Marvell Technology recently unveiled its financial performance for the second quarter of fiscal year 2026, showcasing impressive revenue figures largely propelled by the escalating demand within the artificial intelligence sector. The company achieved a record revenue of $2.006 billion, marking a 6% sequential growth and a remarkable 58% year-over-year increase. This robust expansion was significantly influenced by the data center market, which alone experienced a 69% surge compared to the previous year. Furthermore, Marvell strategically divested its automotive Ethernet business for $2.5 billion, a move aimed at sharpening its focus and investment in core growth areas, particularly the lucrative AI and cloud markets. This strategic shift is expected to further consolidate its position in high-growth segments, enhancing its operational efficiency and long-term profitability. The firm also reported a substantial recovery in its enterprise networking and carrier infrastructure divisions, collectively growing 43% year-over-year, alongside expanding non-GAAP operating margins and achieving record non-GAAP earnings per share.
The company's data center segment was a primary driver of its exceptional performance, with revenue reaching $1.49 billion in the second quarter. This growth was underpinned by the strong uptake of custom XPU and XPU-attached products, as well as the advanced Electro-Optics Interconnect portfolio. AI and cloud applications constituted over 90% of this revenue, highlighting Marvell's pivotal role in supporting next-generation computing infrastructures. Looking ahead, Marvell projects continued growth in its Electro-Optics products, anticipating a double-digit sequential increase as demand for AI interconnect solutions remains high. While growth in the custom business is expected to be non-linear, with a stronger fourth quarter, the overall data center revenue is poised for sustained expansion. Marvell's leadership highlighted an expanded $94 billion data center Total Addressable Market (TAM) for calendar year 2028, reflecting a significant increase from previous forecasts and underscoring the vast potential within this market. The company also announced strategic leadership enhancements, promoting Chris Koopmans to President and COO and Sandeep Bharathi to President of the Data Center Group, aiming to capitalize further on opportunities in the AI and cloud sectors.
Marvell is actively expanding its footprint in custom silicon, securing additional design wins beyond the previously disclosed 18 multi-generational XPU and XPU-attached sockets. These new engagements are projected to generate multi-billion dollar lifetime revenue, reinforcing the company's confidence in achieving its ambitious long-term market share targets. The firm anticipates growing its data center market share from 13% in calendar year 2024 to 20% by calendar year 2028. A significant area of focus is the development of scale-up switches for AI infrastructure, leveraging Marvell's expertise in Ethernet switching and high-speed SERDES IP to meet the demands of ultra-low latency and multi-terabit bandwidth in AI training and inference workloads. The company is investing in both open standard Ethernet and proprietary fabrics like UA link, positioning itself as a leader in this critical component of AI network evolution. Additionally, Marvell's advancements in optical technology, including 1.6T PAM DSPs and the demonstration of 400 gig per lane PAM technology, signify its commitment to driving future optical interconnect solutions, essential for the ever-increasing bandwidth requirements of AI and cloud operations.
Beyond the impressive financial metrics and strategic realignments, Marvell's commitment to innovation and market leadership is evident in its continuous investment in research and development. The company’s R&D expenditure is increasingly skewed towards AI and data center initiatives, reflecting a deliberate shift from its historical focus. This proactive approach ensures Marvell remains at the forefront of technological advancements, particularly in custom silicon, which is becoming increasingly complex and critical for hyperscale customers. The discussions during the earnings call also shed light on the challenges and opportunities in the supply chain, with Marvell emphasizing its strong partnerships and execution capabilities to navigate potential constraints. The company's strategic divestiture and its impact on capital allocation further highlight a disciplined approach to maximizing shareholder value while fueling future growth in its most promising segments. Overall, Marvell Technology is strategically positioned to leverage the immense growth in AI and cloud computing, driven by its technological prowess, robust financial performance, and agile market strategy.