Marvell's (MRVL) Q4 Earnings: A Strong Quarter, But Investors Wanted More

Marvell's Q4 Earnings: A Strong Quarter, But Investors Wanted More

Marvell Technology (MRVL) recently released its fourth-quarter earnings, and while the company delivered solid results, its stock took a significant hit.

Investors had extremely high expectations, and despite meeting or slightly surpassing Wall Street estimates, Marvell’s stock dropped sharply.

Earnings and Revenue in Line with Expectations

For the quarter ending February 1, Marvell reported:

• Revenue of $1.82 billion, up 27% year-over-year, slightly ahead of analysts' expectations of $1.8 billion.
• Adjusted earnings per share (EPS) of $0.60, just above the estimated $0.59.
• Cash flow from operations of $514 million, a slight decline from the previous year.
• Long-term debt remained steady at $3.9 billion.

While these numbers were solid, investors had hoped for an even stronger performance, especially given the hype around artificial intelligence (AI) and cloud computing.

Guidance for the Next Quarter: A Key Disappointment

Marvell projected Q1 revenue of $1.875 billion, reflecting 61% growth year-over-year, and an adjusted EPS between $0.56 and $0.66 (midpoint: $0.61, up 154% from last year).

These figures were largely in line with analyst expectations, but the market had been hoping for something closer to $2.1 billion in revenue, as some "whisper numbers" suggested.

CEO Matt Murphy remained optimistic, emphasizing strong demand for Marvell’s AI chips and interconnect products, alongside new design wins that could fuel future growth. He stated that the company is "well positioned for a strong start to fiscal 2026."

Why Did the Stock Drop?

Despite reporting solid numbers, Marvell’s stock plunged nearly 19% in pre-market trading following the earnings release. Several factors contributed to this:

High Expectations – AI-related stocks have been on a strong run, and investors had priced in exceptional growth. Even an in-line report wasn’t enough to satisfy the market.

Uncertainty Over Key Contracts – There are concerns about whether Marvell will secure Amazon's Trainium 3 AI chip contract, a critical revenue stream.

Price Target Cuts – At least 16 analysts lowered their price targets on Marvell, with some dropping it significantly (e.g., from $188 to $122).

Mixed Analyst Sentiment: A Buying Opportunity?

While many analysts trimmed their price targets, some saw the sell-off as overdone. Loop Capital upgraded the stock to a "Buy," arguing that the nearly 40% correction since January creates an attractive entry point. Analyst Kevin Mobley believes Marvell’s AI and cloud growth remain strong long-term drivers.

Looking Ahead: A Stock to Watch Despite the sharp decline, Marvell remains a key player in AI chip development, providing custom AI processors for Amazon, Microsoft, Google, and Meta. The company’s data center segment continues to grow, with AI-related revenue surging 78% year-over-year in Q4.

While short-term volatility may persist, long-term investors could see value in Marvell as demand for AI infrastructure continues to rise. Whether the stock rebounds will likely depend on its ability to exceed expectations in upcoming quarters and secure major AI chip contracts.