot.

Yes. That's very helpful. Perhaps if I could ask another follow-up. Could you discuss the debate on the competitive dynamics of AI. There have been some ASIC design houses in China winning AI designs from hyperscalers, but given the extended revenue trajectory that you spoke about today of your AI programs, it doesn't sound like the competitive landscape has altered your view of the long-term opportunity you see in compute offload in different areas of AI, but if you could just perhaps put a finer point on that, that would be quite helpful? Thank you.

Well, yes, I think, yes, as you heard from our comments, even the wins we got a few years ago, which we had I think at the time, thought we signed appropriately, maybe a little conservatively, but we thought we sized them appropriately. Those have expanded, and those are products we're already developing or have developed. And so that, sort of opportunity that's already there. And I guess the other thing I look at is the design win funnel, and that's expanded dramatically across the board for AI, but a lot of it is in compute offload acceleration, and kind of custom computing. I'd say from a competitive standpoint, and you mentioned potentially overseas competitors. I mean, just given the nature of the criticality of these types of systems. And even at some point, maybe a national security type of concern for this type of AI technology, my belief is that the companies that have strong U.S.-based presence, strong IP portfolio, able to invest in the bleeding-edge technology road map, like 5-nanometer, like 3-nanometer, you name it. Those are the ones that are going to win and be able to do these – not only design the chips, but manufacture them into high volume and have the scale and capacity to do that. And Marvell is one of just a couple of companies probably that can really, really compete at that level. There may be one-offs here and there. But I just think long-term, the largest companies out there are going to look to the scaled up largest suppliers to support them. Thanks Karl for the question. Appreciate it.

Helpful. Thank you.

The next question comes from Harlan Sur with JPMorgan. Please go ahead.

Hi, good afternoon. Thanks for taking my question. Maybe just a quick follow-up to the last question on switching. So, I think you might have mentioned this Matt, but I just wanted to verify. Did the team get first silicon [indiscernible] silicon back on your next-generation 51.2T Teralynx 10 switching chipset, any feedback on the performance or do you ship samples to customers? And then your design win funnel is clearly expanding at a significant pace, as you mentioned, right? I think it was last October, the team announced their 3-nanometer IP libraries, right, high-speed idle building blocks, ARM-based cores, so library. So, on this expanding design win funnel, has the team already engaged and is already starting new design wins on 3-nanometer?

Yes, great couple of questions. I think the first one is pretty simple, the product, which we call TL10 or Teralynx 10, we have product in hand. It's looking good. We have a lot of demand to try to ramp this product up, quite frankly, as fast as we can. That's all going well. And on 3-nanometer, a lot of activity there, pretty similar to, I’d say Harlan, to 5-nanometer, where we really readied ourselves at the right time to be able to bid competitively with the best of the best out there. And I'd say, we're extremely well positioned today on 3-nanometer. I'd say just in general, there's a ton of activity, and I think we're sort of in all those conversations. I would say though that – when we said this previously, the 5-nanometer is going to continue to be a very long, steady workhorse technology that serves a lot of needs for a long time. And I think just in general, as you sort of get to this leading edge we're at, I think it's going to be – customers are going to be more and more choosy about really weighing cost, power, performance, timing, schedule, the whole 9-yards versus it used to be just kind of automatic. You went from 28, then when you went to 16, and then you went to 12, and then you went to – just people you just, sort of was like, you just jump. And I think it's each of these is going to have their place in terms of the application set that they serve. So, we're well-positioned really well on both. But certainly for 3-nanometer, we're in the middle of some pretty exciting discussions across almost all of our major end markets.

Perfect. Thank you for the update Matt.

Thanks, Harlan. I think we – maybe a couple more questions, and then we'll wrap it.

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

Hey guys. Thank you very much for taking my questions. [Indiscernible] getting here. So, I appreciate it. So, I have two different questions for you guys. They're unrelated. The first one is, in the guidance here in the short-term, certainly, it seems like consumer SSD is driving some pretty strong growth. And maybe you could give us a little bit more color on your confidence of seen ability of that market, just given – I mean there certainly are some concerns in pace of China recovery, just return of enterprise, sort of spend in notebook markets and things like that. I'm just trying to understand like the sustainability of that or is this, sort of a snapback off the bottom? Any color there would be helpful. And I guess my second question, really, really encouraging to hear about all these, sort of momentum in the design win pipeline. And obviously, there was a near-term correction in storage and few pushouts. But if you back-up to the 10,000-foot view, it seems like the business momentum has still been really, really strong, and I'm trying to juxtapose that against some OpEx cuts and belt tightening and other things that you guys have done, which seems like this would be the time to be investing more rather than less. So, I'm just trying to square that circle. Hopefully, that makes sense. Thanks.

