Marvell (MRVL) Stock Falls 10% After Q2 Earnings: Buy the Dip?

Marvell Technology MRVL) shares fell 10% in Friday’s trading session despite the AI chip leader posting record Q2 results yesterday evening and raising its longer-term outlook.

The sharp sell-off suggests investors wanted an even bigger beat following MRVL’s tremendous AI-fueled rally rather than signaling a meaningful deterioration in the company’s fundamentals.

With data-center demand accelerating and management raising its current fiscal 2027 and FY28 revenue forecasts, Marvell's post-earnings dip may be starting to look more like a buying opportunity. 

Marvell Posts Record Q2 Results

Marvell delivered record quarterly revenue of $2.74 billion, rising over 36% from Q2 sales of $2 billion a year ago and topping estimates of $2.71 billion. Adjusted net income came in at $865.9 million, translating to record quarterly EPS of $0.94, which climbed 40% YoY and edged Q2 expectations of $0.93 per share.

More importantly, Marvell's critical data-center business generated a record $2.17 billion, surging 46% from the prior-year quarter and accounting for 79% of total revenue. CEO Matt Murphy also stated that AI-related bookings remain exceptionally strong, with Marvell expecting its growth rate to accelerate during the second half of the year.

For Q3, Marvell expects revenue of approximately $3.15 billion, representing roughly 15% sequential growth and more than 50% YoY growth, along with adjusted EPS of $1.10 at the midpoint (+44% YoY growth).

MRVL Raises Its AI-Fueled Growth Outlook

Arguably the most encouraging part of Marvell's Q2 report was another increase to its longer-term guidance.

Management now projects FY27 revenue of roughly $12 billion, up from its previous $11.5 billion forecast and implying approximately 45% annual growth. Data-center revenue is expected to surge about 60%.

Marvell also raised its FY28 revenue target to $18 billion from $16.5 billion, with data-center sales expected to grow more than 60% as custom AI silicon and connectivity demand accelerates.

So why is MRVL falling? Expectations were extremely elevated following the stock's massive rally this year, with shares still up +150% YTD.

Investors also appear disappointed that Marvell's recently expanded custom-chip relationship with Alphabet's GOOGL) Google may not provide a significant incremental revenue boost until FY29, while the growing mix of custom silicon has raised some concerns about margins.

MRVL's Valuation Is Becoming More Reasonable

Friday's decline has taken some of the froth out of Marvell's valuation, although MRVL is certainly not cheap at over $200 a share. Shares are still trading over 50X earnings, but were at more than 70X before the report.

That said, continued earnings growth and upward EPS revisions following Marvell's strong outlook could help the company grow into its premium multiple.

Bottom Line: Is It Too Soon to Buy the MRVL Dip?

Marvell's Q2 results don't appear to justify a fundamental change in the bullish AI thesis. Revenue and earnings reached record levels, data-center sales surged 46%, and management substantially raised its FY27 and FY28 growth outlook.

There are legitimate reasons for some caution regarding Marvell's premium valuation, margin pressure, and the timing of its Google opportunity. Still, the 10% post-earnings dip makes MRVL increasingly attractive for growth-oriented investors willing to tolerate volatility.

Adding to that case, MRVL currently sports a Zacks Rank #2 (Buy), thanks to what had already been a pleasant trend of upward earnings estimate revisions, suggesting it may not be too soon to start buying the dip following Friday's sharp pullback.

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

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