In the emerging automotive business, we continue to make progress in expanding our customer base for Ethernet switches and PHY connectivity products
Fancy Wang
Expert in 10G+ NICs & Switch Modules – Your One-Stop Networking Solutions Provider. | LinkedIn Marketing Mentor | Founder of FANCY SHOP CLUB Dental Floss Brand | 18 Years in International Sales
Fancy Wang 0903 2020
The following part is from Marvell Technology Group
Thank you, and good afternoon, everyone. Welcome to Marvell's second-quarter fiscal-year 2021 earnings call. Joining me today are Matt Murphy, Marvell's president and CEO; and Jean Hu, our CFO. I would like to 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 cautionary 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 on our website in the Investor Relations section.
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With that, I'll turn the call over to Matt for his comments on our performance.
Matt Murphy -- President and Chief Executive Officer
Thanks, Ashish, and good afternoon, everyone. During the second quarter of fiscal 2021, we delivered strong financial results and achieved $727 million in revenue, $7 million above the midpoint of guidance. Revenue grew 5% sequentially and 11% year over year. Our GAAP loss per share was $0.24.
Our non-GAAP earnings per share was $0.21, above the midpoint of guidance, driven by higher revenue, better gross margins and lower operating expenses. We are now halfway through our fiscal year, a time period which has turned out to be very different than we had all imagined, impacted by a global crisis that has significantly disrupted our daily lives and altered our work environment. The Marvell team has met these challenges head-on and has been executing at a very high level. I'm continually impressed by the relentless determination of our engineering teams in the face of a multitude of unprecedented circumstances, like having to manage a chip bringup remotely.
I have proudly watched our sales, marketing and support teams embrace Marvell's new brand identity and use current circumstances to increase customer engagement. In times of uncertainty, I believe that we benefit significantly in building upon our existing deep-rooted engagements. When customers make forward-looking platform decisions, their experience with our products and trust and our team works to our advantage, and we have continued to close design wins at an impressive rate. While getting a design win is a critical milestone, getting our customers to production and volume ramp is the ultimate goal.
To that end, over the last few months, we have received customer approval to move into production several key programs, including a critical SSD controller and a cloud ASIC, which are both ramping now, and a 5G baseband processor for Nokia that is expected to start ramping later this fiscal year. Let me now provide an update on our process technology platform and our custom ASIC chip strategy. Underpinning the development of all our high-performance storage, networking, compute and security products is our industry-leading IP portfolio developed on the leading edge of process technology. Earlier this week, we announced an extension of our long-term collaboration with TSMC, the world's largest dedicated semiconductor foundry, to deliver a comprehensive silicon portfolio, leveraging the industry's most advanced five-nanometer process technology.
This joint development positions Marvell for multigenerational leadership in data infrastructure technology. This accelerated cadence in driving to the latest process node and jumping to five nanometers is the outcome of our multiyear evolution to focus on data infrastructure. In the infrastructure market, 5G, cloud, enterprise and automotive customers are migrating to silicon partners who can solve their most challenging problems, requiring the highest performance to be delivered within a very tight power budget. This requires access to the latest process technology.
The acquisition of Cavium, with their processing and compute-heavy portfolio, further crystallize the need to change our strategy from a fast follower to a technology leader. The later acquisition of Avera was done with the recognition that our advanced process road map would be a significant step-up for Avera's ASIC technology platform and would also increase the volume of projects in advanced geometries with the subsequent benefits of scale across all of Marvell. The leadership position we have established for our process technology platform is the culmination of the last two years of hard work by our central engineering team. This has been a key driver of our recent success in winning sockets in multiple upcoming platforms, such as next-generation 5G base stations.
Marvell's five-nanometer platform solution covers the full spectrum of infrastructure requirements, including high-speed 112-gigabit per second long-reach SerDes, processor subsystems, encryption engines, system-on-chip fabrics, chip-to-chip interconnects and a variety of physical layer interfaces. We have multiple five-nanometer products in development now on TSMC's N5P process. An enhanced version of TSMC's five-nanometer technology, which delivers higher performance and up to approximately 40% lower power compared to the previous seven-nanometer generation. We expect to start sampling these products by the end of '21 with volume production soon thereafter.
