Everything related to ai chips can stir up market sentiment these days. And while Marvell technology may not be a Marvel superhero, its performance in the third quarter certainly caught investors' attention.
Marvell Stock (MRVL) surged 23% on Dec. 4 after the chipmaker reported strong results and upbeat forecasts, as demand for artificial intelligence boosted data center sales.
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Data center sales in the recently reported October quarter nearly doubled (up 98%) year over year and increased 25% sequentially, reaching $1.1 billion.
Marvell CEO Matt Murphy said during the earnings call that the company's ai revenue was expected to surpass $1.5 billion in the current fiscal year and $2.5 billion in 2025.
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The data center segment's contribution to Marvell's total revenue rose to 73% in the latest quarter from 39% in the year-ago period.
Morningstar analyst William Kerwin expects similar sequential growth for the segment in the upcoming January quarter.
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Marvell reported earnings of 43 cents for the fiscal third quarter ended in October, beating Wall Street's estimate of 41 cents.
Revenue rose 19% quarter-over-quarter to $1.52 billion, beating estimates of $1.46 billion and “well above the midpoint of our guidance,” Murphy said in a statement.
Marvell now expects fourth-quarter revenue of $1.8 billion and cash earnings of 59 cents per share, both above analysts' forecasts.
“For the fourth quarter, we forecast another 19% sequential revenue growth at the midpoint of guidance, while year-over-year, we expect revenue growth to accelerate significantly to 26%, marking the beginning of a new era of growth for Marvell,” Murphy said.
The company recently announced a five-year partnership with amazon Web Services. (AMZN) to scale its Trainium ai chips and other custom computing solutions.
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Marvell said the collaboration aims to improve efficiency and reduce costs for AWS and its customers, reflecting the need for hyperscalers (the large cloud infrastructure and service providers) to diversify their ai hardware.
Most ai training is currently done at Nvidia (NVDA) expensive graphics processing units, but rising costs and supply constraints have pushed cloud providers to explore alternatives.
Marvell faces a big challenge in scaling its artificial intelligence business to rival Nvidia's dominance. According to Bank of America analyst Justin Post, amazon spent more than $20 billion on Nvidia chips, compared to between $1 billion and $2 billion on Marvell's offerings, Forbes reported.
Analysts Raise Marvell Stock Price Targets After Earnings
Analysts raised their price targets on Marvell shares after the earnings release.
Benchmark raised Marvell's stock price target to $135 from $115 and affirmed a Buy rating, saying the Santa Clara, California, company “delivered a solid third-quarter impression and offered a similarly encouraging outlook,” it reported. thefly.com.
The investment firm says Marvell offers “a unique non-Nvidia alternative to gain leverage in the data center/ai trade.”
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Bank of America analyst Vivek Arya raised his price target to $125 from $108, maintaining a buy rating.
Marvell “introduces a unique investment in ai electro-optics and custom chips” and could drive annual earnings per share growth of between 40% and 50% over the next few years, the analyst says.
Citi raised Marvell's price target to $112 from $91, and also maintained a buy rating. Beyond the company's “strong advancement and growth” quarter, Citi highlighted Marvell's partnership with AWS, which includes scaling the Trainium chip with a 30% to 40% advantage in price and performance.
Citi has named Marvell its top choice for custom ICs for specific applications through 2025.
At the same time, some analysts were cautious about Marvell stock, arguing that its valuation is high. The forward price-earnings multiple for Marvell stock is 38.31 as of Dec. 4, surpassing Nvidia's 32.89, according to data from Yahoo Finance.
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Morgan Stanley raised its price target on Marvell to $102 from $82, maintaining an equal weight (effectively neutral) rating.
The company cited strong momentum building Trainium 2 chips for amazon as a key factor in Marvell's strong results. But he also pointed to the stock's valuation and potential headwinds in 2026 as reasons for his neutral stance.
Marvell closed at $118.15 on December 4. The stock has more than doubled so far this year.
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