Marvell Technology, Inc.

Good afternoon and welcome to the Marvell Technology, Inc.' 's third quarter of fiscal year 2026 earnings conference call. At this time, all participants are in a listen-only mode. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. Please note this event is being recorded. I will now turn the conference over to Mr. Ashish Saran, Senior Vice President of Investor Relations. Thank you. You may begin.

Thank you and good afternoon, everyone. Welcome to Marvell's Third Quarter Fiscal Year 2026 Earnings Call. Joining me today are Matt Murphy, Marvell's Chairman and CEO, Willem Minkes, CFO, Chris Koopmans, President and COO, and Sandeep Bharati, President, Data Center Group. Let me remind everyone that certain comments made today include forward-looking statements which are subject to significant risks and uncertainties that could cause the 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 8K, 10K, 10Q, and other documents filed by us from time to time with the SEC. 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 our earnings press release. As we discussed in our second quarter earnings call, going forward, we are consolidating our non-data center end markets into a single new communications and other end market. The composition of our data center end market remains unchanged. Our earnings specialist for the third quarter reports revenue by end market in both the prior format as well as the new go-forward format. Please note that today's call will be longer than typical as we'll be discussing the acquisition announced today in addition to a number of extensive updates on our business. You may also find additional details on this transaction in the press release and Form 8 KB5 with the SEC today, and a presentation posted on our website on the investor relations page. Let me now turn the call over to Matt for his comments on the quarter. Matt?

Yeah, hey, thanks, Ashish, and good afternoon, everyone. Settle in, okay? We have a lot of good stuff to talk about today. For the third quarter of fiscal 2026, Marvell delivered record revenue of $2.075 billion. reflecting a 3% sequential increase and strong 37% year-over-year growth. Revenue was above the midpoint of guidance, driven by stronger-than-forecasted demand in our data center and market. As a result, non-GAAP earnings per share of 76 cents exceeded the midpoint of guidance by 2 cents. Excluding revenue from the divested automotive Ethernet business, the implied revenue growth for Marvell's go-forward business was approximately 6% sequentially and 41% year-over-year. Momentum in our data center business remains strong, with revenue growing 38% year-over-year, fueled by robust AI demand. We also saw a strong recovery in our communications and other end market, where revenue grew 34% year-over-year, as reported, and nearly 50% year-over-year, excluding the automotive Ethernet business. We expect growth to continue in the fourth quarter, with total company revenue forecast at 2.2 billion at the midpoint. We expect this momentum to continue throughout next fiscal year and beyond, I will provide more context on our numerous growth drivers later in the call. Before discussing our end markets, I'm excited to share details on the strategic acquisition we announced today of Celestial AI, which brings an entirely new disruptive technology, a photonic fabric platform purpose-built for next generation scale-up interconnect. This acquisition is the latest in a series of decisive moves to further strengthen our data center portfolio. Since 2019, we have continued to increase our focus on data center, divesting our Wi-Fi business, and acquiring Avera, Aquantia, EnFi, and Anovium. These transactions have driven significant revenue growth and scale, and have each proven to be an absolute home run. This year, following the divestiture of our automotive Ethernet business, we are continuing to double down on data center with the acquisition of Celestial AI. This positions us to further capitalize on the massive opportunity in accelerated infrastructure. The acquisition is expected to close in the first quarter of next year, subject to customary closing conditions, including regulatory reviews in the United States, and will remain a separate independent company through the regulatory process. AI is reshaping data center architecture at an unprecedented speed. Next-generation accelerated systems are no longer confined to a single rack. They are evolving into multi-rack, scale-up fabrics that connect hundreds of XPUs in a high-bandwidth, ultra-low latency, any-to-any fashion. These advanced fabrics demand purpose-built switches and interconnects engineered to deliver the performance and efficiency required at scale, creating a new TAM for companies like Marvell. Industry analysts are forecasting the merchant portion of the scale-up switch market to approach $6 billion in revenue in 2030. On the interconnect side, we are seeing the dollar content for optics of the same magnitude as a scale-up switch. As the optical interconnect attaches to both the XPU and the switch, the opportunity actually doubles, meaning over 10 billion. These are both very large and exciting incremental opportunities for Marvell. As we first evaluated Celestial AI, it reminded us of our early look at InFi and the promise we saw in their PAM technology to transform