- Revenue: $1.27 billion, 10% sequential growth, 5% year-over-year decline.
- Data Center Revenue: $881 million, 92% year-over-year growth, 8% sequential growth.
- Enterprise Networking Revenue: $151 million.
- Carrier Revenue: $76 million.
- Consumer Revenue: $89 million, 112% sequential growth.
- Automotive and Industrial Revenue: $76 million, 31% year-over-year decline, 2% sequential decline.
- GAAP Gross Margin: 46.2%.
- Non-GAAP Gross Margin: 61.9%.
- GAAP Operating Expenses: $688 million.
- Non-GAAP Operating Expenses: $456 million.
- GAAP Operating Margin: -7.9%.
- Non-GAAP Operating Margin: 26.1%.
- GAAP Loss Per Share: $0.22.
- Non-GAAP Earnings Per Share: $0.30, 25% sequential growth.
- Cash Flow from Operations: $306 million.
- Inventory: $818 million, $8 million decrease from prior quarter.
- Stock Repurchases: $175 million.
- Total Debt: $4.13 billion.
- Cash and Cash Equivalents: $809 million.
- Q3 Revenue Guidance: $1.45 billion, plus or minus 5%.
- Q3 GAAP Gross Margin Guidance: 47.2%.
- Q3 Non-GAAP Gross Margin Guidance: 61%.
- Q3 GAAP Operating Expenses Guidance: $693 million.
- Q3 Non-GAAP Operating Expenses Guidance: $465 million.
- Q3 Non-GAAP Earnings Per Share Guidance: $0.35 to $0.45.
Release Date: August 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Marvell Technology Inc (MRVL, Financial) delivered revenue of $1.27 billion, exceeding the midpoint of guidance.
- Non-GAAP earnings per share were $0.30, also above the midpoint of guidance.
- Data center end market revenue grew 92% year over year and 8% sequentially, driven by strong demand for electro-optics products and custom silicon.
- Strong bookings for market-leading 800 gig PAM products and 400 ZR data center interconnect products.
- Marvell Technology Inc (MRVL) is confident in its ability to maintain a leadership position in the fast-growing interconnect market, with a TAM expected to grow at a 27% CAGR to $14 billion by 2028.
Negative Points
- GAAP gross margin was 46.2%, indicating a decline compared to non-GAAP gross margin of 61.9%.
- GAAP operating margin was negative 7.9%, reflecting higher operating expenses.
- Revenue from the automotive and industrial end market declined 31% year over year and 2% sequentially.
- Enterprise networking and carrier revenue were flat sequentially in the second quarter, indicating slow recovery.
- Custom silicon programs, while contributing to revenue growth, have lower gross margins compared to merchant products.
Q & A Highlights
Q: Matt, could you elaborate on your comments about the operating leverage to gross margin, especially in relation to certain revenue run rates?
A: (Willem Meintjes, CFO) We expect gross margin to remain in a similar range for the next few quarters. Custom programs, which have lower gross margins, will continue to ramp, but this will be offset by the recovery and growth in our core merchant products. Additionally, we see good leverage and absorption in our manufacturing overhead as the top line grows.
Q: Matt, you mentioned confidence in exceeding the full-year AI revenue target. Is the incremental strength in both custom compute and optics business?
A: (Matthew Murphy, CEO) Yes, demand has been extremely strong in both custom and optics businesses. We see continued strength next year, above our previously communicated targets, in both custom and optics, and the broader portfolio. Bookings momentum has been very strong, setting us up for a strong fiscal '26 in AI.
Q: Can you give us more granularity on the actual AI revenue numbers for July and expectations for October?
A: (Matthew Murphy, CEO) While we don't typically call out numbers by quarter, we had set targets of $1.5 billion for this year and $2.5 billion for next year. Both custom and electro-optics are contributing, with custom being back-end loaded but ramping strongly.
Q: Could you give us an idea of the puts and takes for gross margin next year?
A: (Willem Meintjes, CFO) We expect the trend of gross margin stability to continue into next year. Growth from both optics and the recovery in merchant products will offset the continued growth in custom. Additionally, as the topline grows, we benefit from better absorption and disciplined OpEx management, driving substantial operating leverage to the bottom line.
Q: What are your views on the competitive landscape in the DSP and custom silicon parts of your AI business?
A: (Matthew Murphy, CEO) On the DSP and optics side, we maintain a high market share due to our execution, complete architecture, and best-in-class roadmap. In custom silicon, the complexity of these chips requires a full solution provider like Marvell. We have one large competitor, but we believe our strategy and capabilities position us well for the long term.
Q: Can you talk about the profile of the 1.6 T ramp and its impact on your business?
A: (Matthew Murphy, CEO) We are first to market with 1.6 T products, starting shipments this quarter. However, 800 gig will still be the high-volume platform through next year. The timing of the 1.6 T transition is still uncertain, but we are well-positioned for both opportunities next year.
Q: How should we think about the normalized run rate for your traditional businesses and their long-term growth?
A: (Matthew Murphy, CEO) We aim to drive both enterprise and carrier businesses back to about $1 billion each annually. Long-term, these markets are expected to grow at low- to mid-single digits, with potential for better performance through content or share gains. These businesses are very accretive and profitable for Marvell.
Q: Can you quantify the upside in AI revenues for this year and next?
A: (Matthew Murphy, CEO) While we are not providing specific numbers, we are clearly exceeding the $1.5 billion target for this year. The setup for next year is very strong, with additional customers and aggressive investments in our roadmap, positioning us well for continued growth.
Q: What are the major drivers or products giving you an optimistic outlook for custom ASIC near term and next year?
A: (Matthew Murphy, CEO) Several custom silicon programs for data center, especially those levered to AI, are ramping strongly. We have bookings, backlog, and strong customer commitment, which gives us confidence in our outlook.
Q: Have you seen evidence that US cloud titans are seeking to diversify the procurement of optical transceivers outside of China?
A: (Matthew Murphy, CEO) Yes, there is a trend towards supply chain diversification due to geopolitical risks. We have driven a broad ecosystem of partnerships and are well-positioned to support this trend, maintaining our competitive edge.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
