Marvell Technology, Inc. (NASDAQ: $MRVL) is a leading fabless semiconductor company that designs, manufacturers, and sells analog, digital signal processing, mixed-signal,, and embedded and standalone integrated circuits. The company’s products are widely used in storage, networking, and connectivity applications.
Marvell’s data center and carrier infrastructure products facilitate data movement and storage, securing data network access. Its automotive and industrial solutions offer Ethernet and other wired infrastructure along with wireless connectivity solutions. The company’s consumer products enable the delivery of video, data, and voice content in consumer applications.
On Friday, May 31, 2024, Marvell Technology announced its Q1 and fiscal 2025 financial results, missing first-quarter revenue estimates.
Q125 Key Financial Highlights
The reported earnings reveal a blend of positive and negative metrics. The company’s revenue for the quarter ended April 2024 was $1.16 billion, which was a year-over-year drop of 12.2%. However, this figure narrowly beat the Zacks Consensus Estimate of $1.15 billion, marking a positive surprise of 0.79%.
Earnings per share (EPS) for the quarter stood at $0.24, down from $0.31 a year ago. However, the reported EPS exceeded the consensus estimate of $0.23, delivering a surprise of 4.35%.
Marvell Technology Segment-wise Performance
Marvell’s data center segment, which has become its primary growth driver, continued to shine. Net revenue from the data center segment soared by 87.3% year-over-year to $816.4 million, surpassing the average analyst estimate of $781.99 million. This impressive performance was driven by strong demand for Marvell’s custom AI programs, complementing its substantial base of electro-optics revenue.
However, the company’s other segments faced headwinds. The carrier infrastructure segment saw a significant 75.2% year-over-year decline in revenue to $71.8 million, missing the average estimate of $84.84 million. The automotive/industrial segment’s revenue dropped 13.1% to $77.6 million, slightly below the estimate of $80.77 million.
The consumer and enterprise networking segments also struggled, with revenue falling 70.4% and 58%, respectively, compared to the year-ago quarter.
Margins and Inventory
Marvell’s gross margin (GAAP) improved to 45.5%, up from 42.2% in the same quarter last year. However, the company’s inventory days outstanding (DIO) increased to 119, significantly higher than its five-year average of 24 days. This suggests that Marvell’s inventory levels have grown to higher levels than usual, potentially indicating weaker demand.
Cash Flow and Guidance
Despite the challenges, Marvell generated free cash flow of $233 million during the quarter, although this figure was down 51% from the previous quarter. The company provided optimistic guidance for the second quarter of fiscal 2025, expecting revenue of around $1.25 billion at the midpoint, slightly above analyst estimates of $1.24 billion.
Marvell’s Chairman and CEO, Matt Murphy, expressed confidence in their ability to capitalize on the growing demand for AI solutions, stating, “Marvell delivered first quarter fiscal 2025 revenue of $1.161 billion, above the mid-point of guidance, driven by stronger than forecasted demand from AI.”
Marvell Technology Stock Performance
Despite missing first-quarter revenue estimates, the company’s shares have delivered an 18.7% return over the past month, outperforming the Zacks S&P 500 composite’s 3.2% gain. This strong performance reflects investors’ confidence in Marvell’s long-term prospects, particularly in the data center and AI markets.
However, the stock took a hit on Friday morning trading hours, trading lower at $67.54, down 12.10% as of writing. This dip can be attributed to the revenue miss, which initially raised concerns among investors. Yet, Marvell’s CEO remains optimistic about the company’s ability to recover within the second quarter, potentially fueling a rebound in the stock’s performance.
The stock currently holds a Zacks Rank #2 (Buy), indicating that analysts expect it to outperform the broader market in the near term.
Should You Buy Marvell (MRVL) Shares in 2024?
Marvell’s mixed Q125 results and optimistic guidance present investors with a tempting opportunity to consider. While revenue declined year-over-year, the company’s strong data center and AI performance, linked with improving margins and a promising outlook for the next quarter, suggest potential for growth.
Also, Marvell’s Zacks Rank #2 (Buy) rating indicates analysts’ confidence in its ability to outperform the market in the near term.
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