Good afternoon, and welcome to Marvell Technology’s Fourth Quarter and Fiscal Year 2023 Earnings Conference Call. All participants will be in listen-only mode. After today’s presentation, there will be an opportunity to ask questions. And please note that this event is being recorded today. I would now like to turn the conference over to Mr. Ashish Saran, Senior Vice President of Investor Relations. Please, go ahead, sir.

Thank you, and good afternoon, everyone. Welcome to Marvell's fourth quarter and fiscal year 2023 earnings call. Joining me today are Matt Murphy, Marvell's President and CEO; and Willem Meintjes, our new CFO. Let me remind everyone that certain comments made today 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 by welcoming Willem, who is participating today in his first Marvell earnings call since being named CFO in January. Having previously served as Marvell's Chief Accounting Officer and Treasurer since 2018, Willem has deep institutional knowledge of our company and our end markets, which has helped him seamlessly transition into his new role. I look forward to partnering with him, as we continue to execute on the many opportunities in front of us. Turning to our business results for the fourth quarter of fiscal 2023. Revenue was $1.42 billion, growing 6% year-over-year, above the midpoint of guidance, with better-than-expected results from our data center end market. Sequentially, as our customers dealt with a broad-based inventory correction, revenue declined by 8%, with the majority of the reduction coming from storage products within our data center end market. The rest of our end markets held up relatively well in a worsening macroeconomic environment. Revenue grew sequentially in carrier, consumer and auto industrial and declined slightly in enterprise networking. Looking ahead to the first quarter, the inventory correction that we described last quarter has continued to impact near-term demand, along with typical seasonality for some of our products. As a result, at the midpoint of guidance, we are expecting consolidated revenue to decline by 8% sequentially and 10% year-over-year. In addition, coming out of the supply crunch, broadening inventory corrections are creating an unusual revenue mix. In the first quarter, we expect storage to decline further and inventory correction to spread to a number of additional areas I will discuss later. At the same time, we are forecasting very strong sequential growth in revenue from 5G and number of custom ASICs, but these have gross margins well below Marvell's corporate average. As a result, we expect a challenging gross margin outlook for the next few quarters. However, we are confident that once we emerge from the inventory digestion phase into a more normalized environment, we will be well positioned for our gross margins to recover. Willem will discuss our expectations in his prepared remarks. Let me move on now to discussing our end markets, starting with data center. In our data center end market, revenue for the fourth quarter was $498 million, declining 13% year-over-year and 21% sequentially. Revenue was higher than anticipated, driven by better-than-expected results, primarily from our PAM DSPs and data center switches. As expected, our storage business was responsible for the bulk of the overall sequential decline in our data center revenue. Our results reflect the deceleration in the data center end market and the beginning of efforts by our customers to adjust their inventory to respond to a more challenging market conditions. We are expecting this trend to continue and are projecting lower demand to impact multiple data center products. As a result, we expect revenue in the first quarter from our data center end market to decline in the mid-teens sequentially on a percentage basis. We project data center storage to decline again sequentially in the first quarter across HDD, SSD and fiber channel and also expect to see inventory adjustments to a lesser degree, broadly impact the rest of our data center products. Slowdown in spending signaled this year by multiple large data center customers is also impacting the timing of the ramp of our cloud optimized design wins. Our key design win projects remain intact, but the start of production for some of these programs is being delayed. As a result, the revenue ramp has shifted out by a couple of quarters compared to prior projections. Our lifetime revenue expectations from these design wins remain in the same range as previously communicated. While we work through the near-term dynamics in the data center, we remain confident in the growth outlook for this end market. We are seeing data center customers prioritizing key growth areas such as AI and ML with potentially much larger investment over the next few years. Our relationship with Tier 1 cloud customers has continued to deepen as we engage with their architects on helping solve their most pressing challenges in their next-generation data centers with optimized customer-specific solutions. One key example is the collaboration we announced with Amazon Web Services intended to enable cloud-first silicon design, extending the long-standing relationship between our companies. Marvell is a strategic supplier to AWS, delivering cloud optimized silicon that helps meet the infrastructure needs of AWS customers, including the delivery of electro-optics, networking, security, storage and custom design solutions addressing multiple critical applications. We believe Marvell's leadership in essential silicon technologies helps AWS push the boundaries of data center performance essential for driving their long-term growth. Earlier today, we announced our new Nova optical DSPs and Teralynx 10 switches for next-generation data center networks. Nova is the first commercially available PAM4 optical DSP to provide 200 gig per wavelength, twice the throughput of existing solutions over the same physical fiber. This breakthrough made possible by a significant improvement in electro-optics technology enables the industry's first 1.6 terabits per second pluggable optical modules. These modules provide twice the bandwidth in a physical package similar to existing solutions and are essential for the full deployment of 51.2T switches within the size and thermal density constraints of data centers. The higher performance enabled by this new 200 gig, 5-nanometer PAM DSP helps to extend the lead in electro-optics Inphi established and driving the market from 25-gig NRZ, 50-gig PAM to 100-gig PAM. The Nova platform provides a complete 1.6T solution, including DSPs, TIAs and drivers to the optical module ecosystem, reinforcing our expectations that pluggables will continue to remain the backbone of high-speed optical networking within data centers for the foreseeable future. Teralynx 10, a 5-nanometer programmable 51.2 terabit per second solution marks the latest in a series of cloud-optimized, low-latency, high bandwidth switches designed for use in leaf-and-spine architectures. The switch was designed in close collaboration with leading cloud customers and Teralynx 10 together with Nova creates a full platform to enable the next leap in bandwidth for cloud data centers. This is a tangible realization of the benefit of combining Marvell, Inphi and Innovium into a single entity focused on data infrastructure. This combination of 51.2T switches with 1.6T optics enables a quadrupling in bandwidth versus existing solutions. This significant breakthrough in capacity at a lower power and cost per bit will be a compelling TCO driver for customers to viably upgrade their networks to support the large increase in bandwidth they need for AI and other applications. For customers, the co-deployment of Nova-based pluggable modules and Teralynx 10 switches should reduce their risk and accelerate time-to-market. And when combined with Marvell's extensive verification and interoperability testing should also minimize their work in transitioning to a new technology. Turning to our carrier infrastructure end market. Revenue for the fourth quarter was $275 million, growing 14% year-over-year and 1% sequentially. Marvell's wireless and wired businesses drove strong year-on-year growth. We saw a strong demand for our wireless products as 5G adoption continue to expand. Our wired business benefited from carrier backbone bandwidth upgrades that accelerated during the pandemic. At Mobile World Congress, we announced our next-generation 5-nanometer OCTEON Fusion 10 baseband processor. This customizable wireless platform has been