Good afternoon, welcome to Marvell Technology Fiscal Third Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. 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, Senior Vice President of Investor Relations. Please go ahead. Thank you, good afternoon, everyone. Welcome to Marvell's third quarter fiscal year 2023 earnings call. Joining me today are Matt Murphy, Marvell's President and CEO, and Jean Hu, our CFO. Let me 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 quarterly 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. Good afternoon, everyone. In the third quarter of fiscal 2023, the Marvell team drove revenue to $1.54 billion, a record for the company, growing 27% year-over-year and 1% sequentially. This year-over-year growth was driven by our cloud, 5G and auto business, as well as share and content gains in our enterprise networking end market. Our third quarter revenue came in towards the lower end of our guidance range, and we are forecasting a sequential decline in our fourth quarter. Early in the third quarter, we were still dealing with supply escalations. Late in the quarter, customers started requesting to push out shipments and reschedule orders to manage their inventory in a changing demand environment. In the 3rd quarter, these inventory reductions started to manifest. We are expecting an even greater impact in the 4th quarter. The largest impact is from our storage customers, as has been widely communicated by that set of OEMs. In addition, as our Chinese customers deal with a changing macroeconomic situation, their demand for our products has come down significantly. Just to give you a sense of the magnitude of that change, we estimate that our revenue in the 4th quarter from our OEM customers based in China will decrease by over one-third compared to the 2nd quarter. We expect revenue from China OEMs will account for less than 10% of our total company revenue in the 4th quarter. I would note that to date, the restrictions of the U.S. Department of Commerce announced in October on shipments of U.S. chip technology to China has not meaningfully impacted our revenue. While the inventory correction at our customers is challenging in the near term, we believe it's prudent to work closely with them to manage the change in an orderly fashion and clear the path to a resumption of growth. Let me now move on to discussing our end markets, starting with data center. In our data center end market, revenue for the third quarter was $627 million, exceeding guidance with better than expected results from our cloud business. On a year-over-year basis, our data center revenue grew 26%, with our cloud business driving all the growth, with multiple product lines contributing to strong results. On a sequential basis, our data center revenue declined by 3% due to softness in our on-premise business. Our storage products, including Fibre Channel, HDD, and SSD, all saw demand decline during the quarter. However, our cloud business continued to grow sequentially, driven by strength in our electro-optics and switch products. We are seeing the growth rate of the data center end market decelerate. Customers have started adjusting their inventory to address the changing demand picture. As a result, for the fourth quarter of fiscal 2023, we are expecting our data center revenue to decline year-over-year approximately in the mid-to-high teens on a percentage basis and sequentially decline in the mid-20% range. The biggest change in demand is in product lines where we are one step removed from the end customer. When demand changes quickly, we are more exposed to the supply chain bullwhip effect. As a result, we expect the impact to be the most pronounced in our storage business, which we project will be responsible for the bulk of the overall sequential decline in our data center revenue. In particular, we are projecting a very large reduction in shipments of our HDD controllers and preamps as HDD OEMs deal with a broad-based inventory correction. The rest of our data center business is also expected to deal with inventory adjustments by our customers, but to a much lesser extent compared to our storage business. While we work through the near term situation in the data center end market, we remain confident in our multiple long-term growth drivers. In the third quarter, we started ramping our cloud optimized silicon design wins into production and are planning to launch multiple additional products in fiscal year 2024 and 2025. Our successful execution on the first group of projects, coupled with our ongoing investments in data infrastructure silicon IP and advanced process and packaging technologies, is opening up an even larger set of opportunities with cloud customers. In the third quarter, we launched our next generation cloud security solution, Marvell's LiquidSecurity 2 HSM adapter, the industry's most advanced solution for enabling encryption, key management, and authentication in the cloud. Powered by Marvell's cloud optimized OCTEON DPU, LS2 is a converged security platform for payment, privacy compliance, and general purpose applications. We are also making progress on two of our longer term growth initiatives in the cloud, CXL and AEC. In the third quarter, we announced availability of our CXL development platform for cloud data center operators and server ODMs, enabling two key use cases: memory expansion and memory pooling. The platform pairs Marvell's advanced CXL technology with the latest CXL capable CPUs, including the new 4th-gen AMD EPYC processors, demonstrating multi-host memory pooling. With this platform, cloud operators can begin to advance their infrastructure and enable their applications to take advantage of this cutting-edge technology. I'm very excited to announce that we have recently won a significant design at a tier one hyperscaler, projected to drive a substantial amount of revenue in aggregate over the program's lifetime. Product development activities are in full swing. Our team is driving a large and growing pipeline of CXL opportunities. In the AEC market, multiple cable manufacturers have started sampling 100 Gb per lane active electrical cables powered by Marvell PAM4 DSPs to cloud data center operators, which we expect will pave the way to broader adoption and expand our addressable market. Turning to our carrier infrastructure end market. Revenue was $271 million, growing 26% year-over-year and declining 5% sequentially. On a year-on-year basis, the vast majority of our growth was driven by our wireless business, which continued to benefit from the growth in 5G adoption. As you recall, the annualized revenue run rate for our wireless business crossed $600 million in the second quarter of this fiscal year. We are excited to see growth continue from that milestone. Our wired business also grew year-on-year in the third quarter, driven by solid demand from metro and long haul carrier for our market-leading coherent DSPs