Shares of Marvell Technology (MRVL +0.13%) are up 14% year to date, and there is a good chance the stock could get a nice shot in the arm when it releases its fiscal 2025 second-quarter results on Aug. 29.
Though Marvell may be trailing the 22% gain clocked by the PHLX Semiconductor Sector index, the company's growing revenue from sales of artificial intelligence (AI) chips is driving outstanding results for its data-center segment.
Marvell is facing challenging times in its other business segments, though, which caused investors to press the panic button the last time it reported earnings. However, it won't be surprising to see the company put that weakness behind it with its upcoming quarterly report. Here's why this semiconductor stock could spring a surprise and sustain its rally after Aug. 29.
NASDAQ: MRVL
Key Data Points
Marvell Technology's results should point toward a recovery
When Marvell released its fiscal Q1 results at the end of May, the company's revenue was down 12% year over year to $1.16 billion. Its non-GAAP earnings fell to $0.24 per share from $0.31 per share in the year-ago quarter. The year-over-year decline in Marvell's top and bottom lines was a result of weakness in almost all of its end markets.
The company's revenue from the enterprise networking, carrier infrastructure, consumer, and automotive/industrial business segments fell sharply on account of weak demand. The data-center business was the lone bright spot with revenue jumping an impressive 87% year over year to $816 million, accounting for 70% of total revenue.
A closer look at management's comments on the May earnings call suggests the company is expecting a recovery in some of its beaten-down business segments. For instance, the enterprise networking and carrier-infrastructure markets should hit bottom in fiscal Q2 and improve through the second half of the fiscal year.
These two segments together produced 19% of Marvell's top line in fiscal Q1, so a recovery in those markets will move the needle for the company overall. Meanwhile, the data-center segment could continue to get stronger thanks to the robust demand for Marvell's application-specific integrated circuits (ASICs) and networking chips, which are being used for processing AI workloads.
The company has guided for $1.5 billion in AI-related revenue this fiscal year, which would be a big jump from fiscal 2024's $550 million. That number should further climb to $2.5 billion by fiscal 2026. Analysts are expecting Marvell to deliver $5.4 billion in total revenue for fiscal 2025, about flat from last year. Based on that forecast, AI-related sales could account for 28% of Marvell's top line this year.
More importantly, the incremental growth that Marvell expects from AI-driven sales in fiscal 2026 explains why its revenue growth is set to accelerate significantly.
Data by YCharts.
The company's growth is set to pick up
There is a strong chance of Marvell being able to sustain such healthy revenue growth beyond the next couple of fiscal years too. That's because the company anticipates its addressable opportunity from custom-compute chips deployed in AI data centers to increase at an annual rate of 45% through 2028, generating almost $43 billion in revenue at the end of the forecast period.
Meanwhile, Marvell forecasts the market for data-center switches and interconnect equipment could clock a compound annual growth rate (CAGR) of 15% and 27%, respectively, through 2028. In all, the company's overall AI-related revenue opportunity is expected to increase from $21 billion last year to $75 billion in 2028 at a CAGR of 29%. What's more, Marvell is aiming to double its share of this emerging market opportunity to 20% in the long run.
This potential for a bigger share of rapidly growing markets likely explains why analysts are forecasting outstanding earnings growth from the company too.
Data by YCharts.
Marvell Technology could turn out to be a top AI stock in the long run. At the same time, a rebound for its troubled segments could further support the company's growth and help it deliver better-than-expected results and guidance on Aug. 29, which is why investors should consider buying Marvell Technology before it soars higher.
