Good afternoon and welcome to Marvell Technology’s Fourth Quarter and Fiscal Year 2022 Earnings Conference Call. All participants will be in a listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Mr. Ashish Saran, Vice President of Investor Relations. Please go ahead.

Thank you and good afternoon, everyone. Welcome to Marvell’s fourth quarter and fiscal year 2022 earnings call. Joining me today are Matt Murphy, Marvell’s President and CEO; and Jean Hu, our CFO. I would like to remind everyone that certain comments made today may include forward-looking statements, which are subject to significant risks and uncertainties that could cause our actual results to differ materially from management’s current expectations. Please review the cautionary statements and risk factors contained in our earnings press release, which we filed with the SEC today and posted on our website, as well as our most recent 10-K and 10-Q filings. We do not intend to update our forward-looking statements. During our call today, we will refer to certain non-GAAP financial measures. A reconciliation between our GAAP and non-GAAP financial measures is available in the Investor Relations section of our website. With that, I'll turn the call over to Matt for his comments on our performance. Matt?

Thanks, Ashish, and good afternoon, everyone. Let me start with a recap of the exceptional results Marvell delivered in fiscal 2022, an absolutely pivotal year for the company. We saw a substantial increase in design wins, the completion of two significant acquisitions, and strong revenue growth with great momentum in all our businesses. Our 5-nanometer technology platform, along with the rest of our data-centric IP portfolio, proved to be a key enabler for winning new opportunities in all of our focus markets. Our sales and product teams did a tremendous job securing new sockets and drove a record level of design wins in fiscal 2022, a big step up from the prior year. Fiscal 2022 was also a breakout year for our cloud optimized silicon platform, winning a sizable number of important sockets, which we expect will drive significant revenue for the company going forward. We remain focused on extending our leadership in process technology and advanced packaging. Our engineering teams are driving the architecture and design of our complex analog and mixed-signal IP to 3-nanometers. They are also advancing chiplet and 3D packaging technologies to support the integration of multiple advanced process nodes inside a single package. During the year, we completed the integration of Inphi, a transformational acquisition that substantially increased our participation in the fast-growing cloud data center market. The Marvell and Inphi team share very similar values founded on engineering excellence, innovation, and a passion for our customers' success. The teams have integrated exceptionally well across the company and are jointly taking our capabilities to new heights. Inphi's position at the core of cloud data centers has given the team unique insights into next-generation network architectures. The Inphi team has developed deep relationships with Tier 1 cloud customers, which has been instrumental in unlocking additional opportunities for the combined company, including the success of our cloud optimized silicon platform. The transaction, which was accretive to non-GAAP earnings within the first full quarter after close, has been a resounding success, delivering revenue in fiscal 2022 above our deal model. We further complemented our cloud business with the Innovium acquisition, adding their leading cloud optimized switches to Marvell's feature-rich enterprise and carrier switch portfolio. The Innovium team is fully integrated and are leveraging Marvell's 5-nanometer technology platform and extensive SerDes IP to accelerate the roadmap for our next-generation 51.2 T switches. This development is closely aligned with our electro-optics DSP roadmap to provide customers with a complete solution optimized for power and performance. The combined Marvell and Innovium Ethernet switch portfolios are proving very attractive to data center customers, among them, a new design win at a Tier 1 cloud customer in Asia. We are also engaged with multiple additional customers and are looking forward to further expanding our footprint in this fast-growing market. Moving on to revenue. In fiscal 2022, revenue grew 50% year-on-year to $4.46 billion driven by robust demand for our products. The organic Marvell business and the acquired Inphi business were both strong contributors to growth. Our results reflect our success in the cloud, 5G, and automotive end markets, which collectively doubled in revenue from the prior year. Our enterprise networking end market also had a phenomenal year with revenue growing 43% year-over-year. Later in the call today, you will hear more details about the start of an extended period of infrastructure refreshes in the enterprise market. We expect that these, combined with share and content gains from our merchant products, will produce enduring growth in our enterprise business. And not only that, you will also hear me talk about a new driver of revenue growth in the enterprise networking market. Shifting gears to our fourth quarter, we delivered a record $1.34 billion in revenue, growing 11% sequentially and 68% year-over-year. Revenue exceeded the midpoint of guidance with all end markets growing sequentially and year-over-year. Of particular note, cloud and enterprise networking delivered stronger than projected contributions. Cloud, 5G, and auto collectively increased to 40% of total revenue in the fourth quarter. We exited fiscal 2022 with record bookings momentum and opportunities for accelerated growth across our business going forward. We continue to win in the market as our customers look to expand the scope of their engagements with Marvell. Our operations team continues to secure capacity, and we’re tightly engaged with our strategic suppliers. Growth in demand continues to outstrip increases in supply. And as a result, our delinquency has continued to grow. We are working closely with our suppliers to secure additional capacity wherever possible. Let me now move on to