Fantastic News for Marvell Stock Investors
Key Points
Marvell recently gave bullish guidance at its investor day.
There is independent evidence that the company’s outlook for the industry is strong.
It might not be too late to invest in Marvell.
Marvell Technology(NASDAQ:MRVL) has had a great year so far. The company's shares are up by about 205% as of writing, as it continues to capitalize on the artificial intelligence (AI) boom. But there is an important question for investors interested in the chipmaker: Can the company sustain the recent momentum?
After all, if AI infrastructure spending decreases substantially, the stock could lose significant market value over the medium term. Thankfully, that's not about to happen, at least according to management's recent guidance.
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Marvell's Investor Day surprise
First, some background on Marvell's role in the AI supply chain. The company designs and develops custom AI chips tailored to specific AI workloads. These chips are increasingly popular as many companies seek to diversify away from Nvidia's (NASDAQ:NVDA) market-leading GPUs (graphics processing units). Plus, custom chips tend to be cheaper.
Nvidia's GPUs are versatile, multipurpose chips that are hard to beat on raw performance. But custom chips can sometimes be more cost-efficient (or energy-efficient) for certain AI workloads.
That's why demand for Marvell's products has increased significantly, and the company is posting excellent financial results. For the second quarter of its fiscal year 2027, which ended on Aug. 1, the company's revenue increased by 37% year over year to $2.7 billion. That was a record revenue for Marvell.
Meanwhile, the company's non-GAAP net income per share came in at $0.94, up about 40% compared to the year-ago period. Marvell also said it anticipates accelerating revenue growth in the coming quarters.
The company expects $12 billion in revenue for its fiscal year 2027, representing 45% year-over-year growth. Marvell also guided to $18 billion in revenue for its fiscal year 2028 (covering most of calendar year 2027), about 50% higher than it expects for its ongoing fiscal year.
Marvell gave investors even more bullish guidance at its recent 2026 investor day, held on Oct. 6. The company now expects revenue of $20 billion in fiscal year 2028 -- $2 billion higher than its previous guidance. Why the change?
Marvell is likely seeing demand signals suggesting sales growth will accelerate even faster than it anticipated. And it won't stop next year. By its fiscal year 2031 (covering most of calendar year 2030), Marvell expects to generate sales between $70 billion and $90 billion.
The company thinks its data center segment will grow at a compound annual rate of between 55% and 70% through then.
Time to buy the stock?
Marvell could continue growing its revenue and earnings at a good clip beyond the end of the decade. The company estimates that its data center total addressable market will grow at a compound annual growth rate of 50% through the calendar year 2030, reaching $385 billion by then.
So, even if the company generates $90 billion in revenue during fiscal year 2031, it will have captured just about 23% of its total opportunity, leaving plenty of room for growth. Now, it's important to state the obvious. These are all projections and estimates. Not actual results.
Marvell could turn out to be wildly wrong. But some signs suggest that the company could be onto something. For instance, hyperscalers are investing heavily in AI infrastructure to increase capacity and meet demand for their services. At least one of them, Amazon (NASDAQ:AMZN), has indicated it has visibility into demand for its cloud computing services at least through 2028.
That is particularly relevant to Marvell. Here's why. Amazon has been increasingly relying on its custom AI chip program, Trainium, which it partnered with Marvell to design. According to some reports -- and management's own words -- Amazon may eventually sell these custom chips to outside customers.
These are all bullish signs for Marvell, and there are many more. However, after soaring more than 200% this year, is the stock still attractive? Marvell is trading at 63.3x forward earnings, which seems high. However, that reflects the company's accelerating revenue and earnings growth. My view is that Marvell remains a top stock to buy even at current levels.
Prosper Junior Bakiny has positions in Amazon and Nvidia. The Motley Fool has positions in and recommends Amazon, Marvell Technology, and Nvidia. The Motley Fool has a disclosure policy.