adopted by leading base station OEMs to provide comprehensive, in-line layer 1 acceleration. This new processor, along with our previously announced OCTEON 10 DPU provides a complete processing platform for 5G baseband, transport, and massive MIMO. At MWC, we continue to see strong interest from multiple customers and partners for our latest generation of 5G products for both conventional and cloud-based architectures. Moving on to our outlook for the next quarter. For the first quarter of fiscal 2024, we are expecting significant growth in our wireless business with revenue projected to increase by approximately 25% sequentially driven by 5G deployments in multiple geographies and our customer-specific product ramps. On the other hand, after an extended period of strong growth in our wired business, we are expecting revenue to decline in the double digits sequentially on a percentage basis. As a result, for the first quarter of fiscal 2024, we expect revenue from our overall carrier end market to grow in the mid-single digits sequentially and in the mid-teens year-over-year on a percentage basis. Moving on to our enterprise networking end market. Revenue for the fourth quarter was $366 million, with a strong 39% year-over-year growth, driven primarily by higher content and growing share of our merchant products, which drove the vast majority of our revenue in this end market in fiscal 2023. Sequentially, our revenue declined by 3% as we started to decrease channel inventory of our run rate merchant products, including further reductions in China. This was partially offset by growth in custom ASICs. Looking ahead to the first quarter of fiscal 2024, we are planning for additional reduction in channel and customer inventory of our merchant products and enterprise networking. However, we expect a strong ramp in custom ASICs to partially offset this decline. As a result, we project our overall enterprise networking revenue to decline in the high single digits sequentially, while year-over-year growth is projected to remain strong in the high teens on a percentage basis. Turning to our automotive and industrial end markets. Revenue in the fourth quarter grew 25% year-over-year to $99 million. Sequential revenue growth accelerated to 18% as supply improved. Looking to the first quarter of fiscal 2024, we project continued sequential growth from our auto business to be more than offset by a decline in our industrial business. Year-over-year, we expect our auto business to continue strong growth of over 30%, offset by a decline from our industrial business. As a result for our overall auto and industrial end market, we expect revenue to decline approximately 10% sequentially and be flat to up slightly year-over-year. Moving on to our consumer end market. Revenue for the fourth quarter was $180 million, declining 3% year-over-year and growing 1% sequentially. Revenue from our consumer SSD controllers continue to grow, while we saw declines in legacy printer ASICs and HDD controllers. Looking ahead to the first quarter, which tends to be seasonally softer in the consumer end market, we are forecasting revenue to decline sequentially by approximately 10%. In summary, fiscal 2023 was a very strong year for Marvell, with revenue growing 33% year-over-year to $5.9 billion, well above the industry and our long-term target model. Revenue from cloud grew approximately 50% year-over-year. Annual revenue from 5G crossed over $600 million and auto crossed over $200 million, important milestones for both end markets. During fiscal 2023, the first full year following the acquisition of Innovium, we drove a significant ramp in our data center switch revenue as a combined team. The Inphi portfolio continued to fire on all cylinders, with a strong ramp of our 800-gig PAM4 DSPs and 400ZR data center interconnect products. We completed the acquisition of Tanzanite to accelerate our organic CXL development. Our enterprise networking business had a tremendous year with revenue growing 51% year-over-year, reflecting the significant share and content gains we have driven over the last two years. Through this period of rapid growth, we scaled the company in a thoughtful manner with non-GAAP OpEx growing 20% year-over-year, well below the 33% growth in revenue. Following another strong year for design wins, our opportunity funnel continues to expand with many large sockets that we believe Marvell is well positioned to win. While the broader semiconductor industry, including Marvell, is dealing with near-term headwinds, we are confident in our ability to weather this cycle and continue to execute over the long-term. We remain laser-focused on capital allocation and improving efficiency. We are evaluating our customers' latest plans, assessing our level of investment across the portfolio and redirecting resources to our best opportunities. As a result, we expect to reduce our OpEx in the second half of fiscal 2024. Over the long-term, our prospects remain compelling. We have conviction in our plan, and we will continue to invest to support our strategy. As fiscal 2024 progresses, we expect the headwinds from inventory digestion will begin to subside, and mix will improve as demand patterns normalize. While storage has been impacted the most from inventory digestion, we are encouraged to see that customers have started to reduce their finished goods stock, clearing the path for a recovery. Revenue from OEM customers in China has declined to less than 10% of total company revenue. But as China reopens, we expect demand will recover and become a tailwind. In fiscal 2024, we expect data center switching and 400ZR will continue to grow, and revenue from our cloud optimized silicon programs start to layer in. In addition, we project our 5G and auto end markets will continue to grow in fiscal 2024. As a result, for overall Marvell, we expect revenue to start growing in the second quarter and gather momentum in the second half of the fiscal year. Longer-term, we are confident that our focus on data infrastructure and exposure to diversified end markets with secular growth position us well for the future. In our wireless end market, we expect content gains to layer in as 5G adoption continues worldwide. Our automotive opportunity continues to grow, and we see a path to growing revenue to over $500 million annually over the next few years. In data center, we expect to open up new revenue streams from emerging CXL and AEC opportunities. We expect generative AI to drive a massive transformation in data center architecture. We see a bigger opportunity for cloud optimized silicon for custom compute, a trend we had extensively discussed over the last couple of years. In addition to compute, the level of scaling in these generative models requires significant innovation and technology leadership in networking infrastructure to interconnect AI supercomputers. This requires ultra-high bandwidth links with low latency and sufficient reach, minimizing energy expended to move the massive amounts of data in these platforms is another important criteria. We believe these requirements are best met by high-speed optical connections. Last year, we launched the industry's first 800 gig PAM DSP and saw a huge ramp driven almost exclusively by AI applications. Our PAM DSP revenue from AI in fiscal 2023 more than quadrupled from the prior year. As AI models continue to grow in complexity, we expect that they will require more and more low-latency bandwidth. Earlier today, we announced the industry's first 1.6 terabit per second PAM platform, enabling a further doubling of bandwidth within the AI cluster. As investment in AI accelerates, we see this as a new growth engine for our electro-optics portfolio. As you've often heard me say, our employees are Marvell's greatest resource; the culture they have built is the foundation of our ongoing success. In January, Glassdoor named Marvell as one of the top 100 Best Places to Work in the US for 2023. We were the second highest-ranking among semiconductor companies. In February, we were honored to receive the Great Place to Work certification. These awards are a testament to our culture and dedication to creating a collaborative, compassionate and respectful workplace while remaining focused on growth and execution. I want to thank our entire team for their contributions to Marvell to enable us to develop leading-edge essential technology that helps power the world's data infrastructure. With that, I'll turn the call over to Willem for more detail on our recent results and outlook.

