Marvell Stock Slides as Google AI Deal Revenue Timing Overshadows Strong Forecasts

Marvell Technology (MRVL) shares dropped approximately 8% in premarket trading on Friday, as investor concerns about the timing of revenue from a landmark artificial intelligence deal with Google overshadowed the company's better-than-expected results and upgraded financial forecasts.

Investor Expectations Weighed

The semiconductor designer's stock fell to $223.1 even after it raised its revenue guidance for fiscal years 2027 and 2028. The market's focus remained on a recently announced custom-chip agreement with Alphabet's (GOOGL) Google, which could generate up to $120 billion in revenue for Marvell through fiscal 2033.

However, the immediate financial impact of the deal appeared to be less than what some investors had anticipated. "Expectations were higher, mostly because of the Google deal," analysts at Morgan Stanley noted, adding that its contribution was already largely factored into the company's previous guidance.

Updated Revenue Outlook

Marvell CEO Matt Murphy clarified that the company's custom revenue targets through fiscal 2028 already included some revenue related to the Google partnership. He stated that the deal would begin to contribute "much more significantly in fiscal year 2029."

Ad

Despite the market's reaction, Marvell provided an optimistic long-term outlook, driven by strong data center demand:

• Fiscal 2027 Revenue Forecast: Raised to approximately $12 billion, up from a prior forecast of about $11.5 billion.
• Fiscal 2028 Revenue Forecast: Increased to about $18 billion, compared to its previous target of $16.5 billion.

Market Context and Valuation

Marvell has been a significant beneficiary of the AI infrastructure build-out, with its shares nearly tripling in value this year. The positive long-term view was echoed by several analysts, with at least five brokerages raising their price targets on the stock following the results, according to LSEG data.

The company's high valuation reflects its position in the AI sector. According to LSEG, Marvell trades at a 12-month forward price-to-earnings ratio of 58.41, a significant premium compared to its rival Broadcom at 32.15. This high valuation makes the stock sensitive to any perceived delays in major revenue streams.