Forecast boost overshadowed by Google revenue timing concerns
Marvell Technology failed to provide a meaningful increase to its long-term revenue outlook despite signing a major new AI chip agreement with Google, disappointing investors looking for evidence that the deal would accelerate growth sooner.
The chipmaker's shares slid over 6% after hours on Thursday as concerns over the timing of revenue from the Google agreement overshadowed an increase in revenue forecasts for fiscal 2027 and 2028. The stock has nearly tripled so far this year on AI-driven optimism.
Last week, Marvell struck a custom chip deal with Alphabet's Google that could bring in $120 billion in revenue through fiscal 2033 and make the search giant one of its biggest investors with an up to $12.2 billion stake.
Pressed by analysts on Marvell's post-earnings call on why it did not expect Google-related revenue to contribute more materially in fiscal 2028, CEO Matt Murphy said the company's custom revenue targets through fiscal 2028 already reflected some of that revenue. It would contribute much more significantly in fiscal 2029, he added.
Murphy said custom-chip revenue would more than double next year and that there was "upside bias" to its prior $10 billion-plus fiscal 2029 target. He declined to provide a new target, deferring details to its investor day scheduled for October 6.
"I believe expectations around custom AI accelerator projects are riding very high, especially given the recent news about the Broadcom and OpenAI work on Jalapeno," said Bob O'Donnell, chief analyst at TECHnalysis Research.
"Clearly expectations are getting ahead of themselves, making it difficult for any, except perhaps an Nvidia, to move forward, and even they were down initially after earnings before the big annual forecast prediction they made."
Big Tech's push to develop in-house chips that are cheaper than Nvidia's costly and supply-constrained processors has driven demand for Marvell's custom silicon business, making it a big winner of the data-center buildout.
Demand for such chips has also risen as AI use shifts from training models to running them, where custom chips can deliver better performance and efficiency than off-the-shelf processors.
The company now expects revenue to grow about 45% in fiscal 2027 to roughly $12 billion, up from its prior forecast of about $11.5 billion, thanks to more data-center revenue. It also forecast fiscal 2028 revenue of about $18 billion, up from its prior target of about $16.5 billion.
Second-quarter revenue rose 37% to $2.74 billion, beating estimates of $2.71 billion. Adjusted profit came in at 94 cents per share, compared with estimates of 92 cents.
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