Thanks, Matt, and good afternoon, everyone. Let me start with a summary of our fiscal year 2023 results. Marvell's revenue grew significantly by 33% year-on-year to a record $5.92 billion. GAAP gross margin was 50.5% and GAAP loss per diluted share was $0.19. Our non-GAAP gross margin was 64.5%. Our GAAP operating margin was 4%. Non-GAAP operating margin expanded to 35.5%. Non-GAAP earnings per diluted share grew 35% year-on-year to $2.12. We returned $319 million to shareholders through dividends and buybacks. Moving on to our financial results for the fourth quarter. Revenue in the fourth quarter was $1.419 billion, exceeding the midpoint of our guidance, growing 6% year-over-year and declining 8% sequentially. Data center was our largest end market driving 35% of our total revenue. Enterprise networking was the next largest, with 26% of total revenue, followed by carrier infrastructure at 19%, consumer at 13% and auto industrial at 7%. GAAP gross margin was 47.5%. Non-GAAP gross margin was 63.5%, 50 basis points below forecast, primarily due to a change in revenue mix within certain end markets compared to our guidance. GAAP operating expenses were $650 million, including share-based compensation, amortization of acquired intangible assets, legal settlements and acquisition-related costs. Non-GAAP operating expenses were $431 million. GAAP operating margin was 1.6%. Non-GAAP operating margin was 33.1%. For the fourth quarter, GAAP loss per diluted share was $0.02. Non-GAAP income per diluted share was $0.46 at the midpoint of guidance. Now turning to our balance sheet and cash flow. During the quarter, cash flow from operations was $352 million. This included $56 million in payments for long-term capacity agreements. In fiscal 2023, payments for long-term capacity totaled $252 million. Looking ahead to fiscal 2024, we are currently anticipating significantly lower payments for capacity and a much-reduced headwind to operating cash flow. Inventory at the end of the fourth quarter was $1.07 billion, growing by $111 million sequentially. As we indicated in our prior call, we expected inventory to grow in the fourth quarter to support upcoming product ramps. Looking ahead to the first quarter, we expect inventory to start to come down and be a tailwind to operating cash flow over the year. We returned $51 million to shareholders through cash dividends. As of the end of the fourth fiscal quarter, our cash and cash equivalents were $911 million, growing by $188 million from the prior quarter. Our total debt was $4.5 billion. Our gross debt-to-EBITDA ratio was 1.87 times and net debt-to-EBITDA ratio was 1.49 times. $500 million of our total debt is due in June 2023. We are currently planning on paying this off using our cash balance and free cash flow, which we expect to improve our gross leverage. Turning to our guidance for the first quarter of fiscal 2024. We are forecasting revenue to be in the range of $1.3 billion, plus or minus 5%. We expect our GAAP gross margin will be in the range of 44.1% to 46.1%. We project our non-GAAP gross margin will be approximately 60%. This guidance takes into account the adverse revenue mix we are expecting in the first quarter, and we currently expect that the mix will remain challenging for a few quarters. Once we get through this period of inventory correction, combined with cost improvement actions underway, we expect non-GAAP gross margin to get closer to the low end of our target range by the fourth quarter. We project our GAAP operating expenses to be approximately $687 million. We anticipate our non-GAAP operating expenses to be approximately $460 million. This forecast includes a step-up from the prior quarter due to typical seasonality in payroll taxes and employee salary merit increases. As Matt discussed, we intend to continue to invest prudently in our long-term growth initiatives while further improving efficiency and optimizing capital deployment. Altogether, we expect to reduce our non-GAAP operating expense run rate by approximately $15 million a quarter in the second half of the year. We expect the full reduction to be achieved in the fourth quarter. Other income and expense, including interest on our debt is expected to be approximately $49 million. For the first quarter, we expect a non-GAAP tax rate of 7%. We expect our basic weighted average shares outstanding will be 858 million, and our diluted weighted average shares outstanding will be 863 million. As a result, we anticipate GAAP loss per share in the range of $0.12 to $0.20 per share. We expect non-GAAP income per diluted share in the range of $0.24 to $0.34.

