Marvell FQ2 Earnings: Rebound in the cards

Posted on August 30, 2024June 30, 2026 by io-fund

Marvell reported strong Q2 FY2025 results. The company beat the revenue consensus estimates by 1.5% and non-GAAP EPS estimates by 2.3%. Revenue grew 10% sequentially, and the guide for the next quarter beat estimates by 2.8%. The guide suggests the company returns to growth from FQ3.

AI led the way, with data center revenue growing 92% YoY. The consumer segment revenue recovered, more than doubling sequentially, and management believes that enterprise networking, carrier and auto and industrial end markets have bottomed in the second quarter. All the end markets are expected to grow in Q3.

Revenue

FQ2 revenue declined by (5.1%) YoY and grew by 10% sequentially to $1.27 billion, primarily due to solid growth in the data center end market led by AI. This compares to a (-12.2%) YoY decline in FQ1. Next quarter, management has guided for a revenue to accelerate to 2.2% YoY growth to $1.45 billion at the midpoint. This beat the consensus estimates by 2.8% and the positive price action further implies we will see analysts raise consensus.

Matt Murphy Chairman and CEO said in the earnings call, “For the third quarter, we are forecasting consolidated revenue to grow 14% sequentially at the midpoint of guidance. We expect this growth to be primarily driven by data center AI, and further augmented by the start of a recovery in our enterprise networking and carrier end markets.”

Margins

Margins are improving. The higher custom ASIC revenue will weigh on the gross margins. However, operating leverage and non-recurring engineering (NRE) cost benefits will help to improve the bottom line, particularly the management pointed to the next fiscal year.

The gross margin was in line with the guide at 46.2%, up from 38.9% in the same period last year and 45.5% in the previous quarter. Management has guided for 47.2% in the next quarter.
Adjusted gross margin is 61.9%, up from 60.3% last year and down from 62.4% in the previous quarter. The management guide for the next quarter is 61%, down sequentially primarily due to the lower margins for custom ASIC business.
The operating margin was (-7.9%), up from (-15.3%) last year and (-13.1%) in the previous quarter. The management guide for the next quarter is (-0.6%). Adjusted operating margin was 26.1%, down from 26.9% in the last year and up from 23.3% in the previous quarter. It beat the guide marginally by 0.5%. The guide for the next quarter is 28.9%. The improvement in margin is due to operating leverage and also non-recurring engineering (NRE) cost benefits.

Net loss was ($193.3 million) or (-15.2%) of revenue compared to a net loss of ($207.5 million) or (-15.5%) of revenue in the same period last year. Adjusted net income was $266.2 million or 20.9% compared to $290.2 million or 21.6% last year.

EPS

Adjusted EPS was $0.30, beating estimates by 2.3% compared to $0.33 in the same period last year. The management GAAP loss per share guide for the quarter is ($0.09) +/- $0.05 and adjusted EPS guide is $0.40 +/- $0.05, representing a YoY decline of (-2.4%).
Analysts expect adjusted EPS to accelerate to 5.2% growth in Q4 and 108.7% in Q1 FY2026.

Cash Flow and Balance Sheet

The cash flows have improved when we compared to last year. This is positive particularly since the company has high debt.

Operating cash flow was $306.4 million or 24.1% of revenue compared to $112.5 million or 8.4% of revenue in the same period last year and 28% in the previous quarter.
Free cash flow was $253 million or 19.9% of revenue compared to $1.2 million or 0.1% in the same period last year and 20% in the previous quarter. The cash flows were lower in the last year due to higher days sales outstanding of 82 days compared to 76 days in the recent quarter and also higher severance-related cash restructuring charges last year.
Cash was $808.7 million and debt of $4.13 billion compared to $847.7 million and $4.15 billion in the previous quarter.
Inventory was $818 million compared to $826 million in the previous quarter.
The company paid $52 million in dividends and repurchased shares worth $175 million. The company expects to increase share repurchases further in FQ3.

Key Segments

Data Center

Data Center end market grew by 92% YoY and 8% sequentially to $880.9 million led by strong AI revenue.

Matt Murphy said in the earnings call, “These above-guidance results were driven by strong demand for our electro-optics products, custom silicon beginning its anticipated ramp, as well as growth in our storage and switch revenue. Strong bookings continue for our market leading 800 gig PAM products and 400ZR data center interconnect, or DCI products, and we are looking forward to starting shipments of our next-generation 200 gig per lane, 1.6 terabit DSPs in the third quarter. As a result, we expect our electro-optics revenue will continue to grow every quarter this fiscal year on a sequential basis.”

The management also highlighted that custom silicon business is moving in the right direction and custom silicon customers are here to stay. “Our AI custom silicon programs are progressing very well with our first 2 chips now ramping into volume production. Development for new custom programs we have already won, including projects with the new Tier 1 AI customer we announced earlier this year, are also tracking well to key milestones.

Looking ahead to the third quarter of fiscal 2025 for our data center end market, we are forecasting revenue growth to accelerate into the high teens sequentially on a percentage basis. We expect the largest contributor to this growth will be our AI custom silicon programs as they begin to ramp meaningfully in the third quarter, further augmented by ongoing growth from our optics portfolio.

Although custom has a lower gross margin than our merchant products, it benefits from inherently lower operating expense levels, given NRE offsets from customers and the sharing of IP with our merchant business. As a result, as custom silicon becomes a larger part of our overall revenue, we see a path for operating expenses as a percentage of revenue decreasing below our current target operating model.”

Carrier Infrastructure

Carrier Infrastructure revenue declined by (-72%) YoY and up 6% sequentially to $75.9 million. Management expects aggregate revenue from carrier infrastructure revenue and enterprise networking to grow sequentially in the mid-single digits in the next quarter and further improve in the fourth quarter.

Enterprise Networking

Enterprise Networking revenue was down (-54%) YoY and (-1%) sequentially to $151 million. Management expects aggregate revenue from carrier infrastructure revenue and enterprise networking to grow sequentially in the mid-single digits in the next quarter and further improve in the fourth quarter. After several quarters of inventory correction, the company is seeing signs of growth in both Carrier Infrastructure and Enterprise Networking.

Consumer

Consumer end market was down (-47%) YoY and up 112% sequentially to $88.9 million following the gaming inventory correction. Management expects revenue to grow slightly on a sequential basis in the next quarter.

Automotive/Industrial

The automotive and industrial end markets revenue declined by (-31%) YoY and (-2%) sequentially to $76.2 million due to the broad inventory correction in the automotive end market. Management expects auto and industrial end market to grow sequentially in the mid-single digits in the next quarter.

Earnings Call:

No Update on AI Revenue:

The CEO had stated the following at the beginning of the call: “Given the strong start in the first half of the fiscal year from AI and our expectations for accelerated growth in the second half, we remain confident in our ability to significantly exceed the full year AI revenue target discussed earlier this year at our AI event” – yet, there was no update to the $1.5 billion floor provided for this year and the $2.5 billion floor for AI revenue provided for next year. Analysts poked quite a bit to get an update, but to no avail, with the CEO stating: “we're not calling those numbers out typically by quarter.”

