Marvell’s Conference Call Ends – Stock Now Down 13%

Ross Seymore Deutsche Bank AG, Research Division

I want to dive into the guidance for the custom business, Matt. I appreciate the lumpiness of it, but could you give any more color on the headwinds are in the third quarter? And then what gives you the confidence and any sort of magnitude on the increase in the fiscal fourth quarter?

Matthew Murphy Chief Executive Officer

Yes. Thanks, Ross. And I think you captured the right phrase, which is lumpiness. I think this is normal to see, particularly with the large hyperscale builds that happen and especially as you ramp them into production, which we’ve done this year on a number of programs. So this is not unusual. Fortunately, our optics business is quite strong in the coming quarter, and that’s growing double digits.

And then as we said — as I said in the prepared remarks, we see a demand increase again in custom. So yes, there’s nothing unique there, Ross, other than we’ve spent the last couple of years ramping these into production, and we’ve got kind of a 1-quarter digestion with the recovery in Q4. I will say that, overall, we expect custom to be up in the second half over the first half. And so you should expect a strong fourth quarter for custom

Conference call transcription compliments of S&P Capital IQ. 

Matt Murphy just finished speaking and we thought our last post was the most material information he said. Another highlight worth watching:

• He said the company has booked wins representing ‘multibillion dollar lifetime revenue potential’ since their custom event in June. While encouraging, the market is well aware of Marvell’s potential wins and wants the company to start proving it can turn these initial contracts into significant revenue.

We’ll monitor Wall Street’s Q&A to see if the company shares any interesting information.

Marvell just said they expect business in their custom business to be ‘substantially stronger than the third,’ positioning their miss next quarter as more of a speed bump than a long-term trend.

Wall Street expects the growth rate for Q3 to Q4 to be similar to what the company projected from this quarter to Q3.

In other words, the company is hinting that Q4 revenue could come in ahead of expectations. We’ll see if Wall Street focuses on that quote tomorrow and whether it can stem some of the company’s after hours losses.

Marvell’s earnings call is starting in just a minute.

You can join by dialing 1-877-407-8291 or listening live online at investor.marvell.com.

We will post updates during the call, simply leave your browser open and they’ll appear automatically. 

We just posted the growth rates Marvell saw last quarter.

• 58% sales growth
• 72% profit growth
• 50.6% operating cash flow growth

Those numbers look pretty strong, so why is the stock down?

Simply put, most of Marvell’s competitors have been exceeding Wall Street’s targets (often comfortably) both in performance last quarter and their guide. Marvell’s revenue forecast is particularly disappointing.

The big picture for why Marvell has underperformed this year is there was a lot of expectations surrounding the scale up of their Trainium partnership with Amazon, but so far results have trailed Wall Street’s expectations.

There is a bright side, however. There’s little happening next quarter that will determine whether Marvell is a massive winner across the next three years. That’s because the biggest factor in Marvell’s growth story is whether their custom processors from clients like Microsoft reach massive scale.

Custom chips to Microsoft won’t be impacting the company’s guidance for next quarter. Instead, the company should start booking its first revenue from Microsoft in 2026 with the chance for significant scale in 2027.

That is to say, this quarter was disappointing. However, if you’re betting on Marvell because they’re a high-risk/high-reward bet on custom computing, this quarter shouldn’t impact your long-term view of the stock in any significant way.

Here’s a look at the Marvell’s growth rates last quarter in several of the most important financial categories:

Marvell Technology’s earnings call is scheduled for Thursday, August 28 at 4:45 pm ET. You can join by dialing 1-877-407-8291 or listening live online at investor.marvell.com.

The stock will very likely be down tomorrow.

However, the comments Marvell makes on their call could significantly impact the stock’s price tomorrow.

Just a couple of quarters ago, Broadcom CEO Hock Tan revised the company’s addressable market on their call and shares skyrocketed.

With Marvell’s future increasingly driven by a small number of custom design contracts that could significantly drive revenue, CEO Matt Murphy could disclose new information that leads to a strong reversal in the stock’s current decline.

We’ll post updates from the conference call on this live blog. In fact, we’re the only live blog that will be posting thoughts live from Marvell’s call. So, I’d recommend keeping this page open for new updates to load automatically during the call.

MRVL | Marvell Technology Q2’26 Earnings Highlights:

• Adj. EPS: $0.67 [✅]; UP +123% YoY
• Revenue: $2.006B (Est. $2.010B) [⚠️]; UP +58% YoY
• Adj. Gross Margin: 59.4% [✅]; UP +320 bps YoY
• Net Income: $194.8M [✅]; UP +201% YoY
• Cash Flow from Operations: $461.6M; UP +50% YoY

Outlook:

• Revenue: $2.060B ±5% (Est. $2.060B) [✅]
  • The outlook reflects the divestiture of Marvell’s Automotive Ethernet business on August 14, 2025.
  • Continued growth is expected driven by strong AI demand and recovery in enterprise networking and carrier infrastructure markets.

