Shares of Marvell Technology (MRVL) are down over 7% in Friday’s pre-market trading despite a strong fiscal Q2 report. The company beat Wall Street’s estimates for both earnings and revenue, while its Q3 outlook also came in above expectations. The sell-off suggests investors were looking for more from Marvell’s AI business, especially after the stock had already gained about 185% in 2026. With expectations so high, another solid quarter was not enough to keep the stock moving higher.
Marvell’s Q2 Numbers Were Strong
Marvell reported $0.94 in adjusted EPS on $2.74 billion in revenue. Analysts had expected $0.93 in EPS and $2.72 billion in revenue. The Data Center business was the main growth driver. Revenue from the segment rose 46% year over year to $2.17 billion.
Marvell also expects another strong quarter. Q3 revenue is forecast at $3.15 billion, plus or minus 5%. That is above Wall Street’s $3.04 billion estimate. Adjusted EPS is expected to come in at $1.10, compared with the $1.08 consensus.
So, the sell-off is not because Marvell missed its targets.
4 Key Factors Behind the Sell-Off
1. Lower Gross Margin: Marvell expects Q3 non-GAAP gross margin of 57.5% to 58.5%, compared with 58.9% in Q2. Management said the expected increase in its custom business will be a headwind to margins in Q3. That means Marvell could see faster revenue growth while giving up some margin in the process.
2. About $1 Billion in Supplier Prepayments: Marvell plans to make about $1 billion in capacity prepayments in fiscal 2027. These payments are meant to secure the supply needed for its growing custom-chip business. However, they also mean more cash is going toward securing future production capacity.
3. Google Deal Will Take Time to Show Up: Marvell’s expanded agreement with Google (GOOGL) is a major part of the AI story, but investors may have expected a faster revenue impact. The company said the deal is already reflected in its fiscal 2027 and 2028 targets, while the bigger contribution is expected from fiscal 2029 onward. That timing appears to have disappointed investors.
4. Weakness Outside Data Centers: Marvell expects Communications and other non-data-center revenue to decline by the low-to-mid teens sequentially in Q3 before recovering in Q4. That weakness could offset some of the strength coming from the Data Center business in the near term.
Is MRVL Stock a Good Buy?
Turning to Wall Street, analysts have a Strong Buy consensus rating on MRVL stock based on 20 Buys, five Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average MRVL price target of $299.32 per share implies about 24% upside potential. (See MRVL Stock Forecast).
