Marvell Technology Earnings Beat Expectations. Why the Stock Is Falling.

4 weeks ago 14
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Photograph by David Paul Morris/Bloomberg

Infrastructure chip maker Marvell Technology shares fell in the extended session, even though the company beat earnings expectations on an adjusted basis.

Shares of Marvell dropped 4.4% in after-hours trading.

Marvell reported a fiscal second-quarter net loss of $276.4 million, which amounts to 34 cents a share, compared with $157.9 million, or 24 cents a share, in the year-ago period. Revenue rose 48% to $1.08 billion.

Adjusted for the amortization of intangible assets, stock compensation, and other items, earnings were 34 cents a share. Analysts had expected adjusted earnings of 31 cents a share on revenue of $1.07 billion.

“Growth was driven by the data center, which now represents Marvell’s largest end market at 40 percent of total revenue, benefiting from our growing momentum in the fast-growing cloud infrastructure market,” Marvell CEO Matt Murphy said.

Marvell said it expects fiscal third-quarter adjusted earnings of roughly 38 cents (plus or minus 3 cents), and revenue of $1.12 billion (plus or minus 3%). Analysts had expected third-quarter non-GAAP earnings of 37 cents a share on revenue of $1.13 billion.

Murphy said the cloud data center and 5G markets will help the company’s third-quarter growth. The company’s 5G revenue is projected to see “a significant step up” in the fourth quarter, he said.

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Amid a global shortage for semiconductors, investors have typically expected chip companies to handily beat estimates, and issue bullish guidance for the coming quarter. With demand outstripping supply, semiconductor makers can theoretically sell nearly every chip they can produce.

Marvell also said that beginning with the second quarter, it planned to report its segmented revenue based on end market versus the customer product as it had previously disclosed. End markets include data center, enterprise networking, and carrier infrastructure, among others.

Earlier this month, Marvell said it plans to acquire Innovium, a networking chip startup, for $1.1 billion. The deal will give the company access to a market of $2 billion for Ethernet switch chips inside data centers. Marvell bought Inphi, an optical component maker, last year for $10 billion.

Marvell stock closed Thursday with an advance of 0.1% to $63.24. Shares gained 33% this year, as the PHLX Semiconductor index, or Sox, rose 21%.

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