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    Marvell Technology Inc (MRVL)

    Q2 2025 Summary

    Published Feb 14, 2025, 5:45 PM UTC
    Initial Price$65.12May 2, 2024
    Final Price$59.25August 2, 2024
    Price Change$-5.87
    % Change-9.01%

    What went well

    • Marvell is significantly exceeding its previous $1.5 billion AI revenue target, driven by strong demand in both custom silicon and optics. The company reports substantial bookings and backlog, with plans for capacity ramps next year, indicating robust growth in its AI business. , ,
    • Marvell holds a strong market position in electro-optics, maintaining high market share in 800G products and leading the transition to 1.6 terabit DSPs. Their technological leadership and full platform offerings position them to benefit from industry transitions and supply chain diversification by U.S. cloud providers. , ,
    • Recovery in traditional businesses: Marvell's data center storage, enterprise networking, and carrier infrastructure businesses have bottomed out and are beginning to recover, with sequential growth expected into Q4. The company aims to restore these businesses to a combined annual run rate of approximately $2 billion, contributing to overall growth. ,

    What went wrong

    • Gross margins may face pressure due to an increasing mix of lower-margin AI custom silicon business, while the recovery in higher-margin merchant products remains uncertain.
    • Intensifying competition in both the DSP optics and custom silicon markets may erode Marvell's market share and margins.
    • Uncertainty around the timing and adoption rate of new products like 1.6-terabit DSPs could impact future growth projections.

    Q&A Summary

    1. AI Revenue Targets
      Q: Will you exceed AI revenue targets next year?
      A: Demand in AI is extremely strong in both custom compute and optics businesses, and we expect to significantly exceed our $2.5 billion target for next year in AI revenue. ( )

    2. Gross Margin Outlook
      Q: How will custom ASICs affect gross margins next year?
      A: Gross margins are expected to remain stable over the next few quarters, with lower-margin custom ASIC growth offset by recovery in higher-margin merchant products. We anticipate higher revenues next year will help with overhead absorption, supporting our operating margin targets. ( , )

    3. Custom ASIC Growth
      Q: What drives your optimism about custom ASIC business?
      A: We have multiple programs in custom silicon for data center, especially in AI, that are ramping significantly. We're seeing strong bookings and backlog, planning capacity ramps for next year, indicating robust growth in our custom ASIC business. ( , )

    4. Competitive Landscape
      Q: How is competition in AI DSPs and custom silicon?
      A: We maintain a high market share in DSP and optics due to strong execution and partnerships. In custom silicon, increasing chip complexity favors full-solution providers like us. We believe we are well-positioned against competitors in both areas. ( )

    5. Data Center Storage Recovery
      Q: Is data center storage contributing to second-half strength?
      A: Yes, we're pleased to see recovery in data center storage after a severe downturn. It's growing each quarter, moving towards a $200 million per quarter run rate, contributing to our data center business strength. ( )

    6. Data Center Switching Opportunity
      Q: How will 51.2T silicon ramp in data center switching?
      A: We're well-positioned with our 51.2 terabit switch, seeing strong interest and starting production with a lead customer. While early, we view this as a strategic area with growth potential in AI fabric build-outs. ( )

    7. Traditional Business Recovery
      Q: What is the outlook for enterprise and carrier businesses?
      A: Both businesses are recovering, with sequential growth expected in Q3 and faster growth in Q4. We aim to bring each back to about $1 billion annual run rate, viewing them as important, profitable parts of our portfolio. ( )

    8. Electro-Optics Roadmap
      Q: Can you discuss the ramp of 1.6 Tbps products?
      A: We are starting shipments of our 1.6 terabit per second DSPs this quarter. While 800 gigabit per second remains the high-volume platform into next year, we are well-positioned for both opportunities, investing aggressively to maintain market leadership. ( , )

    9. Supply Chain Diversification
      Q: Are U.S. cloud providers shifting optical procurement from China?
      A: Hyperscale customers are concerned about supply chain risks and are diversifying procurement. We have a high market share and broad partnerships, so we're well-positioned to support customers regardless of shifts in supply chains. ( )

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