MRVL Earnings Ahead: GOOGL Partnership Tailwind, Dilution Headwind

down on the session. A bit of a mixed picture there across some of those software names. I want to bring Sam back into the conversation, though, and turn our attention over to Marvell ahead of its earnings tomorrow afternoon with Derek Yan, senior investment strategist over at Crane Shares. Derek, great to have you on with us. Now we've got Marvell coming going into the earnings report. What do you view as being the single most important thing that we're going to hear or receive from the company? Thank you for having me today. I think the market has well anticipated the guidance around the customer silicon business from a well tomorrow. But the market is really underappreciated. I think their optical interconnect business that's something I would think investors should watch closely tomorrow because we believe that data movement and data connectivity is going to be a very big bottleneck for the next coming years. Derek has the Google announcement, and that deal changed the game for Marvell heading into this print. Yes, the Google announcement is really a validation that Marvell is in the silicon of customer silicon ecosystem for Google. And potentially, if the company is going to give more guidance, if they're going to broaden that customers into other hyperscalers. That's Marvell now sit on the two biggest trend. One is just like customer silicon. As the training of the AI is becoming more relying on the TPUs, the second biggest trend they're seeing is really this data connectivity. We have very good compute, but the bottlenecks really move the data between the GPUs and data centers. And while they have multiple layers in this connectivity ecosystem, they have DSP transceivers, they have switches. They have many critical components. That's why we at CoinShares, we built an ETF around that called Luma investing, the whole connectivity ecosystem. And so, Derek, as we look at this Google agreement and its potentially enormous here, I mean, across the ecosystem and also the warrants that are tied to as much as $120 billion of cumulative custom product revenue. How much of that opportunity should investors really be putting into their models today. Yeah I think company got it. Almost there. Custom customized silicon revenue going to double by fiscal year 2028. So that's something like I think like people are going to gradually pricing or that you see like the stock went up so much after news, but then coming down, I think market is still digesting how much that dilution going to impact the stock price. But I think it is in the long term, this customer silicon is going to be a core business for well, but then like on top of that, you have this optical interconnect that's really growing very fast. Do you have company guided over 70% growth rate for fiscal year 2027? That's something I think market is really underappreciated. And if the main focus remains on AI and data center growth right now, I mean, I was looking at how much they're guiding as far as that quarterly revenue is concerned. I mean, 35% year over year, if the music stops with all the hyperscalers, CapEx spending, is the party over for Marvell? I don't think so, because one thing you're going to have still, we have very strong guidance from the company. So that shows that the company is very bullish on their CapEx outlook. The second thing is Marvell is sitting at a structural change within this data center CapEx. So even the CapEx can stay even stay flat. The structural change that we're going to need more connectivity. We're going to need more switches, more interconnect. That's that's really beyond the whole total CapEx. Because if the percentage of CapEx flow into the connectivity going from 2% to 12%, that's a big total addressable market for mobile. And you mentioned the optical interconnect capabilities is one of the things you're keeping a close eye on, obviously, that tied very closely to the celestial AI acquisition. So does that acquisition then give Marvell a meaningful technological advantage here as AI moves towards some of these much larger scale up architectures? Exactly. I think like in the history has proven that they being really good at integrating other companies technology, they are very good at strategic investment into many bottlenecks. I would say for the AI infrastructure, that's how they've been winning a lot of the data connectivity layers. So that's like we're very bullish on. Well, that's why we put Marvell as one top holding of Luma. So they can actually address many bottlenecks across the ecosystem. And what are you expecting to hear from Marvell as far as visibility is concerned? Because, you know, something I've noticed in previous quarters is that, you know, they have been able to give a fairly strong outlook and, and, you know, some runway at least, which it has been rewarded for. Do you think we will hear a similar story tomorrow? Yeah, I will watch three things tomorrow. One is their guidance on like, what if they're going to broaden the customer base for their customer silicon, and if they have very sustainable outlook for their just guidance on the revenue side, both for customer silicon and optical interconnect, and how bullish are they on this outlook of this, their DSP, their transceivers, their silicon photonics. And that's more important because you're right. Like they can be bullish for one quarter. But I think investors really pricing that. So people need to show that revenue growth is going to be sustainable for the coming quarters. And Derek, I'm just looking at how much of a move is implied post earnings here for Marvell. It's about a 10% move around earnings. So how much of the good news is already priced into this stock. Yeah I think market do have a very high expectation as the Q1 guidance is pretty strong. But if you look at the total addressable market growth for say data connectivity, Goldman projected that growth can be nine X from today to 2028. So if the potential growth rate for the markets for the revenue can be so large, it's really hard to ignore this going to be multiple years of growth potential and you discount all those cash flows back to today. So the valuation can be adjusted. Derek, thank you for joining us today to take a look at those earnings and what we might hear from Marvell in that preview. There will of cours