Here is an example of what transpired in the Q&A, to where the CEO insisted the number was higher yet did not provide specifics:

Question
Quinn Bolton (Analysts)

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

Answer
Matthew Murphy (Executives)

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

1.6T Transceivers Ramping in Q3:

The earnings report provided a surprise in terms of the 1.6T transceivers ramping in Q3. We covered this recently here (and a few other times in archived Marvell analysis on our site). Per our previous analysis: “Marvell offers 200-gig, 400-gig and 800-gig PAM-based electro-optics. The 800-gig is the primary interconnect for AI deployments. The company is qualifying a 1.6T solution with 200-gig per lane for the next leg up in AI acceleration. For the 1.6T solution, Nvidia will be a lead partner.”

Here is an update from the call which points toward next year being a big year for Marvell on electro-optics:

Question
Christopher Rolland (Analysts)

Congrats on the results. I have an Inphi question primarily. And Matt, you talked about 1.6T. That's pretty exciting that, if I understood that correctly, you're going to be ramping in 3Q. Perhaps you can talk about the profile of this ramp, what it looks like in 3Q, 4Q and into '25. I think The Street's all over the place on this node. But if you could talk about that and maybe even the economics, what it means for you guys, that would be fantastic.

Answer
Matthew Murphy (Executives)

Yes. Thanks, Chris. Yes, it's still early. We were first to market in this area, having introduced these products at OFC a year ago. It's great to see that they're going into production. We'll know a lot more when we start to see how our customers are planning to deploy it. But we are seeing initial shipments now. The way I would think about it though is 800 gig right now and into — and through next year is still going to be the workhorse high-volume platform. And even some of the newer launches that are coming, as an example, are going to still support 800 gig as well as 1.6T.

So it's really hard to call exactly. It's going to be an important transition. There's no question. The only question is the timing of which. And Chris, I think we'll be in a better position to comment on that probably as we get closer to the end of the year, we start looking at the setup for calendar '25 and what our customers are thinking. But either way, we're going to be well positioned for both of those opportunities for next year.

– End Quote

Conclusion:

Marvell is bottoming and we are looking for an entry. We can’t say right now if we will enter this quarter or enter closer to calendar year 2025. Although the rebound is a step in the right direction, the lack of an update on AI revenue leads us to the assumption there isn’t much of an update to report. Today there are stronger AI stories, whereas next year Marvell could rival some of the AI stories we own today.

Royston Roche, Equity Analyst at the I/O Fund, contributed to this article.

Recommended Reading:

Marvell Q2 Preview: Growth Rebound on the Horizon

Posted on August 28, 2024June 30, 2026 by io-fund

Marvell is a stock we watch closely and a stock we ultimately want to own due to its abundant AI potential, yet the company’s AI potential is buried by other segments in a steep, cyclical trough. Looking ahead, next year has the makings of a solid comeback for this often-overlooked AI stock, with revenue growth set to return as early as Q3 before accelerating strongly in fiscal 2026 (CY2025).

Marvell reports fiscal Q2 earnings on August 29, with AI revenue at the forefront after management hinted at exceeding its previously set $1.5 billion AI revenue floor. This will be the key metric to watch alongside data center revenue, which is Marvell’s only end market segment with both YoY and QoQ growth at the moment. We see potential for ASICs to become a meaningful part of data center build-outs, with Big Tech touting performance and cost advantages from custom silicon hosted in the cloud, and we’re closely tracking both Broadcom as the leader and Marvell as the runner-up in the space.

Revenue

Marvell guided for $1.25 billion in revenue in the quarter, for a YoY decline of (6.5%) and QoQ growth of 7.8%. This is a notable acceleration from (12.2%) YoY in fiscal Q1, where Marvell reported $1.16 billion in revenue.

This acceleration is expected to persist through the second half of fiscal 2025, with consensus estimates for Q3 pointing to $1.41 billion, for a YoY decline of just (0.8%), a 570 bp acceleration from Q2, and QoQ growth of 12.8%. Q4 is currently estimated at $1.59 billion, for YoY growth of 11.5% and QoQ growth of 12.8%.

However, the real growth story lies in fiscal 2026, with Q1 through Q3 all currently estimated to record >30% YoY growth.

For fiscal 2025, Marvell is expected to report $5.4 billion in revenue, or a (2%) YoY decline. Revenue growth is expected to sharply accelerate to 32.2% YoY to $7.14 billion in fiscal 2026.

Key Metrics

As is the case with other AI semiconductors, Marvell’s data center segment drove Q1’s growth, nearly doubling YoY and the only end market segment with both YoY and QoQ growth. For a refresher on Marvell’s key products, refer to our prior analysis “Marvell: Tons of AI Potential Obscured by Underperforming Segments.”

Data center is Marvell’s strongest segment, with $816.4 million in revenue in Q1, up 87% YoY and up 7% QoQ. This came on the heels of another historic data center quarter of $765.3 million, up 54% YoY and up 38% QoQ. Management guided for mid-single-digit sequential growth in the segment as ASICs continues to ramp, implying revenue of ~$865 million in Q2 at ~6% QoQ growth. Electro-optics and interconnects were primary growth drivers in Q1, with initial custom silicon shipments starting, so we’re expecting to see more ASICs in the mix this quarter.

Outside of the data center, Marvell’s other segments are showing deep YoY declines.

Carrier infrastructure revenue declined (75%) YoY and (58%) QoQ to $72 million in Q1, with Q2 guided to be near flat sequentially, with management saying the recovery will be harder to predict.
Enterprise networking declined (58%) YoY and (42%) QoQ to $153 million in Q1, with Q2 similarly expected to be near flat sequentially, before recovering in the second half of this fiscal year.
Consumer revenue declined (70%) YoY and (71%) QoQ to $42 million in Q1, dragged down from softness in the gaming market. However, management believes the gaming inventory correction has cleared, with the segment expected to double on a sequential basis in Q2.
Automotive revenue declined just (13%) YoY and (6%) QoQ to $78 million, and once more is expected to be flat sequentially, with growth resuming in the second half of the fiscal year.

Margins

Margins are a bit lower historically as volume production of ASICs ramp this year, with management “expecting a very substantial ramp in the second half of this year, followed by a full year of high volume production in fiscal 2026.” This will weigh on gross margins in the near term, but will help to drive stronger operating margins, primarily due to non-recurring engineering costs.

Marvell guided for GAAP gross margin to be 46.2%, a 70 bp QoQ improvement from 45.5% in Q1 and a 730 bp YoY improvement. Adjusted gross margin was guided to be 62%, down 40 bp QoQ from 62.4% in Q1 but up 170 bp YoY.

Management provided some context on the path of gross margins, saying that the sequential decrease in adjusted gross margin stems from a shift in product mix as consumer revenue rebounds and ASICs ramp. Management added that the “substantial” ramp in H2 in ASICs “is likely to be dilutive to our current gross margins, but to be accretive to operating margin and earnings.”

GAAP operating margin for Q2 was guided at (8.8%), an improvement from (13.1%) last quarter and (15.3%) last year. While it is a step in the right direction, Marvell still has a lot of ground to cover to return to GAAP operating profitability. Adjusted operating margin is expected to be 25.6% in Q2, up 230 bp sequentially.