Totally. Yes, let me answer both and if Willem wants to jump in on the second one at the end, he can. On the first one, yes, I wouldn't really read too much into this one, Matt. The way to think about how that consumer storage business has evolved is, it's a limited number of products. They're really customized designs, I would say. And I wouldn't – I think somebody earlier you may have been going through [security as this] [ph] we basically said, hey, just sort of assume the first half, Q1 plus Q2, kind of average that out, that's probably where that – there's a little bit of lumpiness. We were down in Q1. It's kind of going back up in Q2. But if you look at that, half over half, it should be down in the second half and over time, consumer for us will just trend down, kind of in-line with our Investor Day model. So, I wouldn't – I would not sort of assume that, that just keeps going. I would take a very kind of conservative view on our consumer business. And if it does better, that would be great. We just sort of bank it, put it away and cash the check. But it's not something we put a lot of R&D to in anymore. These are designs from some time ago, and there's a little bit of just a funky Q1, Q2 dynamic on the demand. So, I wouldn't read too much into that. I'm glad you asked on the OpEx. Let me just give you my take and Willem can chime in. So, when – look, we do our annual strategic plan in Marvell usually every August, kind of September. And so, we did that last year. And between now and then, the world has really changed. It's changed in terms of the market dynamics, what's happening with some of our major customers. The macro economy is different. Interest rates are different. You name it, right? It's sort of summer of last year versus now. And so, we're always very thoughtful about how we think about our R&D and capital allocation. I mean, in my mind, it's the most important thing, Matt, that we do, okay? That lever is really going to be our future or not. And things have changed. And so, we did a very extensive review last quarter, very methodically of all the programs in flight by business unit, by product line, looked at how they compare to what our original estimates were for our estimates, at least the last time we posted it. And we made a number of decisions on some programs where the sponsorship really wasn't there or the customer they were wavering or their plans changed. And at the same time, you've got this inflection where huge surge in demand for AI type of things, optics, you name it. And so, we've done some pretty aggressive repositioning in terms of our spending footprint. And so, we're able to exit the year in a lower OpEx footprint than we're running today, but it's still at an incredibly healthy level. I mean, we're spending more as a percent of R&D than almost all of our peers of, sort of similar or even larger size. We've allocated more R&D to some of the key areas where we see just a lot of activity and growth. In some cases, we've rightsized certain product groups that maybe their new reality is different. Maybe it's a legacy business. It's running at a lower level than it was before. We're just sort of dealing with that on an individual group by individual group basis. And then in some cases, we're just getting more efficiency. I mean as an example, we took our processor business unit and our custom ASIC group. And over time, those two teams end up, kind of at the same customer, they end up sharing IP. We're in all the joint meetings together. And so, Raghib Hussain made the decision, which I think is spot-on, which was to combine those into a single organization. And when you do that, you typically get some efficiency savings. So, I feel very confident in the OpEx profile of the company exiting the year. I think it's appropriate for the conditions we're in. The growth areas are getting more and we're just being very judicious about how we do it. And quite frankly, we had a lot of [growth there] [ph]. We acquired a couple of companies over the last few years. Marvell effectively doubled, right, kind of from pre-pandemic to now in terms of revenues. And so, there was just an opportunity really to go through, kind of systematically and look at what do we need to run this company and run it with compelling financials with a setup for next year with that, sort of OpEx profile and spending level to really enable a tremendous drop through to the bottom line as we get leverage in some of these new design wins kicking in. And so, look, we're going to keep evaluating all the opportunities on a systematic basis. And as our revenues improve and as we see the growth ahead, we'll layer back in, in a thoughtful way. But right now, take kind of the Q4 exit rate that Willem talked about. There'll be some normal step-up in Q1, which would really be just normal payroll tax and merit. And then that's probably, kind of where we hang out for the first half of next year, at least at this time. Again, if things change and revenues going gangbusters and something we'll look at it, but we're sort of set-up right now to have a very strong flow through, drop through next year and have not sacrificed any growth opportunities. Long answer, but I did want to cover it for the whole investor team out there.

Can you get the last question please.

That's the last question, yeah.

I think there's one more, Matt.

The last question today will come from Srini Pajjuri with Raymond James. Please go ahead.

Yes, thank you. Thanks for squeezing me in. Matt, your enterprise networking business and carrier, obviously, they've grown very strongly in the last couple of years. and you're guiding for, kind of somewhat softer second half, which makes sense. I'm just curious, as we go into the next year, it looks like 5G is at a point where most of the world now has 5G. And in enterprise, the macro is not exactly encouraging right now. So, just curious to hear your thoughts on how you're thinking about the growth in those segments as we go into the first half of next year?

Sure. Yes, great questions. And I think we've got a very, kind of practical view on these, Srini. So, on enterprise, I think you indicated in your part of your question, I mean, this actually business is really outperformed relative to the expectations we set at our Investor Day in 2021. Lot of great progress on share gains, content gains as things like multi-gig ramped up, we added things like new custom ASICs. So, that business has sort of outperformed, but it's outperformed because the market was good, but also really because of our own doing. And so, we've been saying for some time, it's going to correct. It did better than we thought in Q1, but it will come down in Q2. And yes, I think that environment you've sort of got is correct. But I think of enterprise, at least now it's kind of at least if you look at it year-on-year from last year, this year or next year, it's kind of flattish. We've got – even if there's some – there'll be quarters where it's down more. But if you, sort of normalize it, there'll be – we still have, sort of a strong story underneath, if you will. But we're not saying it's a grower for sure, and there'll be a couple of quarters or however long it takes to do some inventory clearing. I think you're right on overall carrier, especially on 5G. There's been very robust deployments worldwide. You still got things like India, which are happening this year, and there'll be more other regions next year. But I do think that overall, the market side will probably move down. At the same time, we still have content gains in front of us. So, that's a little bit of an offset. There's still at least one kind of bigger socket that still hasn't ramped. So, I think our content story is still pretty good in 5G. But look, we've got pretty good visibility through the third quarter of this year, after that, we do think it's going to drop in Q4, and then where it ends up next year is, kind of a little bit early, but I'd say, at some point, we have content that layers in there, too. So, hopefully, that's helpful to kind of paint a picture, but we're not pounding the table that these are going to be continued growth drivers into 2025. We're actually modeling. And then something like wired, we're modeling it to still stay pretty weak in telecom for some time. So, there's some puts and takes, obviously, in the overall business.

Got it. Thanks Matt.

With that I think we could wrap it. A lot of questions, I know. But we want to make sure we answered them all. We appreciate everybody's participation today. I look forward to the call backs and talking to everybody afterwards. So, thanks very much, everybody.

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