and accompanying TIAs and drivers. On a sequential basis, our wired business came down as expected from a very strong second quarter and more than offset growth from our wireless business. We are excited to see our 5G business continuing to flourish, and are looking forward to broader deployment of 5G in multiple geographies, including the U.S., Europe and India. In addition, we anticipate significant share in content growth ahead and new opportunities in O-RAN and V-RAN architectures. As you will recall, in March 2020, Nokia and Marvell announced that our companies have started working together to develop leading 5G silicon, including multiple generations of custom silicon and infrastructure processors to further expand the range of Nokia's ReefShark chipsets. Earlier this week, we announced an extension of our collaboration with Nokia to further advance their 5G chipset portfolio. Nokia will be using our new OCTEON 10 DPU, the industry's leading 5G transport processor, built on Marvell's cutting edge 5 nanometer platform and hardware acceleration technology. These high performance and highly efficient processors will allow operators to scale rapidly and manage the dramatic increase in data traffic and performance demanded by 5G's innovative service based architecture, while reducing cost and energy consumption. We continue to expand our collaboration with Nokia and look forward to enabling their next generation 5G platforms. There are also 2 key announcements from the Open RAN ecosystem. Vodafone and Nokia announced that they have agreed to work on a fully compliant Open RAN solution with Marvell. Developed in cooperation with us, Nokia's ReefShark SoC boasts layer one processing capability to enable Open RAN systems to reach full functionality and performance parity with traditional mobile radio networks. In another development, Vodafone and Samsung recently announced that they are jointly cooperating with Marvell to accelerate the performance and adoption of 5G Open RAN across Europe. They plan on incorporating Marvell's advanced OCTEON Fusion processor, specifically designed for Open RAN, into the latest off-the-shelf servers. The specialized accelerator chip also enables Massive MIMO, a technology developed to serve many subscribers in dense urban areas. Moving on to our outlook for next quarter. For the fourth quarter of fiscal 2023, we are expecting revenue from our carrier end market to grow slightly on a sequential basis and grow year-over-year approximately in the mid-teens on a percentage basis. Moving on to our enterprise networking end market. Revenue for the third quarter was $376 million, growing 52% year over year and 10% sequentially. As the quarter progressed, our Chinese customers started to turn cautious due to an evolving macroeconomic environment. In response, we worked with customers realigning shipments to reflect their reduced demand. As a result, despite the strong sequential and year-over-year growth, revenue was lower than our guidance. In the fourth quarter of fiscal 2023, we are expecting revenue from the enterprise networking end market to decline sequentially in the low single digits on a percentage basis. However, we expect growth to continue year over year at close to 40%, reflecting our higher content and growing share. Turning to our automotive and industrial end market, revenue for the third quarter was $84 million, growing 26% year-over-year and 1% sequentially. Revenue was lower than our forecast in industrial as well as automotive, where we continue to experience supply challenges in certain legacy nodes. We expect these supply challenges to start to improve in our fourth quarter. On a sequential basis, our auto business continued to grow, partially offset by a decline in our industrial business. On a year-over-year basis in this end market, Marvell's growth was primarily from our auto business, driven by continuing adoption of our Ethernet technology. Our auto business achieved another milestone in the third quarter, with annualized revenues exceeding $200 million. As you recall, we have been accumulating platform design wins across a broad spectrum of auto OEMs. We have generated a substantial pipeline of lifetime revenue that will benefit us over many years. Looking to the fourth quarter of fiscal 2023, we are projecting strong growth for our overall auto and industrial end market, expecting revenue to grow approximately 30% year-over-year and in the mid 20% range sequentially. Moving to our consumer end market, revenue for the third quarter was $178 million, declining 2% year-over-year and growing 9% sequentially. Looking ahead to the fourth quarter of fiscal 2023, we are forecasting revenue to be flat sequentially and decline in the low to mid single digits year-over-year on a percentage basis. In summary, Marvell delivered record results in the third quarter despite the macroeconomic uncertainty in the world and inventory corrections in some of our end markets. Taking stock of our progress this fiscal year, at the midpoint of our fourth quarter guidance, we are projecting full fiscal year revenue growth in the low 30% range. While we are not immune to the global slowdown impacting the semiconductor sector, we expect to finish this year growing revenue well above the industry and our long-term model, reflecting our continued focus on data infrastructure. Looking forward to the next fiscal year, we remain confident in our key growth drivers of cloud, 5G and auto. We expect that our cloud optimized silicon programs will build from the initial ramp that started in the H2 of this fiscal year and continue to grow approximately $400 million in aggregate revenue in fiscal 2024 and $800 million in fiscal 2025. Our cloud customers are relying on these chips to build incredibly efficient and optimized custom hardware to enable their key growth drivers. In addition to our cloud optimized programs, we expect that our 5G products and our automotive business will drive strong year-over-year revenue growth in fiscal 2024. Offsetting this growth to an extent, we expect a few quarters of inventory adjustments in some of our businesses as customers realign their demand. We continue to be disciplined on operating expenses. We have tightened spending and slowed our pace of hiring, focusing on critical hires for future success. At the same time, we continue to invest in our long-term growth initiatives, including our 3 nm silicon platform, which is now available for new product designs. We are committed to executing on a number of new products which our customers have designed into their mission-critical applications. Over the last few years, we have significantly transformed the company, creating a diversified business with growing exposure to multiple infrastructure end markets with strong secular growth drivers. Our business is at scale. We have a growing design win funnel, leadership products and strong customer engagement. We've built an