Marvell FY26Q3 corresponds to the actual period of August/September/October 2025.
Marvell FY26Q3 Earnings:
Revenue $2.075B, up 37% year over year and 3% sequentially. Q4 revenue guided to $2.2B, up 21% year over year.
GAAP gross margin 51.6%, up 28.6 percentage points year over year. Non-GAAP gross margin 59.7%, down 0.8 percentage points year over year but up 0.5 percentage points sequentially, ending 7 consecutive quarters of sequential decline. Q4 non-GAAP gross margin guided to 59.5%, down 0.6 percentage points year over year.
Non-GAAP operating income $753M, up 67% year over year. Non-GAAP operating margin 36.3%, up 6.6 percentage points year over year and 1.5 percentage points sequentially. Q4 non-GAAP operating income guided to $794M, up 30% year over year, operating margin 36.1%.
Non-GAAP net income $655M, up 76% year over year. Non-GAAP net margin 31.6%. Q4 non-GAAP net income guided to $677M, up 27% year over year, net margin 30.8%.
GAAP days in inventory 91 days, down 5 days sequentially.
$1.3B in share repurchases this quarter, $50.8M in dividends.
By final shipment destination, mainland China accounted for 40%, Taiwan 27%, US 15%, other 31%.
Segment Detail, Q3:
Data center revenue $1.52B, up 38% year over year and 2% sequentially, 73% of revenue, remaining the largest business. Growth driven primarily by the electro-optics business; ASIC business was weak, with some sequential recovery in Q4.
Electro-optics and ASIC currently account for approximately 50% and 25% of data center revenue, respectively. The remaining 25% is primarily data center storage, switching, and security product portfolio.
The company's ASIC business currently consists mainly of custom XPUs (Amazon Tranium2 XPU + Google Axion CPU) and XPU Attach products. The company has secured all forecasted purchase orders for the next-generation XPU project for the next fiscal year. Looking beyond FY27, several high-volume custom designs are in development, expected to contribute meaningful revenue in FY28, consistent with prior guidance. Contrary to the market consensus that the custom business relies primarily on XPUs, management disclosed over 15 XPU attach chip design wins; based on NIC and CXL use-case design wins alone, these are expected to contribute over $2B in revenue in FY29.
The company's full electro-optics portfolio includes: DSPs for AEC and AOC; retimers for PCIe, Ethernet, and UALink; and silicon photonics for NPO and CPO XPU optics. AEC active electrical cables and retimers have become new growth drivers: AEC DSP demand is strong, and as PAM-based 100G and 200G technologies become dominant, the company expects its market share to continue growing. PCIe Gen 6 retimers are engaged with 30+ customers and partners, designed into 10+ slots, expected to enter production in the second half of next year and contribute full revenue in FY28. AEC and retimer combined revenue is expected to more than double next year.
Data center switching revenue is expected to exceed $300M this fiscal year. 12.8T product demand remains strong; next-gen 51.2T product shipments have begun. FY27 revenue expected to exceed $500M. Management estimates the merchant scale-up switch market at ~$6B by 2030; with electro-optics attach on both XPU and switch sides, the interconnect TAM could exceed $10B.
Enterprise networking revenue $240M, up 57% year over year and 23% sequentially, third consecutive quarter of year-over-year recovery, 11% of revenue.
Carrier infrastructure revenue $170M, up 98% year over year and 29% sequentially, third consecutive quarter of year-over-year recovery, 8% of revenue.
Consumer revenue $120M, up 21% year over year and 1% sequentially, 6% of revenue.
Automotive/industrial revenue $35M, down 58% year over year and 54% sequentially, 2% of revenue. Sale of automotive Ethernet business to Infineon recorded a pre-tax gain of $1.8B.
Since 2019, the company has continuously acquired to build out its data center portfolio, divesting Wi-Fi and automotive Ethernet businesses while acquiring Avera, Aquantia, Inphi, and Innovium, resulting in substantial intangible asset amortization, once exceeding 20% of revenue. However, as revenue has grown significantly, intangible asset amortization as a percentage of revenue has continuously declined.
Outlook:
Q4 data center revenue guided up 20% year over year, up high-single-digits sequentially, driven by a rebound in custom ASIC business and continued growth in interconnect, switching, and storage.
Q4 carrier infrastructure and enterprise networking combined revenue guided up 25% year over year, up low-single-digits sequentially. Q4 consumer revenue guided to decline sharply sequentially.
Announced acquisition of photonic interconnect company Celestial AI for $3.25B ($1B cash + $2.25B stock). With earnout, total consideration ceiling could reach ~$6.5B. Expected to close in Q1 next year. The acquisition is driven by secured purchase orders for next-gen XPU projects and alignment with customer roadmaps. Celestial's photonic products are expected to contribute $500M run-rate revenue by end of FY28 and $1B run-rate by end of FY29. Notably, Marvell issued Amazon a warrant tied to photonic product purchases, exercisable for up to 1M shares, further locking in the hyperscaler customer.
FY27 revenue guided to $10B+, with sequential quarterly growth. FY27 data center revenue guided up 25%. Interconnect business (~50% of data center revenue) will continue to grow faster than cloud capex. ASIC business (~25% of data center revenue) revenue guided up 20%, weighted toward the second half with no gaps. The remaining 25% of data center (storage, switching, and other products) guided up at least 15%, driven by increased switching demand.
Regarding the market's most-watched AWS Trainium 3 order, management stated it has secured all forecasted purchase orders for the next-generation XPU project (AWS Trainium 3) for the next fiscal year. However, this sits uneasily with the FY27 custom ASIC growth guide of 20% versus Amazon's guidance for a significant ramp in Trainium 3 volumes next year. This may reflect limited IP exposure to Trainium 3, with backend orders largely going to Alchip. FY27 ASIC custom growth may even lag overall data center growth. The company's second true AI ASIC major customer is expected to ramp in FY28.
What truly moved the market was management's expectation that FY28 data center revenue growth will exceed 25%, and FY28 ASIC custom revenue will double year over year.
Overall, this earnings report opened up new market imagination for the custom business. Future XPU attach chips are likely to attract more attention. Electro-optics secures the FY27 growth floor, while custom business ramp in FY28 accelerates data center growth.
Based on official Q4 guidance, full-year revenue should reach $8.2B, below the prior expectation, while non-GAAP net income of roughly $2.5B is also slightly below the $2.6B estimate. Management's next-year outlook implies more than $10B of FY27 revenue and over $3B of net income, valuing the company at about 28 times earnings.