What's Happening?
Marvell Technology's shares experienced a significant decline, dropping 15% in premarket trading on August 29, 2025, following the release of its fiscal second-quarter results. The company's revenue for the quarter reached $2 billion, marking a 57.5% increase compared to the previous year. However, this figure fell $10 million short of analysts' expectations. The company's data center growth, which increased by 69% year-over-year, was primarily driven by custom XPU performance and optical interconnects. Despite meeting the adjusted earnings per share (EPS) forecast of $0.67, the company's outlook for the next quarter was mixed. Marvell anticipates revenue of $2.060 billion, slightly below the consensus estimate of $2.10 billion, with adjusted EPS expected at $0.74, compared to the Street's forecast of $0.72. The data center revenues are expected to remain flat sequentially, while the networking and carrier business is projected to grow by about 30% quarter-over-quarter.
Why It's Important?
The mixed results and outlook have raised concerns among investors and analysts about Marvell's future growth prospects, particularly in the data center segment. The company's recent sale of its auto business has been cited as a factor in the guidance miss, highlighting the challenges Marvell faces in aligning its growth commentary with its financial guidance. The lack of growth in the data center sector, despite strong demand for AI interconnects, poses a challenge for Marvell as it competes with larger peers in the semiconductor industry. The company's stock has underperformed compared to its rivals, reflecting investor apprehension about its ability to scale and maintain competitive margins.
What's Next?
Looking ahead, Marvell's management will need to address the concerns surrounding its data center growth and overall business strategy. Analysts, such as Piper Sandler's Harsh Kumar, have adjusted their financial models for Marvell, projecting lower revenue and EPS for the coming fiscal years. Despite these challenges, Kumar maintains an Overweight rating on Marvell's stock, suggesting potential upside if the company can successfully navigate its current hurdles. The broader market will be closely watching Marvell's performance in the coming quarters, particularly its ability to capitalize on the growing demand for AI and networking solutions.
