Shares of Marvell Technology (MRVL 6.58%) sank, despite the company once again displaying robust data center and artificial intelligence (AI) revenue growth, when it reported its fiscal Q1 earnings results on May 29. The stock is now down about 43% year to date, as of this writing.
Let's dig into the chipmaker's latest results and forecast for the current fiscal year to see if investors should buy the dip.
Strong data center revenue, but uncertain future
Marvell has been a solid beneficiary of the AI infrastructure build-out, supplying networking chips, connectivity solutions, and storage controllers used to build and scale servers for AI workloads. The company also works closely with cloud computing providers on custom chips, helping them design their own AI chips and contributing IP (intellectual property) used in Amazon's (AMZN 1.96%) custom chips. Most recently, Marvell announced a partnership with Nvidia to support NVLink Fusion, which allows customers to integrate Marvell's custom AI chips into Nvidia rack-scale systems.
However, investors are worried about the company's future relationship with Amazon, and Marvell management wasn't able to soothe investor fears. While not calling out Amazon by name, Marvell CEO Matt Murphy said it was continuing to work with Amazon on its next-generation custom AI chip, including securing 3-nanometer wafer and advanced packaging capacity.
Murphy said he expects revenue from Amazon to continue to grow over a multiyear and multigenerational basis, but that its customers could pursue "multiple paths to meet their requirements." This means that Amazon may be working with competitors or just looking to do everything in-house for future custom chip iterations, which would put some risk to future revenue.
Marvell is also supposedly involved with Microsoft's new custom AI chip called Maia, with J.P. Morgan analysts saying that Marvell is supplying IP to the chips and recently won a deal to be part of the third generation of the new chip. This program is still very much in its early stages, and if successful, could drive significant revenue growth.
Turning to Marvell's results, its overall revenue soared by 63% year over year to $1.9 billion, while its adjusted earnings per share (EPS) surged from $0.24 a year ago to $0.62. Those results were just ahead of the midpoint of management's outlook for adjusted EPS of $0.61 on revenue of $1.88 billion.
Data center revenue skyrocketed 76% year over year in the quarter to $1.44 billion. The company credited the growth to rapid scaling by AI chip customers and strong shipments of electro-optics products. Data center revenue accounted for 76% of its sales in the quarter.
Its other end markets saw solid rebounds in the quarter, led by a 93% revenue increase in carrier infrastructure to $138 million. Consumer revenue, meanwhile, climbed 50% year over year to $63 million, while enterprise networking revenue rose 16% to $178 million. Automobile revenue fell 2% to $76 million. Most of these businesses saw a big improvement from the large year-over-year declines they experienced in fiscal 2025's Q4.
| Business Segment |
FY 2025 |
FY 2025 Q4 |
FY 2026 Q1 Revenue |
FY 2026 Q1 Increase (YOY) |
|---|---|---|---|---|
| Data center | $1.37 billion | 78% | $1.44 billion | 76% |
| Networking | $171 million | (35%) | $178 million | 16% |
| Carrier infrastructure | $106 million | (38%) | $138 million | 93% |
| Consumer | $89 million | (38%) | $63 million | 50% |
| Automobile | $86 million | 4% | $86 million | (2%) |
| Total | $1.82 billion | 27% | $1.9 billion | 83% |
Data source: Marvell Q1 and Q4 earnings press release. YOY = year over year.
Marvell management expects the recovery in the enterprise networking and carrier infrastructure markets to continue. It's also looking for a nice 50% sequential jump in consumer revenue, led by gaming. The company generated operating cash flow of $333 million for the quarter, and it repurchased $340 million in stock in the quarter.
Looking ahead, Marvell management guided for fiscal 2026 second-quarter revenue of $2 billion, plus or minus 5%, which represents year-over-year growth of about 57%. It is looking for adjusted EPS of $0.62 to $0.72. Its custom AI chips are once again expected to be its main growth driver.
Image source: Getty Images.
Is it time to buy the dip?
Trading at a forward price-to-earnings (P/E) ratio of under 22 times fiscal 2026 estimates, Marvell's stock is cheap, given the type of growth the company is producing.
The question, though, is whether its main source of revenue growth will disappear in a few years. There has been much speculation that Amazon is also working with Taiwan-based AIchip for future generations of custom AI chips, but there is a lot of uncertainty about what this means for Marvell. Based on Marvell's comments and a five-year deal they have in place, signed last December, it does not appear like its relationship with Amazon is going away anytime soon, but there is a risk it could play a lesser role in future custom chip designs.
Meanwhile, the company's speculated award with Microsoft is promising, but there is not much track record with how its chips will be received. However, this could be a substantial opportunity.
Given the uncertainties, Marvell is a bit of a speculative stock. However, given its valuation and growth opportunities with Microsoft, I think risk-tolerant investors can take a small position.
