As investors turned their attention from Marvell Technology Inc.’s in-line fiscal first-quarter results to unanswered questions over the company’s operations with Amazon.com Inc. and Microsoft Corp., shares of the company were down more than 7% on Friday.
Chief Executive Matthew Murphy stated during the company’s results call on Thursday that Marvell’s (MRVL) custom chips unit is “benefitting from revenue contributions across multiple programs.”
“For a large U.S. hyperscale data-center customer, Marvell’s custom chip program is doing extremely well and has become a key revenue driver for our custom business,” Murphy stated. Marvell is also collaborating with the customer on the next generation of its custom chips and has “secured 3-nanometer wafer and advanced packaging capacity” that is anticipated to begin production next year.
According to Murphy, Marvell expects its income from custom AI chips for customers to keep rising in the upcoming year and beyond.
However, Jefferies analysts stated in a note on Thursday that although the company expressed confidence in its Trainium3 project with Amazon (AMZN), the remarks “probably doesn’t sway many minds” and that investors would be anticipating further details regarding Marvell’s roadmap for custom chips at its investor event on June 17.
Analysts stated that while they “still see the potential for earnings upside” for the upcoming year and 2027, they “don’t see much for the remainder of the year” because of the company’s reliance on its Trainium2 business with Amazon, “where we haven’t seen many indications of wider deployments.”
Regarding exclusivity for the 3-nanometer chips for Amazon, Murphy responded to an analyst question by saying that although Marvell’s customers have relationships with other chip partners, “we expect our revenue to continue to grow on a multiyear, multigenerational basis with this customer.” However, Murphy acknowledged that considering the huge demand for the customized chips, “it’s certainly possible that customers and our customer may be pursuing multiple paths to meet their requirements.”
In a note released on Thursday, TD Cowen Securities analysts predicted that the remark would result in “a dampened response to an otherwise strong defense of the company’s positioning in custom silicon.”
The development of Marvell’s unique AI accelerators for another U.S.-based hyperscaler group “continues to progress well, and we are already engaged with this same customer on the architecture for the follow-on generation” of the custom chips, Murphy added during the company’s earnings call.
Karl Ackerman, a research analyst at BNP Paribas Exane, stated in a note on Friday that investors would be seeking clarification at Marvell’s investor event since they remain concerned about this Maia project with Microsoft (MSFT) because of inconsistent supply-chain checks.
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“The lack of data-center upside” in Marvell’s first-quarter results and its guidance for the current quarter “leaves more questions around the current ramp of the AI business,” according to a note released Friday by analysts at Melius Research. In the absence of that upside, Marvell’s “stock is a’show-me story’ and may have trouble breaking out.”
Nonetheless, the analysts noted that increased awareness of Marvell’s collaboration with Microsoft on the upcoming generations of its Maia chips might serve as the company’s next impetus.
Similar opinions were expressed earlier this month by the Melius analysts, who stated that “investors need to be hoping for perfect execution and an enduring role in an unproven Microsoft accelerator line” if Marvell fails to demonstrate any benefit or downside for its Amazon business.
