Marvell Technology Group (NASDAQ:MRVL) had already warned investors that it would be witnessing near-term pains thanks to weak demand for its chips across the storage and networking businesses. This was clearly evident in its fourth-quarter results, with Marvell meeting expectations that were already scaled down to accommodate the guidance warning issued in February.

Additionally, the company's tepid forecast for the current quarter set alarm bells ringing. Marvell's first-quarter fiscal 2020 results will be nowhere near Wall Street's expectations. The company is looking at $0.14 per share in earnings this quarter on revenue of $650 million, according to the midpoint of its guidance range.

The outlook is mixed at best because Marvell had $0.32 per share in earnings during the same period last year on $604 million in revenue. Unsurprisingly, investors initially reacted negatively to the news and sold the stock off. But Marvell stock bounced back quickly once it emerged that a major catalyst could soon kick in.

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Networking saves Marvell

Demand for Marvell's storage controller products hasn't been healthy of late thanks to end-market headwinds. In the most recent quarter, revenue from this segment fell 22% sequentially and 2% annually on the back of reduced cloud spending, shortage of PC CPUs (central processing units), and macroeconomic uncertainty.

But investors seem to be impressed with the progress being made by Marvell in the networking business, which grew 60% year over year and now accounts for the majority of its revenue. Networking produced 39% of the company's revenue a year ago, but that has increased to 52% of the top line after the $6 billion acquisition of Cavium went through in July last year.

So Marvell's massive networking jump was a result of that acquisition, which it made to transition toward high-growth revenue streams driven by opportunities in the networking business.

For instance, the chipmaker seems to be making strong progress in fifth-generation (5G) wireless technology. Management believes that the company is "entering an extremely strong new product cycle driven by our design wins in the 5G, data center, automotive and enterprise markets," and that's helping it offset weakness in other areas of the business.

Marvell saw strong demand for its embedded processors that are used in pre-5G wireless infrastructure. The company's embedded processor revenue was up double digits on a sequential basis on the back of stronger-than-anticipated demand from wireless base stations, while the overall networking business was down 3% sequentially.

Betting on 5G

This is just the beginning as demand for Marvell's 5G products should increase rapidly in the coming quarters as deployments pick up. Industry trade association 5G Americas estimates that the number of 5G connections will grow from under 1 million in 2019 to 37 million next year. Thereafter, 5G connections will keep increasing exponentially, to 500 million in 2022 and 1.3 billion in 2023, spawning the need for large infrastructure investments.

The good news for Marvell investors is that it is already enjoying early traction in this space as the growing demand for its base station processors shows. The company has scored a design win with Samsung to "deliver multiple generations of embedded processors and baseband processors for both LTE and 5G base stations."

Marvell believes that its Samsung design win will boost its 5G shipments from the end of the current fiscal year, and keep growing at a terrific pace into the next year and beyond.

More importantly, Marvell is pushing the envelope in the 5G space to land more design wins. It will start sampling its 5G Fusion baseband processor to customers from the next quarter. This product is based on Marvell's multi-core OCTEON embedded processor that's already successful in the end market. Additionally, the company is looking to integrate next-generation features such as artificial intelligence into its 5G processors.

In all, Marvell is extremely focused on the 5G opportunity so that it can take advantage of the billions that will be spent to construct the required infrastructure. But investors shouldn't expect near-term gains as the 5G ramp-up is estimated to supply just $50 million to the company's revenue this fiscal year, according to Bank of America analyst Vivek Arya.

Marvell generated $2.87 billion in revenue last fiscal year, so 5G isn't going to move the needle this year. However, Arya believes that Marvell's 5G revenue could ramp up to a range of $150 million-$200 million next fiscal year, and then to $250 million-$300 million after that. But there could be more upside in the offing if the company's new 5G offerings help it score more customers.

This is probably why Marvell investors are keeping their faith in the company despite a tepid near-term outlook -- and that looks like the right thing to do given the substantial 5G opportunity that lies ahead.