MRVL.US (MRVL.US) suffered a severe setback after the results: Earnings exceeded expectations and Wall Street thought it was too slow for Google (GOOGL.US) big orders to “register”

The Zhitong Finance App learned that although the latest financial report and future revenue guidance of Maywell Technology (MRVL.US) apparently surpassed market expectations, the stock price still plummeted before the market on Friday. What triggered the sell-off was not a weakening of fundamentals, but Wall Street's repricing of Google's (GOOGL.US) custom chip revenue when it landed — many institutions believe that this significant benefit was fully reflected in the previous rise, and management emphasized that the “significant impact” of the cooperation would not be apparent until FY2029 or later. This time point fell far behind the market's previous expectations, which disappointed investors who had expected the deal to bring more rapid growth in performance.

Judging from the data itself, Maywell Technology's second-fiscal quarter revenue was 2.5 billion US dollars, in line with market expectations. The company's guidance for the third fiscal quarter was revenue of US$3.15 billion, fluctuating 5%, and adjusted earnings per share of US$1.10, fluctuating up and down US$0.05; while analysts had previously estimated revenue of US$3.04 billion, with adjusted earnings per share of US$1.08. In other words, short-term guidance is slightly higher than market consensus.

In addition, the company also raised its long-term revenue target: thanks to continued growth in the data center business, revenue for fiscal year 2027 was raised from about US$11.5 billion to approximately US$12 billion, which represents a year-on-year increase of about 45%; revenue for fiscal year 2028 was raised from approximately US$16.5 billion to approximately US$18 billion.

However, these increases have not satisfied investors. Goldman Sachs analysts pointed out that before entering this quarter's earnings report, market expectations were already “significantly higher,” partly due to strong spending from major customers and the Google cooperative deal announced last week.

Morgan Stanley believes that Google's revenue contribution “is already basically reflected in previous guidelines,” so from a institutional perspective, although Maywell Technology's guidelines have been raised, they are “generally consistent” with the long-term growth trajectory given by previous management. In other words, this is a typical “buy expectations, sell facts” market. Maywell Technology's stock price has nearly tripled during the year. After the news was announced, the market included Google's big order in the valuation. The financial report only confirmed the current logic, but did not provide enough additional catalysts.

Google Deals: Long story enticing, short term details missing

Last week, Maywell Technology announced that it had reached a custom chip cooperation agreement with Google. According to the disclosure, the agreement could bring in up to 120 billion US dollars in revenue by fiscal year 2033, and could make Google one of the largest shareholders of Mywell Technology. This should have been a major benefit, but investors' focus quickly turned to the pace of revenue recognition.

Matt Murphy, CEO of Mywell Technology, explained in a conference call that the company's previously stated custom chip revenue target up to the 2028 fiscal year already includes some Google-related revenue, and the “significant impact” of the deal will not really be apparent until FY2029 or later. This statement directly weakens the room for short-term imagination.

Jefferies analyst Blayne Curtis wrote in the report that Maywell Technology's performance “was only moderately better than expected and did not break any long-term logic,” but there was also some disappointment. “It's disappointing that Google-related revenue has been included in previous AI growth guidelines,” he said. However, Curtis believes that the 2028 $10 billion revenue target may have room to rise, and that greater incremental opportunities are focused on the 2029 fiscal year and beyond. He maintained a “buy” rating and a target price of $325.

RBC Capital Markets analyst Srini Pajjuri also believes that the performance is consistent with his judgment, but the market is disappointed by Google's insufficient disclosure of the details of the agreement. He said, “The custom chip business is progressing well, driven by Amazon (AMZN.US) AWS and Microsoft (MSFT.US) XPU projects. However, revenue details about the Google agreement were limited and postponed until Analyst Day, which probably affected the stock price.” However, Pajjuri is not concerned. He expects the Google project to expand in the 2029 fiscal year, creating significant upside for the current “10 billion US dollars or more” custom chip revenue target. He reiterated the “outperforming the market” rating and a target price of $360.

Cantor analyst C.J. Muse's team pointed out that although Mewell Technology's earnings report moderately exceeded expectations and raised guidelines, market expectations have already been raised after Google's partnership announcement. Cantor maintains a “neutral” rating, but believes that the sell-off after earnings reports and October Investor Day may reveal more details of Google transactions or create opportunities for a short-term rebound.

Despite falling stock prices, most institutions have not changed their long-term bullish stance. According to LSEG data, at least five brokerage firms raised Maywell Technology's target price after the earnings report. The median target price was 275 US dollars, and there is still about 13.8% upside compared to Thursday's closing price.

Melius Research said in the report that although the quarterly performance and short-term guidance are “not exciting” compared to expectations, “the upside of Google transactions, Microsoft related prospects, and AI-connected businesses may point to some very large numbers,” making “the ability to achieve earnings of $20 per share by the end of this decade seem realistic.”

Citibank analyst Atif Malik was impressed by Maywell Technology's sales growth trajectory over the next three years. In particular, data center revenue is expected to grow 60% in FY2027 and more than 60% in FY2028.

In terms of valuation, Maywell Technology's 12-month forward price-earnings ratio is about 58 times, while competitor Broadcom (AVGO.US) is about 32 times. Overvaluation means any difference in expectations could amplify share price fluctuations. Morgan Stanley also pointed out that Maywell Technology's trading model is different from many of its peers: “They tend to give very optimistic long-term predictions and then execute those predictions, while other companies rely more on performance continuing to exceed expectations and increases to drive stock prices.” This style makes Investor Day a key verification point.

Maywell Technology plans to hold an Investor Day in early October. At that time, it will provide more details on the Google deal, including the pace of revenue growth, profit margin impact, customized chip production capacity arrangements, and synergy effects with other hyperscale customers.