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Marvell (MRVL -17%) is under heavy pressure despite reporting upside with its Q4 (Jan) results last night. One problem was that the upside was more modest than we saw in Q3 (Oct). Also, in Q3, the company guided Q4 a good bit above expectations, but the Q1 (Apr) guidance was just in-line. Furthermore, based on the questions from analysts on last night's call, it sounds like they were a bit letdown by Marvell's AI results/guidance.

• Its Data Center end market, which represented 75% of Q4 sales, up from 54% a year ago, was the primary growth driver, fueled by strong AI demand. In addition, Marvell saw continued demand recovery across its multi-market businesses, including carrier, enterprise, networking, and automotive and industrial.
• Let's start with its Data Center segment. Sales jumped 78% yr/yr and 24% sequentially to a record $1.37 bln. This was in-line with prior guidance of low-to-mid 20% sequential growth. Results were driven by its custom AI silicon programs ramping to high-volume production. Additionally, it benefited from strong shipments of its electro-optics products and Teralynx Ethernet switches.
• The Q1 Data Center guidance was a bit lackluster at mid-single digits. Marvell expects the cloud and AI portion to continue driving sequential double-digit growth. However, for the on-premise portion of its Data Center end market, Marvell expects a seasonal sequential decline to partially offset AI. Nevertheless, the AI guidance seemed a bit muted given the cap-ex announcements recently made by its largest customer (AMZN) and others.
• Turning to its other end markets, Enterprise Networking and Carrier Infrastructure are its next largest segments. Both saw 35+% yr/yr declines, but they both improved nicely on a sequential basis (EN +14% to $171.4 mln; CI +25% to $105.8 mln). Marvell saw continued recovery in both of these end markets and there could be more upside as it's still shipping below end-market consumption. Taken in aggregate (EN and CI), Marvell expects further 10% sequential growth in Q1.
• Consumer segment revenue declined 38% yr/yr and 8% sequentially to $88.7 mln. A 35% sequential decline in Q1 is expected, driven by seasonality in gaming demand. Automotive/Industrial was its only other segment to see yr/yr growth, but it was modest at +4% to $85.7 mln. Marvell continues to see a modest recovery in this end market. For Q1, Marvell expects sequential growth in automotive, but this will be more than offset by a decline in Industrial, where order patterns can be lumpy.

When Marvell's numbers hit the tape last night, we were initially surprised to see the stock fall so much. However, Marvell has really become an AI story and any little chink in the armor sees a big stock reaction. We think Marvell's fairly muted Q1 outlook for DC and AI, in particular, is adding to already existing concerns that the possible AI digestion slowdown this spring/summer people have talked about is a real possibility. Other AI-related chip stocks are also lower (AVGO -4%, NVDA -2%).