Marvell Tech reports record $2.075 billion revenue for Q3 2026, driven by data center growth and strategic acquisition of Celestial AI to enhance AI capabilities.

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 listen-only mode. A listen only mode. If anyone should require operator assistance during the conference, please press Star 0 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 Minke, 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 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 8-K, 10-K, 10-Q 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 press release 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 will 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 KB filed 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? Thank you, 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 end market. As a result, non-GAAP earnings per share of $0.76 exceeded the midpoint of guidance by $0.02 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's, 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, Aquancha, Inphi and Innovium. 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's. 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 Total Addressable Market (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's, 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 AIs 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'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's solution provides nanosecond class latency and and excellent thermal stability which enables deeper levels of optical interconnect connectivity into XPUs and switch systems. The thermal stability of Celestial AI's'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 and 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's approach results in a more compact and integrated solution freeing up highly valuable die edge beachfront 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 but possible for XPUs and switch systems. Celestial AI's'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, SERDEs, 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's is deeply engaged with multiple hyperscalers and ecosystem partners who recognize the disruptive potential of this technology. Notably, Celestial AI's has already secured a major design win with one of the world's largest hyperscalers who plans to use celestial AIs PF chiplets in its next generation scale up architecture. These PF chiplets will be co packaged into both the hyperscaler's custom XPU's 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's photonic fabric to optically connect multiple XPUs to large shared external disaggregated memory bank. 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's to begin in the second half of fiscal 2028. Our base case forecast shows Celestial AI's'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's team to Marvell. Celestial AI's 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's 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 2028. 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's. And for our communications and other end market, 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 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 end market to accelerate, growing sequentially in the high single digits on a percentage basis and 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 400Gig, 800Gig 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 3 nanometer technology, but we expect production deployments which are expected in calendar 2028 to require two nanometer solutions to optimize module power in 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 1 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 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. 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 serdes 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&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 I O 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 I O memory expansion and security, 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 customer accelerated infrastructure. The first use case is for custom foundational and SmartNics 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 1 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 over call 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 solutions 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 wins centered on offloading from CPUs, more recent wins attached 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 Total Addressable Market (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 refresh 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 of approximately 25% as 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 steep seasonal declines in our consumer business. We expect the enterprise networking portion of our communications end 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 2020 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. First, we have activated Marvell's M and A Playbook and expect to close the transformational acquisition of Celestial AI's 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.

