Marvell Posts Record Sales on AI Focus

Marvell Technology(NASDAQ:MRVL) reported record revenue of $2.006 billion in the fiscal second quarter ended Aug. 3, 2025 (+58% year-over-year revenue growth, +6% sequential revenue growth), non-GAAP EPS of $0.67 (+123% year-over-year (non-GAAP)), and operating cash flow of $462 million. Management announced the $2.5 billion divestiture of the Automotive Ethernet business, completed at the beginning of the fiscal third quarter ending Nov. 1, 2025, representing a major strategic pivot to AI-focused data center markets, with data center comprised 74% of total revenue. The following analysis highlights key developments in market focus, operating leverage, and custom silicon momentum.

Marvell pivots portfolio to AI data center dominance

Management executed a $2.5 billion all-cash sale of the Automotive Ethernet business at the start of the fiscal third quarter, with proceeds to bolster buybacks and data center R&D. Data center end market revenue has more than doubled from 34% of total in 2024 to 74% in 2026, and is expected to continue outpacing other segments as new classification aligns reporting to this core strategy.

"to further bolster our technology platform. The auto divestiture aligns with our strategy to focus the company on what we expect to continue to be a massive AI opportunity in front of us by purposely redirecting our investments towards data center, relative to our other end markets. That strategy has been very successful, with data center alone now driving three-quarters of our total revenue. The auto divestiture further reduces the relative proportion of revenue from our non-data center end markets. As a result, starting in the third quarter, we will consolidate our non-data center end markets into a new single communications and other end market."
-- Matt Murphy, Chairman and CEO

This transaction and reporting realignment cement Marvell’s transformation into an AI and cloud-centric chip supplier, likely improving capital efficiency and competitive focus while simplifying investor narratives around long-term growth drivers.

Operating leverage accelerates as margins and cash flow hit new highs

Non-GAAP operating margin expanded sharply by 870 basis points year-over-year to 34.8%, outpacing the 58% YoY revenue growth as Non-GAAP operating expenses came in below guidance. Operating cash flow rose to $462 million, up $129 million sequentially, with gross debt to EBITDA improving to 1.63x, providing further financial flexibility for buybacks or capacity investment.

"We expanded our non-GAAP operating margin by 870 basis points year-over-year to 34.8%, and delivered record non-GAAP earnings per share of $0.67, up 123% year-over-year. We also delivered $462 million in operating cash flow, up significantly from the $333 million in the first quarter. Robust cash flow generation is enabling us to continue to return significant capital to our stockholders. We have repurchased $540 million of stock through the first half of the fiscal year, with approximately $2 billion remaining in our authorization."
-- Matt Murphy, Chairman and CEO

Sustained margin expansion and outsized EPS growth versus revenue point to greater fixed-cost absorption and scalable profitability as more custom silicon ramps to production, supporting Marvell’s long-term compounding potential.

Custom silicon and XPU pipeline drive multiyear revenue visibility

Design win momentum is accelerating, with management disclosed over 50 pipeline opportunities representing $75 billion in estimated lifetime value as of June 2025. Over 90% of data center segment revenue is now tied to AI and cloud, while existing custom programs are ramping, and newly won sockets are expected to enter production over the next 24 months.

"During the quarter, we hosted a highly successful custom silicon investor event in June, where we outlined an expanded $94 billion data center TAM for calendar 2028, a 26% increase from our prior view. We also unveiled a new fast-growing custom silicon product category of XPU attach, updated our custom design win board to 18 multi-generational XPU and XPU attached sockets, and highlighted over 50 new pipeline opportunities with an estimated $75 billion of lifetime revenue potential. Based on the sockets we have already won, we concluded with our plan to grow our data center market share from 13% of a $33 billion TAM in calendar 2024 to 20% of a $94 billion TAM in calendar 2028."
-- Matt Murphy, Chairman and CEO

This rapid expansion in design pipeline and TAM substantiates Marvell’s increasing strategic value to hyperscalers, supporting a path for structurally higher revenue growth and long-term share gains in AI infrastructure semiconductors.

Looking Ahead

Management guided total revenue to $2.06 billion at the midpoint for the fiscal third quarter ending Nov. 1, 2025 (+36% year-over-year revenue growth forecast), with non-GAAP EPS of $0.69 to $0.79 and gross margin in a 59.5%-60% range. The company remains on track to accelerate in the fiscal fourth quarter ending Jan. 31, 2026, driving annual second-half strength. Following the auto Ethernet divestiture, new reporting segments will be implemented beginning in the fiscal fourth quarter, further emphasizing the primacy of data center growth and profitability in Marvell’s future outlook.

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This article was created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. The Motley Fool recommends Marvell Technology. The Motley Fool has a disclosure policy.