What Happened?
Shares of networking chips designer Marvell Technology (NASDAQ: MRVL) jumped 22.6% in the afternoon session after the company reported strong third-quarter results that exceeded Wall Street's sales and earnings expectations. Sales grew by 19% sequentially amid unwavering AI demand, particularly in data center end markets. In addition, Marvell expects to significantly exceed the guide of $1.5B for AI revenue this year and is optimistic about achieving its $2.5 billion target for FY26. Looking ahead, its full-year revenue and EPS guidance also exceeded consensus estimates.
Zooming out, we think this was a good quarter with some key areas of upside.
Additionally, CEO Matt Murphy addressed speculation about a potential move to Intel, firmly stating he is "All In" on Marvel. This dispels any uncertainty that could stem from his potential exit, at least in the short term.
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What The Market Is Telling Us
Marvell Technology’s shares are very volatile and have had 23 moves greater than 5% over the last year. But moves this big are rare even for Marvell Technology and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 9 months ago when the stock dropped 16.9% on the news that the company reported fourth-quarter results and provided revenue and EPS guidance for the next quarter, which fell below analysts' expectations. Revenue and EPS guidance for the current quarter also underwhelmed and came in roughly in line with expectations. The results were driven by underperformance in its Carrier infrastructure and Auto/Industrial segments, offsetting strength in Data Center and Enterprise Networking.
Taking a closer look at the results, Marvell's Data Center segment did the bulk of the heavy lifting during the quarter, recording an impressive growth of 54% year on year, which covered the weaknesses in most of the other segments. The Data Center business also continued to benefit from the demand for AI. Notably, revenue from AI drove 10% of overall revenue in FY'2024 ( vs. 3% in the previous year) and came in over $200m in the fourth quarter. For the next quarter (Q1'2025), the company expects the Data Center revenue to record sequentially low single-digit growth.
Lastly, the company announced a $3 billion increase to its share repurchase program, bringing the total available authorization to $3.3 billion. Overall, the results could have been better, considering the huge expectations placed on the company given its AI potential.
Marvell Technology is up 104% since the beginning of the year, and at $118.92 per share, has set a new 52-week high. Investors who bought $1,000 worth of Marvell Technology’s shares 5 years ago would now be looking at an investment worth $4,969.
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