In the previous article, we mainly analyzed Marvell's overall business situation and the highlights of its core business data center. This article focuses on Marvell's performance estimation and comparison with Broadcom. From a specific data perspective, we look at Marvell's operational outlook and current investment value.

In fact, looking at $Marvell Tech(MRVL.US) financial report data, we find that some of the company's data often shows some "anomalies." This is mainly influenced by asset amortization and other factors, as the company engages in certain financial treatments. However, after "removing the makeup" from Marvell's financial report, the actual data of the company's operations remains consistent.

In this article, Dolphin will first "remove the makeup" from the financial report, and then make hypothetical expectations for Marvell's main business revenue, gross margin, and operating expense ratio, thereby estimating the company's specific operational performance.

Combining the company's and industry situation, the specific assumptions are:

According to the company, the ASIC market it operates in maintains a compound growth rate of 45% (2023-2028), and the company's market share increases from the current approximately 5% to around 20%;

The company's optoelectronic products, switching chips, and storage products grow close to or slightly better than the industry growth rate;

Due to the relatively low gross margin of ASIC products, it is assumed that the company's gross margin declines in the low single digits, to a range of 55-60%, with the combined R&D expense ratio and sales management expense ratio decreasing to a range of 20-25%.

Thus, it is expected that Marvell's operational net profit will reach $5 billion by 2028 (fiscal year 2029), with a compound growth rate of around 60%.

Since both the company and Broadcom are core players in the ASIC sector, Dolphin will compare the performance outlook of the two (2026). Considering the current market capitalization of Broadcom and Marvell, the PE valuations corresponding to the operational net profit for both companies in 2026 are 27 times and 33.7 times, respectively. This indicates that Marvell has relatively higher growth and AI proportion, while also having a higher valuation multiple.

The performance outlook for Broadcom and Marvell is mainly based on the current situation of the company and the industry. If the ASIC industry grows beyond expectations in the future, both companies will continue to benefit. If Marvell's market share increases beyond expectations driven by downstream customers, it will be even more favorable for Marvell.

As for the current choice between Marvell and Broadcom, Dolphin believes it mainly depends on market investors' preferences. If there is a preference for market leaders, Broadcom's position is more stable; if one seeks the elasticity of performance improvement, Marvell's performance will be relatively better. Dolphin Jun's specific analysis of Marvell Technology (MRVL.O) financial report is detailed below:

1. The "Virtual and Real" of Marvell's Financial Report

Before making performance predictions, let's take a look at Marvell's financial report situation. Due to the company's current impact from previous asset amortization and other factors, the disclosed financial data does not directly reflect the "real" operational situation of the company.

Dolphin Jun compared the adjusted financial data with the original report data, and there are significant differences between the two. Taking Marvell's gross margin as an example, the adjusted gross margin stabilizes around 60%, while the gross margin in the original report fluctuates frequently, which will directly affect expectations for the company.

From the perspective of the impact of Marvell's acquisition amortization and other adjustments, it mainly affects the company's gross profit, operating expenses, and taxes. After adjusting each part, the actual operational situation of the company will be clearer.

1.1 Operating Expenses

The impact on operating expenses for Marvell mainly comes from three sources: stock-related compensation, amortization of acquired intangible assets, and other items. Since the stock-related compensation is a relatively stable part and has been a long-term expense for the company, it will continue to be counted in operating expenses.

From the current operational perspective of the company, the adjustment of R&D expenses is relatively small. Due to the amortization of intangible assets also being included in selling expenses, the adjusted selling expense ratio has fallen to around 8%.

1.2 Income Tax

Marvell frequently adjusts the income tax data in its financial reports, leading to significant fluctuations in the tax rate presented in the original report. By using the adjusted income tax data, it can be seen that the company's current income tax rate mostly maintains around 10%.

1.3 Net Profit Situation in Operations

After adjusting Marvell's gross profit, operating expenses, and income tax, the true operational status of the company is finally revealed. Previously affected by the downturn in infrastructure investment from 5G operators, the company's operational profit was sluggish, but with the boost from the company's data center efforts, the operational situation has returned to growth.

II. Marvell's Revenue Split Expectations

The expectations for Marvell's operating performance are based on adjustments to the company's financial report data, followed by separate expectations for the company's revenue situation and expense ratios. Given that the company's current data center business accounts for over 70%, this part will be the focus of the split expectations.

2.1 Data Center - ASIC

The company's data center business is mainly divided into ASIC, optical modules, switching chips, storage control chips, and other parts. According to company and market expectations, ASIC is expected to become the main growth point for the company's performance in the future.

According to company and industry expectations, the Total Addressable Market (TAM) for the ASIC industry where Marvell operates is expected to grow to USD 42.9 billion by 2028 (the company's fiscal year 2029), with a compound annual growth rate (CAGR) of 45%.

