The News: Marvell Technologies Inc (NASDAQ: MRVL), a provider of data infrastructure semiconductor solutions, reported financial results for the first quarter (Q1) of fiscal year 2024. Read the Marvell Press Release here.
Marvell Fiscal Q1 2024: AI and ASICs are Marvell’s Shining Stars
Analyst Take: In fiscal Q1 2024 Marvell generated revenue of $1.322 billion, $22 million above the midpoint of the company’s guidance provided on March 2, 2023. GAAP net loss for fiscal Q1 2024 was $264 million, or $0.31 per diluted share. Cash flow from operations from Q1 was $208.4 million.
Marvell President and CEO Matt Murphy highlighted that the company delivered fiscal Q1 2024 revenue of $1.322 billion, above the midpoint of guidance, and forecasting sequential revenue growth in fiscal Q2 2024. Marvell is expecting revenue growth to accelerate in fiscal H2 2024, accompanied by gross and operating margin expansion.
We are impressed that Marvell has identified AI as a key growth driver, which the company is enabling with its network connectivity products and cloud optimized silicon platform. While Marvell is still in the nascent stage of its AI ramp, the company is forecasting AI revenue to at least double from the prior year and to continue to grow swiftly in the coming years.
In other words, Marvell is forecasting an AI revenue growth of over 100% compound annual growth rate (CAGR) across the fiscal 2023 to 2025 timeframe. This includes the expectation that generative AI implementations involving video and images can provide a tailwind to overall storage and exabyte growth, both in HDD and flash.
Notably, Marvell’s enterprise networking end market fiscal Q1 2024 revenue was $365 million, growing 27% year-over-year and flat sequentially, beating the company’s guidance. Marvell’s Q1 enterprise results reflected a strong ramp in custom ASICs, offset by its planned reduction in channel and customer inventory of its merchant products. We find that Marvell’s ASIC portfolio can fulfill the growing demand for customized ASIC technology as we expect customized silicon to gain a larger portion of the overall ASIC pie into the foreseeable future.
The key highlights of Marvell’s Fiscal Q2 2024 Financial Outlook include:
- Net revenue is expected to be $1.330 billion +/-5%.
- GAAP gross margin in expected to be 44.3% – 46.8%
- Non-GAAP gross margin is expected to be approximately 60.0% – 61.0%.
- GAAP operating expenses are expected to be approximately $694 million.
- Non-GAAP operating expenses are expected to be $455 million.
- Basic weighted average shares outstanding are expected to be 861 million.
- Diluted weighted average shares outstanding are expected to be 865 million.
- GAAP diluted loss per share is expected to be $(0.16) +/- $0.05 per share.
- Non-GAAP diluted income per share is expected to be $0.32 +/- $0.05 per share.
From our view, Marvell is solidly positioned to meet its fiscal Q2 2024 guidance. Specifically, Marvell’s Nova offering, a 1.6T PAM4 DSP optimized for high-performance fabrics in AI/ML environments, focuses on delivering breakthroughs in optical connectivity by enabling the highest speed of data movement in cloud AI/ML and data center networks.
Powered by a groundbreaking 200 Gbps/lambda optical DSP, Nova doubles the optical bandwidth of current solutions to enable 1.6 Tbps pluggable modules for scaling AI clusters. Nova extends the multi-source pluggable optics ecosystem and provides the advanced technology needed to alleviate data center network bottlenecks as the industry transitions to 51.2 Tbps networking architectures.
Moreover, Marvell’s 3nm debut pushes the innovation envelope across the semiconductor market, representing good news for data infrastructure environments such as data centers. The new building blocks are integral to Marvell’s portfolio strategy of developing a comprehensive silicon IP portfolio for designing chips that advance the bandwidth performance and energy efficiency of data infrastructure. These technologies support the full range of semiconductor packaging options from standard and low-cost Redistribution Layers (RDL) to silicon-based high-density interconnect.
The 3nm offering follows Marvell’s initial data infrastructure SerDes silicon based on TSMC’s 5nm process. The new offering is combined with 2.5D and 3D packaging for advanced semiconductors and aims to decrease the required number of pins and traces, as well as circuit board space, that can yield decreased costs across the data infrastructure value chain. With data center capacity and bandwidth demands expected to skyrocket into the foreseeable future due to major drivers such as AI and cloud compute requirements, we anticipate that Marvell SerDes link technology can prove a significant cost difference maker as well as cost saver.
Marvell Fiscal Q4 2023 and FY 2023: Key Takeaways
Overall, we believe that Marvell turned in an impressive quarter fueled by rapidly burgeoning ecosystem-wide demand for AI and expanding demand for custom ASICs in the enterprise networking segment. Marvell’s Nova product is ready to meet the bandwidth boom clouds are facing as data traffic is forecasted to grow at over 40% per year. Notably, it’s growing even faster inside the data center, where PAM4s are mostly used. Some estimate that East-West traffic between racks in data centers is now 70% of traffic. As a result, clouds are investing heavily in switched and optical interconnects powered by DSPs such as Nova.
Plus, Marvell’s 3nm portfolio can broaden and catalyze data infrastructure market adoption of Marvell interconnect, SerDes, and parallel interface features as computing system applications, such as AI, cloud, networking, 5G, automotive, and custom solutions, expand in scope, intricacy, and use case range. Marvell is shrewdly playing in the right market segments needed to power AI silicon innovation and meet its guidance of improved performance in fiscal Q2 2024.
Daniel Newman and his co-host of The Six Five Webcast, Patrick Moorhead of Moor Insights and Strategy discussed Marvell’s earnings in their latest episode. Check it out here and be sure to subscribe to The Six Five Webcast so you never miss an episode.
Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.
Other insights from The Futurum Group:
Marvell Breaks on Through to the 3nm Process Realm
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
