Marvell Technology Reports Q1 2026 Earnings, Stock Declines
Marvell Technology (NASDAQ: MRVL), a semiconductor company focused on integrated circuits for data centers, announced its Q1 fiscal 2026 results, slightly exceeding analyst expectations. The company reported earnings of $0.62 per share on revenues of $1.9 billion, surpassing forecasts of $0.61 and $1.88 billion. However, Marvell’s stock fell 3% in after-hours trading and is down 43% for the year, primarily due to a disappointing outlook given in March.
Image by Cornell Frühauf from Pixabay
Valuation Perspective
With the stock’s recent volatility, investors may question if Marvell is a buying opportunity. Currently priced around $62 per share, it trades at 8.3x trailing revenues and 32x trailing adjusted earnings. These figures are below its three-year average price-to-sales (P/S) ratio of 10.4x and price-to-earnings (P/E) ratio of 42x.
The decline in valuation multiples may appear warranted, given average revenue growth of just 10% over the past three years and a drop in adjusted net income margin from 30.5% in fiscal 2023 to 26.3%. However, this perspective may overlook other factors.
Strong Q1 Performance and Future Growth
Marvell demonstrated significant growth in Q1, with overall sales climbing 63% year-over-year. Core data center sales surged by 76%, reaching $1.44 billion, driven by increasing demand for custom AI chips. While adjusted gross margin decreased by 240 basis points to 59.8%, earnings improved substantially, hitting $0.62 per share, up 158% from $0.24 in the same quarter last year. The company projects Q2 sales to be approximately $2.0 billion, in line with market expectations.
Additionally, Marvell is poised for accelerated growth. Analysts predict a 42% increase in sales this year, followed by a 20% rise next year. This momentum could significantly enhance earnings, projected to grow 2.3 times during this span. Consequently, analysts have set an average price target of $96 for MRVL, indicating an upside potential exceeding 50%.
Marvell’s Position in the AI Landscape
Marvell has strategically entered the AI sector, initially focusing on interconnect solutions for data centers. The more lucrative opportunity lies in application-specific integrated circuits (ASICs), which function as custom AI chips. These specialized chips for hyperscaler data centers provide benefits over general-purpose GPUs from Nvidia and AMD, such as cost reduction, enhanced energy efficiency, and optimized performance. Marvell has been strengthening partnerships with major AI firms, including Amazon Web Services, to expand its data center semiconductor offerings, particularly custom AI products.
Risks to Consider
While Marvell’s current valuation appears appealing, several risks warrant attention. Historically, MRVL stock has underperformed during economic downturns. For example, in the 2022 inflation spike, the stock dropped 62%, compared to a 25.4% decline for the S&P 500. During the 2020 COVID-19 pandemic, it fell 40% against a 33.9% drop in the S&P 500, indicating a higher sensitivity to macroeconomic challenges.
Add to this the slow rollout of Amazon’s Trainium chips amid weak external demand, which could hinder future revenue growth. Therefore, although Marvell may seem attractive from a valuation standpoint, investors should evaluate these risks carefully.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