Considering the company's operating conditions, Dolphin expects the company's ASIC revenue for fiscal year 2025 to be between USD 600 million and USD 700 million, with a market share of around 5% (Broadcom accounts for about 80%, while other companies like WorldChip account for about 15%). With the growth in demand for related chips from Amazon and the shipment of chip products from the other two major customers, the company expects its market share to reach 20% in the future.

In summary, Dolphin expects Marvell's ASIC revenue to grow to USD 8.6 billion by fiscal year 2029, with a compound growth rate of 88%, exceeding the overall industry growth rate, and the relevant market share is expected to increase to around 20%.

2.2 Data Center - Other Businesses

In addition to ASIC, other businesses in the data center will also benefit from the shipment of related products such as AI servers, but the growth rate will be weaker than that of ASIC.

1) Optical Module Photonic Products: Mainly includes high-end products such as DSPs for AI servers and other low-end photonic products. The company expects the optical product market for data center optical modules to grow to USD 13.9 billion by 2028 (the company's fiscal year 2029), with a compound growth rate of 27%.

Dolphin believes that with the growth in shipments of AI servers, the company's high-end photonic products will provide the main incremental revenue, with annual revenue expected to grow to over USD 3 billion. Non-AI products are expected to maintain relatively stable low-speed growth, remaining around USD 1 billion. Overall, the company's photonic products are expected to grow to over USD 4 billion by 2028 (the company's fiscal year 2029), with a compound growth rate of 20%+. Currently, the company holds a leading position in the DSP market (over 50%), and the growth of its related products is close to the industry growth rate 2) Ethernet Switch Chip Products: The company's product capabilities for data centers mainly come from the acquisition of Innovium. The company expects the data center switch chip market to grow to $12 billion by 2028 (the company's fiscal year 2029), with a compound annual growth rate (CAGR) of 15%.

Dolphin expects the current annual revenue of the company's Innovium products to be approximately $200 million, with a market share of around 3%. As the shipment of customer products increases, the revenue and market share of data center switch chips will also improve. The company's Innovium products are expected to grow to around $400 million by 2028 (the company's fiscal year 2029), with a CAGR slightly higher than the industry's growth.

3) Storage Products: The company's storage business mainly focuses on hard disk controller chips and enterprise-grade SSD markets. The company expects the related storage market to grow to $5.9 billion by 2028 (the company's fiscal year 2029), with a CAGR of 7%.

Dolphin expects the current annual revenue of the company's storage products to be approximately $600 million, with a market share slightly above 10%. Benefiting from demand driven by data centers and other factors, the company's storage products are expected to grow to over $800 million by 2028 (the company's fiscal year 2029), with a CAGR slightly better than the industry's growth.

In summary, driven by AISC and AI servers, Marvell's data center business is expected to grow to $15.4 billion by 2028 (the company's fiscal year 2029), with a CAGR of around 40%.

2.3 Marvell's Traditional Business

Apart from data centers, Marvell's other traditional businesses account for a relatively small proportion. In addition, after the large-scale implementation of 5G infrastructure, related investments have also decreased, and the company's traditional business will remain relatively stable.

For the company's traditional business, Dolphin expects ① Enterprise Network and Carrier Infrastructure Business: to maintain single-digit growth after recovering from the bottom; ② Consumer Business: mainly including home broadband routers, will also maintain single-digit growth; ③ Automotive and Industrial Business: driven by demand from the Internet of Vehicles, will grow faster than the first two, with an expected double-digit compound growth rate.

Combining the data center and traditional businesses, Dolphin expects Marvell's operating revenue to grow to $15.9 billion by 2028 (the company's fiscal year 2029), with a CAGR close to 30%. Driven by demand from AI and other sectors, the company's data center business share will grow to over 95%, and the company's business structure will achieve a complete transformation.

3. Marvell's Operational Performance Outlook

In addition to breaking down revenue expectations, it is also necessary to forecast the company's gross margin and operating expenses to infer the specific performance of the company. After adjusting Marvell's financial data, we can clearly see the current operational gross margin and expense ratio of the company.

Dolphin 君 mainly makes assumptions about the company's future gross margin, R&D expense ratio, sales and management expense ratio, and tax rate.

1) Gross Margin: After adjusting the financial data, it can be seen that the company's overall operational gross margin has remained above 60%. However, due to the relatively low gross margin of ASICs, the growth of related businesses will impact the company's overall gross margin. Currently, the proportion of ASIC business has increased to 70%, and the company maintains around 60%. With the subsequent growth of the data center business, the gross margin is expected to fall back to the range of 55%-60%.

2) R&D Expense Ratio and Sales Management Expense Ratio: After adjusting the financial data, it can be seen that the company's R&D expense ratio and sales management expense ratio are approximately 34% and 8%, respectively. Dolphin 君 expects that the company's investment in both areas will continue to grow, but with high revenue growth, the expense ratios will continue to decline. The two expense ratios are expected to fall back to the range of 20-25%.

3) Income Tax Rate: After adjusting the financial data, it can be seen that the company's historical income tax rate has remained in the range of 8-12%. Dolphin 君 expects the company's future income tax rate to remain around 10%.

