Marvell Stock Falls 6% Despite Q2 Earnings Beat

Key Takeaways

• Marvell reported record fiscal Q2 revenue of $2.74 billion and adjusted EPS of $0.94, exceeding market expectations.
• Marvell stock fell more than 6% after hours as investors questioned when its expanded Google partnership would materially accelerate revenue.
• Lower third-quarter gross-margin guidance and Marvell’s exposure to a limited number of hyperscale customers added to investor caution.

Marvell stock dropped more than 6% in extended trading on Thursday, even after the semiconductor company delivered record quarterly revenue, exceeded Wall Street forecasts and raised its longer-term outlook.

The negative reaction showed that a conventional earnings beat was not enough to satisfy investors after a powerful AI-driven rally. Instead, attention shifted towards the timing of revenue from Marvell’s expanded partnership with Google, pressure on gross margins and whether future growth was already reflected in the company’s valuation.

Marvell Earnings Beat Wall Street Expectations

Marvell Technology reported revenue of $2.739 billion for the second quarter of fiscal 2027, representing growth of 37% from the same period last year and 13% from the previous quarter.

Revenue finished $39 million above the midpoint of the company’s guidance. Adjusted earnings reached $0.94 per share, while GAAP earnings came in at $0.33 per share. The company also generated $605.5 million in operating cash flow during the quarter.

Both revenue and adjusted earnings slightly exceeded market expectations. Analysts had generally forecast revenue of approximately $2.71 billion and adjusted EPS of between $0.92 and $0.93.

The data-centre division remained Marvell’s main growth engine. Segment revenue increased 46% year on year and 18% sequentially to a record $2.17 billion. Demand remained strong across optical interconnect products, Ethernet switching systems and custom chips designed for hyperscale cloud customers.

Management expects this momentum to accelerate. For the third quarter, Marvell projected revenue of approximately $3.15 billion, plus or minus 5%, which would represent growth of more than 50% year on year.

The company also forecast adjusted EPS of $1.10, plus or minus $0.05.

Why Did Marvell Stock Fall After Earnings?

The main concern was not Marvell’s latest quarterly performance. Investors instead focused on whether its updated forecasts fully captured the potential contribution from a recently expanded agreement with Google.

The multiyear arrangement could generate as much as $120 billion in revenue through fiscal 2033. It also includes warrants that could allow Google’s parent company, Alphabet, to build a significant equity position in Marvell if certain purchase conditions are met.

However, management indicated that the Google-related revenue included in its fiscal 2028 outlook would be limited compared with the larger contribution expected from fiscal 2029 onwards.

Marvell declined to provide a new fiscal 2029 revenue target, postponing a more detailed long-term update until its investor day on October 6. That disappointed investors who had expected the Google agreement to produce a more immediate increase in the company’s forecasts.

Marvell now expects fiscal 2027 revenue to reach roughly $12 billion, up from its previous estimate of approximately $11.5 billion. Its fiscal 2028 forecast was raised from $16.5 billion to around $18 billion.

Although these are substantial upgrades, the market had already priced in rapid growth from the company’s AI chip business. Investors therefore appeared to be looking for a larger or earlier contribution from the new customer agreement.

Lower Gross-Margin Guidance Adds Pressure

Marvell’s margin outlook offered another reason for the cautious reaction.

The company recorded an adjusted gross margin of 58.9% in the second quarter. For fiscal Q3, however, management expects the figure to decline to between 57.5% and 58.5%.

The projected compression reflects a changing product mix. Custom application-specific integrated circuits, or ASICs, are expected to account for a larger share of Marvell’s revenue as hyperscale customers increase their spending on internally designed AI accelerators.

Custom chips can generate substantial revenue, but they generally carry lower gross margins than some of Marvell’s connectivity and optical products. Consequently, rapid growth in custom silicon may lift total sales while temporarily reducing the company’s overall margin percentage.

This does not necessarily indicate weaker demand or deteriorating execution. However, it complicates the earnings outlook because investors must balance faster revenue growth against a less profitable sales mix.

Customer Concentration Remains a Risk

Marvell’s expanding relationships with Google, Amazon and other major cloud companies represent an important opportunity, but they also increase customer-concentration risk.

Developing a custom AI chip requires close cooperation between the chip designer and the hyperscale customer. Once a supplier wins a major programme, it can benefit from large orders over several years.

However, losing part of a programme or receiving a smaller allocation than expected could have a material effect on revenue. Large technology companies may also divide orders among multiple chip suppliers to reduce costs and limit their dependence on a single partner.

The structure of Marvell’s Google agreement highlighted the negotiating power of hyperscale customers. Equity warrants may strengthen the commercial partnership, but they also demonstrate the concessions semiconductor suppliers may make to secure large, long-term orders.

Competition is another consideration. Broadcom is already a major provider of custom AI silicon, while cloud companies continue to build their own internal chip-design capabilities. Marvell must therefore convert its growing pipeline into sustained production revenue while protecting its position against both direct rivals and greater vertical integration by customers.

What Comes Next for Marvell Stock?

Marvell’s fundamental growth story remains closely connected to AI infrastructure investment. Management expects data-centre revenue to grow approximately 60% in fiscal 2027 and more than 60% in fiscal 2028, with custom-chip revenue projected to more than double next year.

The immediate market reaction nevertheless suggests that expectations have risen faster than the company’s near-term forecasts. Following a sharp rally in Marvell stock during 2026, investors were looking beyond a modest quarterly beat and focusing on the size, timing and profitability of future AI revenue.

The October 6 investor day will therefore be an important event. Markets will look for more detailed information on the Google partnership, Marvell’s fiscal 2029 opportunity, customer diversification and the expected evolution of gross margins.

Until greater clarity emerges, Marvell stock may remain sensitive to changes in AI spending expectations and updates concerning its largest cloud customers.