the scale-out interconnect market. We see even greater potential for Celestial AI's photonic fabric to transform the scale-up interconnect market. Interconnect technology is as critical as switching and scale-up networks to enable hundreds of XPUs to be tightly coupled together. This is driving a massive increase in the number of links in the network and overall system bandwidth, therefore creating the need for a fabric which can span across racks. Copper-based interconnects used in today's scale-up systems are approaching their fundamental limits in reach and bandwidth, creating a compelling need for optical solutions. Celestial AI's photonic fabric technology platform was purpose-built for this inflection. It enables large AI clusters that scale both within and across racks using a high bandwidth, low latency, low power, and cost-effective optical fabric. This breakthrough enables a true optical solution with greater than two times the power efficiency of copper interconnects, but with far longer reach and significantly higher bandwidth. In addition to exceptionally low power consumption, Celestial AI's solution provides nanosecond-class latency and excellent thermal stability, which enables deeper levels of optical interconnectivity into XPUs and switch systems. The thermal stability of Celestial AI's photonic fabric technology is a significant competitive differentiator. It enables reliable operation in the extreme thermal environments created by large, multi-kilowatt XPUs. This allows the photonics technology to be co-packaged vertically with the high-power XPUs and switches in a 3D package, enabling the photonic connection to be made directly into the XPU, rather than from the edge of the die. This stands in sharp contrast to many other CPO implementations, where the photonics engine sits adjacent to the XPU and must connect at the die edge. Celestial AI's approach results in a more compact and integrated solution, freeing up highly valuable die-edge beachfronts which can be repurposed to significantly increase the amount of HBM within the XPU package. Eliminating beachfront I.O. constraints also significantly increases the amount of package bandwidth possible for XPUs and switch systems. Celestial AI's first generation product is a photonic fabric chiplet, or PF chiplet, which integrates all the required electrical and optical components, including drivers, TIAs, equalizers, SIRDEs, microcontrollers, modulators, photodiodes, and waveguides. all into a compact form factor. This is the industry's first scale-up optical solution delivering an unprecedented 16 terabits per second of bandwidth in a single chiplet, 10 times the capacity of today's state-of-the-art 1.6T ports used in scale-out applications. Its compact form factor allows multiple PF chiplets to be co-packaged with XPUs and the scale-up switches on the other side of the link to further increase total bandwidth. Celestial AI is deeply engaged with multiple hyperscalers and ecosystem partners who recognize the disruptive potential of this technology. Notably, Celestial AI has already secured a major design win with one of the world's largest hyperscalers, who plans to use Celestial AI's PF chiplets in its next-generation scale-up architecture. These PF chiplets will be co-packaged into both the hyperscalers' custom XPUs and the scale-up switches providing connectivity. This is expected to be the industry's first large-scale commercial deployment of optical interconnects for scale-up connectivity. Beyond connecting XPUs and scale-up networks, the Photonic Fabric technology platform can enable a wide range of transformational applications over time. First is a pooled memory appliance that uses Celestial AI's Photonic Fabric to optically connect multiple XPUs to large shared external desegregated memory banks. A second use case for Celestial AI's Photonic Fabric to replace traditional electrical die-to-die connections in multi-die packages. This is just the beginning of a broad set of new applications which can be enabled from this technology. After close, we expect meaningful revenue contributions from Celestial AI to begin in the second half of fiscal 2028. Our base case forecast shows Celestial AI's revenue reaching a $500 million annualized run rate in the fourth quarter of fiscal 2028, doubling to a $1 billion run rate by the fourth quarter of fiscal 2029. Following the close of the transaction, we look forward to welcoming the Celestial AI team to Marvell. Celestial AI brings one of the industry's strongest photonic interconnect engineering groups with deep expertise in optics, advanced packaging, and high-speed interconnect architecture and systems. In addition, the CEO, founders, and key executives from Celestial AI will assume leadership roles at Marvell, continuing our successful integration blueprint from prior acquisitions. These leaders have been at the forefront of innovation and scale-up switching and photonic interconnects, and their technical depth and strategic insight will play an important role in shaping Marvell's next phase of growth. Okay, now let me transition back to Marvell's current business and outlook. As you may recall, on September 24th, I hosted a virtual call with investors where I outlined a framework for Marvell's revenue growth for fiscal 2027. At that time, we indexed our data center growth potential to