Shares of Marvell Technology (NASDAQ: MRVL ) crashed 18.6% on Friday after the company submitted a weaker-than-expected earnings scorecard for the second fiscal quarter. Although the technology company missed earnings and revenue estimate, Marvell Technology is perfectly situated to benefit from a CapEx ramp inAnalyst’s Disclosure:I/we have a beneficial long position in the shares of CRWV, NBIS, NVDA either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses ...

Summary of Marvell Technology Inc. (MRVL) Conference Call Company Overview - **Company**: Marvell Technology Inc. (MRVL) - **Industry**: Semiconductors, specifically focusing on Datacenter, Networking, and AI technologies Key Financial Results - **Total Revenue**: Reported at $2.01 billion, in line with expectations from Goldman Sachs (GS) and the Street [2] - **Gross Margin**: 59.4%, slightly below GS's expectation of 59.7% and the Street's 59.5% [2] - **Operating Margin**: 34.8%, just below GS's 35.3% and the Street's 34.9% [2] - **Operating EPS**: $0.67, matching GS and the Street [2] - **Datacenter Revenue**: $1.49 billion, in line with GS and the Street [2] - **Enterprise Networking Revenue**: $194 million, above GS's $186 million and the Street's $185 million [2] - **Carrier Infrastructure Revenue**: $130 million, below GS's $145 million and the Street's $147 million [2] - **Consumer Revenue**: $116 million, significantly above GS's $95 million and the Street's $90 million [2] - **Automotive/Industrial Revenue**: $76 million, in line with expectations [2] Datacenter Trends - **QoQ Growth**: Datacenter business increased by 3%, driven by the electro-optics segment [2] - **3Q Guidance**: Expected to be flat QoQ, with double-digit growth in optics and connectivity, offset by a decline in custom silicon revenue [2] - **4Q Outlook**: Anticipated recovery in custom silicon business, with overall growth expected in the second half of the year [2] Revenue Guidance and Estimates - **3Q Revenue Guidance**: Midpoint of $2.06 billion, in line with GS's $2.13 billion and the Street's $2.10 billion [4] - **Gross Margin Guidance**: Expected at 59.75%, slightly above GS's 59.8% and the Street's 59.5% [4] - **Non-GAAP EPS Guidance**: $0.74 at the midpoint, just above GS and the Street's $0.72 [4] - **EPS Estimates**: Trimmed by an average of 5% due to lower revenue and gross margin expectations [5] Price Target and Risks - **12-Month Price Target**: Adjusted to $72 from $75, reflecting a 24x P/E multiple applied to normalized EPS of $3.00 [6] - **Key Upside Risks**: Stronger-than-expected ramp in custom compute and recovery in traditional businesses [6] - **Key Downside Risks**: Slowdown in AI spending and potential share loss in custom compute [6] Investment Rating - **Current Rating**: Neutral, with limited traction expected through 2026 due to content loss with Amazon and upcoming product ramp with Microsoft [7] - **Future Outlook**: More constructive stance possible with improved visibility into AI revenue trajectory [7] Additional Insights - **Segment Revenue Reporting**: Starting in 3Q, all segment revenues excluding Datacenter will be reported on a consolidated basis [4] - **Competitive Landscape**: High competitive intensity at key customer accounts may dampen sentiment [2] This summary encapsulates the key points from the conference call regarding Marvell Technology Inc., highlighting financial performance, market trends, guidance, and investment outlook.