Thank you Matt and good afternoon everyone. Let me start with a summary of financial Results for the third quarter of fiscal 2026 Revenue in the third quarter was $2.075 billion, growing 37% year over year and 3% sequentially. Data center was our largest end market, contributing 73% of total revenue. Our communications and other end market contributed the remaining 27% of revenue. GAAP gross margin was 51.6%. Non GAAP gross margin was 59.7%, an increase of 30 basis points sequentially. Moving on to operating expenses, GAAP operating expenses were $712 million including stock based compensation, amortization of acquired intangible assets, restructuring costs and acquisition related costs. Non GAAP operating expenses came in at $485 million. In line with our guidance, our GAAP operating margin was 17.2% while our non-GAAP operating margin was 36.3%. I'm pleased that we drove 150 basis point sequential increase in non-GAAP operating margin for the third quarter. GAAP earnings per diluted share was $2.20, including the gain from the divestiture of our automotive Ethernet business. Non GAAP earnings per diluted share was $0.76, reflecting year over year growth of 77%, which is more than double the pace of revenue growth, demonstrating the significant operating leverage in our model, non-GAAP earnings per diluted share increased 13% sequentially. Now turning to our cash flow and balance sheet, Cash flow from operations in the third quarter was a record $582 million, growing approximately 121 million from the prior quarter. Our inventory at the end of the third quarter was 1.01 billion, a decrease of 37 million from the prior quarter. During the quarter, we executed our 1 billion accelerated repurchase program. In addition, we repurchased 300 million of our stock through our ongoing capital return program and returned 51 million to shareholders through cash dividends in the quarter. As of the end of the third quarter, our total debt was 4.5 billion, with a gross debt to EBITDA ratio of 1.47 times and a net debt to EBITDA ratio of 0.58 times. Our debt ratios have continued to improve as we have driven an increase in our EBITDA. As of the end of the third fiscal quarter, our cash and cash equivalents were 2.7 billion, an increase of 1.5 billion from last quarter, reflecting the addition of proceeds from the divestiture of our automotive Ethernet business and ongoing cash generation from operations, offset by our capital return of 1.35 billion between stock repurchases and dividends. Turning to our guidance for the fourth quarter of fiscal 2026, we're forecasting revenue to be in the range of 2.2 billion plus or minus 5%. We expect our GAAP gross margin to be between 51.1% and 52.1%. We expect our non-GAAP gross margin to be between 58.5% and 59.5%. Looking forward, we anticipate that the overall level of revenue and product mix will remain key determinants of our gross margin in any given quarter. For the fourth quarter, we project our GAAP operating expenses to be approximately $741 million. We anticipate our non-GAAP operating expenses to be approximately $515 million, growing from the prior quarter as we continue to invest in the business and anticipate higher employee bonus payouts reflecting a strong expected finish to the fiscal year. For the fourth quarter, we expect GAAP and non-GAAP other income and expense, including interest on our debt, to be approximately 30 million. We expect our non-GAAP tax rate of 10%. For the fourth quarter, we expect our basic weighted average shares outstanding to be 850 million and our diluted weighted average shares are standing to be 857 million. We anticipate GAAP earnings per diluted share in the range of $0.31 to $0.41. We expect non-GAAP earnings per diluted share in the range of $0.74 to $0.84. Looking ahead to fiscal 2027, Matt already provided an update on our strong revenue growth expectations. We intend to continue to invest in growing our business while driving operating leverage and expect our non-GAAP operating expenses to increase at roughly half the rate of the revenue growth next fiscal year. Keep in mind that we typically see a mid single digit sequential increase in OPEX on a percentage basis in the first quarter. This forecast for next year's OPEX does not include any additions from the acquisition we announced today. I will provide that forecast separately. Regarding taxes, we expect our non-GAAP tax rate to move to approximately 12% next fiscal year. Turning to the acquisition we announced today post closing, we expect the addition of Celestial AI's to add approximately 50 million in annual operating expenses. We expect Celestial AI's to start generating meaningful revenue in the second half of fiscal 2028, at which point it is expected to become accretive to our non-GAAP earnings. We plan to fund the acquisition through a combination of stock and cash on hand and do not intend to take on additional debt. We have a strong balance sheet and are generating robust operating cash flow as a result. In parallel with paying for the acquisition, we plan on continuing to return capital to stockholders through dividends and buybacks. In summary, we're executing on our strategy to drive strong revenue growth while delivering operating leverage. In addition to organic investments, we are actively deploying our strong balance sheet to acquire a transformational asset that we expect to further strengthen our capabilities and increase our addressable market. With that, we're ready to start our Q and A session. Operator, Please open the line and announce Q and A instructions. Thank you.

We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star2 to remove your question from the queue. In the interest of time, please restrict yourself to one question only. If you have additional questions, please rejoin the queue at this time. We'll pause momentarily to assemble our roster. Thank you. Our first question is from Ross Seymour with Deutsche Bank. Hi guys.

Thanks for letting me ask a question. Matt, I appreciate all the details you gave about how to think about next year. If I run through those numbers, basically it sounds like you're implying somewhere around $10 billion in revenue for next year. So I guess first of all, is that in the right ballpark? And then back in June you gave a longer term target for fiscal 29 for your business, especially on the AI side of things. How does what you're looking for next year get you aligned to those long term targets?