Cloud CapEx. which was expected to grow 18% next year. Since then, Cloud CapEx growth expectations have increased to over 30%. Additionally, we have seen strong demand increases for our products for next year. As a result, our outlook for next fiscal year is even stronger than the expectations we discussed in September. We expect our interconnect business, which is roughly half our overall data center revenue, to continue growing faster than Cloud CapEx next year, even with the higher outlook. We expect our custom business, roughly a quarter of our overall data center revenue, to grow by at least 20% next year, also from higher than prior expectations. As a reminder, in the near term, this business remains tied to a few specific sockets. We expect custom growth next fiscal year to be higher in the second half and do not expect any air pockets in custom revenue. Next year's custom revenue forecast comprehends a transition to a next-generation XPU at a large customer, and I would note that we already have purchase orders for the entirety of next fiscal year's current forecast for this next-generation program. Our revenue forecast for this program remains consistent with our prior expectations. As we look beyond fiscal 27, we have several high-volume custom designs in development, with meaningful revenue expected from these programs in fiscal 28, consistent with our prior communications. For the remaining quarter of our data center business, which includes storage, switching, and other products, we now expect revenue to grow by at least 15% next year, up from our prior expectation of 10% growth, driven in particular from increased demand for our switching products. Adding all of this up, we now expect Marvell's data center revenue to grow year over year by more than 25% next fiscal year. Please note that this forecast does not include any revenue from the pending acquisition of Celestial AI. And for our communications and other end markets, we continue to expect 10% revenue growth next year. Putting it all together, we are looking forward to a strong fiscal 2027. Let me provide more details for each of our end markets. In our data center end market, we delivered record third quarter revenue of 1.52 billion, representing 2% sequential growth and 38% year-over-year growth. Revenue exceeded our guidance for flat sequential performance, driven by increased demand across our networking portfolio. Our industry-leading PAM DSPs, TIAs, and drivers continue to see strong demand, with revenue from our optical interconnect businesses growing by double digits sequentially on a percentage basis. Our data center storage and switch businesses also posted double-digit sequential revenue growth on a percentage basis. As expected, this strength was partially offset by a sequential decline in our custom revenue due to lumpiness in demand. Looking ahead to the fourth quarter, We expect revenue growth from our data center and market to accelerate, growing sequentially in the high single digits on a percentage basis in approximately 20% year over year. This growth is expected to be driven by a rebound in custom and continued growth in interconnect, switching, and storage. Let me now highlight broader trends we are seeing in both our established data center businesses and our newer growth initiatives. I'll start with our interconnect business where we offer the industry's broadest and most comprehensive high-speed connectivity portfolio. As our PAM DSP products enter into their fifth year of 800 gig production, demand for our solutions continues to accelerate, underscoring the strength of the platform we have built through more than a decade of sustained investment in core technology. Our playbook is simple. First to market, first to ramp, with timely follow-up, optimized solutions to maintain leadership. We did this at 400 gig, 800 gig, and now at 1.6T, where we established early leadership with our first 5 nanometer solution, which sampled in February 2024. We then accelerated the launch of our optimized 1.6T solution and sampled our 3 nanometer product just one year later, in February 2025. As a result, we are enabling volume production of pluggable 1.6T transceivers across the industry. We began shipping our 1.6T products in the second half of this fiscal year and are seeing exceptionally strong demand heading into next year. This consistent execution enables us to secure qualifications at major customers well ahead of competitors, reinforcing market leadership. While 1.6T has a long life cycle ahead, we have already demonstrated at the Optical Fiber Conference this past April 400 gig per lane technology to drive the next industry transition to 3.2T. The demonstration was on three nanometer technology, but we expect production deployments, which are expected in calendar 2028 to require a two nanometer solutions to optimize module power. In addition to our PAM portfolio, we are also enabling longer reach connectivity with our coherent light solutions to support campus wide data centers in the era of million GPU AI clusters. We introduced our 1.6T coherent light solution last year, expect to start shipping next year, and we are on track to deliver our 3.2T solution the year after. Now, complementing our DSPs, our high-performance analog TIAs and drivers remain foundational to our electro-optics leadership. Our TIAs have