discussing our five end markets, starting with data center. In our data center end market, revenue for the fourth quarter was $574 million, growing 15% sequentially and 113% year-over-year, exceeding our guidance. The majority of the growth was from cloud driven by robust demand from hyperscale customers. Let me note that our on-premise data center business also grew sequentially and year-over-year. In the fourth quarter, sequential and year-over-year revenue growth was broad-based with multiple product lines contributing to the excellent results. We expect the demand outlook from cloud customers to remain strong, and we are also looking forward to the ramp of new design wins. At our Investor Day, we discussed our expectations for $400 million in incremental revenue contributions in fiscal 2024 from new cloud optimized wins, doubling to $800 million in fiscal 2025. Development of these programs is well on track with several products slated to enter production later this year and start contributing meaningful revenue. Since that update, we have won multiple additional cloud optimized designs. Similar to the wins in prior quarters, these chips are for a variety of networking and compute offload or acceleration functions in cloud data centers. We are expecting revenue contributions from these new wins to start as early as fiscal 2024 and then ramp more substantially over time. Both of these wins are incremental to what we had discussed at our Investor Day. In aggregate, in fiscal 2022, we have won over a dozen cloud optimized programs across multiple Tier 1 cloud customers. A significant number of these designs are for custom DPU implementations, reflecting the increase in the attach rate of DPUs inside cloud data centers. We expect this trend to accelerate in next-generation architectures. We are confident that we are uniquely positioned to win these opportunities with our leading portfolio of compute, networking, security, storage, and high-speed electro-optics IP, all of them delivered on our cloud optimized 5-nanometer platform. In our electro-optics business, we are continuing to innovate. We are aggressively driving the roadmap to improve power performance in leading-edge technology nodes with our next-generation products. We have begun volume shipments of our 800-gig PAM4 DSPs, enabling customers to start deployment of 800-gig optical modules in cloud data center and AI network applications. We are confident that we are the industry's first PAM4 DSP supplier to achieve this production milestone. Let me now discuss a new product line we just announced for the emerging active electrical cable market. This opens up another avenue of growth for us in the data center, leveraging our core DSP expertise. Today, our PAM4 products are primarily deployed in optical modules, used in cloud data centers for long-reach, switch-to-switch connections. In the same data centers, short-reach connections between switches, between server to top of rack switches and in AI interconnects have traditionally used passive electrical cables for speeds of up to 50 gig per lane. None of these requires advanced signal processing today. However, in next-generation cloud data centers, AI, ML and other data-intensive workloads are pushing these short-reach connections to higher 100 gig per lane throughput. At these speeds, passive electrical cables have significant reach and performance limitations. To overcome these challenges, the industry is turning to active electrical cables, referred to as ADCs, which require advanced DSPs. To meet that demand, Marvell has introduced the industry's first 400-gig and 800-gig DSPs for the ADC market, based on our leading PAM4 SerDes technology. Our unique business model allows us to work with both cloud customers, as well as all leading cable manufacturers to drive an open ecosystem. Our industry-leading DSPs have enabled major cable vendors to complete development of their first ADC solutions. We are also working with multiple cloud operators to take advantage of this new growth opportunity. On the storage side, our leading process technology platform and PCIe roadmap execution continues to drive new design wins for our data center SSD controllers. During the quarter, we secured designs with our PCIe Gen 5 controllers at two additional NAND OEMs, making a total of three who are adopting the Marvell solution. Looking ahead, our team is also pushing forward with our PCIe Gen 6 development, and our customers are very excited about our roadmap. Moving on to our expectations for the first fiscal quarter of fiscal 2023 from our data center end market, we project revenue to grow sequentially in the mid-single digits on a percentage basis and more than double year-over-year. We are expecting another strong performance led by cloud customers across a broad range of products. We are also projecting the start of a strong ramp of our 400-gig ZR data center interconnect products. In fact, we are expecting this ramp to drive our DCI revenue to a new record in the first quarter, eclipsing the peak we had achieved in the 100-gig cycle. Even at this very early stage of industry adoption, we are excited to see the rapid growth of 400 ZR, and we expect to see a lot more growth over time. Looking forward, we see ongoing growth in the data center, including revenue contribution starting from the new cloud-optimized product ramps to drive another step-up in our data center revenue in the second half of this fiscal year and beyond. Turning to our carrier infrastructure end market. Revenue for the fourth quarter was $241 million, growing 12% sequentially and 45% year-over-year. These results were driven by our 5G business, which delivered substantial revenue growth of over 30% sequentially, exceeding our guidance. We benefited from the broader rollout of 5G technology and product ramps at multiple base station customers. Marvell recently announced a collaboration with Dell on their new suite of telecom solutions to help service providers enable their transformation to open cloud-native networks. This offering includes a co-developed open RAN accelerator card using our proven OCTEON Fusion baseband silicon to deliver in-line 5G layer 1 processing. We continue to see