EPS

Though Marvell did not provide any guidance on net margins for Q2, we can infer from management’s EPS guides that net margin is likely to marginally improve sequentially.

GAAP EPS is guided to be ($0.20), +/- $0.05 for Q2, compared to ($0.25) in Q1, a slight improvement at midpoint, though the lower end of the range comes in line with Q1’s result.

Adjusted EPS is guided to be $0.29, +/- $0.05, compared to $0.24 in Q1, again a slight improvement at midpoint with the low end of the range being flat to Q1. This reflects a YoY decline of (11.1%), before improving to (7.5%) in Q3 and returning to bottom-line growth of 5.1% in Q4.

For FY2025, Marvell is projected to report $1.40 in adjusted EPS, for a YoY decline of (7.2%).

The real growth story for Marvell’s bottom line arises in FY2026, once ASICs reaches full volume production, as noted previously by management to be accretive to both operating margin and EPS. Q1 FY26 is currently estimated to see Marvell report nearly 108% YoY growth in adjusted EPS to $0.50.

On a full year basis, FY2026’s adjusted EPS growth is currently estimated at 71.9% YoY to $2.41, reflecting the significant operating leverage opportunity that lies ahead from ramping ASICs to full volume production.

Cash Flows and Debt

Cash flows have remained strong for Marvell despite the end market weakness in a majority of its segments aside from AI; however, debt is one concern as debt-to-EBITDA ratios are high.

Operating cash flow in Q1 was $324.5 million for a margin of 28%, while free cash flow was $232.5 million, for a margin of 20%. This is lower than usual due to annual employee cash bonuses.

Inventory was $826 million in Q1, decreasing $38 million QoQ and $200 million YoY. Days sales outstanding decreased 8 days to 69 days.

Cash and equivalents totaled $847.7 million at the end of Q1, down from $950.5 million at the end of the prior quarter, primarily due to the employee bonuses.

Debt totaled $4.15 billion. Marvell’s gross debt-to-EBITDA ratio at the end of Q1 was 2.27x and net debt-to-EBITDA was 1.8x.

What to Expect for AI Revenue

Marvell’s AI revenue will be closely watched in Q2, given that other AI semiconductors in AMD and Broadcom both recently raised AI revenue outlooks for this year. Marvell had guided for $1.5 billion in AI revenue exiting the fiscal year, setting a floor for next year at $2.5 billion.

Marvell had given clues that ASICs AI revenue is trending around $500 million per quarter in Q1, and offered more color on the full year outlook:

CEO Matt Murphy: “If you look at our Q2, most of the growth in the data center segment is coming from custom. So that's a positive. And then, the whole thing inflects meaningfully in the second half and I'd say from a full year perspective, the way to think about it, maybe some additional color would be, we talked about a floor of $1.5 billion for AI revenue for Marvell for this fiscal year with about two-third in electro-optics and a third in custom. And we see now both of those exceeding that number.”most of the growth in the data center segment is coming from custom. So that's a positive. And then, the whole thing inflects meaningfully in the second half and I'd say from a full year perspective, the way to think about it, maybe some additional color would be, we talked about a floor of $1.5 billion for AI revenue for Marvell for this fiscal year with about two-third in electro-optics and a third in custom. And we see now both of those exceeding that number.”

On the topic of AI revenue growth in fiscal 2026 (calendar 2025), management said:

“Our programs continue to kind of upsize in terms of the magnitude we're looking at. I'd just say we didn't give the breakout exactly for next year, but we did talk about incremental $1 billion is the floor for next year from this year, so going from $1.5 billion to $2.5 billion.we did talk about incremental $1 billion is the floor for next year from this year, so going from $1.5 billion to $2.5 billion.

And a lot of that is going to be due to the custom programs hitting their first full year of volume. So we're not calling out the exact split for next year, but maybe that will help you triangulate in the middle in terms of where we are today, where we're trying to drive the business and then also where we see the overall AI business for next year. “And a lot of that is going to be due to the custom programs hitting their first full year of volume. So we're not calling out the exact split for next year, but maybe that will help you triangulate in the middle in terms of where we are today, where we're trying to drive the business and then also where we see the overall AI business for next year. “

At the moment, analysts are already looking above that guided range. For example, JP Morgan believes Marvell’s AI revenues will easily surpass management’s $1.5 billion floor and rise to $1.6 to $1.8 billion in calendar 2024, before soaring more than 70% YoY in 2025 to $2.8 billion to $3.0 billion, as ASICs programs ramp at Amazon and later Microsoft.

Valuation

Marvell is currently trading above historical norms on top-line and bottom-line valuations, but it’s likely the market is pricing Marvell at this premium on expectations that custom silicon will ramp and accelerate ahead of schedule, and drive margin improvement and stronger bottom line growth.

Marvell is currently trading just above 11x sales, on both a TTM and forward basis, given the low growth environment for the current fiscal year. This is approximately a 30% premium to Marvell’s 3-year average forward revenue multiple of 8.6x; however, this 11x revenue multiple has been Marvell’s average for 2024.

On the bottom-line, Marvell trades near the higher end of its range over the past three years, given that margins down the line have struggled and not yet recovered. Marvell trades at nearly 50x forward adjusted EPS, much higher than its 3-year average of 34x. Marvell is expected to grow into this multiple in FY26 on the back of strong adjusted EPS growth as ASICs ramp.

Conclusion

On one hand, Marvell’s rebound and growth story might be too early, and there will be a couple of less-spectacular earnings reports until we get to the rebound in 2025. On the other hand, Marvell may start to move quicker than current consensus is forecasting as it’s participating in a few explosive trends, namely ASICs and data center optics.

How the market perceives Marvell’s non-AI segments until a material recovery arises is anyone’s guess. In a risk-on environment, these segments will be dismissed and the number of times a management team mentions the words “AI” on an earnings call is all that matters. In a risk-off environment, Marvell’s unfortunate exposure to telecom and gaming will mute upside. As it stands, we remain cautiously optimistic on Marvell.

We will cover the report for our premium members briefly BMO on Friday.

Damien Robbins, Equity Analyst at the I/O Fund, contributed to this article.

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Marvell Q4: Data Center Strong but AI Slow to Materialize

Posted on March 8, 2024June 30, 2026 by io-fund

Marvell’s Q4 was primarily in line with consensus, though GAAP EPS reported a rather large miss. The Q1 forecast across the board was very weak, with revenues guided 16% below consensus with margins firmly negative.

Q4 saw a marginal YoY increase in revenue, breaking a three-quarter string of declining growth, but Marvell guided for a (13%) YoY decline in revenue in Q1 at midpoint, suggesting that it is not yet out of the woods with weak growth in all of its end markets except for data center. Management dangled some carrots in the earnings call, primarily that Q1 would mark the bottom and that qualifications for ASICs are now moving to production for full ramp in FY26 (one year from now).

