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Marvell shares slide on disappointing guidance amidst soft demand outlook

AInvestThursday, Mar 7, 2024 4:33 pm ET
2min read

Marvell Technology Group Ltd. (MRVL) reported Q4 earnings after the close on Thursday. Sares of MRVL have enjoyed a strong start to 2024 with shares up 41% YTD. The results fell short of lofty expectations following the rally. This led to an exodus of investors as the stock tumbled 12% to the $75 area. It is attempting to hold support at this level as participants await the conference call. 

MRVL posted adjusted earnings per share (EPS) of $0.46, in line with consensus estimates. However, the company's stock plunged in extended-hours trading on the back of disappointing guidance for the first quarter of fiscal 2025.

Marvell reported Q4 net revenue of $1.427 billion, which was above the mid-point of its guidance provided on November 30, 2023. Non-GAAP net income for the quarter was $401.6 million, or $0.46 per diluted share. Cash flows from operations for the quarter were $546.6 million.

Data center revenue significantly increased by 54% year over year, while consumer revenue dropped by 20%. Carrier infrastructure revenue also decreased notably by 38%, and enterprise networking revenue fell by 28%. The automotive and industrial segment saw a decline of 17% in revenue. Adjusted gross margin for the quarter was favorable, coming in at 63.9% compared to last year and the estimate of 63.5%.

One of the key drivers of Marvell's growth in the data center end market was its strong performance in artificial intelligence (AI)-related products. Data center revenue increased by an impressive 38% sequentially and 54% year-over-year. This growth can be attributed to Marvell's position as a critical enabler of accelerated infrastructure for AI, capitalizing on the increasing momentum of this technology inflection.

Marvell's Chairman and CEO, Matt Murphy, expressed optimism about the company's prospects in the data center end market, citing strong growth in revenue driven by AI. He also mentioned the company's critical role in accelerating infrastructure for AI, which continues to gain momentum. However, the company forecasted soft demand impacting consumer, carrier infrastructure, and enterprise networking in the near term, with revenue declines in these end markets expected to be behind after the first quarter, projecting a recovery in the second half of the fiscal year.

Marvell's outlook for the upcoming first quarter of fiscal year 2025 (Q1 FY25) indicates potential challenges ahead. The company forecasts soft demand affecting consumer, carrier infrastructure, and enterprise networking in the near term. 

As a result, Marvell expects to see a decline in revenue within these end markets in Q1 FY25. Nonetheless, the company projects a recovery in the second half of the fiscal year. For Q1 FY25, Marvell anticipates net revenue to be approximately $1.150 billion, which falls short of analysts' estimates of $1.37 billion. The adjusted gross margin is projected to be between 62.0% to 63.0%, slightly below the estimated 63.6%. Marvell's GAAP operating expenses are expected to be around $676 million, with non-GAAP operating expenses at approximately $455 million.

In conclusion, Marvell's Q4 earnings report showed mixed results, with revenue growth and significant data center revenue increase, but also declines in other segments and disappointing guidance for the first quarter of fiscal 2025. The company faces challenges in the near term, but remains optimistic about its long-term prospects and the growth potential of the AI market. Investors will be watching closely for future developments and updates from the company.


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