Thank you, Ross. I think that's actually a great way to tee up the Q and A here. So, yeah, a couple things. I think you're absolutely in the ballpark when you add up the numbers I gave you on 10 billion for next year. And I think that's a great target actually, by the way, that motivational for us as a team to go drive. And just as a reminder, this is just based on the Marvell Organic Plan. No MA contribution. A couple things about next year and then I'll actually give you some commentary on how you think about that slope we're on for next year. Another thing I would note, I didn't say in my prepared remarks, but we do expect sequential revenue growth next year every quarter. So year over year we see a nice growth throughout the year. But I would say the second half of the year stronger than the first and with I think a really compelling exit rate to to fiscal 2027 now it's a little, you know, far out to go all the way to 29, let's say. But let me just Give you a pass sort of on where we're headed and how we think about fiscal 2028 and how we build on that strong second half we see next year. So a couple things maybe to talk about those same businesses. So first on custom and just as a reminder, I mean basically we quadrupled that business from calendar 23 to 24. We doubled it from calendar 24 to 25. We're saying it's going to be up about 20% this next year. But then when I look at the year after with all this goodness from XPU attach plus a new meaningful XPU socket ramping and the other programs continuing, we see the custom business action in fiscal 2028 doubling off of 27. So we see a re acceleration big time in that year. And that puts us on a nice trajectory towards our growth targets in fiscal 2029 in custom coming off strong second half next year and then fiscal 2028 on interconnect. Look, it's early, but we do expect that business should continue to outgrow capex. It's done that for a long time. Look, if you just said, Hey, 20% CapEx growth in fiscal 2028 and nobody knows what that number is, but just peg that in there for now, we'll definitely grow above that. And I would say our customer forecasts support a much higher number than that. But just as a base case, just assume CAPEX is 20 that year and so optics would grow faster. And then for storage switch and the other part of data center, just assume 10% growth in fiscal 2028 over 27. I think that's a reasonable set of assumptions to use based on what we see. And so when you actually add all that together, you come up with a number bottoms up, which looks more like 40% growth in data center in fiscal 2028. So that's what I was talking about in my lead in which was strong data center 45% growth basically this year in data center targeting 25% next year and then 40% the year after. And if you actually look at it over the cycle where we started back in calendar 23, that's like a 50% kind of compounded growth rate. We'll be growing our data center business. So the 28 numbers I'm laying out for you are not totally crazy. And then just for reference, if you just sort of plug in comms and other growing at GDP for fiscal 2028 just to keep it simple, again it's too far out. You basically get Marvell growing like another 30% in fiscal 2028, which would be above where we're looking for 27. So kind of a long answer, but maybe what's been on a lot of investors mind is how do you get from where we are to where we're going. But certainly we're very optimistic about our outlook over the next couple of years. And then things like Celestial AI and some of these other big growth drivers, those are going to kick in starting in fiscal 2028, but then really in 29 and 30 and beyond. And I think through the end of the decade it's looking very bright for Marvell. Thanks for the question.

Thank you.

Our next question is from Harlan sir with JP Morgan.

Yeah, good afternoon. Thanks for taking my question and congrats on the Celestial acquisition today, Matt, your lead AI customer announced their next generation 3 nanometer AI XPU product and I think you just said you have secured purchase orders for this program for the entirety of next year. But your lead customer also pre announced their next generation 2 nanometer XPU product. Today as well, which we believe you're. Also involved with, especially now with the Celestial team. I remember at the June Custom AI event that the team talked about concurrent design programs. So in other words, at the same time you're towards the tail end of your customers 3 nanometer design. You're already starting to work with customers on their next generation 2 nanometer designs. You know, during our fireside chat in September you talked about the team being heads down focused on two nanometer designs. You even talked about next generation A16 and A14 technologies technologies. Can you just give us an Update on your sub 3 nanometer design win pipeline? Does it include both XPU XPU attached programs and what's the timeline for these programs to ramp into production?

Thank you, Harlan for the question. And yeah, just you know, in the spirit of the customer confidentiality and details, you can't go into too much. But what I would say which is incorporated into our numbers is that our product transition from where we are today with our lead XPU customer to the next one is baked into all the numbers I gave you and I got the backlog and I got the orders and you know we got great visibility there on the 2 nanometer. Very exciting. I mean there's a number of programs that we're working on in this area and that's going to be a workhorse process technology for us. But same as I said and I would just say that the design funnel keeps increasing there and the power benefits you see are compelling and I think that'll continue. I mean that's really where AI is sort of kicked in to keep the Moore's Law train running is really just the power savings are worth real OPEX dollars when you can save power dissipation from one generation to the other. So nothing really new to report there other than just heads down execution. And we do see strong product ramps coming over this time period I gave you, especially into fiscal 2028 where you'll start seeing some of the 2 nanometer products ramp. And my team internally, just to give them a shout out, is executing extremely well. The whole team you saw that got up there at the AI Investor event in June. My engineering leadership executing extremely well across the board on the core ip, the nodes, the packaging, you know, you name it. So we're really firing on all cylinders internally. Thanks, Harlan.

