Thursday, June 13, 2024

Marvell Technology Data Center Revenues Surge, But the Rest Fall

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Marvell Technology Inc. NASDAQ: MRVL is a leading semiconductor company in the computer and technology sector sector that designs and manufactures high-performance chips. They are a powerhouse when it comes to their largest market addressing data infrastructure solutions and data centers. While the company is a benefactor of the artificial intelligence (AI) boom and explosive growth in data centers, it may be perceived as one-dimensional, as evidenced by the 10% drop in shares in reaction to its fiscal Q1 2025 earnings report.

Marvell has heavy competition from peers, including Broadcom Inc. NASDAQ: AVGO, Synaptics Inc. NASDAQ: SYNA and STMicroelectronics N.V. NYSE: STM.

The Good: Explosive Data Center TAM Growth of Over 300% by 2028.

Marvell generates 70% of its revenues from the data center segment. The boom in AI infrastructure demand and scorching growth in data centers led to an 87% YoY and 7% sequential spike in its data center revenues to $816.4 million in its fiscal Q1 2025 earnings report. Robust growth was driven by cloud AI and cloud infrastructure electro-optic products as well as initial shipments of its custom AI compute programs.

Marvell Expects to Double its 10% Market Share in Coming Years.

Data Center revenue is expected to grow in the mid-single digits sequentially as they ramp up custom AI silicon production. The data center’s total addressable market (TAM) is expected to more than triple, growing from $21 billion last year to $75 billion in 2028. With the numerous opportunities in interconnect, switching, storage and compute, Marvell expects to double its 10% market share over the next several years.

Marvell is believed to be working on application-specific integrated circuit (ASIC) chips with hyperscaler giants Amazon.com Inc. NASDAQ: AMZN on its 5nm Tranium chip, Alphabet Inc. NASDAQ: GOOGL on its 5nm Axion ARM CPU and Microsoft Co. NASDAQ: MSFT on its Maia chip.

The Bad: Carrier and Enterprise Revenues Sink 58% YoY

Inventory glut and normalization are expected to continue driving softer industry demand. Enterprise networking revenue sank 58% YoY and 42% sequentially to $153.1 million. Carrier revenues fell 75% YoY and 58% sequentially to $71.8 million, well below Marvell’s forecast of declines of 40% and 50%, respectively. However, the company expects a recovery to start in the second half of fiscal 2025 as customers work through the inventory correction.

The Ugly: Consumer Segment Revenues Fall 70% YoY

The consumer segment revenue fell 70% YoY to $42 million, in line with prior guidance. However, the company expects the consumer segment revenues to double on a sequential basis. The automotive and industrial segment saw a 13% YoY decline to $77.6 million due to broad inventory correction in the automotive end market. Growth is expected to resume after a flat fiscal Q2 2025.

 

MRVL Sinks on a Descending Triangle Breakdown Pattern

The daily candlestick chart on MRVL illustrates a descending triangle breakdown pattern. The descending trendline formed at the $85.76 swing high on March 7, 2024, and the ascending lower trendline formed at the $61.72 swing low on April 22, 2024. MRVL rejected off the upper trendline at $78.44 and collapsed through the lower trendline on its earnings release as shares spilled to $66.10. The daily relative strength index (RSI) fell to the 45-band and is coiled to either bounce and retest the lower trendline or proceed on its next leg down. Pullback support levels are at $66.10, $61.72, $55.63 and $50.35.

Robust Growth Hampered by a Ball and Chain.

Marvel reported fiscal Q1 2025 EPS of 24 cents, matching consensus estimates. Revenues fell 12.2% YoY to $1.16 billion, beating $1.15 billion consensus estimates.

 Marvel Provides Conservative In-Line Fiscal Q2 2025 Guidance.

Marvell took a conservative approach due to its sinking segments and provided in-line guidance for fiscal Q2 2022 EPS of 24 cents to 34 cents versus 28 cents consensus estimates. Revenues are expected between $1.1875 billion to $1.3125 billion versus $1.22 billion consensus estimates. Non-GAAP gross margins are expected to be around 62%. Non-GAAP operating expenses are expected to be around $455 million.

Marvell Technology CEO Matt Murphy commented, “For the second quarter of fiscal 2025, we are guiding an 8% sequential increase in revenue at the mid-point, fueled by ramping custom AI silicon. We see a favorable setup for the second half of this fiscal year, driven by continued growth in data center and the beginning of a recovery in enterprise networking and carrier infrastructure.”

Marvell Technology analyst ratings and price targets are at MarketBeat. 

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