Marvell Technology's Revenues To Recover On AI Demand; These 9 Analysts Dive Into Q1 Results

Marvell Technology (NASDAQ:MRVL) missed earnings for its fiscal first quarter, with its Data Center segment continuing to outperform while its Custom Compute segment exerted pressure. However, management expects revenue growth to accelerate in the second half of the year on the continued ramp of AI ASIC programs. Analysts from Oppenheimer, Stifel, BofA Securities, Needham, JPMorgan, Rosenblatt Securities, Piper Sandler, Cantor Fitzgerald, and Roth Capital Partners provided their takeaways on Marvell Technology's Q1 results. The analysts maintained Buy ratings and raised price targets, citing the company's strong performance in the Data Center segment and the potential for growth in AI-related revenues. Marvell Technology's legacy business continues to be a drag, while AI tailwinds are picking up speed. The company's AI sales are projected to grow by 75% from fiscal 2025 to 2026. Marvell Technology reported a beat and raise quarter, with the Data Center segment continuing to outperform. The company expects growth to accelerate in the second half of the year on continued strong ramp of its AI ASICs. Marvell Technology reported mixed results, with a beat on sales and a slight miss on earnings. The company's guidance of 8% sequential sales growth for Q2 marks a bottom for the overall business in the April quarter. Marvell Technology's earnings were driven by strength in the Data Center business, offset by continued weakness in the Enterprise Networking and Carrier businesses. The company guided to high-single-digit revenue growth reflecting continued AI infrastructure demand coupled with stabilizing non-AI segments. Shares of Marvell Technology declined by 9.07% to $69.88. [c1ee3625]

Marvell Technology (NASDAQ:MRVL) hosted its Accelerated Infrastructure for the AI Era Event in New York City, where it showcased new technologies that will allow the company to better position itself in the AI arms race. Marvell's expertise lies in Digital Signal Processing (DSP) and Application Specific Integrated Circuits (ASICs), rather than GPUs like NVIDIA. Despite rising about 73% this year, Marvell's gains have fallen short of NVIDIA's. However, Marvell's DSP business is expected to continue playing a central role in the AI space. The semiconductor industry that serves AI is likely to continue growing rapidly as the technology becomes more widely adopted. Investors can choose to invest in individual stocks or opt for an AI-exposed fund like Spear Alpha ETF (NYSE:SPRX), which has performed well under the captaincy of Ivana Delevska.

Marvell has won new business helping large U.S.-based cloud computing firms make custom chips for AI. Marvell expects the AI chip business to hit $2.5 billion in sales by its fiscal 2026. Marvell helps customers such as Amazon.com design custom chips for their cloud units and competes against rivals such as Alphabet supplier Broadcomm, which has said it expects $10 billion in AI chip sales this year. Marvell CEO Matt Murphy said the company has a custom AI chip in production for one cloud computing company and a central processor based on technology from another, both of which will generate revenue this year. Marvell is also developing an AI chip for a third customer that will go into production in 2026. Gross margins on custom chips are lower than the company's off-the-shelf offerings, but operating margins are expected to be on par over time. Marvell's custom unit competes with AI chip leader Broadcom, which has disclosed that its custom chip margins will be on par with its corporate average.

Shares of Marvell Technology fell 2.3% to $69.77 after the company announced that its custom AI chips unit will have lower margins than other lines of business. Marvell Technology's shares have risen about 77% year over year. Of the 32 analysts covering the stock, 29 rate it "buy" or "strong buy" and 3 rate it "hold".

Meanwhile, Broadcom (NASDAQ:AVGO) is forging ahead with its AI chips, unlocking billions in tech potential, according to analysts. Piper Sandler analyst Harsh V. Kumar reiterated an Overweight rating on Broadcom with a price target of $1,650. Kumar hosted a meeting with Broadcom's management and noted Broadcom as a premier player in the generative AI computing space. Management sized a potential 1 million unit cluster as a $50 billion opportunity. Broadcom is 1-1.5 years ahead of the competition in the Switch Products category. The company has significantly intensified its investments in this space. The XPU business's gross margins are slightly lower than those of the traditional silicon business. Broadcom could be in pole position for the next generation of custom chips with these customers. Barclays analyst Tom O'Malley maintained Broadcom with an Overweight rating and raised the price target from $1405 to $1500.

Shares of Broadcom traded lower by 2.63% at $1,294.09. [c1ee3625]

Broadcom is set to release its second-quarter 2024 earnings report on June 12. Analysts project revenue of $12.04 billion, up from the previous quarter and the same period in 2023. Net income is expected to be $2.22 billion, with diluted earnings per share of $4.88. After adjustment for one-time expenses, net income is projected to be $5.33 billion. Broadcom's networking and semiconductor businesses offer products used in AI data centers, and the company expects to generate $10 billion in AI chip sales in 2024. The company has found an AI niche with big tech companies creating their own custom chips, and analysts believe the AI revenue could approach $50 billion. Broadcom shares have gained nearly 27% since the start of the year.