Q3 2025 Summary
Published Feb 14, 2025, 5:46 PM UTC- Marvell is significantly exceeding its AI revenue targets for fiscal 2025, with AI revenue tracking ahead by hundreds of millions of dollars, driven by strong demand in custom AI silicon and a significant multi-year agreement with AWS covering custom AI products and data center semiconductors. This positions Marvell strongly in the AI supercycle and custom silicon market, with the AWS agreement being a testament to their strategy.
- Gross margins are expected to continue around 60% even as custom programs ramp, and operating margin is improving, projected to be 33% in Q4, up from 30% in Q3. Marvell is showing significant operating leverage as operating income grows faster than expenses, supporting strong financial results.
- Marvell's largest custom silicon opportunity ("Customer C") is on track, expected to ramp in 2026 and projected to be larger than customers A and B combined. This indicates significant future revenue growth potential in custom silicon.
- Pressure on gross margins due to increased mix of custom silicon products, which may have lower gross margins compared to other products. While operating margins are expected to improve, gross margins could face pressure if custom silicon revenue grows more than expected.
- Potential inventory build-up in optical DSPs, raising concerns about demand sustainability. Some investors are worried about customer inventory levels, especially with tariff years coming up, which could lead to a slowdown if customers adjust inventories.
- Uncertain timing for recovery in Enterprise and Carrier segments, with management acknowledging that while they expect to return to a $2 billion run rate, the exact timing is uncertain, and recovery will continue through next year. This uncertainty might affect growth projections for these segments.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +7% (Q3 2025: $1,516.1M vs Q3 2024: $1,418.6M) | Overall revenue grew by 7%, driven primarily by a dramatic recovery in the Data Center segment, which more than doubled year-over-year, offsetting declines in other segments. |
Data Center Revenue | ~+100% (Q3 2025: $1,101.1M vs Q3 2024: $555.8M) | Data Center revenue nearly doubled, reflecting strong market demand for AI and high-performance computing solutions and successful penetration of new product lines, indicating a significant shift in customer focus compared to the previous period. |
Enterprise Networking | -44% (Q3 2025: $150.9M vs Q3 2024: $271.1M) | Revenue dropped by 44% due to weakening demand and likely inventory corrections in this end market, signaling a tougher competitive environment compared to the previous period when traditional revenue streams were stronger. |
Carrier Infrastructure | -73% (Q3 2025: $84.7M vs Q3 2024: $316.5M) | A 73% decline reflects significant challenges in this segment, driven by soft industry demand and inventory normalization, highlighting a strategic or cyclical transition away from these legacy revenue streams. |
Taiwan Revenue | +660% (Q3 2025: $198.5M vs Q3 2024: $26.1M) | Taiwan revenue soared by 660%, suggesting that Marvell significantly increased its market share or secured new contracts in that region, likely due to favorable local market conditions and strategic initiatives not seen in the prior period. |
United States Revenue | +36% (Q3 2025: $256.0M vs Q3 2024: $188.4M) | Revenue in the U.S. grew by 36%, underpinned by stronger demand in high-growth areas such as the data center, although broader market conditions and export dynamics may also be influencing the improved performance relative to the previous year. |
Singapore Revenue | -42% (Q3 2025: $46.1M vs Q3 2024: $79.5M) | A 42% decline in Singapore revenue indicates headwinds in that market, potentially due to changes in local business conditions or revised financial strategies (including incentive agreements), contrasting with the growth seen in other geographies. |
Operating Income | Deteriorated from -$33.3M to -$702.8M | Operating income worsened dramatically (from a modest loss of -$33.3M to -$702.8M) due to increased expenses and investment in new product lines amid a shifting revenue mix, as higher cost structures in support of the booming data center business couldn’t offset steep declines in other areas. |
Net Income | Worsened from -$392.7M to -$676.3M | Net income declined substantially, reflecting mounting costs (including higher operating expenses, restructuring and integration costs) that eroded profitability despite revenue growth in the data center; this suggests significant execution and cost challenges relative to the prior period. |