We will now begin the question-and-answer session. And our first question will come from Ross Seymore with Deutsche Bank. Please, go ahead.

Hi everyone. I appreciate the opportunity to ask a question. Matt, I'd like to inquire about the overall business conditions. In your last quarter update, you mentioned that there was a decline towards the end of the quarter, and that this continued into January. Could you discuss the demand trends, particularly by end markets and regions, as we wrap up January and move into April?

Thanks for the question, Ross. We've observed a continued decline in business conditions over the past couple of months, both in terms of breadth and severity. We previously believed that storage would start to stabilize, but it has declined again this quarter. However, there are some positive signs as we see end customer stock levels decreasing, and we expect improvements throughout the year. Overall, both in storage and the data center, as indicated by our guidance, the inventory correction is ongoing. Meanwhile, our wireless business in 5G remains robust and continues to grow, which is encouraging, along with the strong performance from the automotive sector that is also on a positive growth path this year. There are many factors at play, but it seems that segments that were weaker previously have continued to decline slightly, whereas areas where we were optimistic have shown improvements. It's fascinating to see how different end markets are evolving at different paces. However, when we consider the overall outlook for the next few quarters, we anticipate growth in the second quarter due to inventory digestion and normalization in the latter half of the year, alongside sustained strength in sectors like 5G and automotive, as well as our cloud optimized growth. We are becoming cautiously optimistic about the second half, particularly with some recovery anticipated in our China business. It's important to note that in the infrastructure sector, fluctuations are typically less pronounced compared to consumer businesses. We started seeing changes in October, and we are still navigating through this transition in the January and April quarters, with a recovery forecasted for the second half.

Thank you.

Thanks for taking my question. Matt, I'm curious what second half recovery looks like? Is there the potential to get back to this kind of $1.5-ish billion quarterly run rate, you guys were at. And then as part of that, I'm also curious to know what should be the updated view $400 million and $800 million in cloud optimized silicon. And the one thing that I think Willem mentioned that you will only be able to get to the lower end of the gross margin range. I'm a little confused that if there is the recovery, then why would you be at the lower end of the gross margin range. So kind of related questions. Thank you.

Sure. Yes. No problem, Vivek. We'll treat it as one integrated question. So let me start with the cloud optimized ramp. As I said in my prepared remarks, and you can see sort of what's happening in the data center area, there is some delay, and there's some prioritization within those companies on how they're going to deploy. We feel very good overall about the programs and the lifetime revenue of those programs, but they have, in aggregate, shifted out by a couple of quarters. So if you just assume that the plan for $400 million this year was more back-end loaded as those ramped then the effect of that pushing out by a couple of quarters, we think it probably takes it down by about half. We don't know quite yet exactly, but just to give you a big round numbers, I think that's a safe assumption for now. The other question was around what does the second half recovery look like. I think it's too early to call it specifically at this point. I mean we're still seeing a lot of volatility in the business, as you can see from our first quarter guide. But when we step back and look at it from 30,000 feet and we also take the broad indicators from our customers, we do expect it as we said, to start growing from Q2 and beyond. The question is how big is the recovery and what comes back. So it's a little bit hard to call precisely where that's going to be at this juncture. And then on gross margins, again, it really comes down to the mix. Historically, if you look, we've the company has actually had pretty stable gross margins. I mean, they've moved around a little bit, but in general, that's been a fairly predictable thing. You can see based on this downturn we're going through just the volatility that's come in relative to the mix. So we see that improving in the second half. Again, I think it's too early to call the exact trajectory. So just in the abundance of being prudent here, we're calling it getting up to the lower end of the range. But again, it's highly dependent on mix, product ramps and what the end markets do. This is the best we know at this time.

