MRVL Stock Slips After Hours As Thin Q2 Beat Meets Lower Q3 Margin Outlook — Murphy Still Calls Data-Center Strength Ahead of Expectations

• Q2 revenue hit $2.739 billion, up 37% from a year earlier and above Wall Street estimate of $2.71 billion.
• “AI-related bookings remain exceptionally robust,” Murphy said. 
• For Q3, adjusted gross margin is expected to be 57.5%-58.5%, down from 58.9% in Q2.

Shares of Marvell Technology (MRVL) fell about 8% in after-hours trading on Thursday after a thin second-quarter beat and a guided dip in third-quarter gross margins, even as the company raised its multi-year sales outlook again.

Q2 Numbers

Revenue hit $2.739 billion in the fiscal second quarter, up 37% from a year earlier and above a Wall Street estimate of $2.71 billion. Adjusted earnings were $0.94 a share, versus $0.67 a year ago, but only marginally above a Wall Street estimate of $0.93.

Data center sales were $2.171 billion, up 46% year over year and 18% from the prior quarter. That business now accounts for 79% of revenue. Communications and other sales rose 10% year over year to $568 million.

Higher Multi-Year Targets

CEO Matt Murphy said demand is accelerating. The company now sees fiscal 2027 sales of about $12 billion, up $500 million from last quarter’s outlook and around 45% growth. Data-center sales are expected to rise about 60%.

Fiscal 2028 sales are now projected at about $18 billion, $1.5 billion higher than the prior view, or about 50% growth. Data-center sales should grow more than 60%, and custom business is expected to more than double. 

Q3 revenue is guided to $3.15 billion, plus or minus 5%, with data center expected to rise more than 20% sequentially and about 75% year over year. Adjusted earnings are seen at $1.10 a share, plus or minus 5 cents, compared to an analyst estimate of $1.08. Adjusted gross margin is expected at 57.5% to 58.5%, down from 58.9% in Q2.

Bookings Are Strong, Says Murphy

Chairman and CEO Matt Murphy said demand is strong across Marvell’s main data-center products: the chips that connect AI systems, the switch chips, and the custom chips built for large cloud customers.

“The strength of our data center business continues to exceed our prior expectations,” he said. Sales of current high-speed optical connection chips remain solid, and the next-faster generation is ramping up. High-capacity switch chips are on track to more than double this year. Newer optics that sit closer to the processors are larger than the company previously expected, and customers plan to start deploying them as early as next year.

Regarding the expanded Google deal announced by the company last week, Murphy said the scope of work is broad. It includes AI inference chips, plus storage, networking, and memory chips, all located next to Google’s own TPU processors. He called the overall opportunity “just massive.” Sales from these programs through fiscal 2028 are already in the current forecast. The bigger extra growth is expected in 2029, and later, he added. The company will provide more details at Investor Day on October 6 in New York.

Why Q3 Margins Dip?

Marvell guided adjusted Q3 gross margin to 57.5%–58.5%, down from 58.9%. 

New CFO Dan Durn said next quarter’s slightly lower margin comes from selling a bigger mix of custom chips, an expected shift. Fourth-quarter margins should stay in the same range, and the following year’s gross margins should look similar. Overall operating profit is still expected to reach the company’s 38%–40% target by the end of this year and hit the high end of that range the year after, he said. 

How Did MRVL Retail Traders React?

On Stocktwits, retail sentiment around MRVL stock jumped from ‘bullish’ to ‘extremely bullish’ over the past 24 hours, while message volume rose from ‘high’ to ‘extremely high.’

MRVL stock has gained 184% year-to-date. 

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