No good. Great execution. Thank you.

Thanks.

Our next question is from Tory Swanberg with Stifel.

Yes, thank you. And congratulations on the acquisition. I had a question on celestial AI, Matt, so when you gave those 500. Million and 1 billion targets, would that be for the Pflink products only or. Would that also include some of the.

Potential businesses with memory? Yeah. Couple things to note maybe at the highest level, the first is the revenue targets and also the earn out that we're all going to drive for is all based on Celestial AI in totality. Now the reality is from a lead perspective, the PF Chiplet is sort of what's going to go first, but everything's on the table and there's just tremendous activity that that team has driven, punching way above their weight in the industry in terms of the engagements they have. So those are all in numbers, but clearly going to be driven more from the PF Chiplet side in terms of the revenue build in end of fiscal 2028 and then the end of fiscal 2029. Great, thank you.

Yeah.

Our next question is from Chris Casto with Wolf Research.

Yes, thank you. Also a question about Celestial and with that revenue ramp that you're expecting at the end of fiscal 28, beginning of fiscal 29, can you talk about the breadth of, of that and you know, obviously I'm sure you're not willing to name the customers right now, but is it, you know, a fairly narrow customer base? What's the, you know, and going over time, how diversified is that revenue stream? Yeah, no, great question, Chris. I think that the engagement is certainly broad, but remember we're, there's a bold effort across the industry to really, you know, bring this product into volume, stable production and it's going to take, you know, real big companies and a few of them to do that. And so yeah, we have strong engagement across the board, but there will be, you know, and we're fortunate with this that we have, as I said on the call, we have one, you know, tier one hyperscaler that we're engaged with on this that I think is a great partner and a great teaching customer and a great way to call a great customer to collaborate with, to really go make this happen. So it's very exciting to see Celestial come into Marvell because just as a reminder, we have an incredibly strong internal silicon photonics organization. I mean this team that we got from INFI pioneered this technology. We drove it into high volume production and market leadership in the 100 and then 400 gig ZR business, now 800 gig. So all the DCI stuff they enabled, that's on the back of very, very innovative silicon photonics technology. So we have a ton of know how here. So then when we bring in Celestial, we're all going to benefit from that common set of learnings and then having a lead customer pulling us through is very exciting. So I think this is just the first phase here, Chris, that you're going to see. But certainly the interest is there across the industry and this is just so evident to us over the last couple of years and really pronounced at the last strategic review. It's a process I run every year where we do our capital allocation review with everybody. And that was a couple months back. And we're just staring at this just giant transition to photonics inside the data center and that TAM and we looked at could we do it ourselves, could we do it with the parts? And we just concluded this is a home run to bring them in with our internal team plus really a lead customer to pull us through the first wave. But beyond that, we see very broad adoption beyond that timeframe.

Thank you.

Yep.

Our next question is from Harsh Kumar with Piper.

Yeah. Hey guys. Congratulations Matt and the team on a lot of good developments. Matt. I had two, so I'll just ask them both together. The first one is on custom. You specifically mentioned at least 20% growth for next year. Seems like you've got a lot of good things happening, a lot of good stuff ramping. And I was hoping that you could bookend that number for us. So at least 20% to me seems like that's what's in the bag. But maybe you could give us a sense of what, you know, if everything worked out right for you, what could be a normalized 20, 27 F5 growth rate for customers and Then the second question was you gave us a lot of color all the way to FY 2028 and this is kind of not the norm on Wall Street. Most companies go out a quarter, as you well know. So my question is, and this we've been getting from a lot of investors already is what is your comfort level and what is the visibility on some of this long term revenue materializing that you're talking about?