strong traction on our 5G technology platform, resulting in another key 5-nanometer design win for a radio ASIC at a Tier 1 base station customer. Following the strong step-up in the fourth quarter, we expect revenue from the carrier end market to continue to grow in the first quarter of fiscal 2023. We are projecting revenue to grow in the low single digits sequentially, while year-over-year growth is expected to remain strong at over 40%. Moving on to our enterprise networking and end market. Revenue for the fourth quarter was $263 million, growing 6% sequentially and 64% year-over-year, another strong performance from this large and growing Marvell business. As you heard in the opening remarks, this end market is going through an inflection. Hybrid work is here to stay, but the current networking infrastructure was never designed to support this flexible, seamless, connect from anywhere, immersive, and high video usage environment. Companies are now embarking upon an extended period of refreshing their infrastructure, becoming borderless, enabling new digital capabilities, massively increasing bandwidth, building redundancy, and beefing up security. You will also remember from our prior discussions that we have been winning designs with our refreshed products over several years in this end market. These wins have typically come with higher Marvell content, driven by new features such as multi-gig Ethernet and MACsec. As the upgrade cycle in the enterprise networking market gains momentum, we are beginning to see our customers starting to ship their new platforms where we have higher share and increased content. Looking forward, we expect enterprises will continue to modernize their networks. And as a result, we project ongoing growth to continue from this end market. Let me now discuss a new source of growth for Marvell in this end market, custom silicon. We have a very successful custom business in the carrier end market and are also building a large revenue stream from hyperscalers with our cloud optimized products. We are now enabling the enterprise networking market to take advantage of our advanced technology platform. I would like to point out that these designs frequently pull through additional Marvell content across a number of our product lines. Our pipeline of opportunities is growing and we see custom silicon becoming another leg to the enterprise networking tool, adding to the ongoing growth from our merchant products. We expect revenue from custom products and enterprise networking to grow sharply to well over $100 million in fiscal 2023. In aggregate, we expect a very durable period of high growth from enterprise networking to strongly complement our cloud, 5G, and auto pillars. Looking ahead to the first quarter of fiscal 2023, we expect growth to accelerate in our enterprise networking end market. We are projecting revenue to be up sequentially in the mid-teens on a percentage basis and year-over-year growth over 70%. Its growth outlook reflects our expectations of higher supply to support our product ramps and the ongoing enterprise infrastructure refresh cycle. Turning to our automotive and industrial end market, revenue for the fourth quarter was $79 million, growing 19% sequentially and 134% year-over-year. Strong revenue growth in this end market is being driven by higher adoption of our Brightlane Ethernet solutions in a growing number of vehicles from multiple OEMs. Looking ahead to the first quarter of fiscal 2023, we are expecting strong sequential growth to continue from auto and a flattish outlook for our industrial business. As a result, for the auto and industrial end market, we are projecting sequential revenue growth in the high single digits on a percentage basis, while year-over-year growth is expected above 80%. Moving on to our consumer end market. Revenue for the fourth quarter was $185 million, growing 2% sequentially and 11% year-over-year. Growth in this end market is being driven by our SSD controllers, shipping into consumer-oriented platforms such as game consoles. Looking ahead to the first quarter of fiscal 2023, we expect revenue to be flattish on a sequential basis and continue to grow year-over-year, approximately in the double digits on a percentage basis. In closing, we delivered record results for the fourth quarter and fiscal year 2022, growing revenue well above our long-term target model. We expect this momentum to continue. Marvell is uniquely positioned to benefit from the three most important growth opportunities in semiconductors: cloud, 5G, and automotive. The transformation in the enterprise end market is also becoming another continuing growth driver for Marvell. We expect secular growth to continue from all our end markets, further supported by our large and growing pipeline of secured design wins, which will drive incremental revenue. We are also working to make sure that we grow in a responsible and sustainable manner. Over the past year, Marvell has taken meaningful action on evolving our environmental, social, and governance strategy, setting new goals and increasing transparency. We've committed to achieving net-zero emissions as a company and are setting a science-based target to put us on track to reach this goal. Building a more inclusive and diverse workforce is another important area of focus, and we have increased our outreach to traditionally underrepresented talent. I would encourage investors to visit our new ESG website to review the goals we've outlined and our progress to date. On behalf of Marvell's Board and leadership team, I thank our valued employees for the outstanding results they've helped deliver in the fourth quarter and throughout fiscal year 2022. Ours is a highly resilient team that has stayed focused and outperformed through an extended period of challenges and uncertainty. This is an exciting time for our company as we've hit an inflection point in our growth cycle and are seeing strong momentum in our businesses across the board. I look forward to continuing to work alongside our exceptional Marvell team to address the numerous opportunities in front of us. With that, I'll turn the call over to Jean for more detail on our recent results and outlook.