EPS (Basic) | Declined from -$0.45 to -$0.78 | Basic EPS deteriorated as the increased net loss per share resulted from higher operating costs and dramatic shifts in segment performance, indicating that despite top-line growth in key areas, the cost base and margin pressure were not successfully contained compared to the previous quarter. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue | Q3 2025 | $1.45 billion, plus or minus 5% | no guidance | no current guidance |
GAAP Gross Margin | Q3 2025 | 47.2% | no guidance | no current guidance |
Non-GAAP Gross Margin | Q3 2025 | 61% | no guidance | no current guidance |
GAAP Operating Expenses | Q3 2025 | $693 million | no guidance | no current guidance |
Non-GAAP Operating Expenses | Q3 2025 | $465 million | no guidance | no current guidance |
Other Income and Expense | Q3 2025 | $46 million | no guidance | no current guidance |
Non-GAAP Tax Rate | Q3 2025 | 7% | no guidance | no current guidance |
Basic Weighted Average Shares Outstanding | Q3 2025 | 867 million | no guidance | no current guidance |
Diluted Weighted Average Shares Outstanding | Q3 2025 | 875 million | no guidance | no current guidance |
GAAP Income Per Diluted Share | Q3 2025 | loss of $0.09 to earnings of $0.05 | no guidance | no current guidance |
Non-GAAP Income Per Diluted Share | Q3 2025 | $0.35 to $0.45 | no guidance | no current guidance |
Sequential Revenue Growth | Q3 2025 | 14% sequentially | no guidance | no current guidance |
Non-GAAP EPS Growth | Q3 2025 | 33% sequentially | no guidance | no current guidance |
Revenue | Q4 2025 | no prior guidance | $1.8 billion, plus or minus 5% | no prior guidance |
GAAP Gross Margin | Q4 2025 | no prior guidance | 50% | no prior guidance |
Non-GAAP Gross Margin | Q4 2025 | no prior guidance | 60% | no prior guidance |
GAAP Operating Expenses | Q4 2025 | no prior guidance | $710 million | no prior guidance |
Non-GAAP Operating Expenses | Q4 2025 | no prior guidance | $480 million | no prior guidance |
Other Income and Expense | Q4 2025 | no prior guidance | $46 million | no prior guidance |
Non-GAAP Tax Rate | Q4 2025 | no prior guidance | 7% for Q4 2025 | no prior guidance |
Non-GAAP Tax Rate for Fiscal 2026 | Q4 2025 | no prior guidance | 10% to 11% | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Rapid AI Revenue Growth | Emphasized in Q4’24 ( ), Q1’25 ( ), and Q2’25 ( ) as a major revenue driver, targeting >$1.5B in FY25. | Surpassed $1.5B FY25 goal; AI now 73% of data center revenue in Q3’25 ( ). | Continues accelerating |
Custom AI Compute | Ramping programs noted in Q4’24 ( ), Q1’25 ( ), Q2’25 ( ), highlighted as a main AI growth vector. | Q3’25 saw record data center revenue (98% YoY), including multi-gen AWS collaboration for custom AI ( ). | Further expansion with AWS partnership |
Enterprise & Carrier | Described as declined but stabilizing in Q4’24 ( ), Q1’25 ( ), Q2’25 ( ) with gradual recovery expected. | Up 4% sequentially in Q3’25; forecast mid-teens Q4 growth. Gradual recovery continues, driven by both enterprise/carrier ( ). | Starting to recover |
Gross Margin Pressure | Linked to custom silicon mix in Q4’24 ( ), Q1’25 ( ), Q2’25 ( )—lower-margin programs but strong operating leverage. | Q3’25 non-GAAP margin at 60.5%, slightly below guidance, attributed to higher custom mix ( ). | Ongoing pressure from custom mix |
TSMC 2nm Collaboration | Extended in Q4’24 ( ) for advanced 2nm platform. | Not mentioned in Q3’25 ( ). | No longer mentioned |
ARM Competition | Briefly referenced in Q4’24, with no further detail beyond internal strategy ( ). | Not mentioned in Q3’25. | No longer mentioned |
Multi-year AWS Agreement | No mention in Q4’24, Q1’25, or Q2’25. | Announced Q3’25 as a 5-year multigenerational deal for custom AI & data center silicon ( ). | Newly emerged |
Customer C Ramp | No prior mention. | Largest custom silicon opportunity, ramping in 2026 and exceeding earlier programs ( ). | Newly emerged |
Optical DSP Inventory | Not discussed in Q4’24, Q1’25, or Q2’25. | Q3’25 commentary notes vigilance on inventory, but demand remains strong, especially for 1.6T transition ( ). | Newly emerged cautious outlook |
Optical DSP Sentiment | Previously bullish in Q1’25 with strong 800G demand ( ), not mentioned in Q2’25 or Q4’24. | Still positive in Q3’25; no major caution signals despite inventory concerns ( ). | Remains bullish overall |
High-Impact Going Forward | AI supercycle, custom silicon ramps, enterprise/carrier recovery consistently cited across Q4’24 ( ), Q1’25 ( ), Q2’25 ( ) as top growth drivers. | Q3’25 underscores AI-first strategy, multi-year custom expansion, and enterprise/carrier rebound ( ). | Increasing importance |
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AI Revenue Outlook
Q: Can you quantify AI revenues for fiscal '25 and '26?