extraordinary team at Marvell with a track record of execution excellence, we believe we are well positioned to navigate the current environment to continue to deliver strong top and bottom line results over the long term. With that, I'll turn the call over to Jean for more detail on our recent results and outlook. Thanks, Matt. Good afternoon, everyone. I'll start with a review of our financial results for the third quarter and then provide our current outlook for the fourth quarter of fiscal 2023. Revenue in the third quarter was $1.537 billion within our guidance range, growing 1% sequentially and 27% year-over-year, driven by growth from our data infrastructure and the market. Data center accounted for 41% of revenue. Enterprise networking was 24% of revenue, carrier infrastructure at 18%, consumer at 12% and auto industrial at 5%. GAAP gross margin was 50.6%. Non-GAAP gross margin was 64% of revenue below our guidance range, primarily due to product mix. Our enterprise and auto industrial end market revenue was lower than expected and consumer revenue was higher than our forecast. GAAP operating expenses were $672 million. Non-GAAP operating expenses were $420 million, declining by 3% sequentially. Year-over-year, OpEx increased by 13%, growing at less than half the rate of top line revenue growth. OpEx was lower than guidance due to lower bonus growth and better than expected NRE. Our GAAP operating income was $106 million. Non-GAAP operating profit was $564 million, or 36.7% of revenue. Another all time record demonstrating the strong leverage in our operating model. Other income expense, including interest on our debt, was $41 million, higher than guidance, primarily due to higher interest rate on our outstanding debt. For the third quarter, GAAP income per diluted share was $0.02. Non-GAAP income per diluted share was $0.57 within our guidance range. Earnings per share grew 33% year-over-year faster than top line revenue growth. Turning to our balance sheet and the cash flow. During the quarter, we generated $411 million in cash from operations, reflecting our strong earnings, offset by continued working capital investment to support our top line revenue growth, including $94 million in payments for long-term back end and substrate capacity agreements. These agreements are critical to ramping our complex products in data infrastructure market, including the cloud optimized silicon solutions Matt discussed earlier. In the third quarter, we increased our inventory by $44 million or 5% sequentially. Looking at the change in demand we are forecasting in the fourth quarter, we expect our inventory level to continue to be elevated. We are focused on prioritizing new product ramps to support our customers. Since most of our products have long product cycles of 3 to 5 years or even longer, we're comfortable carrying higher inventory in a dynamic supply chain environment. We plan on reducing inventory starting next fiscal year. As of the end of the third fiscal quarter, our cash and cash equivalent was $723 million, increasing by $106 million from the prior quarter. Our total debt was $4.5 billion. Our gross debt to EBITDA ratio was 1.9 times. Net debt to EBITDA ratio was 1.6 times. During the third quarter, we returned $101 million to shareholders through $51 million in cash dividends and $50 million of share repurchases. In summary, in an uncertain macroeconomic environment, the Marvell team executed very well, delivering top-line revenue growth and earnings expansion much faster than revenue growth. Now turning to our guidance for the fourth quarter of fiscal 2023. We are forecasting revenue to be in the range of $1.4 billion ±5%. We expect our GAAP gross margin in the range of 48.2%-50.2%. We project our non-GAAP gross margin will be approximately 64%. We project our GAAP operating expenses to be approximately $646 million. We anticipate our non-GAAP operating expenses to be approximately $430 million. As Matt mentioned earlier, we have proactively slowed down our pace of hiring and tightened the discretionary spending to manage our operating expenses. We have a proven track record of executing through economic and market cycles to maintain strong profitability while we continue to invest in long-term growth initiatives. As a reminder, looking ahead to the first fiscal quarter of 2024, due to the typical seasonality in payroll taxes and employee merit increase, our OpEx tends to increase from the fourth fiscal quarter in the high single digits sequentially on a percentage basis. Following the step-up in the first fiscal quarter, we are currently planning on holding our OpEx approximately flat at that level for the next few quarters. Other income and expense, including interest on our debt, is expected to be approximately $44 million. We expect a non-GAAP tax rate of 6% for the fourth quarter and currently expect this to increase slightly to 7% next fiscal year. We expect our basic weighted average share outstanding will be 855 million, and our diluted weighted average share outstanding will be 861 million. As a result, we anticipate GAAP earnings per share in the range of breakeven to $0.05 per diluted share. We expect non-GAAP income per diluted share in the range of $0.46 ± $0.05. Operator, please open the line and announce Q&A instructions. Thank you. Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. In the interest of time, please restrict yourself to only one question. If you have additional questions, please rejoin the queue. At this time, we will pause momentarily to assemble our roster. Our first question comes from Blayne Curtis with Barclays. Please go ahead. Hey, thanks for taking my question. Matt, maybe just on the data center, I wanna understand the moving pieces a little bit better. I think storage has been weak for a bit. I think nearline, I think you've been pretty open that that was weak. I guess it's, it's implied a big move in storage. I guess what I'm struggling with is I'm trying to figure out how to foot that, the comment on the Chinese weakness as well, 'cause that's a, that's a big number and I guess maybe that overlaps. Can you just parse those two pieces a little bit more for me? you know, When you say China's weak, what kind of products are we talking about? Is there a way you kinda give any better color on that, within the data center for January? Got you, Blayne. Yeah. On the first one on nearline, as you mentioned, you know, there's been a lot of reports out there about the weakness there. We really, you know, hadn't seen that when we guided the quarter. In Q3, we started to see some weakness, but the impact is very pronounced in the fourth quarter, and that nearline weakness obviously flows into the data center end market, into that bucket. When you go to China, and the weakness we've seen there, that's really in the enterprise area. While overall enterprise is hanging in there, it was slightly below in Q3. We've had some offsets