Marvell Technology, Inc. (NASDAQ: MRVL) experienced a sharp sell-off on Friday, with shares tumbling 10.3% to close at $216.62. The decline erased approximately $22.3 billion from the company's market capitalization, as investors reacted to news that significant revenue from its partnership with Google (NASDAQ: GOOGL) is now expected to materialize only in fiscal 2029.
The semiconductor maker's stock had nearly tripled during 2026, driven by optimism surrounding its custom chip designs for AI data centers. However, the latest guidance suggests that the anticipated windfall from Google will be delayed, prompting a reassessment of the company's near-term growth trajectory.
Record Q2 Results Fail to Soothe Investors
Despite the negative market response, Marvell reported record financial results for its fiscal second quarter ended August 1. Revenue surged 37% year-over-year to an all-time high of $2.739 billion, surpassing the midpoint of the company's guidance by $39 million. Data-center revenue, a key growth driver, climbed 46% and accounted for roughly 79% of total revenue.
Operating cash flow reached $605.5 million, while GAAP net income came in at $308 million. The company's data-center segment saw strong demand across custom silicon, switching, storage, and electro-optics products.
Google Partnership: Long-Term Potential, Near-Term Pain
The crux of the investor disappointment lies in the timeline for revenue from Google. Management stated that Google-related revenue will "grow substantially larger" in fiscal 2029, but this timeline is later than many on Wall Street had anticipated. The partnership is structured with Alphabet receiving warrants for up to 58.97 million Marvell shares at an exercise price of $206.58 each, vesting in 240 installments tied to $500 million in custom-product revenue per installment.
CEO Matt Murphy noted that Google's contributions will play a "much larger role" in fiscal 2029. Morgan Stanley analysts pointed out that a majority of the agreement's value had already been incorporated into earlier guidance, suggesting limited upside from the announcement.
Guidance and Valuation Concerns
For the fiscal third quarter, Marvell forecasts revenue of $3.15 billion, plus or minus 5%, implying sequential growth of about 15% at the midpoint. The company also projects adjusted earnings per share of $1.10 and a non-GAAP gross margin between 57.5% and 58.5%.
However, valuation remains a key concern. Marvell shares are trading at 58.41 times forward earnings, significantly higher than Broadcom Inc.'s (NASDAQ: AVGO) multiple of 32.15 times. This premium pricing leaves little room for execution missteps or delays in key growth initiatives.
Analyst Outlook Remains Cautiously Optimistic
Despite the sharp drop, analysts maintain a generally positive stance. According to FactSet, there are 30 Buy ratings, seven Overweight ratings, and six Hold ratings, with no Sell ratings. The median price target stands at $295, representing a 36% premium over Friday's closing price.
Investors will now look to Marvell's investor day on October 6, where executives are expected to outline the company's AI infrastructure strategy and long-term growth plans.
Risks and Considerations
Key risks include the potential for further delays in Google revenue recognition, high customer concentration—with four customers accounting for 72% of receivables—and supply chain vulnerabilities due to most manufacturing being conducted outside the United States, which could expose the company to tariffs and logistical disruptions.
In summary, while Marvell's fundamentals remain strong, the market's reaction underscores the high expectations embedded in its valuation. The delayed Google revenue timeline is a sobering reminder that even record earnings may not be sufficient to satisfy investors when growth prospects are pushed further into the future.
