Marvell Technology Inc. (NASDAQ: MRVL) saw its shares plunge 10.3% on Friday, closing at $216.62, erasing approximately $22.4 billion in market capitalization. The decline came even as the company reported its strongest quarterly revenue in history, highlighting investor concerns about the timing of significant revenue from its custom-chip partnership with Google.
Record Revenue, But Growth Concerns
For the second quarter, Marvell reported revenue of $2.739 billion, a 37% increase year-over-year. Non-GAAP earnings came in at $0.94 per share, with operating cash flow of $605.5 million. The data-center segment was a standout, generating $2.17 billion in revenue, up 46% from the prior year and representing 79% of total sales.
Despite these strong numbers, the market's reaction was negative. Investors focused on management's guidance that significant revenue from the Google custom-chip project is now expected mainly in fiscal 2029, rather than earlier. This pushed the timeline for a major growth catalyst further out, raising questions about the stock's rich valuation.
Valuation Under Scrutiny
Marvell shares are trading at approximately 51.6 times the consensus earnings estimate for fiscal 2027, which is a premium multiple. Even after the decline, the stock trades at about 32.4 times projected fiscal 2028 earnings, comparable to competitor Broadcom Inc. (NASDAQ: AVGO), which recently traded at around 32 times forward earnings.
The high valuation leaves little room for disappointment, and the delayed Google revenue has made investors more cautious. "The market is pricing in perfection," noted one analyst. "Any delay in the AI revenue trajectory is met with sharp selling."
Guidance and Projections
Looking ahead, Marvell expects third-quarter revenue of $3.15 billion, plus or minus 5%, with adjusted earnings per share of $1.10, plus or minus five cents. The company maintains its fiscal 2027 revenue target of approximately $12 billion and aims for about $18 billion in fiscal 2028, driven by demand for custom compute and interconnect solutions.
The Google deal has the potential to generate up to $120 billion in revenue by fiscal 2033, but executives anticipate that its significant impact will only begin in fiscal 2029. This longer timeline means investors must wait longer for the full payoff.
Market Reaction and Analyst Sentiment
Trading volume on Friday reached 48.98 million shares, about 21% above the 65-day average, indicating widespread participation in the sell-off. Wall Street remains largely bullish, with 37 Buy or Overweight ratings, six Holds, and zero Sell ratings. The average analyst price target stands at $291.26, implying a 34.5% upside from Friday's close.
However, margins present another challenge. Marvell projected an adjusted gross margin between 57.5% and 58.5% for the current quarter, below the 58.9% recorded in the second quarter. This margin compression could pressure earnings estimates.
Risks and Next Catalysts
Key risks include the timing of Google-related revenue, customer concentration, and the integration of recent acquisitions, Celestial AI and XConn, which were finalized in February. Investors will look for updates on these fronts at Marvell's upcoming investor day on October 6.
The stock's sharp decline underscores the market's sensitivity to AI revenue timing. While near-term demand remains robust, the delayed Google contribution has raised the discount rate on future cash flows. As one trader put it, "The market is saying: great quarter, but we want to see the money sooner."
