Maivell Technology: Pouring Cold Water on AI Again, ASIC Sounds the Alarm

Marvell Technology (MRVL.O) released its Q4 FY2025 financial report (for the period ending January 2025) after U.S. stock market hours on March 6, Beijing time:

1. Overall Performance: Operating conditions continue to improve. Marvell Technology achieved revenue of $1.82 billion in Q4 FY2025, a year-on-year increase of 27.4%, in line with market expectations ($1.8 billion). The quarterly revenue growth was mainly driven by the ASIC and data center businesses. Marvell Technology achieved a net profit of $200 million in Q4 FY2025, returning to profitability. Excluding the impact of acquisition amortization and other factors, the company achieved an adjusted operating profit of $390 million this quarter (compared to $216 million in the previous quarter).

2. Specific Business Segments: Data center is the largest growth point. From the breakdown of $Marvell Tech(MRVL.US), driven by the continuous growth in AI demand, the company's data center business has increased to over 70% of its total revenue.

1) Data Center Business: This quarter's revenue was $1.366 billion, a year-on-year increase of 78.5%. The growth in the company's data center business was mainly driven by the increase in AISC and optical module DSP chips. This quarter, the company's AI business revenue reached approximately $700 million, primarily driven by increased demand for customized ASIC products from clients such as Amazon;

2) Enterprise Networking and Carrier Infrastructure Business: This quarter, the revenues for these two businesses were $171 million and $106 million, respectively, with a narrowing year-on-year decline and double-digit growth on a quarter-on-quarter basis, indicating signs of recovery for both businesses;

3) Consumer Electronics and Automotive/Industrial: This quarter, the revenues for these two businesses were $89 million and $86 million, respectively. In terms of sub-segments, the automotive business continued to grow, while consumer electronics and industrial products remained relatively sluggish.

3. Marvell Technology's Performance Guidance: For Q1 FY2026, expected revenue is around $1.88 billion, with market expectations at $1.87 billion. The company expects a GAAP gross margin of 50.5% for Q1 FY2026, with market expectations at 50%.

Dolphin Research's Overall View: The financial report data is acceptable, but the guidance deepens concerns about AI growth potential.

Marvell Technology achieved double-digit revenue growth this quarter, meeting market expectations, mainly driven by the growth in data center and AI demand. Due to the impact of acquisition amortization, restructuring costs, and other factors in the previous quarter, the gross margin experienced a significant decline If the impact is excluded, the company's gross margin this quarter is also steadily rising.

From a specific business perspective, benefiting from the demand for customized ASICs from companies like Amazon and the boost from optoelectronic products, the company's data center business achieved a year-on-year growth of 78.5% this quarter, making it the main growth point for the company. Traditional businesses such as enterprise networking and carrier infrastructure have also shown signs of recovery.

However, the market is most concerned about the performance of the company's AI business: Dolphin Research estimates that out of the $1.366 billion revenue from the data center business this quarter, the AI segment contributed about $700 million in revenue (of which customized ASIC revenue contributed approximately $340 million), with a quarter-on-quarter growth of 30-40%. Therefore, the AI business has grown as expected this quarter, which is quite good.

However, combined with the company's guidance for the next quarter, it is speculated that the growth of the AI business will show a significant slowdown. As the company's enterprise networking and infrastructure businesses will continue to recover next quarter, the incremental contribution from the data center business will be less. Dolphin Research estimates that the AI business revenue for the next quarter will be only about $800 million, with ASIC revenue around $400 million, and the quarter-on-quarter growth will directly fall below 20%.

Due to the trend of major cloud service providers' capital expenditures showing "lower in the front and higher in the back" in 2025, the market has shifted its focus on the company's major client Amazon from Trainium 2 to Trainium 3. Before this earnings report, there were already news about the reduction of CoWoS orders and intense competition for the Trainium 3 product from Alchip. However, the company's guidance for the next quarter will undoubtedly further intensify market concerns about the company's AI growth.

