Shares of newcomers in the semiconductor field Marvell technology (NASDAQ:MRVL) fell 10.5% on Friday.
Thanks to its networking portfolio and custom ASIC (application-specific integrated chip) business, Marvell has seen bullish sentiment among investors lately. Some believe it will become a major player in the artificial intelligence (AI) race.
However, the purely AI-related part of Marvell’s business apparently didn’t live up to the hype in its first-quarter results reported Thursday evening.
AI data centers are flourishing, but at the expense of everything else
In the first quarter, Marvell saw revenue decline 12% to $1.16 billion, and adjusted (non-GAAP, generally accepted accounting principles) earnings per share (EPS) was $0.24, down 22.5%. While these declines may look ugly, they were pretty much in line with what analysts expected.
Looking under the hood, you can see a huge difference between the company’s data center segment, which includes AI revenue, and the other segments:
|
Segment |
Q1 2025 Turnover (millions) |
YOY growth |
|---|---|---|
|
Data center |
816.4 |
87% |
|
Enterprise networks |
153.1 |
(58%) |
|
Carrier infrastructure |
71.8 |
(75%) |
|
Customer |
42.0 |
(70%) |
|
Automotive/industrial |
77.6 |
(13%) |
|
Total |
1,160.9 |
(12%) |
Data source: Marvell press release Q1 2025. YOY = year over year.
As you can see, AI spending seems to be crowding out everything else. That may not be surprising, but the weight of declines in the other non-AI segments kept results in line with expectations rather than exceeding them.
On the plus side, the data center segment is now the company’s largest, and its huge weighting will likely boost growth next quarter and through 2024. In the press release, management assumed sequential growth of 8%, or 36% on an annual basis.
Management attributed the strong sequential growth primarily to custom ASICs, which certain major cloud infrastructure giants use to design their own custom AI accelerators. And in the second half, the company sees continued data center growth, along with a recovery of its network and carrier infrastructure.
Still, the in-line quarter and expectations weren’t enough to beat expectations, as the stock is up about 27.6% year-over-year and trading at about 51 times next year’s earnings estimates.
Is recovery in the cards?
Even in the wake of Friday’s decline, most analysts still seemed bullish on Marvell, as its AI story remains intact. Moreover, the huge declines in the other segments mean that these segments can recover as the economy improves.
Increased optical connectivity and cloud giants producing their own custom accelerators are trends that don’t seem to be slowing down anytime soon. So while Marvell isn’t the cheapest AI stock, it’s a name to keep an eye on, especially after its recent haircut.
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Billy Duberstein and/or his clients have no positions in the stocks mentioned. The Motley Fool recommends Marvell technology. The Motley Fool has a disclosure policy.
Why Marvell Technology Sank Today was originally published by The Motley Fool
