Story Stocks^®

Marvell (MRVL -6%) is heading lower despite reporting upside with its Q1 (Apr) report last night. The data infrastructure chipmaker reported its typical modest EPS upside. Revenue jumped 63.3% yr/yr to $1.90 bln, which also was slightly better than expected. The Q2 (Jul) guidance was in-line. Its Data Center end market continued to benefit from robust AI demand. In addition, Marvell is seeing ongoing recovery in its Carrier Infrastructure and Enterprise Networking end markets.

• Its Data Center end market, which represented 76% of Q1 sales, posted 76% yr/yr and 5% sequential sales growth to a record $1.44 bln. Growth is being driven by the rapid scaling of its custom AI silicon programs to high volume production, along with robust shipments of its electro-optics products for AI and cloud applications. Marvell expects the momentum to continue in Q2 with mid-single digit sequential growth.
• Marvell continues to see strong tailwinds in AI, including robust capital expenditure plans from hyperscalers, an increasing number of sovereign data center announcements, and an emerging group of hyperscalers further expanding the market.
• Turning to its Enterprise Networking segment, sales grew 16% y/yr to $177.5 mln while Carrier Infrastructure jumped 93% to $138.4 mln. Collectively, EN+CI revenue grew by 14% sequentially, exceeding the midpoint of guidance and reflecting the ongoing recovery in both end markets. Marvell expects EN+CI to grow sequentially in the mid-single digit range in Q2.
• Consumer sales grew 50% yr/yr but fell 29% sequentially to $63.1 mln. Automotive/Industrial was down 2% yr/yr to $75.7 mln.

Overall, investors are disappointed with Marvell's Q1 report and guidance. The numbers were decent, but could have been better. The results were pretty lackluster relative to what we saw from Nvidia's (NVDA) report and its commentary this week. Given the recent stock performance with shares having been roughly cut in half from its January highs, we thought a lot of negativity was priced in, but investors are taking the stock even lower today. We think investors wanted to see more robust Q2 guidance following big reports from data center infrastructure peers NVDA and even Dell (DELL) last night.