Our advanced technology is a key enabler of our new custom ASIC platform which builds upon the Avera acquisition. While customizing silicon is not new to Marvell, this acquisition significantly expanded our capabilities to become a much broader custom silicon supplier. We benefit from Avera's decades of experience in developing over 2,000 complex, full custom ASICs as part of IBM and GLOBALFOUNDRIES. We believe that access to our more advanced process platform, combined with exposure to Marvell's large customer base, opens up a host of new opportunities for the Avera team.
Equally important, we are evolving the traditional ASIC model by including all of Marvell's leading standard product IP into Avera's custom platform. The breadth of IP we're offering for customization is what sets us apart. We aren't just providing high-speed SerDes and other foundational IP, we are also providing highly scalable, multi-core ARM processors, Ethernet switches and controllers, storage controllers and more. This IP can be integrated on chip or as a companion chip, tightly coupled with advanced system and package solutions.
Customers can reuse Marvell's hardened and widely deployed IP and focus their engineering teams on only the unique aspects of their application, benefiting from faster time to market and lower program risk by using our proven technology. I'm very pleased to announce that our ASIC team has recently won a major design win under the Marvell umbrella with a tier-one hyperscaler. This is a new ASIC account for the Avera team, and we hope that this is the first in a series of design wins with this important customer. Let me now provide an update on our server processor strategy.
Very much aligned with our growing emphasis on custom solutions, we are evolving our ARM-based server processor efforts toward a custom engagement model. Over the last few years, we have developed multiple generations of ARM server processors and have been working with customers to qualify our products for volume adoption. Our ThunderX2 processor was the industry's first ARM-based processor capable of powering dual socket servers, which can go toe-to-toe with x86-based solutions and has established the performance credentials for ARM in the server market. Hyperscale data center customers represent the largest opportunity for ARM server processors.
Having worked with them for multiple generations, it has become apparent that the long-term opportunity is for ARM server processors customized to their specific use cases rather than the standard off-the-shelf products. The power of the ARM architecture has always been in its ability to be integrated into highly customized designs optimized for specific use cases, and we see hyperscale data center applications is no different. With our breadth of processor know-how and now our custom ASIC capability, Marvell is uniquely positioned to address this opportunity. The significant amount of unique ARM server processor IP and technology we have developed over the last few years is ideal to create the custom processors hyperscalers are requesting.
Therefore, we have decided to target future investments in the ARM server market exclusively on custom solutions. The business model will be similar to our ASIC and custom programs where customers contribute engineering and mask expenses through NRE for us to develop and produce products specifically for them. We believe that this is the best way for us to continue to drive the growing adoption of ARM-based compute within the server market. While we continue to invest in a number of initiatives to drive long-term growth, such as advanced process technology, new markets, such as automotive and the launch of our new brand, our team has also remained focused on driving operational excellence.
The successful integration of Aquantia and Avera continued operational discipline and the change in scope of the ARM server project are collectively driving a significant reduction in our quarterly operating expenses from the current $300 million non-GAAP run rate to the $280 million we are guiding for the third quarter. Our success in custom engagements, where we do not need to bear the cost and risk of new product development completely on our own, has also enabled us to manage opex tightly while continuing to invest in advanced technology. The increased willingness of our customers to co-invest with us is truly a testament to the trust and belief they have in our capabilities to provide them with differentiated solutions. The improvements in efficiency and the cost structure of the company allow us to improve our earnings power, while we continue to invest more in R&D as a percentage of revenue than any other semiconductor company our size.
We are investing heavily because we believe we can grow faster than the industry, and we have the conviction in our strategy to drive long-term growth. However, we remain extremely diligent about how we allocate the company's resources. Last week, we held our annual strategic portfolio review, where we deep dive into each of our product lines, evaluate end-market dynamics and review progress against our goals. This review is the cornerstone of our annual business planning process and lays the strategic foundation for everything else.
This was our fifth review since I joined Marvell in 2016, and it was, by far, the best one. It is clear how far we have come over that time period, and I could not be more impressed by the quality of our leaders and their depth of experience and technical capabilities. Every year, this process informs our capital allocation decisions and has driven a significant improvement in the quality of our businesses over time. I expect this cycle will be no different as we continue to drive long-term success for our employees, customers, and investors.