Thank you, Matt.

Hi, good afternoon. Thanks so much for taking the question. Matt, I wanted to ask about generative AI and to the extent your customer conversations have evolved over the past couple of months. You talked about the cloud optimized opportunity being pushed out. But have you sensed any change in customer pull as it relates to AI? You talked about your exposure in compute and networking. You also talked about your PAM DSP business, specifically in AI quadrupling last year. Curious how you're thinking about that business in fiscal 2024? Thank you.

Sure. As mentioned in the prepared remarks, the influence of generative AI and the excitement surrounding it is a significant positive for Marvell. The growth of our 800-gig products over the past few years has been driven by AI clusters and applications, which has performed exceptionally well, providing a tailwind for our optics business. We also announced our 1.6 terabit per second product today, featuring native 200-gig per lane I/O. This product is currently sampling and is expected to enter production next year. The increased bandwidth is expected to boost our growth related to AI. Despite challenges in other areas, this segment has genuinely stood out for us, and we are very optimistic about its future. Additionally, many AI cluster systems will require data centers to be restructured, which we believe will create a demand for cloud-optimized silicon to complement the utilized GPUs and optics. There is undoubtedly a wider opportunity here, and this is a significant growth area for us in the cloud, evolving rapidly. Ashish, would you like to add anything?

No, I think the other thing I'd add is, I think we're already starting to see requests from cloud customers to really accelerate the availability of our next-gen products, right? I think we've seen a distinct change in tone, I would say, over the last quarter or two where we introduced our 1.60 as an example. You're certainly getting a request at a, how quickly can it become available, because they see the bandwidth needs really expanding very, very quickly. So I think it's very critical for us to get these products out even faster.

Yes. Good afternoon. Thank you for taking the question. Just a routine part for you, Matt. So I won't take too long. But specific to data center, I was hoping we could drill a little bit deeper into kind of the trends you've seen year-on-year based on the implied guide. So roughly, I think, down to $220 million. Is there a way to kind of parse through how much of that is storage, preamp, fiber channel and other? And maybe help us better understand kind of the slowdown in other, what drove that? And then from here, how do you think about the different parts between storage, other and the new products that you already kind of spoke about. So we have a pretty good idea there. But any way to kind of frame that would be very helpful.

Yes. Sure. Yes, C. J., sure, go ahead. I'll let Willem start off, and then I can add to it as appropriate. Great question.

Yes. So, I think, first of all, on a year-over-year basis, storage is a much bigger part of that decline for Q1. The way we think about it, C. J., we spoke originally about the $1.4 billion for storage, right? And so, if you look at that on a quarterly basis, it's about 60% was data center. So on a quarterly basis, it's just over $200 million. And last quarter, we obviously indicated that was down significantly. And this quarter, again, the decrease in data center was more in storage compared to the rest.

I guess, is there a way to frame what the other parties outside of storage? I mean, it certainly feels like roughly maybe $150 million out of the $220 million decline in storage, but we'd love to isolate on that 70 and how you see that part of your business recovery?

Hey CJ, it's Ashish. Let me just add some more color. So I think if you look at the year-on-year, the much bigger portion of storage, as Willem just walked through, if you think about all the other product lines, right, this includes optics as well as some of our networking products within data center, that's where we're seeing a much smaller decline in Q1. These inventory corrections take typically a couple of quarters, right? So I think you'll expect them to start to bounce back, I would say, in the second half. And I think they get a lot bigger. So the non-storage portion of data center really starts to recover in the second half and gets a lot bigger. And on top of that, even though we have pushed out some of the ramps of our cloud optimized, on an incremental basis, you will see some additional revenue in the second half. So overall, non-storage is a big part of how we see data center recovering in the second half of the year.

Thank you.

Great. Thank you. I wonder if you could talk about the gross margin pressure in the April quarter, carrier being up mid-single digit is not that much incremental revenue. Can you just give us some sense for the gross margin disparity between the carrier-centric custom business and the rest of it? And then I guess, separate from that, as you ramp other parts of custom ASIC into the cloud, do you expect to see that be more like the corporate gross margin.

Yeah. So let me start. So the way to think about that is, I think, in the prepared remarks we just said wire was done significantly about 20% and that was offset by the growth in wireless. So net-net, you see a small growth there, but it's those two dynamics that are offsetting each other.

