Marvell shares fell nearly 8% to $222.35 shortly after Friday's opening bell, despite the company's strong Q2 performance. According to real-time market data, the stock was down 7.91% at 10:13 a.m. ET, representing a significant decline from the previous session's gains. This sharp sell-off came despite the company's impressive quarterly results, with the stock having risen around 184% this year driven by strong demand for networking, connectivity and custom AI chips used in data centers.
Marvell reported solid Q2 results that exceeded Wall Street expectations, with revenue reaching $2.739 billion, representing a 37% year-over-year increase and surpassing the consensus estimate of $2.71 billion. According to reports from The Street, the company's data center sales unit delivered exceptional performance with $2.171 billion in revenue, up 46% year over year and 18% from the prior quarter, accounting for 79% of total revenue. Net income climbed to $308 million from $194.8 million a year earlier, while adjusted earnings reached $0.94 per share, beating the analyst consensus estimate of $0.93. CEO Matt Murphy attributed the growth to strong demand from the company's Data Center business, with AI-related bookings at high levels and demand for connectivity products remaining robust.
The stock decline was primarily driven by Marvell's fiscal 2028 outlook failing to meet investors' elevated expectations, despite the company raising its revenue guidance. According to Goldman Sachs analysts, "high investor expectations" ahead of the quarter were based on robust spending at key customers and the previously disclosed Google relationship. The Google partnership, announced last week, allows the tech giant to buy up to 58.97 million Marvell shares at $206.58 each, subject to purchase targets through fiscal 2033. The agreement covers products that work with Google's TPU systems, including AI inference chips, storage controllers and network interface controllers. However, the limited detail provided on the fiscal 2028 outlook dampened investor sentiment despite the positive Google deal news.
Marvell has significantly raised its multi-year sales outlook, with fiscal 2027 sales now projected at about $12 billion, up $500 million from last quarter's outlook and around 45% growth. The company expects data-center sales to rise about 60% during fiscal 2027, while fiscal 2028 sales are now projected at about $18 billion, $1.5 billion higher than the prior view, or about 50% growth. Data-center sales should grow more than 60% in fiscal 2028, and the custom business is expected to more than double. CEO Matt Murphy noted that "the strength of our data center business continues to exceed our prior expectations" and highlighted strong demand across Marvell's main data-center products including AI system chips, switch chips, and custom chips built for large cloud customers.
Looking ahead, Marvell has provided strong Q3 guidance that exceeds analyst expectations, with net revenue expected to reach $3.15 billion plus or minus 5%, compared to analyst estimates of $3.04 billion. The company expects non-GAAP gross margin of 57.5% to 58.5%, down from 58.9% in Q2, which disappointed investors despite the strong revenue guidance. CEO Matt Murphy indicated that revenue growth is expected to pick up further during the rest of Fiscal Year 2027, with the custom-chip business anticipated to see a major increase in growth during the second half. The company plans to provide more details on these growth drivers and explain its long-term AI infrastructure strategy at its Investor Day on October 6, 2026.
