TLDR
- Marvell stock fell 18% after Q3 guidance of $2.06B missed analyst expectations of $2.11B
- Record Q2 revenue of $2.01B with 58% year-over-year growth driven by AI demand
- Data center segment reached $1.49B but fell short of $1.51B estimates
- CEO warned of “nonlinear growth” and timing issues with cloud provider deployments
- Bank of America downgraded stock from buy to neutral, cutting price target to $78
Marvell Technology shares crashed 18% Friday despite posting record quarterly results. The AI chipmaker’s mixed earnings report left investors questioning near-term growth prospects.
The company delivered Q2 revenue of $2.01 billion, matching consensus estimates exactly. This marked a massive 58% jump from the prior year period and set a new company record.
Adjusted earnings came in at 67 cents per share, meeting Wall Street expectations. The company posted net income of $194.8 million compared to a $193.3 million loss last year.
Data center sales drove the strong performance, expanding 69% year-over-year to $1.49 billion. This segment now represents 74% of total company revenue as AI infrastructure demand surges.
CEO Matt Murphy credited “strong AI demand” for custom silicon and electro-optics products. The company secured new design wins worth billions in potential lifetime revenue during the quarter.
Guidance Concerns Trigger Selloff
The real disappointment came from forward-looking guidance. Marvell projected Q3 revenue of $2.06 billion, below the $2.11 billion analyst consensus.
Murphy warned investors about “nonlinear growth” patterns in the custom AI chip business. He described normal “lumpiness” as large cloud providers ramp infrastructure spending up and down.
The CEO said data center revenue would be “flat sequentially” in Q3 before showing “substantially stronger” growth in Q4. This timing uncertainty spooked investors focused on consistent quarterly gains.
Wall Street Turns Cautious
Analyst reactions turned negative following the mixed results. Bank of America downgraded Marvell from buy to neutral while slashing its price target from $90 to $78 per share.
The bank cited concerns about AI growth prospects “in the near/medium term.” Analysts questioned the company’s ability to hit its 20% data center market share target by 2028.
Cantor analysts expressed frustration over limited visibility into new customer wins. They said more detailed pipeline information was needed before turning positive on the stock.
Other business segments showed mixed performance. Enterprise networking and carrier infrastructure grew 43% year-over-year with expectations for continued 30% sequential growth.
The consumer market jumped 84% sequentially but faces a slight decline in Q3. Following the $2.5 billion automotive Ethernet divestiture, automotive and industrial revenue will drop significantly.
Marvell achieved strong operational metrics with non-GAAP operating margins expanding 870 basis points to 34.8%. The automotive divestiture provides flexibility for increased stock buybacks and technology investments.
The company’s electro-optics portfolio continues leading the industry with strong demand for 800-gig and next-generation 1.6T products.
