Shares of Marvell Technologies (MRVL 3.08%) were plunging following its fiscal 2025 fourth-quarter earnings report, despite the company seeing strong data center and artificial intelligence (AI) revenue growth. The stock is now down more than 40% year to date.
Let's take a closer look at the chipmaker's latest report and guidance to see if this sell-off is a good opportunity to buy the stock.
NASDAQ: MRVL
Key Data Points
Strong data center revenue
Marvell is tied to the data center market as it provides networking chips, connectivity solutions, and data storage controllers. As such, it has been benefiting from the AI infrastructure buildout currently taking place. The company also helps customers design their own custom AI chips and provides some intellectual property around Amazon's custom AI chips.
Marvell's strength in this area was seen in Q4, with its data center revenue surging 78% year over year in the quarter to $1.37 billion. The company credited strong demand for its electro-optics products, which are used for high-speed data transmission, and the ramp-up of its custom AI chip program for the strong growth. Data center revenue accounted for 75% of its top line in the quarter.
However, overall revenue climbed just 27% to $1.82 billion as other areas of its business saw steep declines. That result was just ahead of the midpoint of management's guidance. It recorded $171 million in enterprise networking revenue, down 35% over year but up 14% from the third quarter. Carrier infrastructure revenue sank 38% to $106 million but also rose 25% sequentially. Marvell said it was seeing a recovery in both of these markets. Consumer revenue, meanwhile, dropped 38% year over year to $89 million, while automobile revenue rose 4% to $86 million.
| Data Center | Networking | Carrier Infrastructure | Consumer | Automobile | Total | |
|---|---|---|---|---|---|---|
| Revenue | $1.37 billion | $171 million | $106 million | $89 million | $86 million | $1.82 billion |
| YOY increase | 78% | (35%) | (38%) | (38%) | 4% | 27% |
| QOQ increase | 24% | 14% | 25% | (8%) | 3% | 20% |
Data source: Marvell Q4 earnings press release. YOY = year over year. QOQ = quarter on quarter.
Adjusted earnings per share (EPS) climbed 30% year over year to $0.60. That was just ahead of the midpoint of management's outlook of $0.59.
The company generated operating cash flow of $514 million for the quarter and $1.68 billion for the year, which was a record. Marvell repurchased $200 million in stock in the quarter too.
Looking ahead, Marvell guided for fiscal 2026 first-quarter revenue of $1.875 billion, plus or minus 5%, which represents growth of about 60%. It is looking for adjusted EPS of $0.56 to $0.67.
Management said it expects AI revenue to "significantly exceed" its prior $2.5 billion target for fiscal 2026. The company's two leading AI custom programs are in high volume production, and its lead AI accelerator customer is currently working on a next-generation chip. Once it completes its sampling and qualification cycles, it will begin ramping production. Revenue from this customer should grow in the current fiscal year and beyond.
That next-generation chip is a reference to Amazon's Trainium chip, which has been a growing source of uncertainty for investors. Some analysts have reported the possibility that Marvell is losing its place in the partnership to competition, but management's latest remarks should reassure shareholders for the time being.
Image source: Getty Images.
Is it time to buy the dip?
While Marvell turned in a solid quarter, expectations going into the quarter were high, and the stock's post-earnings sell-off has extended into its third trading day (as of this writing).
Marvell now trades at a forward price-to-earnings (P/E) ratio of just 23 times fiscal 2026 estimates.
Data by YCharts.
That's a much more reasonable valuation compared to where it was trading as recently as January. Meanwhile, it's seeing strong data center and AI revenue growth, and some of its other more cyclical businesses seem to be recovering. The update surrounding its involvement in Amazon's Trainium chip development was overall positive as well.
Macroeconomic uncertainty has only worsened the current sell-off, which looks overdone at this point. With that in mind, investors should consider buying this dip.