Revenue and EPS:

Q4 revenue was $1.43 billion, beating estimates by $10 million, and representing YoY growth of 0.7%.
Q1 revenue guidance missed at $1.15 billion, +/-5%, representing a YoY decline of (13%) at midpoint. As stated above, this is 16% below consensus with expected revenue of $1.37 billion.
FY24 revenue was $5.51 billion, a decline of (6.9%) YoY. Prior to the report, analyst consensus was for an acceleration in FY2025 to 11.1% YoY to $6.11 billion and 19.9% YoY to $7.33 billion in FY2026. The acceleration will likely still materialize but could be delayed given the weak Q1.
Q4 adjusted EPS was $0.46, meeting estimates and representing flat YoY growth. GAAP EPS was ($0.45), missing estimates for $0.00.
Management guided for Q1 EPS of ($0.23) +/- $0.05 and adjusted EPS of $0.23 +/- $0.05. This is a miss compared to consensus for $0.40 adjusted EPS.
FY24 adjusted EPS was $1.51, a decline of (40.4%) YoY. GAAP EPS was ($1.08), compared to ($0.19) in FY23. Previously, EPS was expected to rebound to 33.1% YoY growth to $2.01 in FY2025 and 40.4% YoY growth to $2.82 in FY2026. These estimates may come down given the weaker Q1 guide.

Margins:

Margins were weak, as Marvell reported a negative GAAP operating margin whereas it had guided for a thinly positive operating margin in Q4.

Q4 GAAP gross margin was 46.6%, compared to 47.5% in the year ago quarter. The adjusted gross margin was 63.9%, up from 60.6% in the previous quarters. Per management last quarter: The CFO, Willem Meintjes, said in the earnings call, “Our forecast for this large sequential improvement is driven by expectations of a significantly stronger product mix and our ongoing cost optimization activities. Looking forward, we expect that product mix as well as the overall level of revenue will remain key determinants of our gross margin in any given quarter.”stronger product mix and our ongoing cost optimization activities. Looking forward, we expect that product mix as well as the overall level of revenue will remain key determinants of our gross margin in any given quarter.”
Q4 GAAP operating margin was (2.3%) versus its guide for 1.6% at midpoint. This compares to 1.6% in the year ago quarter. GAAP operating margins for Q1 are expecting to fall further, with management guiding Q1’s GAAP operating margin at (12.3%) at midpoint, a 1000 bps sequential decline. Regarding GAAP OPM, management stated this includes “stock-based compensation, amortization of acquired intangible assets, restructuring costs and acquisition-related costs.” Stock based compensation was $155.3 million, or 11% of revenue.
Adjusted operating margin was 33.8% for adjusted operating profits of $482.6 million. This fluctuates due to seasonality in payroll taxes and employee salary increases.
Q4 GAAP net margin was (27.5%), compared to (1.1%) in the year ago quarter and (11.6%) in Q3. Adjusted net margin was 28.2% for adjusted net profits of $401.6 million.
FY24 GAAP gross margin was 41.6%, compared to 50.5% in FY23. Adjusted gross margin was 61.2% compared to 64.5% FY23.
FY24 GAAP operating margin was (10.3%), compared to 4% in FY23. Adjusted operating margin was 29% down from 36% in the previous year.
FY24 GAAP net margin was (16.9%), compared to (2.8%) in FY23. Adjusted net margin was 23.8% down from 30.8% the previous year.

Cash and Debt:

Q4 operating cash flow was $547 million, representing a 38.3% margin.
FY24 operating cash flow was $1.37 billion, an increase of 6% YoY.
Cash, equivalents and short-term investments totaled $950.8 million.
Debt totaled $4.16 billion. Gross debt-to-EBITDA ratio was 2.19X and net-debt-to-EBITDA ratio is 1.69X. This has been slightly trending down but is still a concern.

Inventory at the end of the fourth quarter was $864 million, down by $77 million from the prior quarter. DSO was 77 days, decreasing by a day from the prior quarter.

The company returned $52 million to shareholders through cash dividends and repurchased $100 million of our stock during the fourth quarter, double from the prior quarter. The company expects to further increase repurchases in the first quarter of fiscal 2025.

Marvell's Board approved the largest repurchase authorization in company history, increasing the current plan by $3 billion, for a total available authorization of $3.3 billion

Key Segments:

Data Center:

Data center revenue was the strongest point of the report, with growth at 54% YoY in Q4, breaking a four-quarter string of declining growth. Data center revenues increased 38% QoQ, ahead of the mid-30% range management had guided and a sharp acceleration from 21% QoQ growth in Q3 and 6% QoQ in Q2.

Data center accounted for 54% of revenue in the fourth quarter, a large increase from 39% in the prior quarter. According to the opening remarks, it was a mix of primarily traditional data center and some AI driving this increase: “The strong revenue growth in the quarter was driven by the cloud portion of our data center end market. While AI has been a key growth driver, I am pleased that our standard cloud infrastructure revenue has also grown every quarter, and we see that continuing next year. Our 800-gig PAM solutions led our growth in the fourth quarter. We also benefited from higher sequential demand for our storage products as that portion of our data center end market continues its recovery. Revenue from our Teralynx, Ethernet switches also grew sequentially in the quarter.”

Management said data center revenue for next quarter will be in the low single digits QoQ: “Turning to the first quarter of fiscal 2025. We expect our overall data center revenue to grow in the low single digits sequentially on a percentage basis. We expect revenue from both AI and standard cloud data centers to continue to grow sequentially. We project our [ Electro ] optics revenue to continue to be strong, and we also expect to benefit from the initial shipments of our cloud optimized AI silicon programs. Partially offsetting this growth, we are projecting a more than seasonal sequential decline in revenue from enterprise on-premise data centers.”

The main carrot that was dangled on data center as it pertains to AI is for H2 growth. I’ve included that commentary below.

Enterprise Networking & Carrier Infrastructure – Steep declines in Q1, Mgmt says will mark the bottom

Enterprise Networking revenue was $265M (down 28% YoY, down 2% QoQ).
Enterprise is expected to decline 40% QoQ in Q1.
Carrier Infrastructure (5G) revenue of $170M (up 38% YoY, down 46% QoQ).
Carrier is expected to decline by 50% QoQ in Q1.

Per the comments on the call, Q1 is expected to be the bottom.

“As we have been communicating, these end markets [enterprise and carrier] have been dealing with a period of soft industry demand. As a result, both were down sequentially in the fourth quarter and we expect them to decline again in the first quarter […] Looking ahead, we expect revenue declines in these end markets to be behind us after the first quarter and forecast a recovery in the second half of the fiscal year. Longer term, these are large and enduring end markets, which are critical to the global economy. As a result, we expect both of these end markets to eventually return to contributing over $1 billion each in revenue on an annual basis once demand normalizes, and we begin to realize the benefits of upcoming Marvell-specific product cycles.

Consumer:

Consumer revenue of $143.9M (down 20%, down 15% QoQ). Consumer is expected to decline (70%) QoQ in Q1.

Per management remarks: “This forecast reflects the completion of deliveries for an end-of-life program in the prior quarter as well as significantly weaker demand from the game console market.”

Automotive:

Automotive/Industrial revenue of $82.3M (down17% YoY, down 23% QoQ). This is a small segment for Marvell that has been impacted by the softness in EVs. For the fiscal year 2024, automotive was up double digits YoY. It’s expected to be flat QoQ in Q1.