Okay. And I mean, it seems like still even 25% growth in 5G, to cause a four-point margin disparity overall, it seems like…

Yeah, sure. So I think the way to look at it is overall, we saw additional weakness in storage, particularly in HCV and fiber channel, which is typically a higher gross margin product for us. In addition, we've seen a decrease in our merchant enterprise networking business, which is also a higher gross margin product. And so that with the growth in 5G, and then also we've seen some strong increases in our ASIC business, which both of those are typically slightly lower gross margin products. And that in combination with, certainly with the top line coming down, we've had some headwinds from fixed cost absorption. And so overall, that's driving the decrease that you're seeing.

Hey Joe, I want to add a few points because it's an important question. I completely agree with everything Willem mentioned regarding our situation. Essentially, we experienced a significant and rapid decline in some of our higher-gross-margin product lines. At the same time, we are seeing strong growth in product lines that are below the corporate average, which has impacted our gross margin more than we've seen in a while. To take a step back, our custom business originated from our acquisition of Avera in 2019. We anticipated that this would be a lower gross margin business, which we accepted at the time, and it has actually performed well. The team has executed effectively, making it a great growth driver for us. In fact, it has likely outpaced the overall Marvell portfolio in growth. However, since 2020, we have successfully driven Marvell's gross margins up. We have a balanced and diversified portfolio of product lines that contribute to a healthy and predictable overall gross margin. The primary change has been the severity and extent of the inventory correction we're facing. We still have growth drivers, particularly in ASIC and carrier, which has traditionally been a lower gross margin segment. We have been open about that, and those areas are continuing to grow significantly during this cycle. On the other hand, our highest margin product lines have decreased considerably, primarily due to inventory corrections on the channel side or customers managing their own inventory. Therefore, we believe that over the next few quarters, things should start to normalize. I hope this provides clarity on both the specific details and the overall situation, Joe.

Thank you.

Thank you very much, everyone. Good afternoon. Matt, you mentioned a possible shift in timing and the delay of the cloud optimized $400 million for this year. Looking ahead to next year, the $800 million you have referenced isn't solely dependent on a single customer or program. The hyperscale companies are currently undergoing various architectural changes and periods of adjustment, which can be described in multiple ways. What I want to understand is how you view that $800 million for next year if there are delays of a few quarters and the initial ramp of early programs. Are some initiatives pushed back while others remain on schedule? Could you walk us through that situation? Also, I’d like a quick clarification on Joe’s question. As we enhance these cloud optimized solutions, will that positively impact gross margin? Could you address that? Thank you.

Sure. So, for next year, I'd say my high-level answer is it's too early to call. And you kind of nailed it. I mean some of the programs are tracking as we thought, some even might be a little bit ahead. Some have pushed out more than we thought. So, the net effect for this year, we're just trying to call it as we see it today on the shift. Now, for next year, I don't know that it just keeps sliding. I think some of these are going to ramp at their own pace. And quite frankly, it's too early to call it and to understand what's going to happen four or five quarters from now, given how much is changing in the near term. I guess I'm reticent to try to provide any more precision there. I mean, I think if you want to be conservative, you could just sort of keep shifting it out a little bit, but I think there's still a call option for growth for Marvell next year in this area, but we have to see how these programs play out. And I think on the question of the margins, it really depends on the program. They're not all the same and some are more custom in nature that would be more traditional profile. Some are higher. But we still see the blend for the overall company returning back to its towards the low end of the range this year, and then we're going to keep driving it towards our long-term model in the next year. So at this point, I think it's too early to call and kind of infer what that the gross margins of those programs would be and then when they ramp versus what's going to happen next year. So as we get through the year, I think, Matt, we can give you more precision on that. But we're not changing our long-term growth model at this point in terms of the financial model, whether it's gross margins or long-term revenue growth and operating margins.

Thanks, Matt. Appreciate the color.

Yes, good afternoon. This is Jeremy calling in for Tore. I guess I want to focus in a little bit on the custom silicon. It sounds like this business has proven more resilient than other areas of the data center. Is this a function of the nature of those programs and the NRE investments in your customers that may and maybe you get better visibility in true end demand? And also, is this resiliency reflected in some of your ongoing current custom programs, maybe more specifically comparing the pushouts here relative to the rest of the data center business?

Sure. There are a couple of factors at play. As mentioned, the business and team have performed strongly in overall ASIC growth, and those programs are still ramping up, meaning there hasn’t been much inventory built into this growth. This accounts for part of the situation. Additionally, the range of engagements we have in traditional custom areas includes data centers, carriers, and enterprises. As indicated, even within the enterprise segment, there has been a mix shift due to the traditional merchant products, which have higher gross margins, decreasing while some of the ASIC components are increasing. I believe this will normalize over time. The growth in that area has shown to be very resilient. Some of this may stem from receiving non-recurring engineering (NRE) investments. Historically, that team has managed a business type that has been somewhat easier to plan, displaying more predictability. However, overall, it largely comes down to the ramping of new programs.

And can you talk about the pushouts here relative to the other segments? Have there been any significant changes there?

No. I mean, again, I wouldn't say that's a major factor. I mean, again, some of the cloud optimized programs that we talked about, those are custom. But in the short term, the data center impact has really been, again, more driven by storage and the impact on the rest of the portfolio, whether it be custom or optics, or whatever hasn't been as pronounced, but it's still going through its own correction.