significant performance lead at 1.6T, and we are seeing strong broad-based demand for our products, which are enabling the entire ecosystem. We have also secured several LPO sockets across multiple hyperscalers and are leading this emerging category as well, although deployments remain relatively small today in the context of a very large transceiver market. Turning to two of our newer interconnect growth drivers, AECs and retimers. Both markets are undergoing a shift to high-speed PAM-based solutions, an inflection point that is perfectly aligned to Marvell's strengths. For the past year, we have been collaborating closely with the cable ecosystem to enable 100 and 200 gig per lane AECs, and we are now on the cusp of substantial product ramps. We have secured design wins with significant share positions at two tier one US hyperscalers, along with multiple wins at emerging hyperscalers. We are seeing strong demand for our AEC DSPs, and we expect our share to continue to grow as PAM-based 100 and 200 gig technology becomes dominant. Our PCIe Gen 6 retimers are also gaining broad traction. We are currently engaged with more than 30 customers and partners, including hyperscalers, cable partners, and system OEMs and ODMs. We are already designed into more than 10 sockets, and we expect to enter production in the second half of next year with full revenue contribution in fiscal 2028. We expect our AEC and retimer revenue in aggregate to more than double from this year to next year. Turning to our data center switching business, which continues to gain momentum, we expect revenue to exceed $300 million this fiscal year. We expect strong, sustained demand for our 12.8T products, reflecting our key customers' plans to rely on 12.8T as a workhorse in their scale-out networks for several more years. In parallel, we've begun shipping our next generation 51.2T products with a strong ramp expected next year. As a result, we now expect our data center switch revenue to surpass $500 million next fiscal year, faster than what I had indicated last quarter. We will also introduce our 100T products next year as we continue to execute our long-term roadmap. We are also accelerating our scale-up switch efforts. These next-generation solutions are as complex as 100T scale-out switches, with high radix supporting up to 576 ports. We are fast-tracking our scale-up switch development by leveraging our in-house, high-speed, low-power certies and experience in developing extremely large, reticle-sized chips. We are deeply engaged with key customers and partners and are on track to sample our UA-Link 115T and 57T solutions in the second half of fiscal 2027, with volume production expected in fiscal 2028. In parallel with our UA-Link development, we are also collaborating closely with key customers on our eSun solutions, completing our scale-up roadmap to address both standards. Turning to our custom business, we expect accelerated growth over the next several years, fueled by our growing portfolio of design wins. At our custom event in June, we disclosed a total of 18 XPU and XPU-attached socket design wins. Several of these are already in volume production, with the remainder on track to ramp over the next couple of years. Since that event, our team has secured additional custom sockets, which represent more than 10% of the $75 billion lifetime revenue opportunity funnel we outlined in June. These new wins include multiple XPU-attached sockets, an XPU win at Emerging Hyperscaler, And most recently, a design win for an electrical IO chiplet inside an XPU. This is a new trend we see emerging where customers and partners are partnering with Marvell to gain access to our high performance networking technology to be integrated along with their core compute engines within multi-die packages, which are becoming more prevalent in a reticle size constrained world. This provides Marvell another avenue for custom growth and sockets which were otherwise not available to us as full XPUs. Now let me provide additional perspective on the rapidly developing XPU attach market. These attached devices offload specific functions such as network IO, memory expansion, and security from XPUs, GPUs, and CPUs, freeing them up to exclusively focus scarce compute resources on the primary AI workload. We now have more than 15 XPU attach wins, and today let me highlight two major use cases emerging across multiple hyperscalers as they architect their next generation custom accelerated infrastructure. The first use case is for custom foundational and smart NICs, and Marvell has already secured multiple design wins across several hyperscalers. Our customers plan to attach these NICs not only to their custom accelerators, but increasingly to their broader AI server fleets. which at large hyperscalers can exceed one million units or more annually. The second use case we are seeing emerge in the XPU attached market is for CXL-based products that enable memory expansion and acceleration to overhaul the memory wall challenge. We made early strategic investments in CXL several years ago, and we have now secured five unique sockets across two tier one hyperscalers, US hyperscalers, and are deeply engaged with the third. The first custom CXL design win started shipping already in the first quarter of this year and is entering volume production now. A second socket