*

Q3 data center revenue jumps 98%

*

Marvell ( MRVL ) sees Q4 revenue around $1.8 bln vs $1.65 bln

analysts'

estimate

*

Marvell ( MRVL ) expects rapid growth in custom chip business

(Adds COO commentary, context in paragraphs 8-10)

By Arsheeya Bajwa and Abhinav Parmar

Dec 3 (Reuters) - Chipmaker Marvell Technology

forecast fourth-quarter revenue above estimates on Tuesday,

underpinned by robust demand for its custom artificial

intelligence chips from businesses racing to develop the most

sophisticated generative AI models.

Shares of the Santa Clara, California-based company rose

more than 8% in extended trading following the results. The

stock hit a record high during Tuesday's trading session.

Marvell's ( MRVL ) shares have risen nearly 60% this year as Wall

Street has bet heavily on soaring demand for advanced chips that

can support the complex processing needs of genAI.

Shares of larger competitor Broadcom ( AVGO ) have rallied

about 50% this year.

Marvell ( MRVL ) forecast fourth-quarter revenue of $1.80 billion,

plus or minus 5%, compared with analysts' average estimate of

$1.65 billion, according to data compiled by LSEG.

While the market for AI processors is dominated by Nvidia ( NVDA )

, Big Tech companies have been pushing to reduce

dependence on the chip leader's supply-constrained

semiconductors, which has benefited companies such as Marvell ( MRVL ).

Marvell ( MRVL ) helps large cloud computing companies make

custom-built processors.

It began discussing custom chips for hyper-scale data center

operators in 2020, and has rapidly grown the business into a

significant earner for the company, Marvell ( MRVL ) Chief Operations

Officer Chris Koopmans said in an interview.

"This thing we have been working on for years (has) come to

fruition," Koopmans said.

The total market for custom chips could grow to as much as

roughly $45 billion by 2028 and largely be split between Marvell ( MRVL )

and Broadcom ( AVGO ), Koopmans said.

According to estimates from research firm 650 Group's Alan

Weckel, the data center custom chip market will grow to as much

as $10 billion this year.

Revenue in Marvell's ( MRVL ) data center segment doubled to $1.10

billion in the third quarter from a year ago. Total quarterly

revenue was $1.52 billion, beating estimates of $1.46 billion.

The company said in April it expects its AI chip sales to

hit $2.5 billion by fiscal 2026.

Revenue derived from custom AI chips alone could be between

$2.5 billion and $3 billion in 2025 for Marvell ( MRVL ), with optical

equipment adding another $1.5 billion to $2 billion to AI

revenue, Jefferies analysts said in a note in October.

While the AI chip business grows, customers in the company's

other end-markets, such as wireless carriers, have been driving

down chip inventory after excessive buying during the pandemic.

Marvell's ( MRVL ) enterprise networking segment posted a 44% fall to

$150.9 million in revenue, and its carrier infrastructure

revenue slumped 73% to $84.7 million.

The company forecast an adjusted gross margin of 60% for the

fourth quarter, compared with estimates of 61%. Its custom chips

typically carry lower margins than its off-the-shelf products.

It recorded adjusted earnings of 43 cents per share in the

third quarter, beating estimates of 41 cents.