Sure, a lot in there, but let me unpack it. I think the first is you should definitely model the 20 and I think that is a good number, that's a good safe base case number. And remember it's a handful of programs today, so I think I would just go for that for now. Clearly we're going to be ready if people want to do more. But I am also mindful of some of the history on this custom business where either people got ahead of themselves or there's a lot of noise in the system. And you know, it's just look, we've got strong backlog. We got that covered, that's great. If we do better later, we'll definitely update you guys. But we got a very, very good outlook for next year in that business and then obviously the year after it really builds. And kind of part of your question is it's not 20% sort of linearly meaning the second half, especially in custom. And the exit rate is much higher than where we are now. And that's simply because we're building all this momentum into, into fiscal 2028 and then yeah, on the sort of guide quarter at a time, you know, that's definitely been our M.O. historically. I think given the multi year cycles we're looking at now in the AI infrastructure build and also quite frankly just being sensitive to investor feedback about looking at some pretty ambitious targets we've set for the company several years out and then, and then wondering, well, how do you see yourselves getting there? And I just view it as it's incumbent on me to paint the picture for folks and share what I see as kind of base case assumptions as I mentioned. I mean these are what I view as the base case, not dream, the dream, not putting anything in. That is sort of a maybe. I think it's very rational how we came up with our fiscal 2027 outlook and even our fiscal 2028, if you just look at it bottoms up on the custom, we should definitely be able to do that because we know those programs. I mean if I say capex is growing 20, it certainly may do better and our optics businesses are Growing way above capex. So that has some legs to it. And then look, even in a quarter, that other category in switching and storage and other has also floated up. So there's still a lot of goodness out there. But I think just from a modeling perspective, that's what you should think about. And I would say finally, it really though, is tied to our customer planning. I mean, they're realizing to go get all this build to happen, they've got to provide visibility several years out. That's giving us increased confidence in our outlook because we're having to plan around that. Our R and D schedules, our capacity, our ramps, all that stuff has got to go kind of, you know, six to eight quarters out now to really be ready. So that's also part of why I felt it was worth sharing this perspective for investors. And again, I think it's timed well as well with Celestial because then that thing just kicks in beyond the timeframe. I'm talking about fiscal 2029, I mean some of it in 20, in fiscal 2028, but then really 29, 30 and beyond. So hopefully that was helpful. Thank you so much for the question.

No, very helpful. Thank you, Matt.

Our next question is from Blaine Curtis with Jeffrey.

Hey guys, thanks for taking my question. I want to ask you, Matt, I know it's always tough to talk about customers, but you did file an 8K and it says, you know, you granted Amazon a warrant for a million shares to buy Potamic fabric. So I guess one very simply, is that your lead customer and if you can maybe talk about that expanding relationship. Obviously there's been a lot of back and forth your status of that customer, but this seems like a positive in terms of your engagement for the next generation. Yeah. And great job checking out the EDGAR website. Lane, you're always one step ahead. Yeah, I think it's great. So first we did file form 8k talking about really an extension, if you think about it, to the Warren agreement we have, which is effectively adding a new swim lane. If you can believe it, it was only one year ago that we announced with AWS a warrant and strategic arrangement with them. Back then a year ago, it was really bucketed between AI custom products and then networking products. And so think of this as just adding another swim lane of photonic fabric products to the mix. And all in the potential of each of these is quite significant. So that's a positive on the first one that's out there. Also pleased to get a very, very strong support in our press release for the acquisition from AWS that was Positive. And so when you sort of look at all the things we're saying and all the data that's out there, you can sort of figure out where we're headed with this and who is helping drive this technology forward. We're very, very excited about where we can go with this technology, especially with our lead tier one hyperscaler, but then also the rest of the market, which I think will be shortly behind them once we can really put the full force of Marvell behind this. So thanks for catching that and giving me a chance to talk about it. It's pretty exciting to see, you know, really if you think about it, we've got the warrant agreement, we've got an aggressive earn out, you know, that the team is driving, you know, which is, which is a $2 billion number by the way, through the end of, of fiscal 29. So all this adds up to just a great sort of set of incentives for everybody to go execute like crazy and bring this into production. Thanks, Glenn. Thanks, Matt.