Let me now move on to discussing our two businesses in more detail. First, in our networking business, revenue grew during the quarter was $406 million and grew 3% sequentially and 23% year over year. Growth was driven primarily by ongoing 5G deployments in China. In the cloud data center end market, we started ramping a new custom chip at a tier-one hyperscaler.
Our LiquidIO programmable smartNICs and LiquidSecurity HSMs continue to gain traction with cloud customers, and revenue for these two products more than doubled from the same quarter last year. We are very pleased with these results, which came on the heels of the very strong growth we had delivered in the prior quarter. This was also the fourth consecutive quarter of sequential revenue growth from the wireless infrastructure market as we benefited from the start of the 5G transition and our diversified design win position at four of the top five tier-one base station OEMs. In addition to the top five global OEMs, there's also a very active next tier of more regionally focused OEMs who are developing their own 5G base station equipment.
We believe that our full suite of production-ready 5G silicon solutions, including the industry's only merchant baseband processor, provide a very compelling path to market for this set of customers. I'm excited to announce we have now secured design wins for our OCTEON embedded processor and our OCTEON Fusion baseband processor with a new 5G customer in this next tier of base station OEMS. We expect this design to start ramping toward the end of next fiscal year. We continue to engage with this group of customers and look forward to updating you on our progress.
We remain on track to start shipping basebands to Nokia and processors customized for massive MIMO applications to Samsung later this year. We believe that OCTEON can continue to improve its position within the large $4-billion market for embedded processors in infrastructure applications. OCTEON has a number of very compelling advantages, including our process technology platform, multicore ARM architecture, optimized hardware accelerators, flexible programming model, and our ability to customize solutions. Compared to alternative products, our next-generation processors designed by the industry's most advanced five-nanometer process using TSMC's proven technology platform have become a very attractive solution for customers.
We believe that our competitive differentiators will enable us to continue to take share in this large market. Now shifting gears to our Ethernet portfolio. We've been working closely with our customers to design the next generation of Ethernet products tailored to meet the new requirements being placed on networks by mobility and cloud applications which are extending the boundaries of the traditional enterprise. This quarter, we announced our latest Ethernet solutions for the emerging world of the borderless enterprise.
And the borderless enterprise is not just about the transformation of on-campus corporate environments, such as Marvell's own infrastructure, but also includes new use cases in the rapidly evolving retail, manufacturing, hospitality, finance, and education verticals. The number of devices connecting to the network is expanding rapidly. And no matter where the users are physically located, enterprise IT organizations are being asked to deliver a secure, high-bandwidth experience. Increasing amount of cloud access and remote work needs switches with more intelligence, visibility, security, and bandwidth, and these requirements are driving the next refresh cycle.
Access switches need to apply intelligent processing right at the edge and offload data to influence engines. The data needs to be encrypted and secured end to end with enhanced network visibility for a seamless experience. The adoption of Wi-Fi 6 is increasing the bandwidth requirements of wired networks. Marvell's unified Prestera Ethernet switch and Alaska PHY solution set is architected from the ground up to manage this complex and evolving environment.
Our advanced telemetry capabilities facilitate network automation, and our switches have embedded cryptography-based security for Ethernet traffic. Intelligent workload management enables optimized data processing at or near the network access edge, improving the performance of hybrid cloud architectures. Our multi-gig capable switches and PHYs facilitate the transition to 2.5- and five-gig connectivity, which is essential for Wi-Fi 6-enabled access points and high-performance end devices. Our software development kit enables networking system vendors to easily develop new and differentiated products quickly on our silicon platform.
As you may recall, we refreshed our Ethernet portfolio soon after I joined Marvell in 2016, and that led to a sustained period of growth for our switch and PHY businesses as we took share with our differentiated products that commanded higher gross margins and outgrew the market. This year's refresh adds an even more impressive set of capabilities and addresses a larger part of the enterprise market, further expanding in the access, core, and aggregation layers, and we believe that we will continue to drive share gains. In our emerging automotive business, we continue to make progress in expanding the customer base for our Ethernet switch and PHY connectivity products. We have recently closed design wins with eight new customers, adding to the 16 I have discussed in prior calls.
We also continue to see a larger opportunity for us in automotive. Leveraging our growing Ethernet position, we are front and center in discussions around future architectures and have the opportunity to extend into the adjacent compute, security, and storage domains within the connected car. Let me now discuss the outlook for the third fiscal quarter for our networking business. We expect strong growth from the wireless infrastructure end market, driven by multiple customers.
