In spite of beating Q3 earnings expectations and guiding Q4 ahead of market expectations, shares of semiconductor producer Marvell (MRVL 22.24, -1.03 -4.4%) have given up opening gains and now trade firmly in the red as broader weakness in technology and the semiconductor space keep post-earnings gains at bay.
On the whole, MRVL reported a solid Q3 as earnings of $0.34 and revenues of $616.30 million modestly beat market expectations. Additionally, non-GAAP gross margins were up 4 percentage points compared to last year to 61.6% and operating expenses came in below the August guidance at $205 million.
Breaking down the Q3 beat, MRVL reported better than expected Storage business revenues; the business saw sequential growth of 1% in the quarter to about $315.34 million. Importantly, MRVL’s HDD revenue came in higher than originally anticipated due mostly to the ramp of the 1-terabyte per platter HDD controller solutions. Further, MRVL sees continued traction in their SSD products, particularly in the enterprise and cloud data center.
In Networking, MRVL saw 2% sequential growth and 3% year-over-year growth to about $150.50 million in Q3. The success in the period was driven mostly by a refreshed portfolio of switches and embedded processors for the enterprise market, offsetting declines in the legacy portfolio.
The Connectivity business saw year-over-year growth of 19% with 4% sequential growth to about $102.66 million in the quarter. The results were aided by strength in automotive, enterprise access, and smart voice connected devices.
As mentioned, MRVL sees Q4 earnings and revenues ahead of market expectations. Specifically, Q4 EPS guidance comes in at $0.29-0.33 and revenues are expected between $595-625 million on non-GAAP gross margins of about 62%.
At first glance, MRVL’s stock move today likely isn’t giving investors visions of sugarplums dancing in their heads. After taking a second look, however, it appears that shares are succumbing to broader market pressure in addition to relinquishing a portion of the post-Cavium Networks (CAVM 84.97, -2.59 -3.0%) acquisition pop (announced November 20). As to the latter, MRVL has enjoyed gains north of 19% in the post-CAVM push, a likely catalyst for the obvious profit-taking in Wednesday’s session.