Thanks, Matt, and good afternoon, everyone. I'll start with a summary of our fiscal year 2022 results. We are very pleased with our performance in fiscal 2022, delivering record revenue and profitability while continuing to aggressively invest to drive strong long-term growth from the data infrastructure market. Revenue grew significantly by 50% year-on-year to $4.46 billion. GAAP gross margin was 46.3% and the GAAP loss per diluted share was $0.53. Our non-GAAP gross margin was 64.9%, expanding by 160 basis points, reflecting the increase in value and the differentiation we provide to our customers. Revenue growth and gross margin expansion, combined with strong operating leverage from our business model, drove robust growth in earnings for the year. Non-GAAP operating margin expanded by 860 basis points from 24.2% to 32.8%, and non-GAAP earnings per share grew 71% year-on-year to $1.57. Moving on to our financial results for the fourth quarter. Revenue in the fourth quarter was $1.343 billion, exceeding the middle point of our guidance, growing 11% sequentially and 68% year-over-year. Data center was our largest end market, driving 43% of consolidated revenue. Enterprise networking was next largest with 19% of total revenue, followed by carrier infrastructure at 18%, consumer at 14%, and auto industrial at 6%. GAAP gross margin was 51.1%. Non-GAAP gross profit was $877 million or 65.3% of revenue, another record driven by a rich product mix, reflecting our strong IP position and the leading product portfolio. GAAP operating expenses were $652 million and include the cost of share-based compensation expenses, amortization of acquired intangible assets, legal settlements, and acquisition and divestiture-related costs. Non-GAAP operating expenses were $390 million, at the low end of our guidance range. GAAP operating income was $35 million. Non-GAAP operating profit was $487 million, up 115% from a year ago, growing significantly faster than revenue. We achieved a record of 36.3% non-GAAP operating margin, an improvement of 790 basis points from the prior year, reflecting the strong operating leverage in our business model. For the fourth quarter, GAAP income per diluted share was $0.01. Non-GAAP income per diluted share was $0.50, up 72% year-over-year, exceeding the middle point of our guidance. Now turning to our balance sheet and cash flow. During the quarter, cash flow from operations was $346 million. I'm pleased with our strong cash flow generation while investing significantly in working capital to support strong revenue growth. We returned $51 million to shareholders through cash dividends. As of the end of the fourth fiscal quarter, our cash and cash equivalents were $614 million, and our long-term debt was $4.5 billion. Our gross debt-to-EBITDA ratio was 2.6 times and net debt-to-EBITDA ratio was 2.3 times. We are confident that we are on track to achieve our targeted gross debt-to-EBITDA ratio of two times by the end of the second quarter of fiscal 2023, at which time we expect to restart share repurchase. Inventory at the end of the fourth quarter was $720 million. $39 million of this inventory balance is from Innovium, due to purchase price accounting. We anticipate amortizing this step-up over the next two quarters. We have also increased our working process inventory to support the rapid growth in revenue we are forecasting. In summary, the Marvell team executed exceptionally well, delivering accelerated top-line growth and strong earnings expansion significantly faster than revenue growth. Turning to our guidance for the fourth quarter of fiscal 2023. We are forecasting revenue to be in the range of $1.425 billion, plus or minus 3%. We expect our GAAP gross margin will be in the range of 49.6% to 50.6%. We project our non-GAAP gross margin will be in the range of 65% to 66%. We project our GAAP operating expenses to be approximately $672 million. We anticipate our non-GAAP operating expenses to be in the range of $430 million to $435 million. For the first quarter, we expect a non-GAAP tax rate of 6%. We expect our basic weighted average shares outstanding will be 848 million. And our diluted weighted average shares outstanding will be 863 million. As a result, we anticipate GAAP earnings per share in the range of a loss of $0.03 per share on the low end to an income of $0.05 per diluted share on the high end. We expect non-GAAP income per diluted share in the range of $0.48 to $0.54. Operator, please open the line and announce Q&A instructions. Thank you.

