Why Marvell Technology Sank Today

Why Marvell Technology Sank Today

Stocks of the semiconductor newcomer Marvell Technology (NASDAQ:MRVL) fell 10.5% on Friday.

Through its networking portfolio and ASIC (application-specific integrated chip) business, Marvell has seen bullish sentiment from investors recently. Some believe it will become a key player in the race for artificial intelligence (AI).

However, the purely AI part of Marvell’s business apparently hasn’t lived up to the hype in its first-quarter results released Thursday evening.

AI data centers are booming but at the expense of everything else

In the first quarter, Marvell saw its revenue decline 12%, to $1.16 billion, and adjusted (non-GAAP, generally accepted accounting principles), earnings per share (EPS) were $0.24, down 22.5%. While these declines may seem ugly, they were almost in line with what analysts predicted.

In fact, looking under the hood, one can see a huge difference between the company’s data center segment, which includes AI revenue, and its other segments:

Segment

Revenue for the first quarter of 2025 (millions)

Annual growth

Data center

816.4

87%

Business Networks

153.1

(58%)

Carrier infrastructure

71.8

(75%)

Consumer

42.0

(70%)

Automotive/Industrial

77.6

(13%)

Total

1,160.9

(12%)

Data source: Marvell Q1 2025 press release. YOY = year over year.

As you can see, AI spending seems to crowd out everything else. Perhaps not surprisingly, the weight of declines in other non-AI segments caused results to be in line with expectations rather than exceeding them.

On the positive side, the data center segment is now the company’s largest, and its huge weighting is expected to drive growth next quarter and through 2024. In the release, management forecasts 8% sequential growth. or 36% annualized.

Management attributed the strong sequential growth primarily to custom ASICs, which some large cloud infrastructure giants use in designing their own custom AI accelerators. And in the second half, the company expects continued data center growth, as well as a recovery in carrier networks and infrastructure.

Still, with the stock up about 27.6% from a year ago and trading at about 51 times next year’s earnings estimates, the quarter in line and guidance n were not enough to exceed expectations.

Is a recovery planned?

Even after Friday’s decline, most analysts still seemed bullish on Marvell as the AI ​​story remains intact. Additionally, the considerable declines seen in its other segments prepare these segments for recovery as the economy improves.

Increasing optical connectivity and cloud giants producing their own custom accelerators are trends that show no signs of slowing down any time soon. So while Marvell isn’t the cheapest AI stock, it’s a name to watch, especially after its recent haircut.

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Billy Duberstein and/or its clients have no position in any of the stocks mentioned. The Motley Fool recommends Marvell technology. The Mad Motley has a disclosure policy.

Why Marvell Technology Sunk Today was originally published by The Motley Fool

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