Our next question is from Vivek Arya with Bank of America.

Thanks for taking my question, Matt. I had two kind of questions on the data center, one on optics and one on custom. So on optics, why correlate it to cloud capex? Why not do growth of AI accelerators which is expected to be much faster than the 30% and then on the custom side you mentioned 20% as the baseline growth. Is that because the second customer is supposed to come on board or is it because you will grow with that first customer? And I ask about the second customer because they don't have a history of ramping big ASIC program. So I just wanted to get your overall views on optics and why correlated to capex. And then on the custom side just kind of puts and takes of the second customer that's supposed to come on board.

Thank you. Yeah. Hey, thanks Vivek. Yeah, so on your first question, I mean just the rationale was just to give just a broad proxy to the investment community about how to think about our business off sort of a very common metric, which is capex. I agree with you. You know, the optics business is fundamentally driven by AI and AI acceleration and that's why it's been growing so far above capex each year. But I think, you know, this was just in the interest of providing some pretty broad brushstrokes. But you should certainly assume that the optics piece is tied to AI, which is growing faster than capex. So that's a fair assumption. But just this was really in the spirit of making this A proxy and then on the growth next year. Yeah, that's all still driven by the way to think about. It is mostly our current business today. So there's a product transition with our lead customer from one generation to another in there. There's some XPU attached that's kicking in the second half. That's going to lead to the 28 and 29 revenues I was talking about. But the next bigger XPU customer we have, not much of that really you should count on for next year. It's really the year after and that's captured in the doubling from fiscal 27 to 28. But I think we've got a very rational base plan for that that we think is achievable and then obviously if things improve or get better then we would up those numbers. But I think what we're trying to do right now, Vivek, is just paint a very, a very rational, clear picture for people and then we'll obviously update along the way more on a granular basis as we go forward. Thank you, Mike. Yeah.

Our next question is from Christopher Rowland with Susquehanna.

Thanks for the question and congrats on the results. So I think your main competitor in ASIC has moved to providing racks, not just silicon. And then with this acquisition and kind of given the increasing complexity we're seeing out there, might you be moving to systems and then perhaps even rack level solutions as well? And do you have the capabilities to do that? Thanks so much, Matt.

Yeah, hey, thanks Chris for the question. And I would sort of answer the second part which is we very much looking at this as a rack level solution in totality and that is all the various flavors of optical interconnect. I rattled through a bunch of those. We're the one stop shop right from AECs, traditional DSPs, retimers, LPOs, photonic fabrics and then scale up and scale out switching and XPU attached sockets and circuits to go make all this work. And then working closely with our customers with that vision on how we enable that entire end to end and enable them to do that. That's our current strategy and most of the people we're working with have that capability themselves today. They're very good at it. But we also add quite a bit of value in how to think about how to pull it all together. So we absolutely have a rack scale vision and this is where celestial AI really fits in. But we don't have any system level revenues comprehended in anything I've talked to you about over the next two years. But certainly from a Strategic standpoint, it's imperative, right. That we go to market in a very comprehensive way, Chris, and not in a point solution way, but rather be able to provide all the fundamental pieces, right from the biggest XPU chip all the way down to a retimer on the board.

Fantastic. Thank you, Matt, and congrats.

Thank you. This was our final question for the evening. I'd now like to hand the call back over to management for any closing comments.

Yeah, fantastic. And thanks for all the great questions and appreciate everybody listening. I know it was a lot. I think this was the world record for the longest. The longest prepared remarks I've ever done. But like I said at the beginning, you know, settle in because there's a lot of good stuff and there really is a lot of great things happening with Marvell. You know, I'm just really pleased with how our team has executed. I want to say thank you to all of them. We have a phenomenal setup for next year, as I indicated. And even, you know, through the next year, we just have very good visibility. Programs are on track. We are playing offense in this company. Okay. We're out doing strategic, you know, acquisitions like Celestial AI and we're thrilled to welcome them to the Marvell team. And I think our future is very bright where we're headed. So appreciate everybody's interest. I look forward to the follow up conversations and appreciate all the investor interest in following Marvell in our journey. Thank you, everybody. Have a great day.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you again for your participation.