Marvell Technology Conference Call Summary Company Overview - **Company**: Marvell Technology - **Quarter**: Q2 FY2026 - **Revenue**: $2.006 billion, a 36% year-over-year increase [1][2][15] Key Financial Highlights - **Non-GAAP Operating Margin**: Increased by 870 basis points to 34.8% [1][2][15] - **Non-GAAP Earnings Per Share**: $0.67, a 123% year-over-year increase [1][2][15] - **Operating Cash Flow**: $462 million, significantly higher than $333 million in the previous quarter [1][2][15] - **Stock Buyback**: $540 million in stock repurchased in the first half of the fiscal year, with remaining authorization of approximately $2 billion [2][15] Strategic Developments - **Divestiture**: Completed the divestiture of the automotive Ethernet business for $2.5 billion in cash, with proceeds allocated for stock buybacks and technology platform investments [1][3][4] - **Focus Shift**: Strategic focus has shifted towards data centers, which now account for two-thirds of total revenue [1][4] Data Center Market Performance - **Data Center Revenue**: $1.49 billion, a 69% year-over-year increase and a 3% quarter-over-quarter increase [1][6][12] - **Drivers**: Growth driven by custom XPU and associated products, with AI and cloud computing contributing over 90% of data center revenue [1][6][12] - **Future Projections**: Anticipated revenue growth of approximately 30% in the third quarter, with expectations for continued strong performance in the data center segment [7][12] Product Innovations - **New Product Launch**: Introduction of the rapidly growing custom silicon product category, XPU Attach, with potential revenue of $75 billion [1][8] - **Market Share Goals**: Aim to increase data center market share from 13% in a $33 billion total addressable market (TAM) in 2024 to 20% in a $94 billion TAM by 2028 [1][8] Leadership Changes - **Executive Promotions**: Chris Coopmans promoted to President and COO; Sandip Bharati promoted to President of the Data Center Group [5] Industry Outlook - **AI and Cloud Computing**: Strong demand in AI and cloud computing markets, with expectations for AI-related revenue to exceed half of total revenue by the end of the fiscal year [26] - **Market Trends**: Anticipated growth in optical technologies and custom products, with significant opportunities in the data interconnect product portfolio [9][10][11] Financial Health - **Balance Sheet**: Cash and cash equivalents of $1.2 billion; total debt of $4.5 billion with a debt-to-EBITDA ratio of 1.63 [17] - **Future Guidance**: Projected total revenue of approximately $2.06 billion for Q3 FY2026, with non-GAAP earnings per share expected to grow by 10% [18] Conclusion - **Overall Performance**: Marvell Technology demonstrates strong financial performance, robust growth in the data center market, and a strategic pivot towards AI and cloud computing, positioning itself for future success [31]

Core Insights - JR Research is recognized as a top analyst in technology, software, and internet sectors, focusing on growth and GARP strategies [1] - The investment approach emphasizes identifying attractive risk/reward opportunities with robust price action to generate alpha above the S&P 500 [1][2] - The investment group Ultimate Growth Investing specializes in high-potential opportunities across various sectors with a focus on strong growth potential and contrarian plays [3] Investment Strategy - The strategy combines sharp price action analysis with fundamentals investing, avoiding overhyped stocks while targeting battered stocks with recovery potential [2] - The investment outlook is typically 18 to 24 months for the thesis to materialize, aiming for robust fundamentals and attractive valuations [3] Target Audience - The group is designed for investors looking to capitalize on growth stocks with strong fundamentals, buying momentum, and turnaround plays [3]

Core Viewpoint - The AI chip sector is facing significant challenges, highlighted by the sharp decline in Marvell Technology's stock price due to disappointing earnings guidance and performance, raising concerns about growth prospects in the industry [2][4]. Financial Performance - Marvell Technology reported Q2 revenue of $2.01 billion, a 58% year-over-year increase, meeting analyst expectations. However, its data center business revenue of $1.49 billion grew 69%, falling short of the expected $1.51 billion [5]. - The company anticipates Q3 revenue of $2.06 billion, below the consensus estimate of $2.1 billion, indicating potential volatility in its custom chip business [5]. Analyst Sentiment - Analyst Vivek Arya from Bank of America downgraded Marvell's rating from "Buy" to "Neutral," citing rising uncertainties regarding the timeline for new projects and the company's share in Amazon's next-generation 3nm chip project. Consequently, the growth forecast for Marvell's data center business in 2026 was revised down from 23%-25% to mid-teens [4]. - The overall sentiment in the market reflects concerns over the high expectations and valuations of AI chip stocks, which leaves little room for error in financial reporting [6]. Market Trends - The semiconductor sector, including major players like Broadcom, AMD, and NVIDIA, experienced a significant downturn, with the Philadelphia Semiconductor Index dropping over 3% [5][6]. - Despite NVIDIA's strong Q2 performance with revenue of $46.7 billion, the market reacted negatively due to slower growth rates, raising fears of a potential slowdown in AI spending [7][8]. Future Outlook - NVIDIA's CEO Jensen Huang emphasized the ongoing demand for AI computing power, predicting substantial growth in the AI chip market over the next five years, driven by infrastructure investments and capital expenditures from major cloud service providers [9].

