As a tech analyst, I’ve covered my fair share of company lows and highs. I particularly enjoy the drama and strategy of a successful turnaround—the more drastic, the better. Marvell has a compelling story, having undergone a significant but necessary reinvention over the last several years. I’ve been interacting with Marvell since the company’s inception, when it was known primarily for consumer hard drive controller play technology. Rock bottom for Marvell came in 2016, with an SEC investigation and a $750 million settlement with Carnegie Mellon in a patent infringement case and accusations it was undervaluing an investor’s shares.
In the aftermath, CEO Sehat Sutardja and President Weili Dai stepped down to make room for new CEO Matt Murphy, a decision that continues to pay extraordinary dividends for the company. With the expressed goal of being “the best growth semiconductor company in the world,” Marvell has leaned heavily over the last five years into fast-growing, lucrative and “sticky” markets, such as cloud, 5G and automotive. It’s this refocusing, in my opinion, that has propelled the company out of the sand and back onto the green.
This week I tuned into the company’s virtual Investor Day 2021 event to check in on Marvell’s progress. While I’m by no means a securities analyst, I seek such events out for the truthful look they give at a company’s prospects. Without further ado, let’s dive in.
Cloud reigns supreme
Marvell’s three big growth markets alone (cloud, automotive and 5G) purportedly brought in $1.5 billion last year, compared to the prior year’s $700 million. Of this year’s revenue, the lion’s share ($1 billion) came from cloud alone; this makes sense, given that, of the three, Marvell considers cloud to be its most significant and highest growth opportunity. Marvell’s strategy of building customized, innovative solutions for its individual cloud customers appears to be paying off handsomely.
Also notable was that 40% of Marvell’s revenue came from data center sales—I believe this is the highest percentage of any data center silicon provider in the industry. Looking to the future, Marvell shared that it expects its revenue of cloud, automotive and 5G to grow at a rate of 40% per year, twice the rate it expects the markets themselves to grow. While cloud very much stole the show at this year’s Investor Day, I’m going to be keeping an eye on automotive moving forward—last quarter, it exceeded the $100 million annualized revenue mark. Just a few years ago, that number was zero.
I’d be remiss not to mention the success Marvell has seen with its strategic acquisitions, and the impact that has had on Marvell’s numbers. Since 2018, the company has brought Cavium, Avera Semi, Aquantia, Inphi and most recently, Innovium. And that’s not simply the addition of the acquired companies’ revenue—these businesses are growing and becoming more successful once integrated with Marvell. All this considered, consumer is now only a tiny shred of what Marvell does. With these acquisitions, Marvell is unique in that it is essentially a one-stop shop for the areas in which it plays. The only company I see in Marvell’s current competitive sphere is Intel (and potentially NVIDIA, in the networking sector, or AMD if the Xilinx deal goes through).
Marvell’s future looks bright
The company also announced it has adjusted its CAGR growth rate to 15-20%, up from the 10-15% CAGR projected at last year’s Investor Day. Notably, this growth rate represents one of the highest current growth rates for a semiconductor company at scale. According to Marvell, its addressable and serviceable market has also seen an impressive 50% growth year over year. Last year’s Investor Day showed Marvell with approximately a $20 billion addressable market, which has since bloomed to $30 billion. This makes sense, given both Marvell’s new acquisitions and the growing demand put on infrastructure by digitalization and cloud adoption in the enterprise.
During the analyst briefing, I asked Nigel Alvares, Marvell VP of Solutions Marketing, how much of these gains he attributed to market growth versus share shift. While a rising tide is raising all boats in these market segments, Alvares says Marvell is still gaining a larger share. Regarding cloud, Alvares attributed this to a growing demand for specific, optimized solutions where a general use CPU or GPU no longer “does the trick.” This is where the puck is going as heterogeneous computing and specialty silicon gets more popular.
“We are winning because the market is going cloud-optimized,” according to Stacey Keegan, VP of Corporate Marketing. This success is no coincidence—Marvell recognized where the market was headed and chose a great time to go all-in on seizing these opportunities.
Marvell’s new projected long-term growth rate of 15 to 20% is only further evidence the company is back on the right track. An excellent exclamation point on all of this was Marvell’s projection of an additional, incremental $800 million in revenue by 2024 because of new 5NP cloud wins (up from a $400 million outlook on Marvell’s last earnings date). Marvell is no longer a cautionary tale—instead, it’s showing the industry what it looks like to achieve sustainable growth at scale. At this rate, there will be more to celebrate at next year’s Investor Day.
Note: Moor Insights & Strategy writers and editors may have contributed to this article.