to that from strength elsewhere, but the main impact of the Chinese customers has really been in enterprise for the most part. Thanks. Then if I could just follow up. You, you mentioned in terms of the cloud, you said it was actually strong in October, both optical, you know, as well as switching. You also made the comment that I think data center is decelerating. Can you just put those two together? Are you still seeing strength in U.S. cloud and weakness elsewhere? Is the comment on data center weakening just on-prem? What did you mean by that? Yep, great question. Let me take it from the top. First point would be that, if you look over the last few years, cloud CapEx has been on fire. You know, it's been growing 30% kind of plus for the last few years. This year, if you look at, you know, reports and kind of what we see is probably something in the 15% range for 2022, and then depends on who you talk to, but, you know, probably down in the, you know, low to mid-single digits or maybe mid-single digits for next year. That's the deceleration that we're talking about. As, you know, the macro has started to catch up, even with these large cloud companies, you know, you see them very publicly tightening their CapEx, tightening their OpEx. You know, they've had this supply chain built in the data center, which was geared up for a lot of growth. As they reset those expectations, it's not a real smooth process. Storage is the most pronounced, as I mentioned earlier. That's the majority reason code for the sequential decline. We are seeing inventory adjustment as well, to a much lesser extent, and I'd say the broader set of product lines outside of storage that we sell in the data center. That is not a China-specific thing. That is a global comment, including, you know, US cloud, seeing inventory adjustment, you know, a bit more broadly. That's a change, certainly from where we were, say, a quarter ago when we were mired in supply escalations and expedites to, you know, an environment where it's now how do we work together to manage the inventory and manage the new reality. That's what you see in the guide for Q4. Hopefully that was helpful to give you the perspective you were looking for. Thanks for the color. Yep. Our next question comes from Vivek Arya with Bank of America. Please go ahead. Thanks for taking my question. Matt, I'm trying to see what is the range of kind of scenarios for fiscal 2024 sales growth. I understand, you know, you're not giving a specific number, but it would be helpful if you give us at least kind of a range. You know, can Marvell grow next year? When I look at the three areas, cloud and 5G and autos, I believe, you know, it's about 35%-40% of business. Can those three areas collectively grow fast enough to offset the inventory correction in other areas? Like, should we be thinking about, you know, flat or, you know, mid-single digit? What, what's the kind of range of scenarios of growth that we should be thinking about for fiscal 2024? Great question, Vivek, and certainly I'd frame all this by saying it's still a very dynamic environment. We'll give you the best view we can. I'd say the first point is we feel very good about the new products that are ramping up and the growth drivers that we've articulated, whether it's cloud-optimized silicon, switching, electro-optics, things like that in the data center. 5G, you know, obviously, continued momentum there with additional regions like India ramping next year, plus content gain rolling through, and then automotive, you know, continuing to grow. Those are all the positives. What we don't know completely, but I'll give you the best color I can, is on the base business and how much, you know, of the inventory correction we're gonna be dealing with, and the magnitude of that. We anticipate, first of all, that that's like typical cycles. It's probably a couple of quarters to work its way through. The three areas I would call out that probably are some offsets next year are, one would be in consumer. That's an area where we just, you know, haven't put a lot of investment. We've been typically running that business for cash. You'll probably see some decline there. I think on-premise data center is another area. The on-prem stuff probably has, you know, work to do next year. Then maybe a little bit in our wired infrastructure business. If you look, actually, it's kind of interesting. If you go back to our fiscal 2022 and you look at those three areas, they all grew pretty dramatically in fiscal 2023, the current year we're in. At a high level, I think some of those are probably gonna trend back to where they were before this big upcycle. Again, from a sort of a timing perspective, think of it as a lot of that headwind or weakness more in the H1, inventory works itself through, and then you have, you know, growth back off of that, plus you have the growth drivers kicking in. I think it's a very different story, most likely H1 versus H2. Those are some of the moving pieces in terms of how you think about the growth drivers versus some of the offsets. You know, we do see, we still believe we can drive positive year-over-year growth. It just certainly isn't gonna be as high as we had been hoping for if you went back even three months ago, just given the magnitude of some of the inventory adjustments. Thank you, Matt. Our next question comes from Timothy Arcuri with UBS. Please go ahead. Thanks a lot. Matt, just along the same lines of that question, I'm just kinda wondering if you can help us figure out what a reasonable baseline is in the data center business headed into next year. If you look at storage, I mean, it must be down about 50% sequentially in January. You were obviously over-shipping the past few quarters and you're really under-shipping now. It seems like if you net all that out, maybe it's kind of a $600 million per quarter baseline in data center, and then you can add the, you know, $400 million for the cloud-optimized silicon next year. Can you sort of help us handicap what a, you know, normalized run rate might be in that business? Thanks. Yeah. First, I think you're in the ballpark on storage. Just for a little context, you know, the magnitude of that decline, we can't find a, you know, a data point that shows it, you know, declining that quickly. Even when we look back to the reset in 2019, you know, this is down, you know, a lot more than that in the same timeframe. You're right. A lot has come out, and so that needs to normalize. I think you've probably got the math about right, if you think about sort of where's the base business at. Just to be clear, we're still in a little bit of a dynamic environment, figuring out where this is going to bottom out. You know, if you look at how fast it's coming down. That's kind of what we're doing, by the way. We're effectively working with our customers to make sure we deal with this quickly and efficiently and minimize any risk of building