Marvell Technology Stock Drops 18.6% as Q3 Outlook Disappoints

Marvell Technology's Q2 revenue rose 58% YoY to $2.006 billion, beating estimates. However, the company's Q3 revenue guidance of $2.06 billion, a 5% variance, fell short of the Street's $2.11 billion target. The weak forecast overshadowed AI gains, leading to an 18.6% share price decline. Analysts cut their ratings and targets due to caution around the pace of major cloud projects.

Marvell Technology, Inc. (MRVL) reported its second-quarter (Q2) fiscal 2026 earnings on Thursday, August 28, with revenue rising 58% year-over-year (YoY) to $2.006 billion, slightly beating analyst estimates. However, the company's guidance for the third quarter (Q3) revenue of $2.06 billion, a 5% variance, fell short of the Street's $2.11 billion target. This weak forecast overshadowed the AI gains, leading to an 18.6% share price decline in pre-market trading.

Marvell's Q2 earnings per share (EPS) reached $0.67, more than doubling the prior-year figure and at the top end of guidance [1]. The data center segment, which generated $1.49 billion in revenue, was a key driver of growth, with a 69% YoY increase. This segment accounted for 74.3% of the quarter's total revenues, demonstrating its dominance in Marvell's business [1].

However, Marvell's CEO Matt Murphy attributed the company's Q3 revenue guidance to "nonlinear growth" in its custom AI chips business, citing "lumpiness" in demand from cloud providers [2]. This guidance was slightly below the average estimate of $2.11 billion, leading to a 18% drop in Marvell's stock price on Friday [2].

Analysts at Cantor and Bank of America downgraded Marvell's stock to neutral from buy, citing concerns around the pace of major cloud projects and the company's AI growth prospects in the near/medium term [2]. The company expects overall data center revenue in Q3 to be flat sequentially, with substantially stronger growth expected in the fourth quarter [2].

Despite the Q3 revenue guidance, Marvell's strong Q2 performance and AI gains in the data center segment highlight the company's potential for growth in the custom AI chips market. Investors should closely monitor Marvell's pipeline of new customers and the company's ability to adapt to the "lumpiness" of demand from major cloud providers.

References:
[1] https://www.nasdaq.com/articles/marvell-technology-q2-earnings-match-estimates-revenues-rise-y-y
[2] https://www.cnbc.com/2025/08/29/marvell-stock-earnings-guidance.html