Earnings Call:

AI Revenue Ramping in H2 & Beyond

Marvell has to find a way to impress Wall Street on AI despite the fact that it’s ramping much slower than its peers. If we read between the lines, a run rate of about $500 million will happen early FY2026. That’s my rough math, but given commentary in the opening remarks, we are looking at $200M per quarter right now on AI networking/optics and can expect $200M by Q1 FY2026 on ASICs/compute. So, if we assume AI networking grows by 50% this year, we arrive at $500M in about 12 months from now.

Here's the commentary I’m basing that on – it’s the second paragraph that has more information on AI revenue specifically:

“We now have a clear view of demand for both this fiscal year as well as fiscal 2026. We have been working closely with our suppliers and are confident that we have secured capacity for the ramp. With the visibility we now have for these programs, along with many new opportunities, we are very excited about the potential scale of long-term revenue for Marvell from this business. As the initial set of design wins reach its full run rate, we expect annual revenue from cloud optimized silicon has the potential to rival our fast-growing data center optics business, which, for reference, grew to over $1 billion in fiscal 2024.”

Additionally, management offered a few more breadcrumbs as to AI revenue, such as: “AI was a key driver of our data center growth in fiscal 2024, contributing over 10% of total company revenue, well above our initial forecast. This was a substantial increase from approximately 3% in the prior year. Our momentum accelerated throughout the fiscal year with AI revenue well over $200 million in the fourth quarter, driven mostly from Optics […] In fact, as our cloud optimized AI silicon programs reach high-volume production, we expect our overall cloud optimized revenue to exceed $200 million exiting the fourth quarter. As a result, on a run rate basis, this momentum would put our overall cloud optimized silicon revenue above the annual $800 million target we had provided at our last Investor Day. And with the full year of contributions in fiscal 2026, we expect to be way ahead of the prior target. In aggregate, we see a favorable setup for the second half of this fiscal year, driven by continued growth from our data center end market, ongoing growth from automotive, and a recovery in carrier, enterprise and consumer.”

Later in the Q&A, this was the better question in terms of discussing potential AI revenue in custom silicon moving from qualification to production:

Question
Harlan Sur (Analysts)

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

Answer
Matthew Murphy (Executives)

So yes, we are in the initial start of the production ramp on both products. And then as far as the follow-on, like I said, the opportunity funnel we see across all of the various opportunities right now is significant, and we're involved in, we believe, we think, every single one of them. So yes, and there'll be more to come sort of at our AI day, but I would just say our 3-nanometer funnel and our 3-nanometer hit rate and design win rate is very encouraging and it really gives us this tremendous confidence in where this business is headed. It also has a side benefit by driving this advanced technology for the custom ASIC side, is it's pulling along the technology development that benefits all the other businesses in Marvell, like our high-performance switching, our DSP for optics, et cetera. So there's actually kind of a virtuous cycle happening where being at that bleeding edge is now we're able to show our other solutions that interoperate with this custom silicon, really a best-in-class road map there.

Q1 is the Bottom

The CFO later reiterated that Q1 will be the bottom:

“Yes, so we're really working with customers to focus on Q1 being the bottom, really confident that, that's the bottom. And then we see growth resuming in the second half across enterprise networking, carrier and consumer so really just trying to make sure that we put this behind us really quickly and see growth in the second half.”

Conclusion:

As I left the Marvell call and moved along to join the Broadcom earnings call, there is no doubt which company is stronger right-here, right-now. It’s Broadcom. Marvell has a strong product story but it’s in a sea of AI whales that are ramping quickly. The $500M in AI revenue per quarter (run rate) estimated to be reported in about 12 months time is a strong start, but the stock is trading quite high. Also, the need to impress the market is high and Marvell management is trying hard with this very-forward-looking commentary.

At the right price, Marvell will make a great stock. But unfortunately, it’s the opposite which is that at this valuation, we plan to sell Marvell. The PE Ratio is similar to PS Ratio, which is that it’s trading in a range that the stock struggles to maintain.

In previous quarterly webinars, we’ve pointed out that Marvell is our weakest stock in an environment where rates remain elevated given its debt-to-equity ratio and GAAP profitability issues. Meanwhile, Nvidia’s PS Ratio and PE Ratio is near it’s October 2022 lows and Broadcom stated today it’s expecting $10B in AI Revenue this year, or 20% of its total revenue for this calendar year compared to Marvell’s 13%. Given Q1 is quite troublesome for Marvell with steep sequential declines and AI revenue that is likely priced in, we will look to trim or exit and buy lower. You can also expect us to re-allocate some of this to AVGO in the meantime. Or, perhaps, we will buy more Nvidia as we go along. Overall, we see both as stronger choices at the moment, and will revisit Marvell when it’s either cheaper or moving quicker in terms of its AI growth trajectory.

Recommended Reading:

Marvell Q2 2023 Earnings & CXL Memory Catalyst

Posted on September 29, 2022June 30, 2026 by io-fund

Marvell’s management team did an excellent job of acquiring Inphi and executing. Typically, we avoid M&A for a year to allow the financials to merge, yet in this case, leaning into the acquisition was a good choice.

The Marvell management team’s execution skills are needed once again because Marvell has an opportunity to greatly increase its revenue and profits if management can execute in a new market one more time. The opportunity is a new architecture called CXL that disaggregates memory from the CPU. CXL is attracting a lot of attention at industry events, such as Hot Chips 2022, because it’s focused on optimizing one of the most expensive parts of the data center – which is memory.

Before we go into the 2023-2024 Marvell product road map, and why it’s key to the company’s future, I want to discuss the fiscal Q2 2023 earnings.

Fiscal Q2 2023 Earnings Overview

The market is concerned over Marvell’s data center guidance of 20% growth next quarter. This is a slowdown from the most recent quarter at 48% YoY growth and earlier quarters at >100% growth.

At an estimated $600 million, it will also mean a sequential decline both from Q2 and Q1, which were at $643M and $640M, respectively. Marvell stated it’s the on-premise business weighing on their cloud data center business and supply issues (more below).

Notably, Q2 of last year was an important moment for the company when 56% sequential data center growth grew from $277 million to $434 million in the span of three months following the close of the Inphi acquisition in April 2021. From there, the company has sustained Inphi’s already high growth levels for over a year.

The company is now at an annualized run rate of $6 billion, which the CEO reminded analysts, was the target for October of 2023. The company met the target originally provided at the October 2021 Investor Day one year earlier than expected. Notably, this was six months after Inphi was closed so M&A not a factor here.

Marvell’s Segment Overview:

The data center represents 42% of revenue at $643 million and grew 48% year-over-year.
The carrier infrastructure segment, which is wired and wireless and reflects 5G growth, reported 45% YoY to $285 million.
Enterprise networking grew handily at 53% YoY to $340 million and is expected to grow at 70% next quarter. We break this segment down below.
Consumer was down (1%) to $164 million and is expected to be down (10%) next quarter. Marvell has exposure to the storage market and this can weigh on the more robust segments.
Automotive was up 46% YoY to $84 million and is expected to be up 40% YoY next quarter. We also break down this segment below.

Marvell Financial Overview

Marvell was reporting negative top line revenue when we first covered it in 2019 and Marvell took another hit on revenue during Covid before accelerating to the 50%-74% revenue growth range.