Q2 Segment Performance:

• Data Center Revenue: $1.490B; UP +69% YoY
• Enterprise Networking Revenue: $193.6M; UP +28% YoY
• Carrier Infrastructure Revenue: $130.1M; UP +71% YoY
• Consumer Revenue: $115.9M; UP +30% YoY
• Automotive/Industrial Revenue: $76.0M; FLAT YoY

Other Key Q2 Metrics:

• Adj. Operating Income: $290.1M; UP +200% YoY
• Adj. Operating Expenses: $720.5M; UP +5% YoY
• R&D Expenses: $519.0M; UP +7% YoY
• Effective Tax Rate: 16.6% (vs. 32.2% YoY)
• Free Cash Flow: $461.6M; UP +50% YoY

CEO Commentary:

• Matt Murphy: “Marvell delivered record revenue of $2.006 billion in the second quarter – a 58% year-over-year increase – and we expect continued growth into the third quarter, accompanied by operating margin and earnings per share expansion. Marvell’s growth is being fueled by strong AI demand for our custom silicon and electro-optics products, as well as a significant increase in the pace of recovery in our enterprise networking and carrier infrastructure end markets. Our custom AI design activity is at an all-time high, with the Marvell team now engaged in over 50 new opportunities across more than 10 customers.”

Marvell shares keep dropping.

In the company’s press release they trumpeted a robust pipeline:

“Our custom AI design activity is at an all-time high, with the Marvell team now engaged in over 50 new opportunities across more than 10 customers.”

However, as we noted in our earnings preview, investors are not giving Marvell the benefit of the doubt. The company continues to be a high-risk bet that a few of their larger projects will scale and lead to significant outperformance versus Wall Street expectations in 2027.

Let’s dive into Marvell’s individual segments:

• Data Center: Revenue of $1.49 billion misses Wall Street’s expectations of $1.52 billion.
• Enterprise Networking beats Wall Street expectations
• Carrier Infrastructure misses Wall Street expectations
• Consumer beats Wall Street expectations
• Automotive is in line with Wall Street expectations

With Data Center revenue at $1.49 billion, or about 75% of total sales, the miss in this segment hurts the most.

While seemingly every other AI stock in networking and compute is beating earnings this season, Marvell’s guidance looks like a miss on revenue.

Here’s what Wall Street expected:

• Revenue: $2.104 billion
• Normalized EPS: $.72
• Gross Margins: 59.53%

And the company is projecting to revenue of $2.06 billion (a miss) and adjusted EPS of $.74 (a beat).

With so many other competitors outperforming, that’s disappointing guidance just about any way you cut it.

Marvell continues its 2025 streak of disappointing performances. Shares are initially down 7%.

Stay tuned on this page as we’ll be breaking down areas like guidance that could impact where shares trade tomorrow morning. 

Wall Street’s Expectations:

• Revenue: $2.01 billion
• EPS (Normalized): $0.67

What Marvell delivered in Q2

• Revenue: $2.01 billion
• EPS (Normalized): $0.67

Earnings are almost exactly in line with expectations (revenue was slightly below Wall Street’s expectations at $2.006 billion)

We’re scanning for Marvell’s earnings. As soon as they’re released, we should have results posted within mere seconds. After that you can leave this page open for continuing analysis that will post automatically.

Once Marvell’s earnings hit, the stock’s initial reaction will likely be driven by the company’s guidance.

Wall Street expects the following guidance from the company:

• Revenue: $2.104 billion
• Normalized EPS: $.72
• Gross Margins: 59.53%

If the company surpasses this guidance by a reasonable margin, its likely the stock will initially trade up.

We expect Marvell’s earnings to release at about 4:05 p.m. ET.

As a reminder, the moment earnings hit we’ll be posting live analysis that will appear in this space automatically. Simply leave this page open to follow along and get insights into why the stock is rising or falling after earnings. 

Looking at year-to-date returns for leading companies in the AI accelerator space, we have:

• Broadcom: Up 33.5%
• NVIDIA: Up 30.6%
• AMD: Up 40%
• Marvell: Down 31.3%

So, we have three stocks all up 30 to 40% and then Marvell down 30%.

Why is that? We broke down Marvell’s struggles in a recent episode of our AI Investor Podcast. We’ve embedded the video below:

The bottom line is that the market is in prove it mode for Marvell. The company has a lucrative relationship with Amazon that covers many custom chips, but has lost Trainium share to Alchip.

In addition, there are fears of competitive pressures from Broadcom in networking technologies that are seeing significant acceleration.

Of course, the other side of Marvell’s drop is that if they are able to scale with key custom compute relationships (such as with Microsoft), the company could deliver earnings that are multiples higher than what Wall Street expects in calendar 2027.

We’ll see if earnings tonight begin reversing Marvell’s year-to-date slide.