What happened
Shares of semiconductor designer Marvell Technology Group (MRVL +6.58%) jumped 23% during the first half of 2021, according to data from S&P Global Market Intelligence.
After a couple of years' worth of chip industry hardship (first from the U.S.-China trade war, followed by the start of the pandemic), sales are rallying strongly this year. Marvell's revenue increased 20% year over year to $832 million during its fiscal 2022 first quarter (which ended May 1), and management indicated it sees more upside ahead due to a global shortage of chips.
So what
Marvell specializes in data processing units (DPUs -- chips that coordinate the flow of information in large computing systems like data centers and mobile network infrastructure) and related hardware. It's been steadily expanding its portfolio of tech circuitry with new designs that can handle high-end workloads like cloud-based artificial intelligence and advanced driver-assist systems in vehicles.
It also completed the acquisition of Inphi at the end of April, building on its DPU lineup with circuitry that can handle the actual high-speed transfer of data in a computing system.
Image source: Getty Images.
Excluding the $22 million in sales it recognized from Inphi at the tail end of the first quarter, Marvell's stand-alone sales were up 17% from the same period a year ago. The company is expecting its business (excluding Inphi) will continue to grow by a similar rate in the second quarter and could accelerate in the second half of the year as 5G network construction continues and companies spend to upgrade their data centers and other network equipment in support of new cloud computing capabilities.
Now what
Management's specific guidance for the second quarter calls for revenue of $1.065 billion. Of that total, $215 million is expected to come from Inphi, which would represent a 23% increase from a year ago when the network hardware outfit was still on its own. The remaining revenue ($850 million) will be made up of Marvell's existing business and represents about a 17% year-over-year increase.
Marvell's profitability will dip as it starts to digest the cost of acquiring and integrating Inphi into its operation, but the addition of the higher-growth and higher-profit-margin hardware firm will boost Marvell's overall financial strength in the long term. This is a top semiconductor industry stock to keep an eye on as its data center, telecom, and automotive markets grow at a steady clip in the years ahead.