The current quarter’s top line revenue in Q2 was at 41% which is a deceleration from Q1 with 74% revenue growth. The company guided for 29% year-over-year growth, which was a slight miss as analysts were expecting 30.3% growth in the fiscal Q3 quarter. The company reported EPS in line with adjusted EPS of $0.57. The guidance on EPS was a slight miss, however, at $0.59 reported versus $0.61 adjusted EPS estimated.

Semiconductors make a tougher investment as analysts can’t model too far into the future beyond what management teams provide. That is why there were many questions looking for help with how to factor in the “acceleration” in the data center the Marvell team is expecting in Q4 and what this will mean for CY2023.

An analyst asked if they can assume 10% QoQ in the data center for $1.7 billion overall revenue and the CEO said it sounded “a little on the high side.” This has led to analysts modeling $1.65 billion in revenue in Q4, for 22.5% growth. Therefore, despite a single-digit acceleration in the data center segment, there will still be a top line deceleration, if today’s forecast does not change.

The company’s margins and cash flow are a bright spot, and I believe this is being overlooked. If we get an acceleration in the data center into next year, then Marvell is fundamentally a much stronger company than it was during the previous data center streak.

On a GAAP basis, the gross margin was at 51% in the most recent quarter, up from 35% in the year ago quarter and up from 46% in FY2022. The company is guiding for the same GM of 51% next quarter.

The GAAP operating margin has improved quite a bit YoY to 8.3% in the current quarter compared to (25%) in the year ago quarter. This is also an improvement from Q1 with GAAP OM of 4.80%. The adjusted operating margin “hit a record” at 36.5% and is guided for 37% next quarter. Stock based compensation was at $139 million in the most recent quarter.

Cash flow is also improving with operating cash flow at $332 million, or 22% of revenue. This compares to $194 million last quarter and $819 million in FY2022. However, the company carries debt of $4.6 billion and has $617 million of cash on the balance sheet. This is a 1.8X net debt to EBITDA ratio.

Therefore, there has been substantial improvement yet Marvell does have a weaker debt profile than a company like AMD or Nvidia.

Source: YCharts

Note on Supply:

Marvell is aligned with AMD in that they believe supply chain issues will ease in Q4 and into 2023. Here is what Marvell said in the opening remarks:

“Therefore, for our overall data center end market, we project revenue in the third quarter to decline sequentially in the mid-single digits on a percentage basis. However, we expect our data center revenue in the fourth quarter to increase on a sequential basis, anticipating an improvement in supply and new product ramps in cloud.”

Here is what AMD said:

“The visibility with our customers, especially our large cloud customers’ second half of this year into next year is very good. And we’re planning really for the next four to six quarters, and that gives us good visibility” and later provided many references toward supply coming online in Q4, such as: “But overall, the 7% increase [in gross margin], I think, is very well supported given all of the new product ramps that we have going on in addition to some additional supply that’s coming in as we get into the fourth quarter.”

It never hurts to have two management teams agree on the larger broad-based issue. However, since those reports, we’ve seen analysts cast doubts on the effects of macro for the rest of the year: “[Mizuho analyst Rakesh] checks show hyperscale orders are seeing "pushbacks" but no cancels, with Q3 trending flat quarter-over-quarter and Q4 "potentially soft." Rakesh lowered estimates for AMD "with macro headwinds clouding the near-term outlook."

Marvell’s Products:

In six brief years, Marvell has pivoted away from consumer (storage) products as the revenue mix was previously 62% consumer/38% infrastructure to being 11% consumer/89% infrastructure today.

This was driven partly by hyperscalers building data center infrastructure and AI/ML driving the need for faster data speed. Inphi also contributed to this.

Data Center Segment

PAM Solutions:

Marvell offers 200-gig and 400-gig PAM-based electro-optics — and the company recently added 800-gig solutions. This market sees tailwinds from the need for more bandwidth as the electro-optics connect short distances and long distances to increase data rates. PAM4 has replaced NRZ data transmission with the benefit of doubling the bit rate.

Hyperscalers are going through an upgrade cycle that requires high bandwidth and port density. PAM4 connects networking ASICs and machines, like servers and AI machines. Digital-based PAM4 uses analog-to-digital converters to clean up the signal in the digital domain before converting it back to analog to transmit.

Artificial intelligence and machine learning drives demand for the 800-gig PAM to increase the speed of input-output and to process the data flows. This doubles the throughput (bandwidth) due to an 8x100Gpbs optical transceiver for inside and between AI clusters.

In the fiscal Q1 results ending in April, management had stated: “our first quarter results benefited from a ramp in volume shipments of our 800-gig PAM solutions at two large customers.” The company has also stated that their products will see increase demand with the release of more powerful CPUs.

COLORZ 400:

COLORZ allows regional data centers to be linked together in the same metro region to function as one single mega data center. COLORZ silicon photonics technology allows data centers in the same metropolitan region to function like a mega data center through a “network fabric.” This facilitates faster edge computing within an 80/120 km distance for 30-megawatt data centers as they will be linked together and function like a 120-megawatt data center.

Per the most recent press release:

“As artificial intelligence (AI), machine learning (ML) and high-performance computing (HPC) applications continue to drive greater bandwidth requirements, cloud-optimized 400G solutions are needed to support high-speed data center interconnections. These requirements can only be met through high bandwidth connectivity offered in a small, cost-effective form factor. The Marvell COLORZ II 400ZR enables cloud data centers the ability to increase the speed of data movement while keeping the power and cost low.”

Another press release stated the company shipped 100,000 units.

Here is what was said on the call about how/why the growth in the data center can continue:

Harlan Sur

Good afternoon. Thanks for taking my question. On the cloud optical connectivity business, this is both inside and between data centers, the upgrade cycles have been this really great multi-year tailwind for the team.

And if I look into next year, I believe that there's still at least one of the top four US hyperscale titans that's going to start the 400-gig PAM4 transition. You still have China CSPs that need to fire. You've got multiple customers on DR that's going to fire as well. Historically, like these transitions, I don't think have been impacted by a slowing macro demand environment. They're viewed as, I think, very strategic.

But is that how your cloud customers are thinking about these upgrades and your views on continued upgrade momentum in this segment for next year? And just relatedly, is the Innovium team on track to drive $150 million in revenues this year?

Matt Murphy

Hey. Thanks, Harlan. Yes, I think the first part of it, you got pretty well in terms of the transition on 200 and 400 gig PAM4 inside the data center. And then, the new ramps we're seeing in 400 gig ZR for DCI between data centers.

What I'd add on top of that is — which has been extremely strong and also, in some ways, a little bit of a constraint we've seen in terms of being able to keep up is, the demand on 800 gig, which is happening right now really around, obviously, very advanced AI workloads.

That is an area where, if we could obviously produce more material, we would be shipping it in Q3. So that's also a positive trend. So you've got sort of the transition going on all the way up to 800 gig, and that continues to look pretty good.

NOTE: Innovium is an acquisition that closed in 2021 and at time of acquisition was expected to add $150 million in revenue for CY2022/FY2023.

Compute Xpress Link (CXP): 2024-2025 Data Center Catalyst

Marvell is launching a new product line called CXL, which will improve how data centers add memory. Right now, a server must be opened to add DRAM and the DIMM slots are limited in number and don’t pass service history or bit-error history, which is needed by hyperscalers.

