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Wednesday, February 5, 2025

Marvell’s Beat-And-Raise: Is AI The Engine Driving Growth?

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Marvell Technology Surges on Upbeat Q2 Sales, Analysts See Strong Growth Ahead

Marvell Technology Inc. (MRVL) shares climbed in early trading on Friday after the company reported upbeat second-quarter sales, exceeding analysts’ expectations and signaling strong growth prospects, particularly in the artificial intelligence (AI) sector. The company’s performance comes amid an exciting earnings season, with several analysts highlighting the positive implications of Marvell’s results.

Key Takeaways:

  • Beat-and-raise quarter: Marvell’s Q2 revenue of $1.27 billion surpassed analysts’ estimates, marking the company’s first beat-and-raise quarter in five periods.
  • Robust AI growth: The company’s AI-related revenue is expected to significantly exceed its previously stated FY2025/26 targets of $1.5 billion and $2.5 billion, respectively.
  • Positive outlook: Marvell’s strong bookings and backlog suggest improved forward visibility across its Custom Compute and Electro-Optics segments.
  • Upward revisions: Several analysts raised their price targets for MRVL shares, reflecting confidence in the company’s future performance.

Analysts Hail Marvell’s Strong AI Performance

Analyst Toshiya Hari of Goldman Sachs maintained a Buy rating on MRVL shares while lifting the price target from $77 to $87. Hari pointed to the company’s first beat-and-raise in five quarters and highlighted the 2% revenue beat compared to consensus.

"Supported by strong bookings and a robust backlog, we believe Marvell’s forward visibility has improved in both Custom Compute and Electro-Optics," Hari wrote in a note.

Analyst Tore Svanberg of Stifel echoed the sentiment, reaffirming a Buy rating and raising the price target from $90 to $95. Svanberg highlighted Marvell’s "above-midpoint" July quarter results, driven by accelerating DC/AI revenue. He further noted the company’s raised October outlook, mainly attributed to strong performance in DC/AI, carrier infrastructure, and enterprise networking.

"Once again, we remain impressed with MRVL’s execution within the DC/AI space, even as the company’s other end markets resume sequential growth," Svanberg added.

Beyond AI: Marvell’s Cyclical Businesses Rebound

Analyst Harlan Sur of JPMorgan reiterated an Overweight rating and a $90 price target, emphasizing Marvell’s "meaningfully higher" AI design win pipeline in the second half of the year. Sur predicts the company could ship between $575 million and $600 million in AI ASICs this year.

"Just as important, the company’s cyclical businesses are now inflecting higher and the AI/cyclical tailwinds will continue into CY25, in our view, and catalyzing a multi-quarter period of positive EPS revisions," Sur wrote.

Analyst Harsh Kumar of Piper Sandler also expressed optimism, reaffirming an Overweight rating and price target of $100. Kumar noted the company’s "solid" quarterly performance, with all its end markets poised for recovery in the upcoming October quarter.

"While custom silicon inherently has lower gross margin but higher operating margin, management feels like a base of 61% plus margin can be maintained going forward given concurrent growth in the merchant business with higher gross margins," Kumar wrote, highlighting the positive outlook for Marvell’s custom silicon business.

Marvell’s AI Story Gains Momentum

Analyst C.J. Muse of Evercore ISI reiterated an Overweight rating and price target of $85. Muse described the report as an "important inflection" for Marvell, emphasizing the company’s successful delivery on its AI promises.

"Following fits and starts over the last year, Marvell finally delivered the goods on its solid AI story overnight," Muse wrote.

He highlighted the company’s strong revenue beat, driven by Data Center outperformance, and noted the "solidly above consensus" guidance, especially for AI and Data Center segments, which are expected to grow at a high-teens percentage sequentially.

"Overall, we see this report as an important inflection for Marvell, with likely upside to the ever-important AI revenues into CY25 and beyond, coupled with growing tailwinds from the more cyclical businesses," Muse stated.

Strong Performance Fuels Share Price Growth

As a result of the positive earnings report and bullish analyst sentiments, shares of Marvell Technology rose by 7.03% to $74.75 at the time of publication on Friday.

With a strong focus on AI, a diversified portfolio of products, and a robust growth outlook, Marvell Technology appears well-positioned to capitalize on the burgeoning AI market and deliver continued value to investors.

Article Reference

Lisa Morgan
Lisa Morgan
Lisa Morgan covers the latest developments in technology, from groundbreaking innovations to industry trends.

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