focused on near-memory compute is expected to enter production a year from now. The remaining CXL design wins are slated for production in calendar 2027. Our solution's technical advantages include support for both DDR4 and DDR5, larger memory capacity and compression, along with deep partnerships with the leading memory and CPU providers. While our initial win centered on offloading from CPUs, more recent wins attach directly to XPUs, which are deployed in far greater numbers. For several upcoming high volume CXL production ramps, Marvell is leading the transition to next generation memory architectures. We expect the XPU attach market to continue to evolve at a rapid pace, and we are very encouraged to see the attach rate of our solutions exceeding our initial expectations. Based on designs we have already won just for the NIC and CXL use cases, we have line of sight to revenue exceeding $2 billion by fiscal 2029, and a significantly higher forecast in the following years. This is why we are so excited about our data center business. Interconnect, switch, XPU, XPU attach, storage, scale up, scale out. We are everywhere in the AI rack, and we are just getting started with what we expect to be a massive TAM ahead of us. All right, let me now move to our communications end market, where we delivered 557 million in third quarter revenue, which grew 8% sequentially and 34% year over year. Excluding revenue from the divested automotive Ethernet business, the implied revenue growth for Marvell's communications end market for the third quarter would be closer to 20% sequentially and 50% year over year. These strong results were driven by normalizing customer inventory levels and strong adoption of our refreshed product portfolio at both our enterprise, networking, and carrier infrastructure customers. Looking ahead to the fourth quarter, we expect revenue from our communications end market to grow sequentially in the low single digits on a percentage basis, with year-over-year growth where approximately 25% is reported and closer to 40% year-over-year, excluding our former automotive Ethernet business. We expect strong sequential growth from carrier and ongoing growth from enterprise to be partially offset by a steep seasonal decline in our consumer business. We expect the enterprise networking portion of our communications and market to reach an annualized revenue run rate of approximately $1 billion in the fourth quarter, which would reflect the complete normalization of customer inventory levels in that business. Going forward from this $1 billion annualized revenue run rate, we expect this business to grow in line with enterprise IT spending. While our carrier business has also been recovering, and our fourth quarter guidance implies this business to almost double from the year-ago quarter, we see continued recovery until this business also settles into its long-term growth trajectory, which would be in line with carrier CapEx. So in summary, during the third quarter of fiscal 2026, we continue to expand operating margins, grow earnings per share, and set new revenue records. We executed our $1 billion accelerated stock repurchase program, in addition to repurchasing $300 million of stock through our ongoing buyback program, funded by our growing operating cash flow. Looking ahead, we expect momentum to continue in the fourth quarter, with total company revenue forecast at $2.2 billion at the midpoint, representing 6% sequential and 21% year-over-year growth. Excluding revenue from our former automotive Ethernet business, implied year-over-year revenue growth from Marvell's go-forward business would be approximately 24% at the midpoint of our forecast for the fourth quarter. As I noted in my opening remarks, we are seeing robust demand signals and strong bookings across our entire portfolio, positioning us for a strong fiscal 2027 and even faster growth in fiscal 2028. Customers are planning to add substantial AI capacity over the next several years and are partnering closely with us on long-term technology roadmaps and coordinated capacity planning. In addition to benefiting from rapid market expansion, We have several of our own unique growth drivers. Taken together, we expect strong market tailwinds and new product cycles to drive significant growth inflections ahead of us. As a result, we see a path for our data center revenue growth in fiscal 2028 to accelerate meaningfully above the 25% growth we expect in fiscal 2027. So look, we covered a lot of ground today, and so before I close, let me just quickly highlight a few key takeaways. We have activated Marvell's M&A playbook and expect to close the transformational acquisition of Celestial AI in the first quarter of next fiscal year, enabling us to fully capitalize on the massive scale of opportunity. Second, our interconnect business is firing on all cylinders. Our electro optic interconnect platforms continue to lead the market with world-class roadmaps across the board and accelerating demand. Finally, when you put it all together, we are positioned for several years of exceptional performance, building on this fiscal year's projected revenue growth of more than 40%. I look forward to updating you on our progress over the coming quarters. And with all of that, I'll turn the call over to Willem for more detail on our recent results and outlook.