Overview

Marvell Technology, Inc. is a leading supplier of data infrastructure semiconductor solutions, spanning the data center core to network edge. As a fabless semiconductor company, Marvell designs and develops high-performance standard and semi-custom products, integrating analog, mixed-signal and digital signal processing functionality.

In the second quarter of fiscal 2025, Marvell reported net revenue of $1.3 billion, a 5% decrease compared to the same period last year. This was due to lower sales across most of Marvell’s end markets, except for the data center segment which saw a 92% increase in revenue. The company has seen strong growth in its data center business, driven by demand for its electro-optics products used in AI applications. However, Marvell continues to face challenges in its other markets, including lower demand from OEM customers in China.

Revenue and Profit Trends

Marvell’s net revenue for the three months ended August 3, 2024 decreased by $68.0 million, or 5.1%, compared to the same period in the prior year. This was primarily due to the following changes in Marvell’s end markets:

End Market	Q2 FY2025 Revenue Change
Carrier Infrastructure	-72%
Enterprise Networking	-54%
Consumer	-47%
Automotive/Industrial	-31%
Data Center	+92%

The overall decrease in net revenue was partially offset by an increase in sales from the data center end market, which saw a 92% year-over-year increase. This growth was driven by strong demand for Marvell’s electro-optics products used in AI applications.

For the six-month period ended August 3, 2024, Marvell’s net revenue decreased by $228.8 million, or 8.6%, compared to the same period in the prior year. The decreases were similar across the end markets, with the exception of the data center segment which grew 90% year-over-year.

Despite the revenue declines, Marvell’s gross margin improved significantly in the second quarter of fiscal 2025, increasing by 7.3 percentage points to 46.2% compared to the prior year period. This was primarily due to a shift in product mix, as well as the resolution of certain product-related claim matters that had impacted the prior year.

However, Marvell’s operating expenses remained elevated, with research and development costs increasing 2.5% in the quarter and representing 38.2% of net revenue. Selling, general and administrative expenses decreased 6.0% but still accounted for 15.5% of net revenue. Restructuring related charges also declined significantly, from $42.0 million in Q2 FY2024 to $4.0 million in the current quarter.

As a result of these factors, Marvell reported a net loss of 15.2% of net revenue in the second quarter of fiscal 2025, compared to a 15.4% net loss in the prior year period. For the six-month period, Marvell’s net loss was 16.8% of net revenue, compared to 14.2% in the prior year.

Strengths and Weaknesses

Strengths:

• Strong position in the data center market, driven by growing demand for Marvell’s electro-optics and AI compute products
• Improving gross margins, indicating better product mix and operational efficiency
• Disciplined approach to cost management, with reductions in SG&A and restructuring expenses

Weaknesses:

• Significant revenue declines across most end markets, except data center
• Elevated research and development spending, putting pressure on profitability
• Ongoing challenges in the China market due to trade restrictions and customer inventory buildups
• Reliance on a few large customers, who represent a significant portion of revenue

Outlook and Risks

Looking ahead, Marvell faces a number of risks and uncertainties that could impact its future performance:

• Macroeconomic conditions such as economic slowdowns, inflation, and recessions, which could further depress demand across its end markets
• Continued volatility in the technology and semiconductor sectors, as well as potential impacts from the U.S. government’s designation of semiconductors as a critical and emerging technology
• Risks related to its ability to develop and introduce new and enhanced products, particularly in the 5G, cloud and AI markets, in a timely manner
• Challenges in its ability to scale the business and maintain a competitive cost structure for manufacturing and operations
• Reliance on a few large customers, which could lead to revenue volatility if they experience financial difficulties or shift their purchasing patterns
• Ongoing trade restrictions and export controls impacting its business in China, as well as the potential for Chinese customers to develop indigenous solutions or seek alternative suppliers
• Risks related to its ability to attract and retain key engineering, managerial, sales and marketing talent
• Potential litigation, regulatory investigations, or contractual disputes that could divert management’s attention and resources

To address these risks, Marvell is focused on strengthening its position in the data center market, while also working to diversify its customer base and end market exposure. The company has entered into capacity reservation arrangements with foundry partners to secure long-term supply, and it continues to invest in research and development to drive innovation across its product portfolio.

Marvell also remains committed to its capital return program, having repurchased $325.0 million of its common stock and paid $103.7 million in dividends during the first half of fiscal 2025. However, the company’s future dividend and share repurchase plans will depend on a variety of factors, including its financial performance, cash requirements, and market conditions.

Overall, Marvell faces a challenging macroeconomic environment and ongoing industry-specific headwinds. While the company’s data center business provides a bright spot, it will need to navigate the broader market volatility and execute on its strategic initiatives to return to consistent profitability. Investors will be closely watching Marvell’s ability to diversify its customer base, control costs, and develop innovative products that can drive growth in the years ahead.