On Tuesday, December 2, shares of semiconductor company Marvell Technology surged in after-hours trading as its far stronger-than-expected growth guidance for next fiscal year's data center business overshadowed an otherwise muted overall outlook, reigniting investor confidence in this specialized custom chipmaker.
The stock initially dropped 5% following the earnings release but reversed course after executives provided robust data center projections during the earnings call, rallying as much as 14% in extended trading.
The key catalyst was CEO Matt Murphy's disclosure that the company expects "data center revenue growth to exceed 25% year-over-year next fiscal year." This guidance surpassed Wall Street's consensus estimates, sending a positive signal about the company's growth momentum in AI hardware—a core business segment.
The early weakness likely stemmed from Marvell's conservative Q4 forecast, which failed to impress. The dramatic reversal highlights how investors in the current market environment are prioritizing long-term AI-related growth prospects over minor short-term earnings fluctuations.
**Earnings Meet Expectations, Key Guidance Shifts Sentiment**
Marvell reported Q3 adjusted EPS of $0.76 on revenue of $2.08 billion, slightly beating analyst estimates of $0.74 EPS and $2.07 billion revenue (per FactSet).
The data center segment—Marvell's revenue backbone—delivered steady performance with Q3 sales up 38% YoY to $1.52 billion, marginally above the $1.51 billion Wall Street expected. CEO Murphy attributed the results to "strong demand for our data center products."
However, the company's Q4 outlook appeared cautious, projecting adjusted EPS of $0.79 (±$0.05) and revenue of $2.2 billion (±5%), essentially in line with analyst expectations and lacking positive surprises.
The sentiment shift came entirely from Murphy's additional next-fiscal-year commentary during the call. His 25%+ data center growth projection served as a major confidence booster for investors. Murphy noted this optimistic forecast excludes potential contributions from Marvell's newly announced $3.25 billion cash-and-stock acquisition of AI startup Celestial AI.
**Market Divisions and ASIC Prospects**
While Marvell's stock soared 83% in 2024 amid AI enthusiasm, it has declined 16% this year, reflecting lingering doubts about its ability to secure long-term orders in a competitive landscape.
The investor debate centers on the outlook for custom ASIC (application-specific integrated circuit) chips—tailored processors like Google's TPUs that are seen as potential alternatives to Nvidia's GPUs. As UBS analyst Timothy Arcuri noted in a November 23 report: "Investors continue viewing custom ASIC through a binary lens—either you win the deal or you're out."
Arcuri argues the reality is more nuanced, with most clients pursuing diversified solutions that "will use multiple GPU vendors and multiple ASIC vendors"—a trend benefiting companies like Marvell. He maintains a "Buy" rating with a $110 price target. Marvell's strong guidance appears to lend fresh support to this optimistic thesis.
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