Marvell Technology, Inc.

Good afternoon and welcome to Marvell Technology, Inc.' 's third quarter of fiscal year 2024 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Mr. Ashish Saran, Senior Vice President of Investor Relations. Please go ahead.

Thank you and good afternoon, everyone. Welcome to Marvell's third fiscal quarter 2024 earnings call. Joining me today are Matt Murphy, Marvell's Chairman and CEO, and Willem Minkus, our CFO. Let me remind everyone that certain comments made today include forward-looking statements which are subject to significant risks and uncertainties that could cause our actual results to differ materially from management's current expectations. Please review the cautionary statements and risk factors contained in our earnings press release, which we filed with the SEC today and posted on our website, as well as our most recent 10-K and 10-Q filings. We do not intend to update our forward-looking statements. During our call today, we will refer to certain non-GAAP financial measures, a reconciliation between our GAAP and non-GAAP financial measures, is available in the investor relations section of our website. Let me now turn the call over to Matt for his comments on the quarter. Matt?

Thanks, Ashish, and good afternoon, everyone. For the third quarter of fiscal 2024, Marvell delivered revenue of $1.42 billion, growing 6% sequentially above the midpoint of guidance. In addition, on a non-GAAP basis, the Marvell team drove a sequential increase in gross margin, remained disciplined on operating expenses, and delivered EPS of 41 cents, above the midpoint of our guidance. We are pleased with our results and execution. In our data center end market, revenue for the third quarter was $556 million, well above our guidance, driven by stronger-than-forecasted AI revenue. We were also encouraged by revenue from cloud returning to year-over-year growth. On a sequential basis, overall data center revenue grew 21% in the third quarter, while cloud grew well in excess of 30%. As expected, revenue from the enterprise on-premise portion of our data center and market declined sequentially in the third quarter, reflecting weakening demand. Demand for data center storage also remains depressed, and industry expectations for a recovery have continued to push out. In cloud, revenue from both AI and standard cloud infrastructure grew sequentially, with AI growing significantly faster. Growth was broad-based, led by our PAM-4 optical products, TerraLink Ethernet, Paralinks Ethernet switches, as well as our data center interconnect or DCI products. Earlier today, we released a video highlighting our longstanding collaboration with NVIDIA. We're using Marvell's optical interconnect technology to enable the bandwidth, scale, and reliability required by generative AI. Marvell has built a broad product portfolio, which our customers are relying upon to power their accelerated computing infrastructure. We are benefiting from strong demand for our 800-gig PAM electro-optic products, tightly correlated to the growth in deployment of AI accelerators. In fact, we are seeing the overall attach rate of our PAM products to accelerators being higher than one-to-one in high-performance AI systems currently shipping in the market. We are also seeing strong customer traction for our next-generation 1.6T, 200-gig-per-lane PAM platform that we started sampling this past April. Customer qualifications have begun, and we are looking forward to ramping our 1.6T solution into production. Complementing our optical solutions, we expect our PAM DSPs for the Active Electrical Cable, or AEC, market to start ramping in our next fiscal year in Tier 1 cloud deployments. We also demonstrated our 224 gigabits per second long-reach CERTIs at the OCP Global Summit held in October. We expect that this technology will serve as a building block for our next-generation 200-gig-per-lane AECs. In our switching portfolio, we are making great progress on our next-generation 51.2T cloud switching platform. At OCP, we demonstrated Marvell's 51.2T solution operating at full capacity with very low industry-leading latency running on Sonic. Our enablement of Sonic, an agile open-source network operating system, is very important for cloud customers who value the flexibility, interoperability, and scalability of an open Ethernet switch ecosystem. Customers have started development on our 51.2T solution, and we look forward to ramping this platform into production. In addition, earlier this week, we announced our membership in the Ultra Ethernet Consortium. This is another step in our commitment to driving continuous innovation on an open Ethernet-based cloud fabric, which can deliver the scale and performance required for next-generation workloads, including generative AI. As our 400-gig DCI modules continue to ramp, we are also seeing strong interest for our next-generation 800-gig products that we launched this past October. These modules are based on our new 5-nanometer, 800-gig coherent DSC and silicon photonics, or SIFO platform, which integrates multiple discrete components within a single device. This level of integration enables the performance and packaging density required for small form factor pluggable modules to drive a high bandwidth signal across long distances between data centers. Marvell's SIFO platform has accumulated billions of operating hours over the past seven years in DCI applications. In addition, we are starting to see emerging applications for our field proven SIFO technology to power next generation higher bandwidth and optical connections inside data centers. We look forward to updating investors as this opportunity unfolds over time. Cloud customers remain focused on enhancing their AI offerings by building custom compute solutions of their own, and we have already won a number of these designs. We have completed qualification on one key AI project and have started wafers into production. For another project, we have received first silicon back from the fab, and the initial testing is looking positive. As a result, we expect both of these custom compute programs to start volume