Although the company reiterated that AI revenue for the fiscal year 2026 will exceed the previous guidance of $2.5 billion, buyers have generally raised their expectations for the company's AI revenue to around $3.5 billion. However, the company's expectations for the AI business next quarter will somewhat shake the market's confidence in the company's AI and ASIC businesses.

Currently, Marvell Technology, the market is more focused on the company's expected performance in the AI business and the product progress of ASIC customers. Dolphin Research will subsequently release the minutes of the conference call on the Changqiao App, and it is recommended to pay close attention.

For a detailed analysis of Marvell Technology's (MRVL.O) earnings report, see below:

1. Marvell Technology's Business

Marvell Technology started with storage technology and later expanded its business through a series of "external acquisitions," with the data center business becoming the largest source of revenue for the company.

Specific business situation:

1) Data Center Business (about 75%): A high-growth business, benefiting from the demand for data centers and ASICs, is currently the main focus of the market. The business includes SSD controllers, high-end Ethernet switches (Innovium), and customized ASIC business (custom chips for Amazon AWS, etc.), mainly applied in cloud servers, edge computing, and other scenarios; 2) Other Businesses (Approximately 25%): Traditional businesses are significantly affected by large-scale 5G infrastructure and downstream demand. ① Enterprise Network and Carrier Infrastructure Business has seen a noticeable decline after the large-scale 5G infrastructure; ② Consumer Electronics Business is influenced by downstream electronic products and home broadband demand; ③ Automotive and Industrial is driven by demand from the Internet of Vehicles, but accounts for a smaller proportion.

II. Core Data of Marvell Technology

2.1 Revenue Side

Marvell Technology achieved revenue of $1.817 billion in the fourth quarter of fiscal year 2025, a year-on-year increase of 27.4%, exceeding market expectations ($1.8 billion). The revenue growth this quarter was mainly driven by data center and AI revenues. Previously, the company had signed a 5-year cooperation agreement with Amazon. The acceleration of mass production of Amazon Trainium 2 and Google Axion this quarter provided incremental revenue for the company.

2.2 Gross Profit Side

Marvell Technology achieved a gross profit of $917 million in the fourth quarter of fiscal year 2025, an increase of 38.1% year-on-year. The gross margin for Marvell this quarter was 50.5%, showing a significant rebound.

The sharp decline in the company's gross margin last quarter was mainly affected by the amortization of acquired assets. However, excluding this impact, the adjusted gross margin for the company last quarter returned to 59.4%. The adjusted gross margin for this quarter is 59.5%, showing a steady increase, mainly benefiting from the recovery of traditional businesses this quarter.

2.3 Operating Expenses

Marvell Technology's operating expenses in the fourth quarter of fiscal year 2025 were $682 million, with a significant increase in operating expenses last quarter mainly due to restructuring-related costs.

Specifically, breaking down the core expense side:

1) R&D Expenses: The company's R&D expenses this quarter were $499 million, a year-on-year increase of 8.6%. The growth in R&D expenses is mainly directed towards custom ASIC and optical module technology. The R&D expense ratio has currently fallen to 27.5%, mainly influenced by revenue growth; 2) Sales and Management Expenses: The company's sales and management expenses for this quarter were $196 million, a year-on-year decline of 7.7%. With the scale effect of revenue growth, the current company's sales and management expense ratio continues to decline to 10.8%;

2.4 Net Profit

Marvell Technology achieved a net profit of $200 million in the fourth quarter of fiscal year 2025, turning positive. The company's losses in the previous quarter widened, mainly due to factors such as acquisition amortization and restructuring costs.

Excluding these impacts (restructuring costs and acquisition amortization, etc.), the company's operating net profit (adjusted) in the previous quarter reached $216 million, further increasing to $390 million this quarter. The core expense side remains robust, and the performance of operating profit is mainly driven by the growth of the data center business.

3. Specific Situations of Marvell Technology's Various Businesses

Since 2018, Marvell Technology has successively acquired companies such as Cavium and Innovium, thereby enhancing the company's AISC and data center-related capabilities. With the increasing demand for custom ASICs and data center optical module DSP chips from companies like Amazon and Google, the company's data center business has grown to account for over 70% of the company's overall revenue, making it the largest impact item on the company's performance.