excess inventory. That's the path we're on. Sometime in the Q4, Q1 timeframe, we think that works itself through, you know, and then you start to kinda grow from there. That's probably, it's probably reasonable, you know, probably, you know, as a, as an annualized type of run rate, maybe a little bit lower in the H1 and certainly higher in the H2 as the new designs really ramp up. Yeah. Got it. I guess just maybe I was just trying to get, you know, to hold people's hand a little bit on the non-storage stuff, 'cause people will say, "Well, you know, the issue is not just storage, the issue is the other stuff too," It sounds like it's not. There is some. I mean, just to be very, very clear, right. The major reason code for the sequential decline from Q3 to Q4 in the data center line is storage. There is inventory adjustment going on in digestion, given that slope of the CapEx curve has just come down. There is some realignment, that, you know, that is not as pronounced and, you know, it's very manageable. I wanna be very clear, it's not 100% a storage issue. There's just a broader digestion. Of course. Yep. Thank you, Matt. Yep. Our next question comes from Toshiya Hari with Goldman Sachs. Please go ahead. Hi, good afternoon. Thanks so much for taking the question. Matt, if we take your guidance for the carrier infrastructure business in Q4, I think you'll be doing about $1.1 billion in revenue in the full year, maybe a little bit below that. To level set us, you know, how much of that is wireless? How much of that is wired? As you look forward into fiscal year 2024, you know, how are you thinking about the 5G business? I think the market overall, you're seeing some spots of softness potentially, but obviously you've got idiosyncratic design wins. How are you thinking about your business there? On the wired side, just given the cyclical dynamics, what sort of decline should we be expecting into fiscal 2024? Thank you. Hey, Toshiya, this is Jean. I'll start to answer this question. Matt can add. First, on the carrier infrastructure, wireless is already more than half. We talk about the wireless revenue is already running at more than $600 million annualized run rate. Wireless definitely is more than half. Going into next year, as Matt mentioned earlier, we continue to see strong 5G adoption. Our customer continue to do very well in the marketplace. We do expect the wireless part of the business will continue to have a very strong growth into next year. Of course, the wireline side is what Matt discussed. You know, we're going to see some headwinds on wireline side. Overall, we do expect carrier infrastructure to continue to grow. Matt, anything you want to add? No, I think that was perfect. I mean, I just put a pin on it that the wireless opportunity continues to be very exciting, and I think it's gonna be a very good year for wireless next year. Thank you. Our next question comes from Karl Ackerman with BNP Paribas. Please go ahead. Yes, thank you. 2 questions, if I may. Matt or Jean, I wanted to first discuss enterprise networking. You spoke about how China impacts that a little bit. Ex-China, are you still seeing growth? I know some of your networking OEMs have spoken about some moderating orders. I think last quarter you said that this segment was an area that was most constrained. I wanted to get- You know, clarify whether that's still true, and if you could kind of tie in, the amount of inventory that some of those customers have to get a better sense of, the demand dynamics enterprise networking going into fiscal 2024. Thanks. Sure. I'll make a few comments, and then Jean, why don't you add as well. Yeah, a couple things are going on. One is the supply environment has definitely improved. Now, some of that is because of the weakness in the China market. That's opened up supply we can give to other customers 'cause, generally, outside of a few select cases, our enterprise business is mostly merchant products. These would be Ethernet switches, you know, gigabit, multi-gigabit PHYs, embedded processors, Karl, things like that. When you would have a demand softness in one region, you know, that helps things. The supply situation has improved, which is a good thing. We do have some of our own growth drivers as well. We've highlighted this over the last few quarters. We have some new custom silicon wins that are ramping up. that's offsetting, you know, some of that weakness as well. In general, you know, the non-China piece has done okay. You know, we're being cautious about how we think about it for next year, you know, I think the run rate that we've guided to in Q4 is probably, you know, a safe run rate to think about for next year. Even if there's a little bit of weakness or there is some inventory digestion that goes on, we do have content gains still rolling through. So those are some of the moving pieces. You know, you basically have China going down, US customers, where we've got either new design wins or share gain or content gain and so it sort of all aligns to the numbers where we've guided for Q4. Jean, anything you wanna add? No. Got it. No, that's helpful, Matt. Maybe just as a quick follow-up, you know, I was wondering as you think about some of the inventory digestion that needs to occur across some end markets, you know, as you contemplate that and plan with your foundry suppliers for next year. If you just maybe just talk about some of the discussions you're having in terms of the ability to perhaps limit, you know, some of the cost inflation from the foundry side and whether, you know, that, whether they can share that cost with you going forward such that it perhaps is less of a onerous task for you to pass that along to your end customers. Thank you. Yeah. I would say without getting into the specifics of each of the input costs that we deal with, I would say that, you know, in general, with supply loosening up, that's going to be a positive. I'd say that being said, there are areas that are still constrained. There's still inflationary aspects, you know, inside our supply chain that sort of are coming towards us. We're doing what we can to mitigate those, and to the extent we can't mitigate those, you know, we're gonna continue to do what we've been doing for the last few years, which is basically pass it on in a generally margin neutral type of manner. We found a way to do that, and we'll continue to do that. Certainly, the Marvell team and the operations team has worked aggressively over the last few years, particularly on the packaging back end, et cetera, to enable more sources to set up more strategic agreements. We're kinda working it on both sides. One is to just, you know, do our job as a good supplier and manage the cost base. The extent we can't, we'll there will be, you know, probably a little bit of inflation still in the system. That's sort of how we're looking at it. We've formed really strategic partnerships with these companies. We