Thank you for taking my question. I wanted to clarify your message regarding data centers. It seems that the hard drive situation is more of an inventory correction at your customer. What is your overall perspective on data centers? I thought last quarter you mentioned the PAM business and switching were doing reasonably well. So, when you say that cloud optimized is being pushed out and that the data center is softer, I'm trying to understand how these two aspects are related. Additionally, you mentioned changes in architecture; could you elaborate on that? I'm still a bit confused about your comments on data centers and why they are delaying the cloud ramp.

Sure, let me break it down into two parts. Last quarter, we highlighted a significant weakness in the data center, especially in storage. We also noted that while we were starting to see some inventory corrections across the rest of our portfolio, it was less pronounced. At that time, we expected storage to either stabilize or potentially decline slightly, with a mild correction happening overall. However, it seems that the need for correction in data center storage is taking longer than we anticipated, leading to a further decline in our Q1 guidance. Additionally, we now see that the rest of the portfolio requires more correction than we believed last quarter. In the short term, storage is down a bit, and there’s an ongoing inventory correction across the data center portfolio, although some individual product lines are fluctuating. Separately, we expect the ramp-up of our cloud-optimized design wins, which we've accumulated over the past few years, to still occur this year, although some of this has been delayed by a couple of quarters. We anticipate this will contribute to growth towards the end of the year, independent of the inventory correction, as it relates to our customers' program execution and the timing of their ramp-ups. Lastly, regarding architecture, as we observe growth in AI-based systems and clusters, and AI-focused data centers, we believe this will lead to significant long-term growth, which will require both cloud-optimized silicon and high-speed optics. So, in summary, we have short-term, medium-term, and long-term considerations to keep in mind.

Thanks a lot.

Yes.

Hey, guys. Thanks for the question. I guess, my first is the $400 million to $800 million regardless of the pushouts. Do you have any visibility into the composition, or can you elaborate on the composition of those wins around maybe percentage storage versus network versus compute and maybe even optics in there as well, anything else that you can offer? Just any visibility into the composition would be great.

Yeah. Hey Chris, there's a couple of challenges there. So one is there's a very high level of customer sensitivity on the nature of these programs. These are all NDA based. They don't really want us discussing those. Ideally, over time, maybe we can get something more public out there, but until my customers give you the go ahead, I'm not going to do it. All I'd say is just in general, maybe to try to be helpful; it's really not much storage in there. This is really more custom compute, custom networking, accelerators, offload that type of thing. That would be the bulk of it, I would say, those types of applications. And as we go along, Chris, I think we get closer to these product ramps and things, I'm obviously hoping for our investors, we can continue to provide more transparency as these things materialize, but it's a bit early to talk about that mix. And I'd prefer to do that as we got closer.

Okay. In terms of AI, you talked about networking, you talked about optics there and that all makes sense. But I was wondering if you had any ability to also provide compute. At one point on your road map, you had AI cards. I think you kind of tabled that effort. But yeah, I would love to know if you can provide compute into AI? And then the second part of that question is, are you willing to guide beyond the $800 million? Do you have visibility into, let's say, beyond $1 billion as it's been some time since you gave that $400 million to $800 million number?

Okay. Maybe just real high-level answer to both of those, I think on the AI one, I think that is and will be an opportunity for custom and for cloud-optimized applications. I think that's a real thing, meaning people will want to use things that are merchant. They want to use some of their own special things and probably in combination. So I think that's an opportunity that's part of the potential. And then as far as the long-term peak revenue from those, the wins, $400 million to $800 million, yeah, I think we said when we won them it would keep going because typically, you don't hit peak until many years into the ramp. So with the design wins intact, the $800 million becomes larger over time. How big that is? I think it's too early to call. But certainly, it would exceed the $800 million on an annual basis just because really, that was our view at the time of the year one, year two ramp would look something like that.

Awesome. Thank you, Matt.

Thank you. I wanted to discuss the data center for a moment. It seems that some of the softness is due to the rebalancing of optical modules at hyperscalers, which is more of a comment on the industry as a whole rather than something specific to our company. For Marvell, does this issue extend into the July quarter? Additionally, looking at the bigger picture, how do you perceive the 400-gig upgrade cycle for 2023 in light of the near-term challenges? How does this impact your overall outlook for 2023 and 2024, given the wide range of products you offer to support both 400-gig and 800-gig needs? Thank you.

Yes, I agree, Karl. Currently, part of the inventory adjustment we're experiencing is related to our PAM products that are sold to the optical module companies. This is an area where we are somewhat further back in the supply chain, so we can observe and feel the effects. Recovery will happen in the coming quarters, but it's uncertain whether it will occur this quarter, the next, or the following one. However, it should take place within that timeframe because the underlying demand remains robust. Regarding your other question, the current headwind we are facing may turn into a tailwind in the second half, if that is the case. Were you asking about the 400-gig ZR or the 400-gig PAM used within data centers?

Your broader portfolio on 400-gig and 800-gig and I guess, how you think about the upgrade cycle because obviously, softer the market near-term, but how do you think about your portfolio broadly as you think about that upgrade cycle over the next couple of quarters? Thanks.