A: We previously guided for $1.5 billion in AI revenue this year and $2.5 billion next year, but we are now tracking significantly ahead by hundreds of millions of dollars for both years, driven by strong demand. -
AWS Agreement and Custom Silicon Growth
Q: Are you supporting your customer's next-gen 3nm custom ASIC?
A: We're excited about our multi-year, multi-generational agreement with AWS, which is significant in revenue and covers AI custom products and networking. We're exceeding our custom silicon targets, with $500 million+ this year and $1 billion+ next year, aiming for 20% market share of a $40 billion custom TAM. -
Margins and Operating Leverage
Q: What are your margin expectations as custom business ramps?
A: Despite ramping custom programs, we've maintained gross margins at or above 60% in the second half. We see a path to sustain this through next year, with operating margins rising from 30% to 33%, and continuing to improve as revenue outpaces OpEx. -
Custom Silicon TAM and Competition
Q: How do you see the custom AI TAM and competitive landscape?
A: We see a $40 billion custom AI TAM and aim for 20% market share. Few companies can deliver these complex solutions due to high barriers to entry. Custom silicon is growing because it offers total cost of ownership benefits for large workloads. -
CEO Commitment and Customer Diversification
Q: Are you committed to Marvell amid reports of other opportunities?
A: I'm 100% focused on Marvell, leading a strong team with best-in-class technology. Our customer diversification is robust, with multiple custom solutions across customers and new programs entering production. -
Future Growth with Customer C
Q: Any updates on Customer C's ramp and its potential?
A: Customer C remains our largest custom opportunity, tracking well and unchanged from our AI Day projections. We're optimistic about achieving significant growth with them. -
Optical DSP Demand and 1.6T Transition
Q: How are optical DSP inventories and the 1.6T transition?
A: Demand and bookings for optical DSPs remain strong with no significant inventory concerns. We expect significant growth next year, with 1.6T products contributing alongside a robust 800-gig cycle. -
Enterprise and Carrier Recovery
Q: What's the outlook for enterprise and carrier segments?
A: We plan to return to a $2 billion run rate. Combined enterprise and carrier were up 4% in Q3 and are guided up mid-teens in Q4. Recovery is ongoing, driven by inventory correction and our unique product cycles, especially in carrier with new base station sockets. -
Accelerated Move to 3nm DSPs
Q: Why the rapid introduction of 3nm 1.6T DSPs?
A: To maintain market leadership, we need to move at hyperscale speed, providing best-in-class solutions in the latest nodes. Advancing to 3nm offers the best TCO, power, and performance for our customers. -
Custom vs. Non-Custom Silicon Growth
Q: How does AI custom silicon compare to other custom programs?
A: AI drives the vast majority of our custom silicon revenue this year and next. While other programs contribute, the scale of AI's impact is significantly higher. Both custom and non-custom areas will see growth next year. -
Sales Mix for Customer Programs
Q: Has the sales mix from your customer programs changed?
A: No, our sales contribution mix from customer programs remains consistent with our plans from 90 days ago.