Marvell Technology, the U.S. chip designer, posted record quarterly results that beat market estimates on surging demand for artificial intelligence infrastructure. Its shares still fell more than 5% on a stretched valuation and concerns about near-term profitability.
Marvell said second-quarter revenue for the May-July period rose 37% from a year earlier to $2.739 billion, or about 3.77 trillion won, Reuters reported on the 27th. Revenue climbed 13% from the previous quarter and slightly exceeded the $2.71 billion consensus estimate, marking the company's highest quarterly revenue on record. Adjusted earnings per share came in at 94 cents, above the 92-cent estimate and up 40% from a year earlier.
The company also lifted its longer-term outlook. Citing growth in data center revenue, Marvell raised its fiscal 2027 revenue forecast to about $12 billion from about $11.5 billion, and its fiscal 2028 forecast to about $18 billion from a previous target of about $16.5 billion.
Even so, Marvell traded at $227.54 in after-hours trading, down $13.91, or 5.76%, from the regular session close. Investor expectations had run ahead of the actual results. The stock has soared more than 220% over the past year, pushing its price-to-earnings ratio above 84 and leaving little room for anything short of dominant growth. Bob O'Donnell, chief analyst at TECHnalysis Research, said expectations for custom AI accelerator projects have been set extremely high. He said market enthusiasm is running ahead of reality, and that no one other than perhaps Nvidia can meet it, adding that even Nvidia's stock fell immediately after earnings before it issued a large annual forecast.
Google Deal Falls Short of Expected Impact
Concerns about near-term profitability also stem from the relatively low margins on the custom AI chips that account for a growing share of Marvell's revenue. The company projected third-quarter gross margin of 57.5% to 58.5%, down from 58.9% in the second quarter, because of that shift in mix. Chief Executive Matt Murphy said custom chip revenue would more than double next year and that the company could raise its target of more than $10 billion in revenue by 2029. He stopped short of giving a specific new target, deferring details to an investor day scheduled for Oct. 6.
Marvell's recent large AI chip agreement with Google also failed to lift its long-term revenue outlook in any meaningful way, analysts said. In a filing on the 19th, Marvell said it had signed a custom semiconductor development and supply agreement with Google and granted the company warrants to buy about 59 million shares of its common stock at $206.58 apiece. Full exercise of the warrants would amount to $12.18 billion, or about 16.9 trillion won, and would make Google Marvell's fifth-largest shareholder once the transaction closes. Marvell shares jumped more than 9% intraday when the partnership was announced.
Many investors voiced disappointment over the Google-related revenue during the conference call that followed the earnings release. Murphy said part of that revenue was already reflected in the company's custom chip revenue targets through fiscal 2028, and that Google-related sales would contribute far more from fiscal 2029.
