Can MRVL Sustain EPS Momentum as AI Competition Heats Up?

Marvell Technology’s MRVL non-GAAP operating margin expanded a whopping 870 basis points year over year, marking 34.8%. On its second-quarter fiscal 2026 earnings call, the company highlighted that non-GAAP earnings per diluted share rose 123% year over year, more than twice the pace of revenue growth, underscoring the strong operating leverage in its business model.

Behind this strong operating result has been Marvell Technology’s robust operational cost control. Marvell Technology reduced its operating expenses to $688 million from the year-ago quarter’s operating expenses of $720.5 million, all the while increasing its revenues on the back of custom AI silicon chips that are experiencing massive traction among hyperscalers, AI data centers and high-performance computing customers.

Marvell Technology’s custom AI silicon chips mainly account for custom AI XPUs and electro-optics solutions. These custom XPUs are a key part of the company’s architecture strategy, including multi-die packaging and high-bandwidth memory integration. To capture the growing opportunity, Marvell Technology is heavily investing in its custom silicon programs to rapidly scale production.

To remain competitive in the future, Marvell Technology has introduced the 2.5D advanced packaging platform. Marvell Technology recently introduced a first-of-its-kind 64 Gbps/wire Bi-Directional die-to-die interface IP in 2nm to power next-generation XPUs. The new IP offers over 3x UCIe bandwidth density while reducing die area use to 15%.

Moreover, in the second quarter, MRVL’s next-generation 200G per lane 1.6T PAM4 DSPs saw volume shipments for the first time. The company also announced a 2nm custom SRAM that will see its application in next-generation AI infrastructure. New product introduction to support the proliferation of AI, along with prudent cost management, is helping MRVL to keep its bottom-line growth strong.

How Competitors Fare Against MRVL

Competitive pressure built by other semiconductor companies like Broadcom AVGO and Advanced Micro Devices AMD can push Marvell Technology to increase its sales and marketing and research and development efforts, which, in turn, might affect the operational excellence that MRVL boasts right now.

Broadcom’s advanced 3.5D XDSiP packaging platform is specifically designed to enhance the performance and efficiency of custom AI XPUs. Broadcom’s Semiconductor segment, which accounts for its custom silicon solutions, grew 16.7% year over year in the second quarter of fiscal 2025.

Advanced Micro Devices’ custom silicon solutions and AI accelerators, like Instinct Accelerators, power numerous data centers. Advanced Micro Devices’ reconfigurable Alveo Adaptable Accelerator Cards are used to speed up compute-intensive applications in data centers.

MRVL’s Price Performance, Valuation and Estimates

Shares of Marvell Technology have lost 39.3% year to date against the Electronics - Semiconductors industry’s growth of 37.4%.

From a valuation standpoint, Marvell Technology trades at a forward price-to-sales ratio of 6.47X, lower than the industry’s average of 9.66X.

The Zacks Consensus Estimate for Marvell Technology’s fiscal 2026 and 2027 earnings implies year-over-year growth of 78.3% and 20.73%, respectively. The estimates for fiscal 2026 and 2027 have been revised upward in the past 30 days.

Marvell Technology currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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