Marvell Technology (MRVL -2.10%), a leader in infrastructure semiconductor solutions, reported fiscal 2025 second-quarter earnings Thursday that were in line with internal guidance but mixed when measured against year-over-year data.
Revenue of $1.27 billion was up 10% sequentially from Q1, although it marks a 5% year-over-year decline. Marvell continued to grapple with losses, posting a GAAP diluted loss per share of $0.22 and non-GAAP diluted income per share of $0.30, both roughly in line with management's expectations.
Overall, the quarter highlighted ongoing challenges in some segments of Marvell's operations.
| Metric | Q2 FY2025 | Management’s Expectations | Q2 FY2024 | Change (YOY) |
|---|---|---|---|---|
| Revenue | $1.27 billion | $1.25 billion +/- 5% | $1.34 billion | (5%) |
| GAAP gross margin | 46.2% | 46.2% | 38.9% | 730 bps |
| Non-GAAP gross margin | 61.9% | 62.0% | 60.3% | 160 bps |
| GAAP EPS (diluted) | ($0.22) | ($0.20) +/- $0.05 | ($0.24) | N/A |
| Non-GAAP EPS (diluted) | $0.30 | $0.29 +/- $0.05 | $0.33 | (3%) |
Source: Marvell Technologies. Note: Management expectations based on guidance provided on 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, serves diverse markets, including data center, enterprise networking, carrier infrastructure, consumer, and automotive/industrial sectors. The company's breadth of focus allows it to address various industry demands. A key current focus is custom and semi-custom solutions for improved customer loyalty and market differentiation.
Marvell’s key success factors are and a strong intellectual property portfolio. With over 10,000 issued patents, it remains at the forefront of semiconductor technology, vital for long-term success. Currently, Marvell is focusing on leveraging artificial intelligence (AI)-driven demands in data centers, where custom solutions bring significant growth opportunities.
Notable Developments in Q2
Revenue from the Data Center segment surged 92% year over year to $880.9 million. This was primarily due to strong AI demand, particularly for Marvell’s electro-optics products and custom AI programs. This sector's strong performance aligns with broader industry expectations for AI-driven computational growth.
Conversely, the enterprise networking and carrier infrastructure segments experienced significant declines. Enterprise networking revenue declined by 54% year over year, while carrier infrastructure revenue saw a 72% drop. These decreases were attributed to inventory corrections and reduced demand. Management has indicated a potential recovery in these areas in the upcoming quarters.
The consumer segment showed some recovery with sequential growth of 112%, but it 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 front, Marvell's GAAP operating expenses were $688 million as guided, with operating expenses consistent at $455 million. Despite these results, the company posted a GAAP net loss for the quarter of $193.3 million. That loss was an improvement on fiscal 2024's Q2 loss of $207.5 million.
Looking Ahead
Looking ahead, provided a cautious but optimistic outlook for the third quarter of fiscal 2025. It expects net revenue to be around $1.45 billion (+/- 5%), indicating a 2% rise from fiscal 2024's Q3. The GAAP gross margin is forecasted to be approximately 47.2%, and the non-GAAP gross margin is set at around 61%. Expected non-GAAP diluted income per share is anticipated to be $0.40 (+/- $0.05), a slight drop from fiscal 2024.
Investors should monitor several areas in the upcoming quarters, including continued growth in AI-driven segments and the anticipated recovery in enterprise networking and carrier infrastructure. Segmental performance will be crucial, especially given the ongoing GAAP losses and inventory management issues. Watching how Marvell manages its operating expenses amid these challenges will provide insights into its strategic stability.