Memory pooling allows memory to scale independently from processors by taking memory for a task and then releasing the memory. The new fabric removes the need for local DRAM, which adds a bit of latency from 100ns to 140-160ns, however, there’s a possibility of adding a CXL accelerator to be more “cache coherent.”

The CXL switch will be used to accelerate protocol-level processing across ethernet, DPUs, SmartNICs and solid-state drive controllers (SSD).

What Marvell is proposing with CXL is a new server architecture to “dynamically assign memory resources between servers.” The result is boosted memory bandwidth and also the ability to enable memory pooling. The company sees a future where a new architecture will separate compute, memory and I/O racks with the interconnect being CXL. Partially-disaggregated racks are expected to deploy in 2024-2025.

Marvell is at the forefront of the shift toward “disaggregate memory from the CPU” because it currently supplies the optics that this new fabric will disrupt. Inphi is the leader in silicon optics, PAM-4, and the encoding of PAM-4 for PCIe 6.0.

2024 seems like a long ways off yet the market will be paying attention to this In Q2/Q3 2023.

Here’s an excerpt from the call:

“As you recall from our discussion last quarter, we see CXL as the next big evolution in cloud data centers that will enable us to increase our reach into the memory ecosystem and presents a multibillion-dollar SAM expansion opportunity for Marvell.

This includes a host of new products such as CXL expanders, cooling devices, switches and accelerators and the potential to embed CXL IP and a broad range of our data center products. Events and presentations at FMS strongly validated our excitement around CXL. This is the hottest topic at FMS with standing room-only presentations by many leading industry participants.

The Marvell booth, we demonstrated the industry's first CXL memory pooling solution, addressing the challenges related to memory scaling and cloud data centers. While the industry is still in the early stages of CXL adoption, we are working on closing significant opportunities right in front of us at key customers and envision a strong design win pipeline.”

Why Marvell for CXL?

There are a handful of companies going after the CXL opportunity. Marvell could be front runner as the company already works closely with memory OEMs by supplying HDD controllers, SSD controller and preamplifiers. The company also has an aggressive PCIe roadmap with the company shipping Gen 5 sockets whereas most SSD device are shipping Gen 4 solutions. Marvell is already investing in Gen 6, which in turn, attracts more Tier 1 memory OEMs.

Marvell acquired Tanzanite, a developer of advanced CXL technologies. The company plans to expand to CXL expanders, cooling devices, switches and accelerators.

The company has stated this will drive “a multibillion-dollar PAM expansion opportunity driven by CXL overtime.” (Note: Marvell is referring to PAM, their premiere product)

We will focus on this more next year. You can listen to a recent tech talk here on CXL. The presentation is located here. This is an article about Microsoft’s interest in CXL with a statement that “50% of their server costs are taken up by DRAM.”

Carrier Infrastructure:

The OCTEON processors and platform is an Arm-based compute architecture for embedded applications, such as wireless networking equipment including 5G, including switches, routers, firewalls and monitoring solutions.

The OCTEON DPU is used with SmartNICs and security accelerators with a 5nm design that delivers to the infrastructure industry the same processing node as consumer smart phones and high performance computing and shipped in 2021. The most recent release from last year was the OCTEON 10 DPU and Prestera carrier switches which combined consumes 50% less power than competitors (according to Marvell).

Marvell’s processors help 5G networks meet latency and bandwidth demand while also allowing the networks to upgrade as cellular standards evolve. Marvell also offers customized solutions, which is ideal for Tier 1 customers who can combine their IP with Marvell’s Arm v8 processors and accelerators.

Recently, Dell and Marvell partnered to develop a server-class accelerator card for 5G base stations based on Marvell’s arm-based OCTEON Fusion processor. The hardware accelerators deliver more processing power including processing solutions for smart radio heads to support massive MIMO antenna rays.

We wrote about MIMO a few years back in a reference guide: “Massive Multiple Input and Multiple Output (MIMO) sends the data through multiple data streams called layers, which increases parallelism and throughput. MIMO helps avoid lost signals with multipathing, which allows the base station to send multiple copies of the same signal for increased redundancy.

Note: The antenna array is one fundamental change to 5G infrastructure. The initial 5G rollout will use existing cell towers, however, newer, dedicated 5G network infrastructures will require many more antennas than used in previous generations. Read more.”

The distributed unit (DU) shares the load with the radio unit by running L1 functions on the RAN protocol. Marvell has been a proponent of OpenRAN with the O-RAN platform, which is an open protocol and open platform that allows Marvell’s hardware to be used with various software vendors. Facebook (Meta) is a partner with Facebook Connectivity.

DPU processors, or digital processing units, are gaining traction for 5G transport, 5G RAN intelligent controllers, edge computing and cloud data center workloads. These hardware accelerators enable high speed connectivity and can improve packet processing rates by 5X. DPUs are ideal for power sensitive edge applications. Marvell’s strength in DPUs is one reason it may be able to stave off competition, which in the narrow field of 5G base stations includes Qualcomm/HPE and Analog Devices. Beyond 5G, Marvell has other competitors for DPUs such as AMD/Pensando and Nvidia.

Regarding 5G, over 7 million of the Octeon processors have been used in 3G, 4G and 5G base stations with Tier 1 customers. In the past, we reported that Samsung and Nokia use Marvell, and supplying these particular companies was a tailwind when Huawei was blacklisted. More recently, Marvell has stated they have design wins with four of the top five global OEMs and next-tier OEMs building base station equipment. These design wins are based on the 5nm platform.

Marvell uses TSMC for the 5nm OCTEON DPUs and this is an advantage because Marvell has the 5nm now and is able to move quickly on a 3nm release.

Notably, 5G has been a long time coming but I do believe it will reward investors over the next few years. Technavio has a CAGR of 67% for 5G equipment through 2025. The growth trend of 5G/edge computing is not one that we plan to complacent on as it will provide the next leg up for substantial capex spending similar to data center capex spending.

Enterprise Networking:

Marvell sells ethernet switches and ethernet PHYs to IT managers and networking equipment manufacturers. The company uses DSP technology for CAT5e ethernet cables to supply data rates up to 5Gbps with support for CAT6 and CAT6a.

Management discussed on the call that the main driver for this market right now is wireless, specifically WiFi 6 as the wireless rate line is now faster than the wired rate. The call also pointed toward content per port going up in the transition to multi-gig. According to the CEO, “it's not like 10%, 20%, 30%. It's sort of multiples on a per port basis of where it was before.”

Increased enterprise share and content gains from wired and wireless enterprise networking drove 53% YoY revenue growth and 19% QoQ revenue growth.

Automotive:

Similar to the networking that Marvell supplies enterprises and the data center, Marvell also supplies auto manufacturers with ethernet PHY transceivers, camera bridges and switches for in-vehicle networks. This is used for things like collision detection, lane warnings, and autonomous driving.

Marvell believes Ethernet will be the backbone for connected and autonomous vehicles to connect the electronic control unit (ECUs), cameras, sensors, and central compute devices. The Ethernet device is called Brightlane.