have a very transparent communication with them on the demand environment and, you know, I'd say that we're counting on them to work with us as partners, you know, as we manage through what looks like an overall, you know, semiconductor down cycle. Thank you. Our next question comes from Gary Mobley with Wells Fargo. Please go ahead. Hey, guys. Thanks for taking my question. I had a question that kind of picks up on the last topic, and that is your purchase obligations. I know you haven't filed your 10-Q yet, but as I looked at the last Q, your purchase obligations are expected to be about 25% of your cost of goods sold next year. Given the current market softness, do you anticipate being able to utilize all that? Do you anticipate the possibility of any sort of inventory write-down? Thank you. Hey. Hey Gary, this is Jean. Thank you for the question. Yeah, the purchasing obligation we have this quarter will not change much from the last 10-Q we filed. It's about $3.2 billion. Just remember, those purchasing agreement, it's really for long term. On average, it's between 4 to 10 years. Also our product are very complex, and a lot of them have a very long manufacturing cycle. We actually need a dedicated capacity for those complex product to support our customers. Single source the customer, large volume, last, you know, long time, regardless of economic environment, we need those dedicated capacity. Frankly, our team has been very thoughtful. We only secure the capacity largely in back end and the substrate for portion of what we need. We feel quite comfortable, we don't have the issues on the purchase agreement obligations or, you know, have to write off any capacity. That's not something we anticipate at all. Thank you, Jean. Gary, if I would just add, I'd say that, you know, if you look at the bundle of the different obligations we have, some of them are in the shorter term, which are in the form of things like prepays and others, where, you know, as we take the capacity, we actually get it back. The LTA, you know, take or pay portion is actually not very large relative to the total. As Jean said, the most strategic aspect of this is really in the most advanced technologies, especially in complex substrates and high-end packaging, which, you know, we absolutely need to secure because of the volume that we're going to be ramping in the next few years. I mean, just take the... As one example, the $800 million of incremental cloud optimized silicon wins, that all is, you know, 5 nm technology using advanced ABF substrates, very customized packaging. You know, those agreements to get that capacity from really the best vendors, you need to put that in place literally years in advance. We've done those types of things, and we feel good about that because they're tied directly to committed programs. As Jean said, overall, while we have obligations, we think they're actually a benefit to us and it certainly helps us underwrite our future success. We're able to send a strong message to our customers about how we're able to provide the necessary capacity and supply chain for them for their future. Thanks, Matt. Our next question comes from Ross Seymore with Deutsche Bank. Please go ahead. Hi, guys. Thanks for letting me ask a question. I guess kind of a two-parter going back to the data center side, Matt? Could you just level set us what percentage of the third quarter data center business was storage? Looking forward on the more kind of constructive side of things, what's your confidence level on that $400 million in incremental cloud optimized revenue growth next year, given the fact that you talked about a deceleration in what's happening at the cloud customers themselves? Are you at all worried about that $400 being something less than that or being pushed out? Is that, at all a level of conservatism that, we should consider? Sure. Yeah. Let me answer the second one first. The answer is we feel very good about that revenue stream. Part of it is, if you remember, Ross, we went from, you know, talking about the 400 and 800 to actually talking about call it 400+, 800+ because we had gotten additional design wins. you know, that created a little bit of a buffer as well, because I think even if we hedge it for next year and the volumes don't quite, you know, achieve what we would have thought, we actually had one additional business that gives us some comfort around that. But I would say all the programs are on track. We are fortunate that, despite the changing environment, I would say we are absolutely head down in trying to tape out multiple new products right now that need to ramp up in very significant volume next year. I'm, you know, personally involved in these with our customers to ensure we're meeting their schedule, and we're doing everything possible to get there. That's the good news. The programs are still on track, and I think that's a good thing. The percentage, I think your other question was what was the percentage of data center revenue that's in storage? Well, other way around. If storage falling is the headwind for data center, just to level set people... Yes. You know, you had 40%- Maybe, maybe, yeah. ... roughly of your business in storage or in data center. Yeah, Ross, maybe I can help you. Yeah, I can help you with that. In general, the way to think about it is our storage business, it's probably about one-third of the data center, total data center business. Average, right? Not particular quarter. Of course, when we go through the inventory correction, as Matt mentioned earlier, that's going to be the largest drop piece for the inventory correction. Thank you, Jean. Our next question comes from Harlan Sur with JP Morgan. Please go ahead. Good afternoon. Thanks for taking my question. You know, Matt, you talked about the impact on a more muted cloud CapEx spend on your overall data center business, most pronounced in storage, but you do have compute, you've got networking, you've got optical products as well. Looking specifically at your cloud optical connectivity segments, which obviously is PAM4 DSPs, your coherent solution. If I look back at the last cloud spending slowdown, which was in 2019, both of these segments combined grew about 35%-40%, right? Granted, this was still in the early innings of the 200, 400 Gb upgrade cycle. Part of it is also very strategic in nature, right? Because your customers are still trying to enable better performance through higher networking speeds. I guess kind of two questions. Near term, is the team dealing with inventory issues in these particular optical products? Looking into next year, can the team see continued growth in cloud optical? Yeah. Great. Thanks, Harlan, for the question. You're right. It is a little bit of a different situation than a few years ago, where that was fairly nascent technology, you know, really ramping up hard in an inflection curve. You know, that being said, we still see strong adoption