Good afternoon, and welcome to Marvell Technology, Inc. Third Quarter of Fiscal Year 2025 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. 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 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. 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 doubled our top-line growth rate, highlights the substantial operating leverage in our business model. Stronger-than-forecasted 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…

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 end 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 [$750 million] (ph), 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-forecasted 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, $0.03 above the midpoint…

We will now begin the question-and-answer session. [Operator Instructions] 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 '25 overall, and then how we should start thinking about fiscal '26 given the upside in fiscal '25? And when you look at that fiscal '26 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 when we -- so again, a very strong outlook for next year. And to your question about on 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 '25 and '26? 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 question. 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 super cycle and data center opportunity. I am all-in, okay, on Marvell. We've got the best team at this company of people. The company is outstanding. The technology is best-in-class. I can't think of a better place to work than Marvell. So, 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'm 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 at 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 is tracking well. And the final thing I would say is on the technology front, I said in my prepared remarks, but very, very good progress on our 2-nanometer platform, extremely complex and broad suite of IP that's best-in-class and 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 and execution on your 5-nanometer 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-nanometers, which would be ramping, according to them, end of next year, so calendar '25. Imagine, like many others, they're pulling in their AI program. So, given what appears to be strong execution of your 5-nanometer 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 3-nanometer 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 3-nanometer 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 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 is 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-plus this year, take your $1 billion-plus 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 its -- 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.

Yeah, great insights. Thank you.

Yeah.

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 asked 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, et cetera. 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 will be a contributor next year, but I don't want to take away from the very strong 800-gig cycle that will continue to be driven through our fiscal '26 next year. So, 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-plus run rate. I mean, carrier has been up, I guess, with the guidance now, you're looking at double-digits two quarters in a row. So, just curious how broad-based that recovery is and you can kind of how quickly do you think you can get back to that $2 billion-plus 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 guided it 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. As we -- 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 that incremental new socket, 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.

Yeah.

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 like that core optical DSP business? Thanks, Matt.

Yeah, 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, a 5-nanometer 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 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 where 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. Like, 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 customer approaches. There's already been a lot of noise in the system around these types of opportunities and applications. But 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, and 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, and 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…

Perfect. 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 3-nanometer 1.6T DSP today. I think it's only about 18 months ago since you announced the Nova 5-nanometer. So, I was a little bit surprised about the timing there. Am I reading into too much there, or is there something going on in the marketplace where there's a big push now towards 3-nanometer and lower power? And 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 this is absolute -- 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 an 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 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. So that's -- it's as simple as that. We're going faster.

Perfect. Thank you.

Yeah.

Your next question comes from CJ Muse with [Cisco] (ph). Your line is now open.

Cisco? Cantor Fitzgerald. Thank you for taking the question. Matt, I had 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 '25? 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 '25 and '26 for the non-AI part of the business?

Yeah. Thanks, CJ. And 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, got it. 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 -- 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, we're not -- I'm not really breaking that out. I'd just say that by default, the growth rate is going to be higher on the custom side because it's a lower base and it's been ramping kind of in the second half, whereas electro-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 start by saying the team has 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 out 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% OEM. 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 levers through next year with the top-line outgrowing 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, and congratulations on hitting the next growth phase. Matt, I was listening to the other Matt, 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 at this customer ramp changed from 90 days ago?

No. We've been -- I think we've been able to plan our business together very well with our key customers in this area, especially customer 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 customers' 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. At the Analyst Day, you talked about a third, 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 is 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 is 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, I really appreciate all the thoughtful questions. Closing remarks, so as we finish the year here, we're very optimistic about our fiscal '26. 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 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 in 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 super cycle 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.

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