Marvell Earnings: AI Helping to Offset Spending Corrections

Key Morningstar Metrics for Marvell Technology

• Fair Value Estimate: $61.00
• Morningstar Rating: 2 stars
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: High

What We Thought of Marvell Technology’s Earnings

We maintain our $61 fair value estimate for shares of Marvell Technology MRVL as we bake in lower short-term expectations but continue to expect strong long-term growth. In our view, Marvell’s enterprise, telecom, and consumer end markets are experiencing significant softness due to spending slowdowns after solid investment in the previous two years.

On the other hand, Marvell’s artificial intelligence products are driving tremendous growth in data center sales. We continue to see the firm as well-positioned in both the data center and enterprise networking. It has strong capabilities in merchant silicon, optical chips, and custom chip design that carve its moat.

We believe AI will be an increasingly large growth driver for the firm over the next five years. Shares dropped 8% after hours because of weak guidance in non-data-center markets, and we still see Marvell shares as overvalued. While we are bullish on Marvell’s AI opportunity, we believe it has been priced into shares too heavily.

January quarter sales rose 1% year over year and sequentially to $1.43 billion, which aligns with our model. These were supported by 54% year-over-year growth in data center sales, primarily due to growth from AI products. Marvell’s other end markets declined in the double digits year over year, behind spending pullbacks across wireless, enterprise, and consumer customers.

Marvell’s guidance for $1.15 billion in sales in the April quarter implies a near-20% sequential decline. This missed our model significantly, further weakening in non-data-center end markets being more aggressive than we expected. Marvell is actively undershipping in the April quarter to alleviate inventory buildups for its customers, which we see as prudent. We expect modest recoveries for these weaker end markets through the rest of fiscal 2025 and more meaningful rebounds in the following years. We continue to expect tremendous data center growth through fiscal 2026.