Why Marvell Technology (MRVL) Shares Are Plunging Today
What Happened:
Shares of networking chips designer Marvell Technology (NASDAQ: MRVL) fell 16.9% in the afternoon session after the company reported fourth-quarter results and provided revenue and EPS guidance for the next quarter, which fell below analysts' expectations. Revenue and EPS guidance for the current quarter also underwhelmed and came in roughly in line with expectations. The results were driven by underperformance in its Carrier infrastructure and Auto/Industrial segments, offsetting strength in Data Center and Enterprise Networking.
Taking a closer look at the results, Marvel's Data Center segment did the bulk of the heavy lifting during the quarter, recording an impressive growth of 54% year on year, which covered the weaknesses in most of the other segments. The Data Center business also continued to benefit from the demand for AI. Notably, revenue from AI drove 10% of overall revenue in FY'204 ( vs. 3% in the previous year) and came in over $200m in the fourth quarter. For the next quarter (Q1'2025), the company expects the Data Center revenue to record sequentially low single-digit growth.
Lastly, the company announced a $3 billion increase to its share repurchase program, bringing the total available authorization to $3.3 billion.
Overall, the results could have been better, considering the huge expectations placed on the company given its AI potential.
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What is the market telling us:
Marvell Technology's shares are very volatile and over the last year have had 19 moves greater than 5%. But moves this big are very rare even for Marvell Technology and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 10 months ago, when the stock gained 18.9% on the news that the company reported first quarter results that beat analysts' revenue and earnings per share (EPS) estimates. Inventory levels also improved.
On the other hand, it was less good to see deterioration in gross and operating margin. Regardless, guidance for the next quarter was slightly ahead for both revenue and EPS. Additionally, management provided bullish comments on the rest of the year, stating that "we are expecting revenue growth to accelerate in the second half of this fiscal year, accompanied by gross and operating margin expansion" and argued that AI is a tailwind for the company. Overall, it was a mixed quarter, but the outlook and accompanying commentary were bright spots.
Marvell Technology is up 30.5% since the beginning of the year, but at $75.93 per share it is still trading 10.8% below its 52-week high of $85.09 from March 2024. Investors who bought $1,000 worth of Marvell Technology's shares 5 years ago would now be looking at an investment worth $4,065.
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