We will now begin the question-and-answer session. Our first question comes from Timothy Arcuri with UBS. You may now go ahead.

Thanks a lot. Matt, it seems like you're ahead of plan, and I'm wondering if you could update us on your fiscal 2023 growth forecast. And then also, as you look to fiscal 2024, I know you said you're going to grow more than 30% this year. But it seems like you can do better than that. Now, it seems like you're getting a little more supply. And then also, I think you had hinted that, well, maybe you can grow somewhere in that range also for fiscal 2024, because the fiscal 2023 guidance didn't include any work on delinquencies. So I'm just kind of wondering if you can update us on those. It sounds like you'd be incrementally more confident that you can grow quite a bit higher, possibly, than 30% this year and maybe even 30% in fiscal 2024? Thanks.

Yes, thank you for the question. I'm very pleased to share that we are currently ahead of our plans due to our strong outlook for the first quarter. Additionally, we are seeing an increase in supply, as demonstrated in both our fourth quarter and our first quarter outlook, which is encouraging. The momentum of orders remains robust, with exceptional bookings in the fourth quarter that bolster our confidence in our outlook for 2023 and beyond. Furthermore, the new design wins looking ahead to 2024 also contribute to our positive sentiment. Overall, we believe we are progressing well across the board, and we are satisfied with our current results, outlook, and long-term prospects.

Matt, can I ask a quick follow-up? I was wondering if you

Sure.

Thanks. Can you sort of size the custom ASIC business? I know it's reported across different segments, but can you maybe add up all of the custom ASIC revenue and just give us a sense for sort of how big it is in aggregate today? Thanks.

Yes. Tim, this is an interesting question. We've actually gotten this on and off over the years. And just to kind of refresh the investors on the line, it's really hard to define this precisely because when you think about customization, you have a range of products and business models that we offer. For example, we have a full custom business in the traditional sense of the world. That would be an ASIC business that we picked up from Avera. But we also do a lot of semi-custom work or cloud optimized work as an example, where we work either with large hyperscalers or in the case of telecom with 5G to take the customer's IP and our IP and put it together. And then even in our merchant offerings, candidly, we end up doing SKUs and derivatives that have something special for what our customers want. So, I'd say that generally, it's not something we can even exactly quantify internally. What I would say is it's an absolute trend. It's the way the market is moving. You have to be able to have a rich set of intellectual property and flexibility in your business model and how you engage with your customers. And that's not just for the hyperscale cloud, Tim, it's also for 5G. It's for enterprise as well. And then in the future, I think this is going to be a key differentiator for us in automotive as well as what we call our flexible business model. But anyway, I think that's as much as I can say. It's a hot trend. It's the way the market is moving, and we're probably the best positioned company to take advantage of it.

Okay Matt. Thank you.

Thanks Tim.

Our next question comes from Vivek Arya with Bank of America Securities. You may now go ahead.

Thanks for taking my question. Matt, given that conditions are so supply constrained, how are you ensuring the quality of demand and the backlog and making sure customers are not just stocking up in product? And related to that is the strength in the enterprise market, which seems to be well above what conventional wisdom and history would suggest, but you seem to be incrementally even more positive. So, just thoughts on just demand quality overall and sustainability of the strength in enterprise?

Sure, Vivek. We've been closely monitoring the supply and demand imbalance that emerged during the pandemic, not just in the fourth quarter. Our internal review process is thorough, and we have strong end-market data, including the number of base stations shipped and which carriers are deploying them, particularly for 5G. We also track cloud deployments and server shipments, allowing us to analyze which of our products are connecting to those systems, similarly for the enterprise market. Our focus is on a select number of major accounts where we have deep insights into their needs. We have established a robust engagement model with our customers, ensuring that our backlog is solid, orders are non-cancelable, and reschedules are minimal. Therefore, as we manage the backlog and bookings, we make sure they align with customer demand and prioritize accordingly. This crisis has further strengthened the relationships between chip industry leaders and OEMs, facilitating valuable interactions, even at the CEO level, which helps us gauge market trends. In the enterprise sector, much of our growth is due to increased content as technology evolves, with infrastructure moving towards multi-gigabit Ethernet and enhanced security measures, resulting in higher average selling prices per port. We've also seen a significant boost in our custom silicon offerings in the enterprise market, which has grown substantially year-over-year and is accelerating in this fiscal year. Additionally, as workplaces adapt to changes from the past two years, there's a renewed push to modernize infrastructure, driving an enterprise upgrade cycle. This combination of factors is contributing to impressive growth that we anticipate will continue throughout fiscal 2023 and beyond, building on a higher revenue base.

Thanks Matt.

Yeah.

Our next question comes from John Pitzer with Credit Suisse. You may now go ahead.

Good afternoon, everyone. I appreciate the opportunity to ask my question. Matt, congratulations on the strong results. There are many aspects to address, but I would like you to discuss gross margins, both from a cyclical and secular perspective. It’s evident that you are experiencing some increases in input costs within your supply chain. Given the strength of your gross margins, I assume your ability to pass these costs onto customers is quite high. However, my main inquiry is about the restructuring of the ARM server business into a more custom silicon focus. You mentioned that the gross margins on that side could be somewhat lower, with operating margins remaining neutral to the overall model. Since adjusting your expectations, it seems you have improved your gross margins. As you engage in these custom projects, are you finding that the profitability is perhaps better than anticipated?

