Marvell Shares Slide After Revenue Misses High AI Expectations
The chipmaker's stock fell after its quarterly revenue and guidance failed to impress investors banking on a stronger AI-fueled boom.
Marvell Technology Inc. shares fell sharply in after-hours trading after the chipmaker's second-quarter earnings and third-quarter forecast failed to meet the high expectations of investors betting on the artificial intelligence boom. The stock dropped about 6.6% after the company reported revenue that narrowly missed Wall Street estimates and offered a sales outlook that was below consensus.
For its fiscal second quarter, Marvell reported revenue of $2.01 billion, a 58% increase from the year-ago period but just shy of the $2.01 billion analysts had anticipated. The company's adjusted earnings of 67 cents per share were in line with expectations. While Chief Executive Matt Murphy highlighted that the results marked a record for the company, driven by strong demand for its custom AI chips and electro-optics products, the performance wasn't enough to satisfy a market with elevated expectations for AI-related stocks.
Looking ahead, Marvell projected third-quarter revenue of about $2.06 billion, below the $2.11 billion that analysts were forecasting. The softer-than-expected guidance added to investor concerns that the company's growth trajectory might not be as steep as previously hoped, particularly in the context of a stock that had already fallen 30% year-to-date.
"Marvell's growth is being fueled by strong AI demand for our custom silicon and electro-optics products, as well as a significant increase in the pace of recovery in our enterprise networking and carrier infrastructure end markets," Murphy said in a statement. He also noted that the company is engaged in over 50 new custom AI-design opportunities, suggesting a robust pipeline.
Analysts suggest the stock's underperformance reflects the lofty valuations across the AI chip sector, which have left little room for error. The slightest disappointment can trigger a significant sell-off, as investors reassess the near-term growth prospects against the backdrop of macroeconomic risks and geopolitical tensions, particularly with China.
Despite the sell-off, some analysts maintain a positive long-term view. They see Marvell as well-positioned to capitalize on the AI trend through its application-specific integrated circuits (ASICs) and its role in data center and cloud infrastructure. Morgan Stanley analysts, for instance, have pointed to the strength of Marvell's optical solutions business, which they believe is more durable and carries higher margins than its ASIC business.