Marvell beats Q2 forecasts, improves margins

Marvell Technology (MRVL 2.05%)leader in semiconductor infrastructure solutions, on Thursday reported its second-quarter fiscal 2025 earnings. The results were in line with internal forecasts but were up from year-over-year data.

Revenue of $1.27 billion was up 10% sequentially from Q1, although that was down 5% year over year. Marvell continued to struggle with losses, reporting a diluted GAAP loss per share of $0.22 and diluted non-GAAP income per share of $0.30, roughly in line with management’s expectations.

Overall, the quarter highlighted continued challenges in certain segments of Marvell’s business.

Source: Marvell Technologies. Note: Management’s expectations based on guidance as of May 30, 2024. FY = fiscal year. YOY = year-over-year. GAAP = generally accepted accounting principles. bps = basis points.

Understanding Marvell Technology

Founded as a leader in infrastructure semiconductor solutions, Marvell Technology serves a variety of markets including data centers, enterprise networks, carrier infrastructure, consumer, and automotive/industrial. The company’s broad focus allows it to address a variety of industry requirements. A key focus today is custom and semi-custom solutions to increase customer loyalty and market differentiation.

Marvell’s key success factors are technological innovation and a strong intellectual property portfolio. With over 10,000 issued patents, the company remains at the forefront of semiconductor technology, which is key to long-term success. Marvell is currently focused on leveraging artificial intelligence (AI)-driven demand in the data center, where customized solutions provide significant growth opportunities.

Important events in Q2

Data Center segment revenue increased 92% year over year to $880.9 million, driven primarily by strong demand for AI, particularly Marvell’s electro-optical products and custom AI programs. The segment’s strong performance is consistent with broader industry expectations for AI-driven computing growth.

On the other hand, the corporate networks and carrier infrastructure segments saw significant declines. Corporate networks revenues declined 54% year-over-year, while carrier infrastructure revenues declined 72%. These declines were attributed to inventory adjustments and reduced demand. Management indicated a potential recovery in these areas in the coming quarters.

The consumer segment showed some recovery with sequential growth of 112% but remained down 47% year-over-year. Automotive and industrial segment revenue declined 31% year-over-year and 2% sequentially, reflecting continued inventory challenges.

On the expense side, Marvell’s GAAP operating expenses were $688 million in line with guidance, while non-GAAP operating expenses remained at $455 million. Despite these results, the company reported a GAAP net loss for the quarter of $193.3 million. The loss was an improvement from the fiscal 2024 second-quarter loss of $207.5 million.

Looking to the future

Looking ahead, Marvell Technology provided cautious but optimistic guidance for the third quarter of fiscal 2025. Net revenue is expected to be approximately $1.45 billion (+/- 5%), up 2% compared to the third quarter of fiscal 2024. GAAP gross margin is expected to be approximately 47.2% and non-GAAP gross margin is expected to be approximately 61%. Non-GAAP diluted earnings per share are expected to be $0.40 (+/- $0.05), down slightly compared to fiscal 2024.

Investors should monitor several areas in the coming quarters, including continued growth in AI-driven segments and the anticipated recovery in enterprise networks and carrier infrastructure. Segment performance will be key, especially given ongoing GAAP losses and inventory management issues. Observing how Marvell manages its operating costs amid these challenges will provide insight into its strategic stability.

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