Marvell's Q2 Revenue Surges 58% But Guidance Disappoints Investors

Marvell Technology Group Ltd. (MRVL.US) has recently released its quarterly financial report and guidance, which has left investors disappointed. The company's revenue for the second quarter grew by 58% year-over-year to $2.01 billion, meeting analyst expectations. However, the data center business, which is a key driver of growth, saw revenue increase by 69% year-over-year to $1.49 billion, falling short of the $1.51 billion expected by analysts. The adjusted earnings per share of $0.67 also met analyst expectations. Despite these results, investors were more disappointed by the company's guidance for the third quarter. Marvell's revenue guidance for the third quarter was $2.06 billion, below the $2.11 billion expected by analysts. Additionally, the company's CEO, Matthew Murphy, stated during the earnings call that data center revenue would remain flat in the third quarter but would see a significant increase in the fourth quarter.

This guidance has led to a decline in investor confidence in Marvell's AI capabilities, as the company's performance has not met the high expectations set by the current AI spending boom. Analysts have expressed concerns about the company's prospects in the AI sector. Vivek Arya, an analyst from a prominent financial institution, stated that he does not have the same level of confidence in Marvell's AI growth prospects in the medium term. He also noted that there is uncertainty surrounding the timeline for the company's new project, Maia, which is a collaboration with Microsoft. The project's timeline may be delayed from the second half of the 2027 fiscal year to the 2028 fiscal year. Additionally, there is uncertainty about Marvell's share in Amazon's next-generation 3-nanometer chip project. As a result, Arya downgraded Marvell's rating from "buy" to "neutral" and reduced the target price from $90 to $78.

N.Quinn Bolton, an analyst from another financial institution, also downgraded Marvell's target price and expressed similar concerns about the company's prospects, particularly in relation to its next-generation chip business for Amazon and Microsoft. Bolton noted that while the custom chip business is expected to grow in the second half of the 2026 fiscal year compared to the first half, it is likely to experience a significant decline in the third quarter of the 2026 fiscal year, with a projected decline of 15% compared to the previous quarter. This volatility is primarily due to changes in customer delivery schedules and supply chain adjustments. Despite these challenges, Bolton expects the custom chip business to rebound strongly in the fourth quarter of the 2026 fiscal year.

Overall, the disappointing financial report and guidance from Marvell Technology Group Ltd. have raised concerns among investors about the company's prospects in the AI sector. Analysts have expressed uncertainty about the company's growth prospects and have downgraded their ratings and target prices accordingly. Despite these challenges, Marvell's management remains optimistic about the company's long-term prospects and its ability to capitalize on the AI spending boom. However, the company will need to address the concerns raised by analysts and investors in order to regain their confidence and continue to grow in the AI sector.