Thank you, John, for your questions. The strong results were largely attributed to the company's robust gross margin performance. We achieved a record gross margin of 65.3% last quarter and guided for gross margins to be in the 65% to 66% range, reaching the upper end of our long-term model. Despite increased input costs and various challenges, the quality of our engineering and products has allowed us to maintain gross margins that facilitate reinvestment in the business. Regarding your question about custom products and their ramp-up, they have already started ramping up, particularly in high volume cloud-optimized silicon. Our data center revenue remains our largest segment, predominantly driven by cloud, which alone surpasses our other segments. Additionally, at our Investor Day, Jean presented a compelling chart on our gross margins by end market, highlighting that data center and automotive were the two highest, coinciding with our highest growth areas. While some individual products may have lower gross margins, the overall business is large and rapidly growing, allowing us to manage any products that may not meet average gross margins. Furthermore, products like those from Inphi are achieving higher gross margins and faster growth. This showcases the strength of our business model, allowing us to aggressively pursue large, high-volume sockets, especially in compute, while still aligning with our long-term margin targets.

Helpful. Thank you.

Yes.

Our next question comes from C.J. Muse with Evercore. You may now go ahead.

Good afternoon. Thank you for the question. Matt, you mentioned several new products that are ramping up this year and beyond, as well as new design wins. I have a two-part question. First, did you include both of those when you initially set the $5.9 billion guidance for fiscal 2023? Secondly, as you consider these design wins in your model, can you rank or highlight the top one, two, or three that you believe are most important for fiscal 2024 and beyond?

Sure. Regarding the design win side and new products, I want to highlight that our sales field applications team and business units performed exceptionally well this year in securing design wins, achieving a significant step-up in results. We just completed our review of the final numbers, and they did an outstanding job. Our pipeline of opportunities is at an all-time high. The additional wins we have will start to contribute in fiscal 2024 and 2025, with some possibly beginning a bit sooner. Generally, new design wins for new products don’t typically result in immediate revenue for the current fiscal year. However, we also have revenue growth expected from $400 million to $800 million, which is looking promising and is planned to ramp up in the latter half of this year. Essentially, the continuous incremental wins, particularly in the cloud sector, will enhance our performance in fiscal 2024 and 2025. We might not capture much from a timing perspective this year, but the wins we have already secured are performing well.

Thank you.

Yeah.

Our next question comes from Blayne Curtis with Barclays. You may now go ahead.

Hey, good afternoon. Thanks for taking my question. I just want to follow up on John's question on margins. And one thing we saw last month, your earnings, was that pricing kind of superseded future wafer costs. A lot of people saw a benefit in the first quarter and margins come down. So I'm just kind of curious, if you can talk about the kind of strength in gross margin. And then just, I wanted to make sure that this is a level that you kind of build off of and it wasn't that same dynamic a lot of other companies saw through earnings.

Hi, Blayne. Thanks for the question. I think, we have been in a very tight supply chain environment. So we have been dealing with the cost increase, price increase on the supply chain side for a long time now. For us, our team will work with the suppliers and customers closely and really try to just offset the cost increase during the whole thing. We have a very long product cycle. So we can plan ahead. Our gross margin is primarily driven by the end market mix that Matt talked about earlier. If you look at this Q4 and Q1, the guidance, we are very pleased with the gross margin, but largely because the data center is growing really fast. Automotive, they are growing really fast, Enterprise market, end market gross margin is also very strong, continue to trend up. So overall, if you look at our mix, that really drives our gross margin. For the rest of the year, it will be the similar situation in any given quarter. It largely depends on the mix.

Thanks, Jean.

Our next question comes from Joe Moore with Morgan Stanley. You may now go ahead.

Great. Thank you. I wonder if you could touch on the supply-demand situation a little bit more. You said delinquencies are still kind of rising, but you are getting more supply. Any progress on getting lead times down? And can you tell, in a lot of these cases, are you still kind of the bottleneck is your product to constraint, or is there any possibility of your product kind of waiting for other chips to arrive?

Yes, Joe, that’s a great question. It's surprising to find ourselves at this point in the cycle. The gap between supply and demand has indeed expanded. When we look at our unfulfilled backlog, which I consider more traditionally as delinquency, that figure continues to rise each quarter. It increased in the fourth quarter, and I expect it will also rise in the first quarter. Demand remains very strong. We're also seeing an uptick in supply, and we're surpassing our guidance from last quarter, with a robust outlook for Q1, both sequentially and year-over-year. However, we are still working hard with our suppliers to secure more of what we need. We've significantly improved our position in the supply chain, particularly with key suppliers who recognize our opportunities, which has been a major transformation over the past year. Kudos to our operations team led by Chris Koopmans and our business units for their efforts, which I am personally involved in, to ensure they understand our opportunities. We prioritize effectively and stay engaged with major accounts, managing to avoid being a bottleneck. Currently, I believe we're satisfying customers without any significant hold-ups, though it can become tight as we scale up and customers embed our solutions. We are managing this situation effectively, being tactical in the short term to align supply with demand, while also avoiding excess inventory. This cycle is unprecedented in terms of its strength and duration. Furthermore, with Marvell's increased market share and exposure to growth drivers, we feel additional pressure from these dynamics. However, we are ready for the challenge, and our team is performing excellently as we collaborate closely with our customers to make this work.