Under the above assumptions, Dolphin 君 expects the company's operational net profit to reach $5 billion by 2028 (fiscal year 2029), with a compound growth rate expected to reach 60%. With the growth of the data center business and the decline in expense ratios, the company's EBITDA is also expected to see continuous improvement.

4. Marvell vs Broadcom's Choice

In the ASIC track, Marvell and Broadcom are both core players in the market. With product shipments to major cloud service providers, both companies' AI data center-related businesses are expected to see significant growth, which is the main driving force behind performance growth.

1) Core Customers and Market Concentration

Both Marvell and Broadcom have their own core ASIC customers. Among them, Marvell's major clients are Amazon, as well as Google (CPU products) and potential client Microsoft; while Broadcom's major clients are Google (TPU products) and Meta, along with potential client ByteDance.

Although some cloud vendors have collaborated with Taiwanese manufacturers like WorldChip for certain products, the latter's product capabilities are still inferior to those of Broadcom and Marvell. Therefore, it is expected that cloud vendors will continue to collaborate with Broadcom or Marvell for the joint research and production of core products in the future In the coming years, as major customer products are successively released and mass-produced, the influence of the ASIC market will further concentrate on two companies.

2) Marvell has a stronger AI attribute

According to the company's and industry situation, Dolphin expects Marvell's data center business to grow to $15.4 billion, accounting for over 95%. Although Broadcom's data center-related network business is also rapidly growing to over $50 billion, the company has other businesses of a certain scale, and its network business's proportion will increase to 80%.

In comparison, Broadcom has a larger revenue scale and will also have a higher market share. Marvell's business has a higher proportion of data center-related revenue and a stronger AI attribute;

3) Comparison of Marvell and Broadcom's performance and valuation

Since Marvell and Broadcom are currently significantly affected by ASIC growth, the market stock prices have already partially included expectations for future growth in AI. The growth of the ASIC market is expected to stabilize in 2026 and beyond, and this comparison mainly focuses on the situation of the two companies in 2026.

Combining the company and industry situation, Dolphin expects both Marvell and Broadcom to achieve nearly 30% growth in revenue, mainly driven by data center-related business (ASIC).

The following data only considers operational aspects and has excluded the impacts of amortization and depreciation. Broadcom's gross margin is significantly better than Marvell's, mainly because Broadcom's software business has a higher gross margin, raising the overall gross margin.

Broadcom's net profit from operations is expected to reach $39.1 billion by 2026, far exceeding Marvell's $2.96 billion. However, the former's growth rate is slightly lower than the latter's, mainly due to Marvell's higher proportion of AI revenue and greater room for reduction in operating expense ratio (currently, the two expense ratios are Marvell 42% vs. Broadcom 27%).

Considering the current market capitalization of Broadcom ($1,056 billion) and Marvell ($99.6 billion), the corresponding 2026 PE valuations for the two companies are 27 times and 33.7 times, respectively. From this perspective, Marvell has relatively higher growth and AI proportion, while also having a higher valuation multiple.

Overall, Dolphin believes that under the current market and industry growth expectations, both Marvell and Broadcom will see significant growth in performance. Due to Marvell's smaller traditional business scale and higher operating expense ratio, the company's future performance elasticity is relatively higher. However, in the ASIC market, Broadcom still occupies more than 50% of the market share as a core player.

Under the current growth expectations, the current market capitalization corresponds to a PE of over 30 times for the company's 2026 (2027 fiscal year) performance, which is relatively reasonable. If future market growth or company share exceeds expectations, it is likely to bring more increments and confidence to the company. As for the choice between Marvell and Broadcom, Dolphin believes it mainly depends on market preferences. If the preference leans towards market leaders, then Broadcom's position is more solid; if one seeks performance improvement flexibility, Marvell's performance will be relatively better.

Dolphin Investment Research on Marvell and ASIC related articles:

Marvell Deep Dive:

On January 2, 2025, company deep dive: Marvell: Challenging the "Trillion" Broadcom, Can ASIC Ignite the Counterattack?

Broadcom Deep Dive:

On December 4, 2024, company deep dive: Broadcom (AVGO.O): Dual Soft and Hard, An Alternative Winner in the AI Computing Era

On September 13, 2024, company deep dive: Broadcom: "Buy, Buy, Buy" Paving the Way for "Trillion"? Tencent and Alibaba, Take Note!

Broadcom Financial Reports:

On December 13, 2024, conference call: Broadcom: The AI Serviceable Market Size Will Reach 60-90 Billion in FY2027 (FY24Q4 Minutes)

On December 13, 2024, financial report commentary: ASIC to Surpass GPU? Broadcom's Good Days Are Ahead

On September 6, 2024, conference call: Broadcom: Demand for ASIC Will Be Greater in 2025 (FY24Q3 Conference Call)

On September 6, 2024, financial report commentary: Broadcom "Surging"? AI Can't Support the Collapse of Traditional Semiconductors

Risk disclosure and statement of this article: Dolphin Investment Research Disclaimer and General Disclosure