MRVL Earnings Preview: High expectations and valuation
2min read Marvell Technology (MRVL) is set to report its Q3 FY2024 earnings after the market closes on December 3. Analysts are expecting adjusted EPS of $0.44 and revenue of $1.41 billion, reflecting year-over-year growth. The company previously guided for revenue between $1.38 billion and $1.46 billion with gross margins around 60%. Investors are particularly interested in whether Marvell can meet or exceed these expectations, given the company's strong performance year-to-date and its strategic positioning in AI-driven semiconductor markets.
Key metrics for this quarter include growth in Marvell's AI-related revenue, particularly its Custom Silicon segment, which serves major customers like Amazon Web Services (AWS) and Google. Analysts expect AI-related sales to surpass the company's previous guidance of $1.5 billion for FY2025, with the Trainium and Inferentia ramps at AWS being closely watched. Gross margin performance and updates on non-data center segments, such as carrier and enterprise networking, will also be important as these segments are expected to show cyclical recovery.
The primary driver of Marvell’s growth is its exposure to hyperscale data centers and AI infrastructure. Products such as Custom Silicon chips and 800G optical solutions are in high demand as cloud service providers (CSPs) ramp up their AI deployments. Additionally, new projects like Trainium2 for AWS, Google's custom silicon efforts, and contributions from Meta and OpenAI are expected to accelerate revenue growth. Analysts are also optimistic about Marvell’s long-term structural growth in AI, with the business potentially reaching $5 billion in AI-related revenue by FY2026.
Marvell Technology reported Q2 FY2024 results that slightly exceeded consensus expectations, with adjusted EPS of $0.30 meeting estimates and revenue of $1.27 billion, ahead of the $1.25 billion estimate. While net revenue declined 5.1% year-over-year, adjusted gross margin improved to 61.9%, up from 60.3% a year ago. Notably, data center revenue grew 92% year-over-year to $880.9 million, underscoring the company’s strength in AI-related sales, while other segments, such as carrier infrastructure (-72%) and enterprise networking (-54%), continued to reflect cyclical pressures.
Marvell’s data center growth was driven by its custom silicon and electro-optics businesses, which saw accelerated demand from hyperscale cloud providers such as AWS. The company highlighted strong momentum in AI-driven projects, with multi-generational engagements and faster customer innovation cycles contributing to growth. Management also raised its AI-related sales targets for FY2025 and FY2026 to exceed the prior guidance of $1.5 billion and $2.5 billion, respectively, supported by its 800G optical and PAM4 technologies.
Analysts praised Marvell’s execution within the AI and data center spaces, with several raising price targets due to its growing AI revenue potential. Stifel highlighted the company’s ability to outperform its previously set AI revenue targets, while UBS noted Marvell’s efforts to address gross margin pressures stemming from the custom silicon business. Analysts were also intrigued by management's ambition to achieve a 20% AI market share in a $40 billion TAM by 2028, a goal that appears ahead of schedule.
Following the earnings report, Marvell shares gained approximately 5%, reflecting investor confidence in its AI-driven growth story. The cyclical recovery in non-data center segments, such as carrier and enterprise networking, also contributed to optimism for sequential improvements. Despite some lingering gross margin concerns, Marvell’s robust positioning in AI and cloud infrastructure makes it a standout player in the semiconductor industry, with analysts viewing it as a high-quality growth story for long-term investors. The raised guidance and strong execution affirm its leadership in the rapidly expanding AI semiconductor market.
Despite the positive momentum, there are some challenges and risks. The stock’s valuation, trading at a significant premium relative to peers like Nvidia, raises concerns about overextension. Furthermore, while demand trends appear favorable, the pace of commercialization and ramping new products like Trainium2 may impact short-term results. However, insider buying by CEO Matt Murphy and recent price target hikes by major analysts reflect growing confidence in Marvell’s growth trajectory.
Analysts are overwhelmingly positive heading into the report, with price targets being raised to as high as $122 by Evercore ISI and $120 by Cantor. Analysts cite accelerating AI deployments and cyclical recovery in non-data center segments as key tailwinds. Looking ahead, the market will closely watch for updates on Marvell’s partnerships with AWS and Google, progress in 1.6T PAM4 DSP optical solutions, and the broader outlook for AI-related revenue. This quarter will provide critical insight into whether Marvell can sustain its growth momentum into FY2025 and beyond.