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Marvell shares slip after downbeat revenue forecast

(Reuters) — Chipmaker Marvell Technology said on Thursday it expects its data center business to continue to grow next year even as roughly half its revenue will decline in the first quarter as its customers face tough conditions.

Its shares fell more than 4% in extended trading.

CEO Matthew Murphy attributed the anticipated drop in revenue from its segments including wireless carrier infrastructure and enterprise to a tough macroeconomic environment and longer-than-expected inventory corrections by its customers.

"You've seen it in announcements from the big enterprise companies and you've also seen it from the carrier companies," Murphy said in an interview with Reuters. "It's a very weak environment."

The data center segment, which includes its custom AI chip business and networking equipment, beat market expectations for revenue in the third quarter of 2024. Murphy said he expects the segment to continue to grow but that it's difficult to predict how that will fare next year largely because of AI.

"The real swing is the AI portion - in terms of how it's going to grow, what's the magnitude of it," Murphy said. "It's gone up so much this year."

Marvell helps companies such as Amazon.com's cloud computing unit build custom chips.

For the company's enterprise and carrier business, inventory clearing has dampened prospects of new orders for chip makers like Marvell.

Murphy said on an earnings call that while Marvell does expect year-on-year growth going forward, he could not comment on concerns surrounding inventory build hindering growth projections for the first quarter.

The company's fourth-quarter forecast came in below Wall Street estimates.

For the current quarter, Marvell expects revenue of $1.42 billion plus or minus 5%, compared with estimates of $1.46 billion.

On an adjusted basis, the company expects income of 46 cents per share, plus or minus 5 cents for the fourth quarter. This compares to estimates of 49 cents profit per share.

However, Marvell beat Wall Street estimates for third-quarter revenue and profit, as the rapid adoption of artificial intelligence (AI) buoyed demand for its chips.

Marvell posted net revenue of $1.42 billion for the quarter ended Oct. 28, compared with analysts' estimates of $1.40 billion, according to LSEG data.

Excluding items, the company posted a profit of 41 cents per share, marginally beating estimates of 40 cents per share.

(Reporting by Arsheeya Bajwa in Bengaluru and Max A. Cherney in San Francisco; Editing by Shailesh Kuber and Sonali Paul)

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