Marvell (MRVL -11%) shares dropped after the semiconductor company reported in-line Q1 (Apr) results and guided in-line for Q2 (Jul). Despite previous optimism for Q2 and 2H24, Marvell's cautious outlook in some areas disappointed investors.
- Data Center: This segment, Marvell's largest at 70% of AprQ sales, saw revenue jump 87% year-over-year and 7% sequentially to $816.4 million, slightly above prior guidance. Growth was driven by cloud AI and standard cloud infrastructure, along with contributions from electro-optics products and initial shipments of custom AI compute programs. For Q2, Marvell expects mid-single-digit sequential growth in data center revenue as custom AI silicon ramps up.
- Marvell sees a massive opportunity in the data center market, predicting the TAM to grow from $21 billion last year to $75 billion by 2028. The company aims to double its market share over the next several years from approximately 10% last fiscal year.
- Carrier and Enterprise: Q1 reflected inventory correction and soft industry demand. Enterprise networking revenue fell 58% year-over-year and 42% sequentially to $153.1 million, while Carrier revenue dropped 75% year-over-year and 58% sequentially to $71.8 million, below prior guidance. Marvell expects these segments to bottom out in the first half of this fiscal year, with flat sequential revenue in Q2 and a recovery starting in 2H as order patterns stabilize.
- Consumer: Segment revenue fell 70% year-over-year and 71% sequentially to $42 million, in line with prior guidance. Q1 reflected the completion of deliveries for an end-of-life program. Marvell expects Q2 consumer segment revenue to approximately double sequentially.
- Automotive/Industrial: Segment revenue fell 13% year-over-year and 6% sequentially to $77.6 million due to a broad inventory correction in the automotive market. Marvell expects flat sequential revenue in Q2 with growth resuming in 2H.
In summary, Marvell's Data Center segment is performing well, accounting for 70% of AprQ sales. However, other segments are weak, and noticeable improvement is expected in 2H. Investors likely expected more optimism about Q2 after a rough Q1, contributing to the stock's weakness.
