Marvell Technology Sees Stock Decline
On Friday, Marvell Technology’s stocks dropped, despite chipmakers reporting strong second-quarter results. This downturn seems to be linked to analyst revisions to price forecasts and concerns over third-quarter guidance, which many found disheartening.
Marvell posted an adjusted revenue of 67 cents per share, surpassing Wall Street’s expectation of 66 cents. However, its overall revenue of $20.06 billion fell short of the estimated $29 billion consensus. The adjusted gross margin stood at 59.4%, illustrating a focus on resilient AI sales.
According to Matt Murphy, the Chairman and CEO, Marvell achieved record revenue of $2.006 billion in the second quarter, marking a 58% year-over-year increase. He expressed optimism for ongoing growth as they move into the third quarter, particularly concerning operating income and earnings per share.
Murphy also mentioned that the increased demand for AI, especially for custom silicon and electro-optic products, has played a significant role in driving this growth. Additionally, there’s been a noticeable recovery in enterprise networking and carrier infrastructure markets.
For the third quarter, Marvell anticipates adjusted earnings per share (EPS) between $1.957 billion and $2.163 billion, with EPS estimates ranging from 69 to 79 cents per share, the midpoint being around 72 cents.
In response, analysts began to adjust price forecasts, addressing both immediate challenges and longer-term potentials. Kevin Cassidy from Rosenblatt Securities noted that adjustments in data center ASIC shipments from October to January contributed to a minor revenue shortfall, despite overall revenues exceeding expectations.
Looking ahead, Marvell has revised its revenue projections for 2027 downward, a change attributed to the sale of its automotive Ethernet business and weakened data center shipments. Nevertheless, Rosenblatt retained a buy rating, highlighting a strong pipeline of 18 upcoming ASICs and over 50 design opportunities meant to diversify its revenue streams and mitigate customer dependencies, although they trimmed the 12-month price forecast from $124 to $95.
JP Morgan analyst Harlan Sur remarked that Marvell’s results for the July quarter were aligned with expectations, with increasing consumer demand compensating for softer metrics in data centers and carrier sales. Analysts observed that the $1.06 billion guidance for the next ten quarters was impacted by the automotive Ethernet business sale.
The anticipation is for flat revenue from data centers, while growth in optical networking is expected to balance out uneven shipments of custom ASICs, regaining momentum by 2026. Carrier and enterprise networking sales are projected to increase by 30% in succession.
Meanwhile, JP Morgan maintained an overweight rating but adjusted its price forecast from $130 to $120. They pointed out the positive trajectory of Amazon’s TRAINIUM and Microsoft’s MAIA ASIC program, expected to ramp up production in 2026, alongside steady demand for Marvell’s optical products.
Goldman Sachs remarked that Marvell’s results and revenue slightly exceeded previous margins, though it didn’t necessarily translate to robust sales. The muted guidance reflects limited short-term prospects for its custom silicon business, despite ongoing strong demand for optical products.
Analyst James Schneider held a neutral stance, citing slow growth expectations and ongoing losses concerning custom chip provisions for clients like Amazon and Microsoft. He reduced his price forecast from $75 to $72, noting that data center revenue rose slightly, thanks to optical strength, but anticipated a setback later in the year due to declines in custom silicon.
Goldman also adjusted its EPS estimate down by 5% to $3.00, suggesting that the company’s stock performance would likely depend on the scale of its custom computing ramp up in 2026.
Price Action: MRVL stock saw a notable decline of 16.15%, closing at $64.76 on Friday.
