Why Marvell Technology (MRVL) is a Must-Buy Ahead of Q1 2026 Earnings: AI-Driven Growth and Margin Expansion Trump Near-Term Headwinds

The tech sector is bracing for a pivotal earnings season, but one company stands out as a rare gem: Marvell Technology (MRVL). With its Q1 2026 earnings release just days away on May 29, investors have a golden opportunity to position themselves in a stock primed for explosive growth. Despite near-term headwinds tied to geopolitical tensions and supply chain dynamics, MRVL's dominance in AI infrastructure, data center leadership, and margin expansion make it a compelling buy with a 58% upside potential. Let's dissect why now is the time to act.

1. Data Center Dominance: The AI Infrastructure Boom is Here

Marvell's data center segment is the engine of its growth, accounting for 75% of Q4 FY2025 revenue ($1.366B) and surging 78% year-over-year. This momentum isn't slowing down—Q1 FY2026 revenue guidance of $1.875B (±5%) implies a 60%+ YoY growth at the midpoint, fueled by its custom AI silicon programs entering volume production.

The AI infrastructure boom is Marvell's tailwind. Its partnerships with giants like NVIDIA (for GPU accelerators) and Juniper Networks (high-speed networking) are enabling hyperscalers like Amazon and Microsoft to build next-gen data centers. Interconnect products—critical for linking AI servers—are also booming, with revenue growth outpacing the industry.

2. Margin Expansion: Profitability at an Inflection Point

Beyond top-line growth, Marvell's profitability is accelerating. Non-GAAP gross margins are expected to hit 60% in Q1, up from 58% in Q4 FY2025, reflecting economies of scale and higher-margin AI silicon sales. This margin expansion is driving EPS growth of 154% YoY to $0.61 non-GAAP—a stark contrast to peers struggling with margin pressures.

The company's operating cash flow ($1.68B in FY2025) and $933M returned to shareholders (dividends + buybacks) underscore its financial health. With a forward P/S ratio of 5.99X—well below the industry average of 造.54X—MRVL is trading at a discount to its growth trajectory.

3. Near-Term Risks? Manageable, Not Existential

Bearish arguments center on geopolitical risks, with China accounting for 43% of FY2025 revenue. While U.S.-China tensions are a wildcard, Marvell's diversification efforts—expanding automotive/industrial markets (+4% YoY growth in Q4)—mitigate over-reliance. Additionally, its U.S.-based design wins (e.g., custom silicon for cloud providers) reduce supply chain vulnerabilities.

4. Why Act Now? 58% Upside and an Imminent Catalyst

Analysts have an average price target of $110.69, implying a 58% upside from current levels (~$70). The May 29 earnings call is a catalyst to unlock this value. A beat on revenue or EPS could trigger a sharp rerating, especially if management upgrades its full-year outlook.

Historically, this strategy underperformed: a backtest showed an average return of -32.5% with a maximum drawdown of -63.3%, reflecting high volatility around earnings. However, current fundamentals—such as the surge in AI-driven data center revenue and margin expansion—suggest this quarter could be an exception.

Investors also benefit from $0.06/share quarterly dividends and a low short interest, suggesting limited downside pressure.

Final Call to Action: Buy MRVL Before Earnings—Don't Miss the AI Train

Marvell's Q1 results will crystallize its position as a leader in the $100B AI infrastructure market. With data center revenue surging, strategic partnerships solidifying, and margins expanding, the stock is primed for a post-earnings surge. Even near-term risks are outweighed by the long-term tailwinds of AI adoption and data center spending.

Act now—allocate capital to MRVL ahead of earnings. The AI revolution isn't waiting, and neither should you.

Disclosure: This analysis is for informational purposes only. Investors should conduct their own research and consult a financial advisor before making decisions.