Thank you very much.

Yes.

Our next question comes from Tore Svanberg with Stifel. You may now go ahead.

Thank you and congratulations on the record results. Matt, a significant highlight for me this quarter is what you mentioned about the custom enterprise business. When you look at your carrier and your cloud, it's clear there are only a few companies involved. However, the enterprise sector is likely a much larger group. Could you provide more details on that? Specifically, will you be collaborating with more than just a handful of companies on the custom enterprise side?

Well, Tore, while there is definitely a wider range of OEMs and application diversity in the enterprise market compared to those focused on base stations, the reality is that the companies willing to invest in a full custom design are fewer. That said, our capability to provide optimization without the need for a full custom design is a significant advantage we offer. This represents a different business model for us. We are engaged with multiple customers, and they are looking for many of the same features, including our high-performance IP, transitioning from 5-nanometer to 3-nanometer. Our computing capabilities are particularly appealing, especially as trends from the hyperscale sector begin to emerge in the enterprise market, prompting interest in acceleration and offloading solutions. Our OCTEON DPU, whether sold as a card or as a customized chip integrated into a larger solution, reflects the exciting developments happening in the enterprise space. Furthermore, our latest OCTEON 10 product is very competitive in the market, being the best we’ve offered at 5-nanometer. In summary, we have a much broader range of opportunities now than before. Regarding custom enterprise, we are very happy with the revenue growth and our strong pipeline, as these products tend to have long life cycles. The profitability and gross margin of Marvell’s enterprise business align with our corporate averages, showcasing healthy margins across a diverse customer base and application set. Once we secure designs, the products become quite sticky and allow us to extend our reach into other sockets. For example, in Ethernet-based designs, we can easily incorporate multiple products. Overall, there are a lot of positive developments happening in the enterprise sector.

Thank you Matt.

Yeah.

Our next question comes from Srini Pajjuri with SMBC Nikko Securities. You may now go ahead.

Thank you. Hi, Matt. I have a question regarding the 400ZR cycle. You mentioned that it will grow in Q1, and you also indicated that the revenue is expected to surpass the previous peak. I understand we are very early in this cycle, but could you explain what is driving that strength? Additionally, it would be helpful to put into perspective how large you believe the SAM will be compared to the previous 100ZR.

Yes, of course. To clarify, when we refer to the peak, we are including the original 100-gig products, known as COLORZ, which was developed by Inphi, and now we have COLORZ 2 at 400 gig. What we’re indicating is that the total contribution from COLORZ and COLORZ 2 has reached peak revenue. The revenue from the DCI product line is expected to peak in Q1 and then increase from that point. Previously, with the 100 gig, the demand was largely driven by a single customer, leading to a semi-custom engagement. However, with 400ZR, we are collaborating with multiple hyperscale customers. This marks the beginning of an exciting growth phase for our products. This transition, which we have all anticipated, is now underway and is already contributing to revenue in Q1.

Got it. Thank you.

Yes.

Our next question comes from Harlan Sur with JPMorgan. You may now go ahead.

Good afternoon and congratulations on the strong results and execution. On your cloud optimized ASIC and some of your DIY design win pipeline, $400 million target in fiscal 2024. I think, Matt, you said that you're on track for doubling that in fiscal 2025, fiscal 2026. so now that you guys are deep in the design phase for many of these products at 5-nanometers, can you guys just give us a sense of the types of chips you're developing for your cloud customers? Is it primarily AI and machine learning acceleration? Is it video transcode? Is it custom DPUs, surplus CPUs, et cetera? And then any color on this point would be great. And then just as important, is the team already starting to engage on early 3-nanometer programs with your cloud customers on their next-generation ASIC programs?

Yes, that's a great question. You have a good understanding of our sensitivities regarding engagement with the hyperscalers. What we've secured and the pipeline we're pursuing includes a variety of applications, primarily focused on acceleration. This could encompass video, security, or storage solutions. We're also developing customized networking ASICs, along with computation resources and custom DPUs. Furthermore, we've mentioned the SmartNIC opportunity, which involves significant customization in that area as well. It's a diverse range of applications, and collectively, they are performing very well. We provided a carefully considered outlook when we presented those figures, and while our customers' forecasts are actually more optimistic than what we shared, that's our baseline. Additionally, we have recently secured more design wins that complement that baseline. Overall, things are looking positive, but it would be challenging to provide precise details at this stage without customer announcements.