of 800 Gb. We've seen strong momentum in 400 ZR, you know, in the new platform. You know, we expect that, you know, overall optics is gonna grow, you know, next year. That being said, I would say, you know, in the fourth quarter, part of the adjustment would be in that area. I think that's a shorter term thing. Because it to your point, it's so strategic, you know, we anticipate that, you know, optics is gonna continue to grow. By the way, we're heads down on new product development there as well, because for the next generation of high-end, you know, 51.2T switches, you're gonna need the associated optics with that, which then moves from 800 Gb per second to 1.6 terabits per second. That's an ongoing, you know, new product development activity we have. Lots of activity in that area. Super exciting. It's a little bit of a different environment than 2019 just because there has been more broad adoption. We do feel good about it. Great. Thanks, Matt. Yep. Our next question comes from C.J. Muse with Evercore. Please go ahead. Yeah, good afternoon. Thank you for taking the question. I guess Matt was hoping to spend a little bit of time on the enterprise networking side of the house. Roughly $1.4 billion business for the fiscal year. You talked about a China slowdown. Is there a way to kind of parse between China and non-China and how you're thinking about the trajectory into January and, you know, all of calendar 2023? Yeah. That's a good question. you know, as we indicated, China's down a lot, right, in Q4 from where it was just two quarters ago. you know, that may end up being a little bit of an overcorrection on... It's hard to tell, quite frankly, on what's going on there and how long that's going to last and how that ripples through. The non-China has been holding up very well. Again, I'd say based on, you know, the content gains we have, as well as just the new products that are ramping up with higher ASPs. That's sort of offsetting it to some extent. We are guiding, you know, for Q4, you know, enterprise networking overall. It's still down just because of the China factor. I'd say if I had to handicap it for next year, you know, non-China will be a bigger percentage of the total in fiscal 2024 than China. I don't have the exact numbers at the tip of my fingers here. A lot of this goes through the channel and, you know, other. Yeah, I just don't have those numbers in front of me. Thank you. No problem. Our next question comes from Christopher Rolland with Susquehanna. Please go ahead. Hey, guys. Thanks for the question. I wanted to follow up on carrier infrastructure as well. A couple of things. I guess, first of all, your agreement with Nokia and the extension there. I was wondering if there's any economics associated with that. Secondly, looking out into next year, you know, there's a lot more talk about India 5G, Nokia winning, Samsung winning there as well. What does the opportunity look like there for growth? Is this going to be sizable overall? Thanks. Yeah. Thanks, Chris. On the Nokia front, you know, again, it was great to see, you know, us being able to announce with them, our layer two transport processor. Recall the initial, you know, engagement with them, which was very successful, and it's great to see how well they did, was on the layer one baseband processor. That, you know, I think that partnership has led to now a broader engagement. As you probably know, you follow the space, the layer two transporter CPU is a critical component, right, with, you know, fairly meaningful content as you sort of roll forward. I think that's all very positive. On India, that, you know, they seem to be, you know, gearing up for a very aggressive rollout next year. I think to your point, a few of our key customers are well-positioned to take advantage of that ramp. That's why we said earlier we feel really good about wireless next year, I think both on sort of our content gains as well as our... Probably even more the regional deployments. I think India probably will be sizable, would be my guess. Thanks, Matt. Our next question comes from Tore Svanberg with Stifel. Please go ahead. Yes, thank you. If you don't mind, I'm gonna ask a question that's not related to the next 2 quarters. It does have 2 parts. First of all, the UCIe standard, is that something that could potentially accelerate the adoption of CXL? The reason I'm asking is 'cause last time on the call you talked about maybe CXL not contributing to revenues probably for another few years, but there does seem to be a lot of activity here that could potentially pull that timeline in a little bit. Yeah. I think the CXL timing, you know, is A lot of that's gonna be gated, Tore, by the server CPU cycle. I think companies are gearing up for that. you know, it may have gotten lost in the noise, but we know we did call out, and I called out in my prepared remarks that we had, you know, received a pretty significant design win in this area, which we're now, you know, well underway in terms of product development. I'd say there's a very large pipeline of semi-custom products, you know, behind that, as well as a merchant product. I think that activity is still, level of activity is very high with our customers, but I wouldn't, I wouldn't, I don't have visibility to any sort of change in terms of when those products would ramp necessarily. It's a, it's a very strategic new area for us, and I'd say we continue to be, you know, focused on building a leadership position there. A lot of these products, especially as you get into, the larger pooling devices, accelerators, these are, these are in some cases have multi-core CPU. They're in 5 nm. They have security features. There's quite a few things that we're adding, and so these are looking more and more like very customized SoCs, which then enable these customers to really take advantage of completely new architectures relative to how they interface their CPU, GPU, XPU, whatever you wanna call it, ASIC, with memory. I think that's gonna continue to be a very strategic area of focus and getting a large win committed and underway is a really good thing. Great. And the second part of the question was related to your new product, and you did mention this earlier. AEC, when should we expect Marvell to get some revenue contribution from AEC? Is that also sort of a few years out, or could you already start to see some revenues next year? I think we need to let that one play out a little bit, Tore. You know, we've taken that one step at a time. I think the milestone really was, you know, lining over the last year, really getting our solution designed in across a broad array of high volume, proven cable suppliers to the largest hyperscale companies, and we've done a great job there. We've now started sampling those, and we have a very high level of interest. At this juncture, we haven't really sized exactly our opportunity and the timing. We'll do that in due course, as we get better