Marvell Technology (MRVL +1.93%) stock has been hammered badly on the market so far this year, losing nearly 45% of its value as of this writing. That seems quite surprising, considering the company's outstanding growth thanks to the booming demand for its artificial intelligence (AI) chips.
Marvell stock received its latest setback following the release of its fiscal 2026 first-quarter results (for the three months ended May 3) on May 29. The stock dropped more than 5% the following day, despite reporting better-than-expected numbers and eye-popping growth in its revenue and earnings. What's more, Marvell's guidance was better than consensus estimates and points toward another solid quarter.
Let's take a closer look at Marvell's quarterly report and check why investors should consider buying this semiconductor stock hand over fist following its steep decline in 2025.
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Marvell Technology is growing at an incredible pace
Marvell's top line shot up an impressive 63% from the year-ago period in fiscal Q1. The company's adjusted earnings grew at an even faster pace of 158% from the prior-year quarter. CEO Matt Murphy attributed this outstanding growth to "strong AI demand in the data center end market, where our revenue is benefiting from the rapid scaling of our custom silicon programs and robust shipments of our electro-optics products."
NASDAQ: MRVL
Key Data Points
The company's custom AI processors are seeing increased demand from hyperscalers. That's not surprising, as the custom AI chips allow cloud computing companies to reduce operating costs, thanks to lower electricity consumption and better performance while performing the specific tasks they're designed for.
As a result, Marvell's hyperscale customers are rapidly scaling up the deployment of custom AI chips in data centers. This explains why the company's revenue from the data center segment rose 76% from the year-ago quarter, accounting for three-fourths of Marvell's top line.
Marvell's custom AI chip business is likely to get stronger going forward. That's because its existing hyperscale customer is engaged in the development of next-generation custom AI chips with the company, and Marvell's also making progress on a custom chip development program with a new customer.
These tailwinds explain why Marvell is guiding for outstanding growth once again in the current quarter. The company is forecasting a 57% jump in its top line, while non-GAAP earnings are expected to more than double from the year-ago quarter. Marvell's solid growth is likely to continue in the long run as well, since it's forecasting annual growth of 45% in its total addressable market through 2028.
This explains why analysts are expecting the company's earnings to grow at healthy double-digit rates over the next two fiscal years.
MRVL EPS Estimates for Current Fiscal Year data by YCharts.
The valuation makes this AI stock a no-brainer buy
Marvell stock is trading at just 22 times trailing earnings, a nice discount to the U.S. technology sector's average price-to-earnings ratio of 46. Its outstanding growth makes Marvell a stock worth buying hand over fist, considering its extremely attractive valuation.
The company is expected to end the current fiscal year with $2.79 per share in earnings. If it trades at 28 times earnings after a year, in line with the Nasdaq-100 index's forward earnings multiple (using the index as a proxy for tech stocks), its stock price could hit $78. That would be a 25% increase from current levels.
But if the market decides to reward Marvell with a premium valuation in light of its remarkable growth, there is a strong possibility of even more stock price upside. That's probably why analysts are expecting a bigger jump in Marvell's stock price in the coming year. The 39 analysts covering Marvell have a median 12-month price target of $90 on the stock, which represents 45% gains from current levels.
Marvell could very well hit that mark in the coming year when we take into account its outstanding growth.
