Marvell's stock drops as AI momentum is outweighed by pressure elsewhere

By Emily Bary

Marvell's earnings outlook underwhelms as company calls out weaknesses in carrier infrastructure and enterprise networking

Marvell Technology Inc. has lately emerged as a hot investment play on the artificial-intelligence trend, but its stock dropped about 8% in Thursday's extended session as other parts of the business are seeing pressure.

For the fiscal first quarter, Marvell (MRVL) projects revenue of $1.15 billion at the midpoint, while analysts tracked by FactSet had been looking for $1.38 billion. The company also expects adjusted earnings per share of 18 cents to 28 cents, while the FactSet consensus was for 41 cents.

The company expects low-single-digit sequential growth in the data-center business for the current quarter and projects that both AI and standard cloud data centers will drive growth. But management called out various areas of weakness elsewhere.

"While we are forecasting soft demand impacting consumer/carrier infrastructure and enterprise networking in the near term, we expect revenue declines in these end markets to be behind us after the first quarter, and project a recovery in the second half of the fiscal year," Chief Executive Matt Murphy said in a release.

While Marvell's overall revenue for the fiscal fourth quarter was nearly flat, the semiconductor company said it saw much faster growth in its data-center business, which benefits from the AI spending rush.

"We see exciting new opportunities ahead of us from growth in generative AI applications driving cloud customers to build new data centers. We also expect a positive uplift from increased investment in inferencing, which will drive more bandwidth between data centers," Murphy said on the earnings call.

Overall revenue was $1.43 billion, up 1% from a year before and roughly in line with the FactSet consensus, which was for $1.42 billion. Marvell pointed to 38% sequential growth in its data-center business, whereas its guidance had called for upwards of 30% growth. Year-over-year growth in revenue for Marvell's data-center end market was 54%.

Marvell posted a $392.7 million net loss, equating to 45 cents a share, for its fiscal fourth quarter. A year before, it lost $15.4 million, or 2 cents a share.

On an adjusted basis, Marvell earned 46 cents a share, matching the FactSet consensus.

Marvell also announced that its board of directors has authorized a $3 billion boost to the company's stock-buyback program, adding to the roughly $300 million that remains available under the existing repurchase authority.

Shares of Marvell have climbed 63% over the past three months, and they've roughly doubled over a 12-month span.

-Emily Bary

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03-07-24 2022ET

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