Chipmaker Marvell Technology posted better-than-expected sales in its fiscal third quarter thanks to strong demand for its custom chips for artificial intelligence applications. MRVL stock popped Wednesday on the news.
"Marvell announced better results and even stronger guidance as robust AI demand again drove data center upside," said Susquehanna analyst Christopher Rolland in a report. "During the quarter, custom ASIC/AI products ramped substantially coupled with continued momentum in electro-optics, which grew double-digit quarter over quarter."
Custom AI Chips Ramp Up
UBS analyst Timothy Arcuri said in a report: "We estimate AI revenue in fiscal Q3 was $535 million with $240 million coming from custom ASIC and $295 million from optics."
He added: "Commentary suggests that Marvel's custom silicon programs will drive meaningful growth in data center in fiscal Q4, with optics tracking to another quarter of double-digit growth, taking full-year AI revenue to well in excess of the company's initial $1.5 billion estimate. With momentum in both optics and custom ASIC, AI revenues in fiscal 2026 should eclipse the company's prior $2.5 billion bogey."
Late Tuesday, Marvell reported adjusted earnings of 43 cents a share on sales of $1.516 billion in its fiscal Q3 ended Aug. 3. Analysts polled by FactSet had expected earnings of 41 cents a share on sales of $1.46 billion.
Marvell Stock: Lower Profit Margins
On a year-over-year basis, Marvell's earnings rose 5% while sales climbed 7%.
"Lower gross margins were the only exception due to the higher ASIC revenue but the company seems to indicate they can maintain around 60% even with higher ASIC revenue," said Jefferies analyst Blayne Curtis in a report.
For the current quarter, the Santa Clara, Calif.-based company expects adjusted earnings of 59 cents a share on sales of $1.8 billion. That's based on the midpoint of its guidance. Wall Street was modeling earnings of 56 cents a share on sales of $1.74 billion in the fiscal fourth quarter.
On the stock market today, Marvell stock jumped more than 16% to 113.86.
MRVL Stock: Amazon Deal Expanded
Marvell makes custom AI chips for Alphabet's Google, Amazon and Microsoft. On Tuesday the company announced an expanded partnership with Amazon for custom AI chips.
"Leveraging its silicon technologies, Marvel will provide AWS with a broad range of data center semiconductors, including custom AI products (Trainium 2), optical digital signal processors, active electrical cable DSPs, data center interconnect optical modules, and Ethernet switching silicon solutions," said Bank of America analyst Justin Post in a report.
Heading into the Marvel earnings report, shares had advanced 58% in 2024.
While Nvidia dominates in AI chips, rival chipmakers such as Marvel aim to capitalize on strong demand for custom devices. Startup OpenAI reportedly has been in talks with Broadcom for custom AI chips.
MRVL stock holds a Composite Rating of 75 out of a best-possible 99.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
