Marvell Shares Slide Nearly 8% in Pre-Market as Data Center Strength Fails to Offset Valuation Concerns

Marvell Technology, Inc shares fell nearly 8% in pre-market trading on Friday as investors recalibrated expectations following the company's earnings report, despite continued strength in its data center business and a more optimistic growth outlook.

Marvell Beats Q2 Estimates, Raises Growth Guidance

Marvell reported second-quarter revenue of $27.4 billion and adjusted earnings per share of 94 cents, both exceeding consensus estimates.

Management highlighted continued strong performance in its data center product portfolio. For the third quarter, Marvell guided revenue of $31.5 billion, plus or minus 5%, and adjusted EPS of $1.10, plus or minus 5 cents.

The company also expects adjusted gross margin to be between 57.5% and 58.5%.

Chief Executive Officer Matt Murphy raised Marvell's revenue target for next year to approximately $18 billion, implying growth of about 50%.

Google Deal Clarification Cools Investor Enthusiasm

CNBC noted that Marvell's data center business grew over 60%, driven by optical components and custom chips connecting AI servers, with Murphy expecting this segment to more than double.

However, Murphy stated that revenue related to Marvell's recently announced warrant agreement with Alphabet Inc's Google is already included in next year's forecast.

This clarification dampened enthusiasm among some investors, as Wall Street had viewed the Google deal as additional upside beyond existing expectations. Murphy indicated the larger contribution from the deal should come in the following year.

CNBC also noted that market expectations were already elevated after Marvell shares had risen approximately 184% year-to-date and nearly 30% over the past month.

Seymour Prefers NVIDIA at Current Valuation

Tim Seymour, founder and Chief Investment Officer of Seymour Asset Management, said Marvell operates in an attractive segment of the AI infrastructure market, particularly networking and data centers.

He called Marvell's forward guidance strong but said investors still face uncertainty regarding an appropriate valuation multiple for the stock.

Seymour does not hold Marvell and said he would prefer to own NVIDIA Corp, as he believes the latter's valuation is more attractive.

Marvell's Major ETF Holdings

Invesco PHLX Semiconductor ETF: Weight 4.53%

State Street SPDR NYSE Technology ETF: Weight 5.69%

First Trust Nasdaq Semiconductor ETF: Weight 6.92%

Significance: Given MRVL's significant weight in these funds, any notable inflows or outflows into these ETFs could force automatic buying or selling of the stock.

MRVL Price Action: Pre-market trading data on Friday showed Marvell Technology shares down 7.58% at $223.14.