production next year. Turning now to our guidance for overall data center and market. In the fourth quarter of fiscal 2024, we expect revenue from our data center and market to grow in the mid-30% range on a sequential basis. In our last earnings call, we provided a forecast for AI revenue to cross a $200 million quarterly run rate exiting this year. Since then, demand has continued to grow, and we now expect our AI revenue in the fourth quarter to come in significantly above our forecast. In addition to strong growth from AI, we also expect revenue from standard cloud infrastructure to grow sequentially in the fourth quarter. For the enterprise on-premise portion of our data center and market, we expect revenue to decline sequentially in the fourth quarter. Turning to our carrier infrastructure and market, revenue for the third quarter was $317 million, above guidance, growing 17% year-over-year and 15% sequentially. The overachievement in the third quarter was driven entirely by the wireless portion of our carrier end market. Marvell's specific product cycles have enabled our wireless revenue to buck the trend of a soft end market for several quarters. However, we have been forecasting for some time that this wave of above-market wireless growth for Marvell would start to decline by the fourth quarter, as the initial wave of 5G rollouts near completion. Additionally, demand is continuing to soften as carriers are managing CapEx in a difficult macroeconomic environment. As a result, following an extended multi-year period of strong growth, we are expecting a period of digestion. In addition, we expect revenue from the wired portion of our carrier end market to continue to decline, reflecting weakening demand. As a result, for the fourth quarter, we expect revenue from our overall carrier end market to decline in the mid-40% range on a sequential basis. Looking longer term, as data traffic continues to grow, we expect that operators will need to continue to invest in adding capacity in both the wireless and wired end markets. We also expect to benefit from share gains, including significant 5-nanometer base station design wins, which we have won but are not in production. We are optimistic that carrier CapEx will normalize over time, and our revenue from this end market will return to growth. Turning to our enterprise networking end markets, Revenue for the third quarter was $271 million, declining 28% year-over-year and 17% sequentially. As we have been signaling, we see weak demand in this end market. As a result, for the fourth quarter of fiscal 2024, we project enterprise networking revenue to decline in the mid-single digits sequentially on a percentage basis. Turning to our automotive and industrial end market, revenue in the third quarter was $107 million. growing 26% year over year and declining 3% sequentially. Looking to the fourth quarter of fiscal 2024, we expect revenue from our overall auto and industrial end market to decline by approximately 20% on a sequential basis. We expect the sequential decline to come from our industrial end market, which includes aerospace and defense, where order patterns can be lumpy in any given quarter. Moving on to our consumer end market, revenue for the third quarter was $169 million. declining 5% year-over-year and growing 1% sequentially. In the fourth quarter, we are expecting revenue from the consumer end market to sequentially decline in the mid-teens on a percentage basis. In summary, we delivered revenue and non-gap earnings above the midpoint of guidance for the fiscal third quarter. The diversification in our end markets is serving us well, with strong growth from AI and cloud carrying us through a softening demand environment across other end markets. Through fiscal 2024, the Marvell team has continued to execute in a dynamic environment, remaining focused on driving continuous improvement on what we can control while dealing with inventory corrections and macroeconomic-induced demand headwinds in many end markets. We reprioritized our investments to align to the highest ROI opportunities in front of us. Our team drove efficiency improvements to reduce operating expenses, and we are well on track to meet our commitments. We have worked proactively with our customers and suppliers to best manage inventory across the combined supply chain. Our operations group has rapidly responded to the increase in demand from AI. At the midpoint of our guidance for the fourth quarter, we are forecasting that our revenue for the second half of this fiscal year should grow approximately 7% over the first half. In addition, we are forecasting a 300-plus basis point sequential improvement in our non-GAAP gross margin in the fourth quarter. This projection reflects our expectation for an improving product mix as well as a multi-quarter cross-functional effort to further optimize our cost structure. Heading into next year, while we don't typically guide beyond a quarter, we expect softness in demand to impact revenue from our enterprise and carrier markets in the first quarter. We also anticipate a significant reduction in consumer and market revenue due to seasonality and demand and the completion of deliveries for an end-of-life program in the fourth quarter. Although the enterprise and carrier markets are experiencing near-term headwinds, these large and long-lasting end markets are critical to the global economy, so we expect them to recover and turn into a revenue tailwind over time. In the meantime, our data center revenue is growing rapidly, reflecting our emergence as a key enabler of accelerated computing. We project data center revenue driven by the ongoing strength in our connectivity solutions inside and between data centers to grow to over 50% of our total revenue in the fourth quarter. Longer term, we expect additional tailwinds to data center growth from the ramp of multiple custom accelerated compute programs for AI. We are also looking forward to a number of new Marvell products entering the data center market, as I discussed earlier. With that, I'll turn the call over to Willem for more detail on our recent results and outlook.