Core Viewpoint - The AI chip sector is facing significant challenges, highlighted by the sharp decline in Marvell Technology's stock price due to disappointing earnings guidance and performance [2][4]. Financial Performance - Marvell Technology expects third-quarter revenue of $2.06 billion, below analyst expectations of $2.1 billion [4]. - The company's second-quarter revenue was $2.01 billion, a 58% year-over-year increase, meeting analyst expectations [5]. - Data center revenue contributed $1.49 billion, a 69% year-over-year increase, but fell short of the average analyst estimate of $1.51 billion [5]. Analyst Sentiment - Analyst Vivek Arya from Bank of America downgraded Marvell's rating from "Buy" to "Neutral," citing rising uncertainties regarding the company's growth trajectory and project timelines [5]. - Arya adjusted the 2026 data center business growth forecast from 23%-25% to mid-double-digit levels due to concerns over project delays and market competition [5]. Market Reaction - On August 29, Marvell's stock fell nearly 19%, contributing to a year-to-date decline of over 40% [2][5]. - The Philadelphia Semiconductor Index dropped over 3%, with major chip stocks like Broadcom, AMD, and NVIDIA also experiencing declines [6]. Industry Context - The overall semiconductor market is facing volatility, with high expectations previously built around AI chip stocks leading to limited room for error in earnings reports [8]. - NVIDIA reported second-quarter revenue of $46.7 billion, exceeding expectations, but the market reacted negatively due to concerns over slowing growth rates in AI spending [8][9]. - NVIDIA's CEO emphasized the ongoing demand for AI computing power and projected significant market expansion in the coming years, despite short-term growth concerns [9].

Core Viewpoint - The AI chip sector is facing significant challenges, highlighted by the sharp decline in Marvell Technology's stock price due to disappointing earnings guidance and performance [1][3]. Financial Performance - Marvell Technology expects third-quarter revenue of $2.06 billion, below analyst expectations of $2.1 billion [3]. - The company reported second-quarter revenue of $2.01 billion, a 58% year-over-year increase, meeting analyst expectations [4]. - Data center business contributed $1.49 billion in revenue, a 69% year-over-year increase, but fell short of the average analyst estimate of $1.51 billion [4]. Analyst Sentiment - Analyst Vivek Arya from Bank of America downgraded Marvell's rating from "Buy" to "Neutral," citing increased uncertainty regarding the company's AI growth prospects [4]. - Arya adjusted the 2026 data center business growth rate forecast from 23%-25% to mid-teens, reflecting concerns over project timelines and competitive pressures [4]. Market Reaction - On August 29, Marvell's stock fell nearly 19%, contributing to a year-to-date decline of over 40% [1][4]. - The Philadelphia Semiconductor Index dropped over 3%, with major chip stocks like Broadcom, AMD, and NVIDIA also experiencing declines [5]. Industry Context - The volatility in Marvell's stock and other semiconductor stocks is attributed to previously high expectations and valuations in the AI chip sector, leaving little room for error in earnings reports [5]. - NVIDIA's recent earnings report showed a revenue of $46.7 billion, exceeding expectations, but the market reacted negatively due to concerns over slowing growth rates in AI spending [7]. - NVIDIA's CEO emphasized the ongoing demand for AI computing power, predicting significant market expansion in the coming years [8].

Core Viewpoint - The AI chip sector is facing significant challenges, highlighted by the sharp decline in Marvell Technology's stock price due to disappointing earnings and guidance for Q3, leading to a cumulative drop of over 40% this year [1][3]. Financial Performance - Marvell Technology expects Q3 revenue to be $2.06 billion, below analyst expectations of $2.1 billion [3]. - The company's Q2 revenue was $2.01 billion, a 58% year-over-year increase, meeting analyst expectations, with data center revenue contributing $1.49 billion, a 69% increase, but slightly below the average analyst forecast of $1.51 billion [4]. - Adjusted earnings per share for Q2 were $0.67, in line with analyst expectations [4]. Analyst Sentiment - Concerns about Marvell's growth trajectory have led to a downgrade by Bank of America analyst Vivek Arya, who lowered the rating from "Buy" to "Neutral" and reduced the target price from $90 to $78 [4]. - Arya noted two main uncertainties: delays in the new project with Microsoft and the company's share in Amazon's next-generation 3nm chip project, leading to a downward revision of the expected growth rate for 2026 data center business from 23%-25% to mid-teens [4]. Market Context - On August 29, the Philadelphia Semiconductor Index fell over 3%, with major chip stocks like Broadcom, AMD, NVIDIA, and TSMC also experiencing declines of over 3% [5]. - Analysts attribute the volatility in chip stocks to previously high expectations and valuations, leaving little room for error in earnings reports [5]. Broader Industry Trends - NVIDIA reported Q2 revenue of $46.7 billion, exceeding expectations, but the market reacted negatively due to concerns over slowing growth rates, particularly in data center revenue, which grew 56% to $41.1 billion, slightly below expectations [7][8]. - NVIDIA's CEO emphasized ongoing demand for AI computing power and projected significant market expansion over the next five years, despite short-term growth concerns [8].

