Marvell's Q2 revenue grew 37% year-over-year, exceeding expectations; Q3 guidance of $3.15 billion far surpasses expectations | Earnings Insights

Marvell Technology reported strong quarterly results, but the company's slightly better-than-expected performance failed to satisfy investors as market expectations had already been significantly inflated, and the stock fell in after-hours trading.

After the US stock market closed on August 27, Marvell Technology released its second fiscal quarter earnings report, with revenue increasing by 37% year-on-year to $2.74 billion and adjusted earnings per share of $0.94, both slightly exceeding analysts' expectations.

The company provided guidance of $3.15 billion for the third fiscal quarter, far exceeding analysts' previous forecasts of $3.03 billion to $3.04 billion.

Despite this, the company's stock price initially fell by about 1.7% in after-hours trading before recovering slightly. It's worth noting that prior to the earnings release, Marvell Technology's stock price had risen by 184% year-to-date.

Marvell Technology is one of the core beneficiaries of this wave of AI trading, engaging in both custom chip design and providing optical network interconnect technology for AI server clusters. However, with the recent pullback in AI-related trading, investors clearly have higher expectations for earnings, and slightly better-than-expected data has failed to boost confidence.

Strong data center business drives accelerated revenue growth

Marvell Technology's data center revenue grew 46% year-over-year to $2.2 billion in the second fiscal quarter, becoming the main driver of overall performance. Revenue from communications and other businesses was $567.8 million, up 10% year-over-year.

In terms of profit, net income reached $865.9 million, higher than analysts' expectations of $852 million; adjusted earnings per share were $0.94, up about 40% from $0.67 in the same period last year, slightly exceeding the market consensus expectation of $0.92 to $0.93.

In terms of gross margin, the non-GAAP gross margin was 58.9%, down 50 basis points from the same period last year; while the GAAP gross margin rose 270 basis points to 53.1%.

Third-quarter guidance exceeded expectations; customized business accelerated.

Marvell Technology expects third-quarter revenue of approximately $3.15 billion (plus or minus 5%), significantly higher than analysts' previous forecasts of $3.03 billion to $3.04 billion. Adjusted earnings per share guidance is $1.10 (plus or minus $0.05), also higher than market expectations of $1.07 to $1.08.

The company also expects its GAAP gross margin for the third fiscal quarter to be between 52.9% and 53.9%, and its non-GAAP gross margin to be between 57.5% and 58.5%; GAAP operating expenses are expected to be approximately $1.02 billion, and non-GAAP operating expenses are expected to be approximately $655 million.

In his earnings statement, Marvell Technology CEO Matt Murphy stated:

We are seeing comprehensive growth across the data center portfolio, including strong demand for interconnect services and a significant acceleration in customized services starting in the second half of fiscal year 2027.

Last week, Google received warrants to purchase $12.2 billion worth of shares in Marvell Technology, which boosted the company's stock price.

The two companies maintain close collaboration on Google's AI Tensor Processing Unit (TPU) business, a partnership that further strengthens Marvell's custom chip design business.

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