Yes, I mean, we tend to think of the upgrade cycle as quite frankly a multiyear rollout, right? We had a very strong year last year, and it's a blend of products, right, from 200, 400, 800 inside data center, 400 ZR between data centers and that 1.6T announced. So, I'd say that the demand and the shift to PAM continues at a very strong rate. Again, we have some inventory correction in the first half. That's more of a module-related issue. And again, the slope of the hyperscale cloud guys revenue growth or CapEx growth kind of dropping, but not declining just not at the same rate of acceleration. So, we think all that works its way through and end consumption continues to grow very strongly last year, this year, and the year after.

I have a clarification and a question. First, you mentioned growth driven by AI clusters for high-speed optics. Are you indifferent about whether those AI clusters use Ethernet or InfiniBand? Different hyperscalers have varying fabrics for those AI clusters. Now for my question, you have discussed growth in PAM. With the OFC show next week, there seems to be increasing talk about linear drive modules that don't require DSPs or other components. Do you perceive any threat from direct driver linear drive modules to your PAM4 business moving forward? Thanks.

Sure. Yes. No. So, it's an exciting time for optics at this point given we've got OFC coming up next week. Yes, on the first one, in general, we're agnostic to both of those. We tend to just partner closely with the customers and design the solutions they need. So, it's the fundamental IP that really matters. As it relates to the disruptive technologies that are lurking around out there, I think that's been the history of optics. Our view is pluggables is going to be the high-volume de facto standard for many years to come. And certainly, we're encouraged by showing demonstrations of our new product at 1.6T, you had OFC, there's real people building systems around this. And of course, the ramp last year of 800 gig gives us confidence under the ramp of 1.6T. So we're paying attention to all of it, Quinn, I would say. We've got a really excellent team that understands the trade-offs and understands the various architectures. But right now, we feel very confident in our approach and our solution set. And I think coupled with our switch platform, which has now also been announced, it's really a nice combination of the assets of Marvell plus Inphi plus Innovium, all coming together in a single platform. So more to come on that. And certainly, we're happy to debrief with you and the rest of the team at and after OFC. I think there's going to be a lot of activity there.

Thank you, Matt.

Thank you. Hi, Matt. I have a question regarding your wireless business. It's encouraging to see that this sector is performing well, especially since some of your competitors are experiencing challenges in the market. I'm interested in understanding what factors are contributing to your success. Looking ahead to the next few quarters, could you share any insights on the sustainability of this business? Whenever we observe significant growth, like 20% or 25% in the semiconductor industry, we start to be concerned about the possibility of inventory buildup. Any details you can provide on what you are observing would be greatly appreciated. Thank you.

Sure. The main issue, particularly with larger incumbent players who have significant carrier communications operations in wireless, is that they usually have a mix of legacy solutions, like 4G LTE, alongside new 5G chips that are being introduced. Currently, most carrier spending in wireless is focused on 5G. From Marvell's perspective, we had limited legacy involvement before, and 5G is where we've seen significant content growth. This has continued to be a strong growth driver for us. It’s important to note that the carrier business can be quite unpredictable and doesn’t typically follow a linear trend; it can be a bit bursty at times. We're pleased with the growth we're witnessing and believe this year will be a growth year for us in 5G, though it can have its ups and downs. The overall situation is aligned with our expectations regarding the designs we've won and the content we've been able to capture. Last year, we surpassed the $600 million milestone in 5G, which was a target we had set years ago, and we're glad we achieved this just a few years after announcing that goal. There are promising areas in the Marvell portfolio, particularly in 5G and the automotive sector, but we need to navigate challenges in some other markets. Is that our final question, Ashish?

Yes, it is, Matt. If you can maybe end with some closing remarks, that would be great.

I appreciate everyone's time on the call today. Reflecting on our last fiscal year, it was a significant success for Marvell. Looking back to 2020, during the pandemic, as we were merging with Inphi, it’s impressive to see where we stand now. In fiscal 2023, both Inphi and the Innovium team we integrated have performed exceptionally well, demonstrating strong growth and margins overall. While we are currently experiencing an inventory correction, which varies across markets, we are managing it prudently, working closely with our customers to understand their actual demand and align our shipments accordingly. Presently, we are likely shipping below the consumption levels of Marvell products, and we aim to correct that, which should also improve our gross margin profile. Additionally, we are excited about the new wins we've secured and the efforts our sales and business unit teams have put in over recent years to build our design win pipeline. Despite facing short-term challenges, we maintain a long-term perspective at Marvell. As I approach the completion of my seventh year as CEO, I am optimistic about the company’s future. We have confidence in our end markets and long-term potential, and the necessary R&D investments to drive our customer programs are clear. We aim to reassess and concentrate on the best opportunities ahead. Capital allocation has been a strategic priority for us since day one, and I believe we can emerge from this cycle as a much stronger company with intact growth prospects and enhanced long-term opportunities. I feel optimistic about the future of Marvell and appreciate your time today. I look forward to reconnecting after the earnings release.

The conference has now concluded. Thank you very much for attending today's presentation. You may now disconnect your lines.