Core Viewpoint - The article discusses the recent downturn in the U.S. stock market, particularly focusing on technology stocks and their performance amid inflation concerns and economic data releases [3][6]. Market Overview - On Friday, U.S. stocks fell across the board, with notable declines in tech stocks such as Dell and Nvidia, as the market digested the latest inflation data [3]. - The Dow Jones Industrial Average decreased by 0.20% to 45,544.88 points, the Nasdaq Composite fell by 1.15% to 21,455.55 points, and the S&P 500 dropped by 0.64% to 6,460.26 points [3]. - Major tech stocks showed weak performance, with Nvidia down 3.3%, Apple down 0.2%, Microsoft down 0.6%, Amazon down 1.1%, and Tesla down 3.5%. In contrast, Google saw a slight increase of 0.6% [3]. Economic Data - The Personal Consumption Expenditures (PCE) price index, a key inflation indicator for the Federal Reserve, rose by 2.6% year-on-year in July, with the core PCE increasing to 2.9% [6]. - The Michigan Consumer Sentiment Index for August was revised down to 58.2 from an initial 58.6, indicating a decline in consumer confidence [6]. - One-year inflation expectations rose to 4.8%, and five-year expectations increased to 3.5%, both higher than July's figures [6]. Sector Performance - The Philadelphia Semiconductor Index experienced a significant drop of 3.2%, marking its largest decline since April [7]. - Nvidia's stock fell 3.3% after its latest earnings report failed to meet high investor expectations, although spending related to AI infrastructure remains strong [7]. - Dell's stock plummeted nearly 9% after the company forecasted lower-than-expected profits for the upcoming quarter [8]. - Caterpillar, a major player in the construction machinery sector, saw its shares decline by 3.6% due to predictions of increased tariff-related expenses by 2025 [9]. Commodity Market - International oil prices weakened, with WTI crude oil near-month contracts falling by 0.91% to $64.01 per barrel, and Brent crude down by 0.73% to $68.12 per barrel [9]. - Gold prices rose due to increased risk aversion, with COMEX gold futures for November delivery up by 1.17% to $3,512.40 per ounce [10].