In addition, the revenue share from traditional businesses such as enterprise networks, carrier infrastructure, consumer electronics, and automotive and industrial has all declined to 10% or below.

3.1 Data Center Business

In the fourth quarter of fiscal year 2025, Marvell Technology's data center business achieved revenue of $1.366 billion, a year-on-year increase of 78.5%. The growth of the company's data center business this quarter mainly came from custom ASICs and optical module DSP chips, while AI business remained relatively stable this quarter.

The company has concentrated products related to data center ASICs, optical module DSP chips, storage controllers, and network switches within the data center business, with relatively many sub-segments Specifically, Dolphin Research believes that the company's AI business has grown to around $700 million this quarter, with the custom ASIC business reaching approximately $340 million, mainly benefiting from increased shipments of Amazon's Trainium 2 and Google's Axion. Additionally, AI-related optical module DSP chips contributed nearly $390 million in revenue.

Moreover, the non-AI segment of the data center business has also seen growth, but the growth rate is significantly lower than that of the AI segment.

The AI segment of Marvell's data center business is the main focus of the market. Over the past year, the significant improvement in the company's performance has primarily been driven by the incremental growth from the AI business. The company is currently providing related custom ASIC products for Amazon and Google, and the products for its third client (presumably Microsoft) are expected to achieve mass production and shipment in 2026 (calendar year).

Therefore, the capital expenditures of major companies will directly impact the growth expectations of the company's data center business. From the capital expenditures of the four major cloud providers (Amazon, Microsoft, Google, and Meta), the total capital expenditure for the fourth quarter of 2024 reached $79.57 billion, a year-on-year increase of 22.6%. The four companies have also expressed confidence in continuing to increase capital expenditures, expecting a 40% growth in total capital expenditures in 2025.

Although the major companies currently provide a relatively positive guidance expectation, Marvell, as a major player in the ASIC market, still faces two risks: ① For the capital expenditures in 2025, major companies generally show a "low first, high later" trend, and Amazon, a major ASIC customer, will shift its focus from Trainium 2 to Trainium 3; ② Marvell faces competition from Alchip in its custom AISC products for Amazon.

Combined with the company's guidance for only a 3% quarter-on-quarter increase in overall revenue for the next quarter, this undoubtedly deepens the market's concerns about the growth potential of the company's AI business.

3.2 Enterprise Networking and Carrier Infrastructure

1) Marvell's enterprise networking business achieved revenue of $171 million in the fourth quarter of fiscal year 2025, a year-on-year decline of 35.3%. The year-on-year decline has narrowed, with a quarter-on-quarter growth of 13.6%. The company's enterprise networking business mainly provides networking products for companies and campuses, including switch chips, PHY chips, etc., and continued to recover this quarter.

2) Marvell Technology achieved revenue of $106 million in its carrier infrastructure business in Q4 of fiscal year 2025, a year-on-year decline of 37.8%. The business primarily targets carrier-related infrastructure, including optical communication chips and 5G base station chips. The previous business decline was mainly influenced by a decrease in carrier capital expenditures following large-scale infrastructure projects. However, this quarter, the carrier infrastructure business continued to show signs of recovery, with a quarter-on-quarter growth of 25%.

3.3 Consumer Electronics, Automotive, and Industrial

1) Marvell Technology achieved revenue of $89 million in its consumer electronics business in Q4 of fiscal year 2025, a year-on-year decline of 38.4%. The company's consumer electronics business mainly includes storage controllers, WiFi chips, and other products, which are significantly affected by end-product demand. The company expects that the consumer electronics business will continue to decline by 35% quarter-on-quarter in the next quarter, mainly due to seasonal factors and gaming demand.

2) Marvell Technology achieved revenue of $86 million in its automotive/industrial business in Q4 of fiscal year 2025, a year-on-year increase of 4.1%. The company's automotive/industrial business mainly covers areas such as autonomous driving, in-vehicle entertainment systems, and industrial robots, with the company primarily providing related products such as in-vehicle Ethernet. Although the automotive business continues to grow, the industrial terminal market remains relatively sluggish.