Are you already engaged on early 3-nanometer?

Yes, we are very engaged on 3-nanometer. In fact, a significant reason for our success in 5-nanometer is our strong commitment to developing a robust 3-nanometer IP portfolio. We are currently in detailed architectural discussions concerning multiple products across various end markets, including cloud, 5G, and enterprise, regarding the use of our 3-nanometer platform. We are fully on track with our plans and our customers are excited about it.

Yes. Strong momentum. Thanks, Matt.

Yes. Thank you, Harlan.

Our next question comes from Christopher Rolland with Susquehanna. You may now go ahead.

Thank you for the question. I also want to extend my congratulations. You mentioned a new opportunity, Matt, related to AEC or DSP for AEC. I'm curious about the timing of this product's market entry. How large do you believe this market could be? Furthermore, are you in a position to capture a majority share? Thank you.

Yes. We're quite excited about the market transition, Chris, and I have mentioned some of this in my prepared remarks. Traditionally, this type of active cable wasn't necessary or at least the last generation that required it was based on NRZ technology. Similar to our approach with Inphi, we targeted the market just as it begins to grow at 400 and 800 with PAM4-based technology in 6-nanometers. This aligns perfectly with our capabilities as we refine our products for specific applications. We have made several announcements and are actively engaged with major cable manufacturers that supply hyperscalers. These cables are currently available and being sampled to customers. We are collaborating directly with cloud clients on further enhancements to the roadmap. We believe we will be a significant player in this market, as it suits us well. When you consider having the complete solution—switches, optics, AEC products, DPUs, and ASICs that interface with all these components—we have a unique opportunity to partner with our customers for optimized solutions. Companies that only possess one piece of the puzzle may not fully grasp these developments. We are very excited about this incremental opportunity. Market size estimates vary, with some saying it's over $1 billion. We are optimistic it's a substantial opportunity for us, and we are currently assessing its potential impact on Marvell while actively participating in the market.

Exciting. Thanks, Matt.

Yes.

Our next question comes from Gary Mobley with Wells Fargo Securities. You may now go ahead.

Hi, everyone. Thanks for sneaking in my question. I know you haven't filed your 10-K yet. But as it relates to that, is there anything notable with respect to purchase commitments on your behalf with your foundry partners, specifically, that's quantifiable and then as well, purchase commitments and CNRs they're called with respect to your customers?

Hi, Gary, this is Jean. Yes, we have not filed 10-K yet. But as far as the purchase agreement, as you know, last quarter end, we have about $3 billion commitment we are engaging with our suppliers to ensure we have the capacity not only for this year, next year and for longer term. So as you probably noticed, a year ago, this is just $200 million. So we have increased our commitment significantly. You're going to see going forward, the same trend is because that's really the driving focus of the company to make sure we have the capacity to support our customers.

And Gary, I would add that, as Jean mentioned, you can follow the trend line. The current engagements are directly related to some of the previous questions we had about our cloud-optimized ramps in fiscal 2024 and 2025. We are planning our business beyond that regarding the key capacity we need for critical technologies, substrates, and other components of the supply chain. You will notice that this trend will continue as we plan our business in alignment with our end OEMs and key supply chain partners to ensure we are all synchronized to meet the significant product ramps required in the coming years.

Thank you, Matt.

Thank you, Gary.

Our next question comes from Matt Ramsay with Cowen. You may now go ahead.

Thank you for having me. Matt, I wanted to ask a quick question about the significance of cloud in your business. I've noticed that there are several developments in the data center space coming up in the next year, such as Sapphire from Intel, General from AMD, PAM4 400-gig optics, and other initiatives that could lead to a substantial upgrade cycle in data center spending. As you interact with your customers, do you agree with this perspective? Are you observing an increase in pent-up spending due to Intel's roadmap causing some uncertainty? How would you describe the hyperscale spending environment over the next year or two based on your current observations? Thank you.

Thank you, Matt, and welcome to the call. I agree with your observations regarding the trends we're discussing. With new processor and server refreshes, along with various chips coming into play, we're seeing a shift that includes acceleration needs, new workloads, and different AI and GPU clusters. Analyzing these trends shows that the underlying silicon architectures are fundamentally driving cloud capital expenditures and requirements. As we enter new cycles and an inflection point, this is advantageous for Marvell. The opportunities with PAM4 400-gig optics are a prime example. Our position in design wins for new systems and architectures is significantly stronger, whether we consider data centers or servers. This is exciting for us. While there have been some delays from certain suppliers, as the roadmap progresses and transitions occur, we anticipate substantial growth for Marvell. This also contributes to the growth projections we are currently seeing.

This concludes our question-and-answer session. Thank you for attending today's presentation. You may now disconnect.