We also project growth from the cloud data center market, and we expect our automotive Ethernet products to start shipping into model-year 2021 vehicles which are starting production now. However, given the softness in the enterprise market, driven by COVID-19 and recently telegraphed by multiple customers and peers, not surprisingly, we project demand for our networking products selling into enterprise applications to be weak. The net result is that we expect our overall networking revenue in the third quarter of fiscal 2021 to increase sequentially in the mid- to high-single digits on a percentage basis. Turning now to our storage business.
Storage revenue for the second quarter was $290 million, growing 12% sequentially and 6% year on year. Strong growth was driven by the start of a ramp of a customized SSD controller for a do it yourself, or DIY, program and easing of COVID-19 production challenges we and our customers experienced in the first quarter. Supply chain improvements benefited both our storage controller and fiber channel products. Controller demand from nearline 16-terabyte HDDs was particularly strong.
The combination of our product cycles and supply recovery drove our outperformance as compared to the drive market where demand was starting to get impacted from COVID-19. Our pipeline of SSD controller engagement continues to grow, driven by our commitment to deliver the most responsive and best-user experience at the lowest power using the most advanced process technology. I'm very pleased that we have won the next generation of SSD controllers for data center applications at one of our key tier-one NAND OEMS, extending the multiyear relationship we have with them. This controller features our leadership PCIe Gen5 technology, and we expect to continue to drive long-term growth for our storage business.
Looking to the third quarter, we are expecting very different trends between our storage controller and fiber channel businesses. We project our storage controller business which addresses both hard disk drive and solid-state drive applications to continue to grow sequentially. We expect this growth from the continuation of a ramp of a custom SSD controller, partially offset by weaker drive demand from enterprise data centers and some edge applications, such as retail. Storage controllers shipping into cloud applications are also expected to continue to trend up in the third quarter.
Conversely, in our fiber channel business, we project a significant sequential decline in revenue, resulting from COVID-19-related weakness in enterprise server and storage system demand. The weakness in fiber channel is expected to offset the growth from storage controllers. And as a result, we project third-quarter consolidated storage revenue to be approximately flat on a sequential basis. In closing, our results continue to validate our strategy to focus on developing the most advanced silicon for data infrastructure.
Our portfolio actions have also significantly diversified our end-market exposure, and we have a much larger share of revenue today from fast-growing 5G wireless and cloud end markets. In 5G, we have wrapped up an impressive set of design wins, which we expect will drive significant revenue growth for us over a number of years. The product ramps at Samsung and, particularly, Nokia are largely in front of us. In addition to the strong momentum expected from our own product cycles, we are also turning increasingly positive on the likelihood of our diversified customer base to gain share in light of recent geopolitical events and market dynamics.
Cloud has only recently become a larger part of our business, crossing over 10% of our total revenue. In this market with long-term secular growth, we have multiple drivers through our OCTEON processor platform, our security products, full custom ASICs, merchant and DIY data center SSD controllers and nearline HDD controllers and preamps. In enterprise, while there are near-term headwinds from COVID-19, it's important to keep a longer-term perspective that this is a large and diversified worldwide market spread across a number of industry verticals. The need for secure and intelligent access to bandwidth is not going away, and the number of endpoints trying to connect to a network are only expanding.
We've introduced new solutions specifically designed to address these challenges, and we believe that we can gain share and drive revenue growth from our own product cycles. In our edge end market, we have barely scratched the surface of the current Ethernet and future compute opportunity in autos, which we believe will become another key driver for long-term revenue growth. We have assembled, under one roof, a critical mass of scarce and unique IP with a very flexible and customized engagement model which is proving very attractive to our customers. We are accelerating our adoption of advanced process technology, which has already started to pay dividends in the form of design wins in new sockets and customers.
Our borderless enterprise and ASIC announcements received strong validation from the industry, and we have seen an increase in inbound request for collaboration from customers as they become more aware of the depth and breadth of technology at Marvell. We believe that we have built a business for the long haul and are confident in driving revenue growth and managing through any transitional challenges in some of our end markets. We continue to invest in technology while reducing overall operating expenses by driving higher levels of efficiency with our platform. This operational excellence enhances our ability to deliver operating leverage and drive earnings growth.