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Presents Marvell Technology's unaudited condensed consolidated financial statements for Q2 fiscal 2026, covering balance sheets, income, equity, and cash flows. [Unaudited Condensed Consolidated Balance Sheets](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) Provides a snapshot of the company's financial position as of August 2, 2025, showing increased assets and liabilities, with stable stockholders' equity. | Category | August 2, 2025 (millions) | February 1, 2025 (millions) | | :-------------------------------- | :-------------------------- | :-------------------------- | | **ASSETS** | | | | Current assets | $4,512.9 | $3,120.3 | | Property and equipment, net | $794.5 | $790.5 | | Goodwill | $11,062.2 | $11,586.9 | | Acquired intangible assets, net | $2,207.2 | $2,710.6 | | Total assets | **$20,586.3** | **$20,204.5** | | **LIABILITIES AND STOCKHOLDERS' EQUITY** | | | | Current liabilities | $2,399.3 | $2,026.8 | | Long-term debt | $3,967.9 | $3,934.3 | | Total liabilities | $7,164.6 | $6,777.5 | | Total stockholders' equity | $13,421.7 | $13,427.0 | | Total liabilities and stockholders' equity | **$20,586.3** | **$20,204.5** | [Unaudited Condensed Consolidated Statements of Operations](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) Details the company's financial performance for the three and six months ended August 2, 2025, showing significant revenue growth and a shift to net income. | Metric | Three Months Ended August 2, 2025 (millions) | Three Months Ended August 3, 2024 (millions) | Six Months Ended August 2, 2025 (millions) | Six Months Ended August 3, 2024 (millions) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :------------------------------------- | :------------------------------------- | | Net revenue | $2,006.1 | $1,272.9 | $3,901.4 | $2,433.8 | | Gross profit | $1,010.6 | $587.6 | $1,963.0 | $1,115.4 | | Operating income (loss) | $290.1 | $(100.4) | $560.7 | $(252.7) | | Net income (loss) | $194.8 | $(193.3) | $372.7 | $(408.9) | | Net income (loss) per share — basic | $0.23 | $(0.22) | $0.43 | $(0.47) | | Net income (loss) per share — diluted | $0.22 | $(0.22) | $0.43 | $(0.47) | [Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) Presents comprehensive income (loss) for the three and six months ended August 2, 2025, indicating a positive shift to income, driven by net income. | Metric | Three Months Ended August 2, 2025 (millions) | Three Months Ended August 3, 2024 (millions) | Six Months Ended August 2, 2025 (millions) | Six Months Ended August 3, 2024 (millions) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :------------------------------------- | :------------------------------------- | | Net income (loss) | $194.8 | $(193.3) | $372.7 | $(408.9) | | Other comprehensive income (loss), net of tax | $0.7 | $(0.8) | $0.2 | $(1.5) | | Comprehensive income (loss), net of tax | **$195.5** | **$(194.1)** | **$372.9** | **$(410.4)** | [Unaudited Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Outlines changes in stockholders' equity for the six months ended August 2, 2025, reflecting impacts from compensation, repurchases, dividends, and net income/loss. | Item | Six Months Ended August 2, 2025 (millions) | Six Months Ended August 3, 2024 (millions) | | :---------------------------------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Balance at beginning of period | $13,427.0 | $14,831.4 | | Issuance of common stock in connection with equity incentive plans | $51.1 | $51.5 | | Tax withholdings related to net share settlement of restricted stock units | $(100.9) | $(131.7) | | Stock-based compensation | $296.0 | $292.8 | | Repurchase of common stock | $(540.0) | $(325.0) | | Cash dividends declared and paid | $(103.5) | $(103.7) | | Net income (loss) | $372.7 | $(408.9) | | Other comprehensive income (loss) | $0.2 | $(1.5) | | Balance at end of period | **$13,421.7** | **$14,204.9** | [Unaudited Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Reports cash flows from operating, investing, and financing activities for the six months ended August 2, 2025, showing a significant increase in cash and equivalents. | Cash Flow Activity | Six Months Ended August 2, 2025 (millions) | Six Months Ended August 3, 2024 (millions) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net cash provided by operating activities | $794.5 | $630.9 | | Net cash used in investing activities | $(171.3) | $(154.9) | | Net cash used in financing activities | $(347.1) | $(618.1) | | Net increase (decrease) in cash and cash equivalents | $276.1 | $(142.1) | | Cash and cash equivalents at end of period | **$1,224.4** | **$808.7** | [Notes to Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed explanations and disclosures supporting the unaudited condensed consolidated financial statements. [Note 1. Basis of Presentation](index=10&type=section&id=Note%201.%20Basis%20of%20Presentation) Describes the financial statement preparation basis, including U.S. GAAP compliance and the automotive ethernet business divestiture. - Company entered into a definitive agreement on April 7, 2025, to sell its automotive ethernet business to Infineon Technologies AG for **$2.5 billion** in cash. The sale was completed on August 14, 2025, with an expected gain on sale in Q3 fiscal 2026[17](index=17&type=chunk)[18](index=18&type=chunk) | Asset Type | Amount (millions) | | :-------------------------------- | :---------------- | | Inventories | $33.0 | | Property and equipment | $20.3 | | Goodwill | $524.7 | | Acquired intangible assets | $14.0 | | **Total Assets Held for Sale** | **$595.5** | [Note 2. Recent Accounting Pronouncements](index=10&type=section&id=Note%202.%20Recent%20Accounting%20Pronouncements) Discusses recent FASB accounting pronouncements on income tax, expense disaggregation, and share-based consideration, and their potential impact. - FASB issued ASU 2023-09 (Income Taxes) effective for fiscal 2026, requiring enhanced cash tax and effective tax rate disclosures[20](index=20&type=chunk) - FASB issued ASU 2024-03 (Expense Disaggregation) effective for fiscal years beginning after December 15, 2026, requiring disaggregated expense disclosures[21](index=21&type=chunk) - FASB issued ASU 2025-04 (Share-Based Consideration) effective for fiscal years beginning after December 15, 2026, clarifying guidance for share-based consideration payable to customers[22](index=22&type=chunk) [Note 3. Revenue](index=11&type=section&id=Note%203.%20Revenue) Provides detailed net revenue disaggregation by end market, geographical destination, and customer type, highlighting data center contributions. | End Market | Three Months Ended August 2, 2025 | % of Total (2025) | Three Months Ended August 3, 2024 | % of Total (2024) | Six Months Ended August 2, 2025 | % of Total (2025) | Six Months Ended August 3, 2024 | % of Total (2024) | | :------------------ | :-------------------------------- | :------------------ | :-------------------------------- | :------------------ | :-------------------------------- | :------------------ | :-------------------------------- | :------------------ | | Data center | $1,490.5 | 74 % |