Shares in Marvell Technology (MRVL) fell 12% in pre-market trading on Friday after the chipmaker delivered a weaker-than-expected forecast for its data centre business, unsettling investors hoping to capitalise on the AI boom.
Revenue from Marvell’s (MRVL) data centre segment rose 69% in the second quarter to $1.49bn (£1.1bn) falling short of the $1.51bn analysts had expected on average. While total quarterly revenue came in at $2.01bn, in line with Wall Street estimates, the company guided for third-quarter revenue of $2.06bn, plus or minus 5%, below the consensus forecast of $2.11bn.
Marvell’s (MRVL) chief executive Matthew Murphy said on a post-earnings call that data centre revenue in the current quarter would be flat compared with the previous quarter, though he added the company expects a “substantially stronger” performance in the fourth quarter.
"We were expecting growth to accelerate for its custom application-specific integrated circuit [ASIC] business as Marvell (MRVL) has design wins with multiple hyperscale customers. Instead, management talks about 'lumpiness' in its custom ASIC business," he said.
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An application-specific integrated circuit (ASIC) is a type of integrated circuit, a collection of electronic circuits on a single chip, that is custom-designed for a specific application or function, rather than for general-purpose use.
Marvell (MRVL) designs custom chips to power AI workloads for large cloud providers including Microsoft (MSFT) and Amazon (AMZN). Its shares have dropped 30% year-to-date, lagging behind other chipmakers that have surged on AI-driven demand.
Shares in Gap (GAP) were lower in pre-market trading on Friday after the US fashion retailer posted mixed second-quarter results and warned that rising tariff costs would weigh further on margins in the months ahead.
The company beat Wall Street expectations on earnings per share, reporting net income of $216m, or 57 cents per share, for the three months to 2 August, up from $206m, or 54 cents per share, a year earlier. However, revenue came in below forecasts at $3.73bn, up marginally from $3.72bn last year, while comparable sales rose 1%, missing the 1.9% growth analysts had expected.
Tariffs emerged as a growing headwind in the results. Gap (GAP) revised its full-year estimate for tariff-related costs to between $150m and $175m, up from the $100m to $150m range it projected in May. The company said these costs would shave 1 to 1.1 percentage points off its full-year operating margin, now expected to be between 6.7% and 7%, down from 7.4% last year.
Gross margin in the current quarter is expected to decline between 1.5 and 1.7 percentage points, also primarily due to higher tariff expenses.
While the company’s core brands — Gap, Banana Republic, and Old Navy — all posted positive comparable sales, Athleta continued to weigh on overall performance, with comparables down 9% during the quarter.
The company reaffirmed its fiscal 2025 net sales growth outlook and is continuing to expect revenue to grow between 1% and 2%.
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Natasha Nair, analyst at Third Bridge, said: "Old Navy and Gap remain central to the group’s growth strategy, especially as tariffs squeeze margins. Our experts believe these two brands are well-placed to capture budget-conscious consumers with affordable basics, while Banana Republic and Athleta may take a back seat for now.
"Athleta, in particular, needs what one expert described as a 'moment of reinvigoration' to regain momentum in a highly competitive activewear market. Leadership and product refreshes could be critical in bringing the brand back into the conversation with its core audience."
Shares in Ulta Beauty (ULTA) traded higher ahead of the US market open on Friday after the cosmetics retailer posted stronger-than-expected second-quarter results and raised its full-year guidance.
For the quarter ended 2 August, Ulta (ULTA) reported a 6.7% increase in comparable-store sales, more than double analysts’ average estimate of 3%. The performance prompted the company to lift its full-year sales forecast to a range of $12bn to $12.1bn, up from a previous high-end projection of $11.7bn.
The upbeat results come despite the looming end of a high-profile retail partnership. Earlier this month, Ulta (ULTA) and Target (TGT) announced they would not renew their in-store shop agreement once it expires next year. Ulta currently operates more than 600 mini-shops within Target stores and also sells through the retailer’s website, under a collaboration launched in 2020.
Still, the strong quarter suggests Ulta (ULTA) is maintaining momentum as consumers continue to prioritise spending on cosmetics and personal care despite higher inflation and living costs.
Shares in Dell Technologies (DELL) fell 6% in pre-market trading on Friday after the company delivered better-than-expected second quarter results but issued a weaker third quarter earnings outlook.
For the three months ended 2 August, Dell (DELL) reported revenue of $29.78bn, ahead of analysts’ estimates of $29.17bn. Adjusted earnings per share came in at $2.32, narrowly beating the $2.31 consensus forecast. Total revenue rose 19% year-on-year, led by a 69% surge in servers and networking revenue, including AI server sales, which reached $12.9bn.
The company raised its full-year guidance, projecting revenue of $107bn at the midpoint and adjusted earnings of $9.55 per share, both topping Wall Street expectations of $104.6bn and $9.38, respectively.
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However, Dell’s (DELL) third-quarter outlook proved less upbeat. The company forecast adjusted earnings per share of $2.45, falling short of the $2.55 expected by analysts, even as its revenue forecast of $27bn exceeded the $26.1bn consensus.
Dell (DELL) said that a larger share of its profit is expected to fall in the fourth quarter due to seasonal patterns, particularly in its storage segment.
Shares in Alibaba (BABA, 9988.HK) were little changed in Hong Kong on Friday as investors awaited the Chinese tech giant’s quarterly earnings report, with a sharp focus on whether its growing investments in artificial intelligence are beginning to yield results.
Alibaba (BABA, 9988.HK) is expected to report earnings of $1.98 per share for the April–June quarter, a 14% decline from the same period last year, according to Wall Street estimates. The results come amid broader concerns that surging AI-related spending across China's tech sector has yet to translate into meaningful revenue gains, a trend evident in recent earnings from peers Tencent (0700.HK) and Baidu (BIDU).
Revenue from Alibaba’s (BABA, 9988.HK) cloud division, which houses its AI operations, is projected to have risen 4.3% sequentially to 31.4bn yuan (£3.26bn/$4.4bn), according to LSEG data. While that would represent an 18% increase from a year earlier, the pace suggests momentum is slowing despite increased investment in the segment.
Alibaba (BABA, 9988.HK), often seen as a bellwether for the Chinese economy, has seen shares outperform the Chinese stock market this year, rising more than 40%. It is due to release its earnings later on Friday.
Traders will get an extra day to prepare for fall this weekend. US stock and bond trading will halt on Monday for the Labour Day holiday.
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