The conference call for Marvell Technology Inc's first quarter of fiscal year 2026 discusses earnings, introduces the speakers, highlights the presence of forward-looking statements subject to risks, and mentions the availability of a reconciliation between GAAP and non-GAAP financial measures.

Marvell achieved record revenue and non-GAAP earnings per share in the first quarter, driven by strong growth in the data center end market, particularly from AI demand. The company also saw revenue recovery in carrier infrastructure and enterprise networking. Marvell significantly increased stock repurchases and announced the sale of its automotive Ethernet business to Infon for $2.5 billion. The company expects continued momentum in the data center market, driven by custom AI silicon programs and electro-optics products. Marvell also announced partnerships and technological advancements, including a collaboration with Nvidia and the introduction of a new multi-die packaging platform.

At the Optical Fiber Conference, Marvell showcased a broad range of products and technologies designed to empower the next generation of scale up and scale out AI deployments, including industry-first 400 gig per lane Pam technology and 3.2 T optical interconnects. Innovations in co-packaged optics, silicon photonics light engines, and 1.6 T AEC Dsps highlight advancements in reducing power consumption and enhancing connectivity for accelerated infrastructure. Positive feedback from customers and industry analysts solidifies Marvell's leadership in enabling advanced AI and cloud infrastructure through cutting-edge interconnect solutions.

In the first quarter of fiscal 2026, Marvell reported growth in enterprise networking and carrier infrastructure revenue, with expectations of mid-single-digit sequential growth in the second quarter. Consumer revenue saw a 29% sequential decline, anticipated to recover slightly in the next quarter due to gaming demand seasonality. Automotive and industrial revenue declined sequentially but is expected to remain flat in Q2. Marvell highlighted strong contributions from its AI-driven data center market, with AI representing the majority of data center revenue and expecting further growth in AI-related revenue. A dedicated investor forum on June 17 will delve into Marvell's position in the custom silicon market, showcasing its technology platform, portfolio solutions, and market opportunities. Despite macroeconomic uncertainties, Marvell forecasts continued growth in Q2, driven by AI tailwinds and recovery in carrier infrastructure and enterprise networking.

In the first quarter of fiscal year 26, the company reported revenues of $1.895 billion, marking a 63% year-over-year increase and a 4% sequential growth. The data center market contributed 76% of total revenue. GAAP gross margin stood at 50.3%, while non-GAAP gross margin was 59.8%. Operating expenses were $735 million on a GAAP basis and $495 million non-GAAP. The company saw a GAAP operating margin of 14.3% and a non-GAAP operating margin of 34.2%. Earnings per diluted share grew by 158% year-over-year to 62 cents on a non-GAAP basis. Cash flow from operations reached $333 million, with inventory at $1.07 billion. The company returned $32 million to shareholders through dividends and significantly increased share repurchases to $Ed million. Debt ratios continued to improve, with a net debt to EBITDA ratio of Ed Ed edx. Guidance for the second quarter includes revenue in the range of $Ed billion, GAAP gross margin between 50% and 51%, and non-GAAP gross margin between 59% and 60%. The company projects strong revenue growth, margin expansion, and increased capital returns to shareholders.

Marvell is set to sell its automotive Ethernet business to Infineon, enhancing its capital allocation strategy. In the AI chip sector, Marvell is the incumbent supplier for a large XP customer's current generation AI XP program and is progressing with the next-generation program, securing 3nm wafer and advanced packaging capacity for 2026 production. Despite potential competition, Marvell anticipates continued revenue growth with this customer due to increasing AI CapEx and possible multi-sourcing strategies.

Marvell has significantly increased its R&D spending and reallocated talent to capitalize on the expanding data center and AI market, positioning itself to support a broader customer base and multiple engagements. The company is set to detail its strategies and advancements at an upcoming AI investor event.

Ravel highlights its leading position in 200 gig CS technology, emphasizing performance and time-to-market advantages. The company also discusses its partnership with Nvidia, aiming to offer custom solutions for customers seeking specialized XPS, showcasing a comprehensive suite of technologies for broad customer offerings.

The discussion focuses on the breakdown of data center revenue, with AI contributing over 55% and expected to become the majority of the company's overall revenue soon. Custom silicon growth is noted to impact gross margins, and optimism surrounds strong custom demand driving gross margin dynamics in the second half of the year.

Despite monitoring macroeconomic dynamics, the company anticipates strong growth in AI demand and data center demand. Additionally, there's a预期的 strong recovery in core businesses, particularly in enterprise networking and carrier segments, with growth expected across the board for the rest of the year setting up a positive outlook for fiscal 27.

Investors express a desire for faster growth in the data center business, particularly focusing on the contrast between AI-driven segments and non-AI areas like on-premise solutions. The company highlights significant growth in the data center business, with AI being the fastest-growing portion, and notes that on-premise contributions are relatively small and stable, indicating a shift in spending towards AI-centric solutions.

The company is guiding data center growth at mid-single digits, with strong growth in custom silicon and continued growth in the optics business. Engagements with Amazon on network and connectivity products are progressing well, including the ramping of AECs and continued revenue growth in switching.

The discussion highlights the impact of seasonal consumer behavior on gross margins, noting a typical dip below average during specific periods due to expected market trends.

The company has started shipping the next generation X 800 and fin platform supporting 1.6 optical connectivity, with a strong demand for the 5 nm solution. The 1.6 T solution is anticipated to have a stronger ramp next year, while the 800 gig continues to dominate this year. There's a push in the ecosystem to drive the solution to 3 nm due to compelling power savings and product performance.

The dialogue delves into the intricacies of managing gross margins for AI ASIC vendors, emphasizing the balance between volume and profitability. Speakers discuss the varying gross margins across different custom projects, the impact of volume on margins, and the strategic approach to managing the business amidst increasing demands. Additionally, questions arise regarding the potential for dual sourcing in ASIC programs and the assurance of revenue continuity, highlighting the complexities and uncertainties in the rapidly evolving AI semiconductor industry.

A discussion on leveraging NVLink technology through chiplet solutions to enhance customer's infrastructure, highlighting the flexibility and potential for unique customer needs in the advanced computing sector.

An analyst from Raymond James questions the company's expectations for optical business growth, market share transition from script to script, the impact of technology like LPL, and current customer inventory levels. The company confirms strong market share, early market leadership in 1.6 T and 1.63 nm technology, and low customer inventory, anticipating continued growth in the optics business with the 1.6 transition.

The CEO expresses satisfaction with the first quarter results and the guidance for a $2 billion quarter in the second quarter. He highlights the team's efforts in ramping key programs and meeting customer needs, and looks forward to discussing the significant opportunities ahead at the custom silicon event for investors.