Shares of Marvell Technology saw a significant decline of 15% on Friday, primarily due to disappointing results in its data center revenue, which fell short of market estimates. The company also provided weak guidance for the current quarter, raising concerns among investors.
In comparison to the LSEG consensus, Marvell reported the following key metrics:
Earnings per share: 67 cents adjusted, compared to the expected 66 cents Revenue: $2.01 billion, matching analysts' expectationsDespite the decline in stock value, Marvell achieved a remarkable 58% revenue increase from the previous year in the fiscal second quarter, which ended on August 2. This surge was primarily driven by strong demand for artificial intelligence (AI) products, including custom silicon and electro-optics, as highlighted by Marvell's CEO, Matt Murphy.
During this quarter, Marvell reported a net income of $194.8 million, or 22 cents per share, a notable turnaround from the previous year’s net loss of $193.3 million, or 22 cents per share. This positive shift demonstrates the company's ability to rebound amidst a competitive market.
Looking ahead, Marvell anticipates revenue for the fiscal third quarter to be around $2.06 billion, with a margin of plus or minus 5%. This forecast falls slightly short of the $2.11 billion expected by analysts, according to StreetAccount.
Marvell's data center segment reported sales of $1.49 billion for the quarter, which also did not meet Wall Street's expectations of $1.51 billion. During a conference call with investors, Murphy indicated that the company expects overall data center revenue in the third quarter to remain flat sequentially, attributing this to the nonlinear growth observed in its custom AI chip business.
Although Marvell is optimistic about a substantial growth rebound in the fourth quarter, some investors were looking for clearer insights into the company's pipeline of new customers. Analysts from Cantor expressed that without more detailed information, it becomes challenging to support the firm's target of a 20% share in the data center market.
Reflecting these concerns, analysts at Bank of America downgraded Marvell's stock from buy to neutral on Friday, adjusting their price target from $90 to $78 per share. This decision was influenced by worries surrounding the company's near to medium-term growth prospects in the evolving AI sector.
As Marvell Technology navigates through a challenging landscape, investors and analysts will be closely monitoring its future performance and strategic developments. The company's ability to address the current concerns and leverage the growing demand for AI products will be crucial for its recovery and growth trajectory.