visibility to the take-up, you know, of our customers that are competing in this market. That trend is very real. The AEC trend is anyway. We hope to be a important part of it. Very good. Thank you. Our next question comes from Ambrish Srivastava with BMO. Please go ahead. Hi. Thank you. I just want to come back to the. This is a clarification for Jean. Looking at the data center business and the storage component. In the last quarter that you reported that segment, you know, before changing the reporting, I see $300 million without Inphi, and then you had given a number $340 million with Inphi. The number you just cited, a third of the recent quarter, it seems really low. That would mean a $190 million-$200 million number rounding up. Is there something I'm missing there or a large chunk of that is now in some other business? Yeah. Maybe let me just recap and clarify. I think, before we change the reporting, our storage business annualized run rate is about $1.4 billion. Yep. That's what you're mentioning is before we change the reporting by end market. That's what our overall storage business. Just as a reminder, it include HDD, flash controller, preamp, and also Fibre Channel. It's all the different storage product lines included there. Over time, the storage has come down. The number I mentioned, one third, is not a particular last quarter. It's more, you know, generally when you look at several quarter, on average it's one third. The H1, that definitely is much higher, and now it's much lower, right? When you think about $1.4 billion storage revenue, I'm talking about 60% it's in data center. That's what we told investors during our Investor Day. Yep. Hope that help you to clarify different pieces. Yeah. No, it does. That means, it's come down from $1.4 billion rev annual run rate to $800 million, right? I don't think the way you can think about that. It's $1.4 billion. The H1 of this year, it probably was much higher than $1.4 annualized run rate. Now it's dropping much lower, right? The H2 the run rate probably is very low. Yeah. Got it. Okay. That is very helpful. I had a follow-up for you, Matt. We're looking at storage, and I don't follow the distrip guys, but Seagate consensus has been down 3 quarters in a row, WD 2 quarters for the mass storage business. Then you throw in the bullwhip effect, so you're seeing a much bigger impact than what consensus has those guys modeled. Is that the right way in terms of timing a couple of quarters before this business comes back? Then the other businesses within data center that... Well, thanks for the clarification earlier when you said it's not just storage. When do those businesses... Cause that magnitude is less, right, in terms of no real bullwhip effect yet. If you combine all that, should we be modeling past December a couple of quarters of sequential declines? Let me just break that into two pieces. I think you absolutely nailed it, when you talked about the end customer kind of dynamics and their trajectory versus ours. That is exactly the bullwhip effect. I mean, you know, you could actually just draw the bullwhip, and you can kind of plot where we would be on that. That's why, you know, and we've seen this historically in any business where you're kind of one additional step removed, you tend to have more volatility, right? It's just the way it works. That, I think you can expect. Again, we don't know exactly, but we anticipate just on past experience, it's probably a couple of quarters to work through that. On the other piece, which was the non-storage piece, yeah, it's inventory digestion. I mean, we've kind of taken a view, Ambrish, which is... I've been, you know, I've been through different scenarios in my career here on how you manage when volume, when demand drops, and you can kind of work with people and manage a soft landing, or you can keep shipping and then you pay the price later in a very hard way. Our view has been let's get through this and get it behind us, and also get to a point where, you know, as you get your visibility up and inventory goes down and lead times turn to normal, your forecast accuracy improves. I mean, I think you know that old adage as well, you know. The worst forecast you're gonna get is if somebody gives you 52 weeks of orders. You're actually better off having a more normalized environment. That's really what we're striving to do there. While there is some inventory adjustment, it's fairly normal given the shift in slope and the CapEx trajectory. We have new products ramping, that probably works its way through fairly quickly as well. We'll have to see, you know, the exact timeframe. Like I said, it's still a little bit of a dynamic environment. Yep. Thank you for being super transparent, Matt. Appreciate it. Jean. No problem. Ashish, do we have time for one more, or should I just wrap it up with some closing comments? Yeah, go ahead and wrap it up, Matt. Thanks. Thanks everybody for all the questions. Just a little bit of a few comments as we close here. You know, look, first, I think, Q3 was a great quarter for us. I mean, we're in the middle of a pretty severe macroeconomic environment. You know, a lot of other companies have obviously seen some of this inventory digestion and impact earlier. In Q3, you know, we delivered record revenue, very strong operating margins. Even if you look at the fourth quarter guide and you kind of compare our H2 of this year to a year ago, you know, we're up about 15%. When you look at sort of the rest of the market, you know, take sort of large digital peers, you know, that peer group's down about 5%. We still think even with a softer Q4 guide, we continue to perform very well from a top-line perspective. I'd say also we've been disciplined on managing expenses. You know, pro forma FY 2023 will grow about 28%. If you look at our OpEx increase, it's about 14%. We've been basically growing operating expenses at about half the rate of revenue growth. We've been able to put together a world-class team as a result, to execute on these massive design wins we've gotten over the last few years. While we're gonna be disciplined in our spending, and Jean sort of gave you the model on the OpEx, we feel very good about the size of the team, the resources we have, and the ability to execute, which our customers are counting on. I believe if we do that, there's even more to come. In conclusion, you know, we continue to have the right strategy with really strong partnerships with key customers. We think we're in the right markets and the growth drivers of cloud, 5G wireless communications and automotive continue to be three of the largest growth opportunities in the semiconductor industry, and Marvell is extremely well-positioned there. Thanks for all the questions. I'm sure we can be more helpful in the callbacks as well. There's a lot of moving pieces, but thank you so much for your time today. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.