ON Semi has partnered with Marvell on use cases such as pairing a standardized protocol, such Ethernet PHY, with ON’s portfolio of ultra-dynamic range image sensors.

Automotive was up 46% to $84 million, yet was down 6% sequentially. Management cited supply issues rather than demand. Marvell counts eight of the largest 10 OEMs worldwide and 36 OEMs total. The company believes revenue growth will be 40% next quarter.

Note on Consumer Market:

Marvell sells hard disc drives (HDD) and solid state disc (SSD) controllers. This is a weaker segment, declining 1% YoY and 8% sequentially to $164 million. For next quarter, Marvell expects revenue to be down 10% YoY and flat sequentially.

Conclusion:

There is a new, powerful trend on the way that is on par with the cloud computing trend. This trend of edge computing will rely on distributed computing rather than centralized processing. Both will exist and rely upon each other but edge computing will have a stronger growth trend when it breaks ground (by virtue of being new/rapidly expanding). Much of this will be in sync with the 5G buildout.

Marvell has the potential to be a strong stock during this buildout as the company provides the base station hardware, supports MIMO antenna rays, beamforming, and accelerates 5G transport and controllers which results in high-speed connectivity.

The company also provides electro-optics and silicon photonics for increased data rates and a network fabric for edge computing. The edge is defined as many things, but what all definitions can agree on, is that the edge needs superior connectivity/networking. Electro-optics, silicon photonics, DPUs, SmartNICs and ethernet in the data center are a warmup for Marvell supplying edge servers and edge devices. As this occurs, the demand for Marvell’s product suite will increase.

In addition to this, Marvell is thinking outside the box by focusing on restructuring memory while most companies are focused on more powerful chips. CXL drives down costs on DRAM and is likely to rapidly adopted by hyperscalers once it becomes available. There’s no guarantee that Marvell will be the one to win the contracts but it’s certainly a front runner.

Quick Update on Snowflake and Nvidia

Posted on August 25, 2022June 30, 2026 by io-fund

Snowflake exceeded top line expectations, as outlined on our forum here. Management focuses on product revenue versus total revenue and GAAP metrics are a bit buried under the more accessible adjusted non-GAAP metrics. However, Snowflake delivered what the market needed to see – which was 83% product revenue growth compared to 72% growth expected. The guide for Q3 was in line with expectations while FY2023 was slightly raised from $1.893B at the midpoint for 66% growth to $1.910B at the midpoint for 67.5% growth.

The top key metric to note was a re-acceleration in customers with TTM product revenue above $1 million, which was at 112% this quarter at 246 customers, up from 98% growth last quarter. This is an important forward-looking metric as it takes 9 months to fully onboard new customers. Another reason this key metric holds more weight is the consumption model means the upside is uncapped, whereas with SaaS, the monthly amount has a ceiling (usually). You can read more about the consumption model here.

Net revenue retention rate is down 300 basis points sequentially but it up 200 basis points year-over-year and this re-acceleration is what’s important. RPO growth of 78% is the lowest in reporting history, down from 82% last quarter and 122% in the year ago quarter.

Analysts did note on the call that there are tougher comps for RPO coming down the line in Q4 (quarter ending in Jan 2023). It was in this quarter that RPO moved from $1.8 billion to $2.6 billion. Right now, it stands at $2.7 billion, so not too much H1 growth over the past six months. This is simply something to note. Of this RPO, 57% is recognized over the next 12 months, or $1.5 billion.

Here is what was discussed:

Brad RebackBrad Reback

Hi, thanks very much. Mike, I know you mentioned the 3Q consumption comp. You also have a really, really difficult 4Q RPO comp. But given your commentary, should we expect a healthy end to the year given that renewal pool? Thanks.

Mike ScarpelliMike Scarpelli

Yes. We expect we will have a big increase in RPO. But I’m not guiding to it. You’ll have to wait and see. I’m never going to guide RPO.

Total customer growth was at 36% growth compared to 40% growth last quarter. As noted above, it’s the TTM > $1M that matters.

There is no denying that on a GAAP basis, Snowflake is largely unprofitable. The company’s GAAP operating margin was at (42%) compared to the adjusted operating margin of 2%. The operating losses of $207 million this quarter increased from $189 million in GAAP operating losses last quarter. Stock based compensation increased from $164 million in the year ago quarter to $209 million in Q2 2022.

Free cash flow fluctuates with $54 million in free cash flow this quarter. This is up from ($12) million in free cash flow last year. The free cash flow margin is 11% and the company raised its adjusted free cash flow guide for the year from 15% of revenue to 17% of revenue. The company has $5 billion on the balance sheet.

Moving Forward …

The top catalyst for Snowflake (in my opinion, and was discussed on the call) is Snowpark going into production with Python. It’s not open to general availability yet.

Here is what was discussed on the call:

Frank SlootmanFrank Slootman

Yes, I will start, and maybe Christian can finish. Python is – so Snowflake for Python is red hot, and people are jumping that for us to declare it GA, which is something and we have customers that are really wanting us to let them use it in production now some of the largest customers that we have. So, pressure is on because the demand is there. The thing about the Iceberg Open Table formats that really completely open Snowflake up to be – for Snowflake cables to be used by anybody and everybody that can support that format. We are seeing incredible results in terms of performance of like executing against that file format. So, these are all very, very, very promising developments for us. And I think that the pressure is on for us to declare these things generally available because people are trying to rip them out of our hands right now.

Mike ScarpelliMike Scarpelli

Yes. As we said at our Summit conference, we expect those to be GA at the end of this year. So, a meaningful contribution to consumption will happen next year.we expect those to be GA at the end of this year. So, a meaningful contribution to consumption will happen next year.

Here is what we’ve said in the past:

“Snowpark offers the ability to migrate business logic with popular programming languages Python, Scala/Java Virtual Machine or Java. The library and DataFrame API allow querying and processing data without having to move data to where the application code runs. This extends programming functionality for ML model training and allows data processing to run natively in the data cloud.

Prior to Snowpark, code deployment required separate infrastructure. Building applications that interact with Snowflake’s virtual warehouses minimizes processing time and lowers the learning curve/broadens adoption of complex data pipelines by removing the need to move or copy data into other systems to overcome working with SQL.

The recent announcement of adding Snowpark for Python is key because of Python’s widespread popularity among developers. With the Snowpark Accelerator, Snowflake is courting developers to build more applications and this is likely to help Snowflake maintain a competitive advantage with a newer class of machine learning startups.”

Nvidia …

Nvidia remains one of our highest convictions and we’ve laid out those reasons in great detail. We will provide an earnings overview soon but you’ve likely already heard through the pre-announcement that gaming was down 44% sequentially. The company’s guidance also missed by $1 billion with $5.9 billion guided versus $6.9 billion expected.

Nvidia is undeniably the highest priced semiconductor, as well, and the one issue investors face when a company misses on EPS (noted in the pre-announcement) is the valuation gets richer overnight. Nvidia has been trading in the 30-35 forward P/E ratio range, yet is now in the 46 forward PE ratio range.

It’s likely we trim here a bit here and re-allocate (perhaps to Snowflake tomorrow). The position is large so the trim is not for lack of conviction, we can promise you that. We also won’t hesitate to buy back again.