Marvell Technology Inc.'s revenue forecast fell short of top-line estimates, sending its shares lower in late trading, disappointing investors who were expecting bigger rewards from the boom in artificial intelligence.

The chipmaker said in a statement on Wednesday that sales for the fiscal first quarter ending in April would reach about $1.88 billion. While that figure was in line with analysts' average expectations, some forecasts had been as high as $2 billion.

Marvell shares fell 16% in late trading following the report. As of the close, the company's shares have fallen 18% so far this year.

Demand for AI chips and the resulting shortages have pushed up prices for Nvidia's AI processors. As a result, tech giants such as Microsoft, Meta Platforms and Amazon are reducing their reliance on Nvidia by developing their own AI processors.

Marvell is seen as a major beneficiary of the growth in AI computing, which has raised expectations for the chipmaker. Three months ago, the company's better-than-expected results pushed its shares to a record high.

The Santa Clara, California-based company provides chip design services to help major tech customers develop their own data center semiconductors. These so-called hyperscalers have been stepping up efforts to produce processors in-house, designed to fine-tune their computer networks for AI software and services. Amazon.com Inc. is one of Marvell's largest customers, according to data compiled by Bloomberg.

Marvell CEO Matt Murphy said in the earnings report: "Our custom AI silicon project has now entered mass production, and our interconnect products continue to grow strongly. We expect strong revenue growth for the full fiscal year."

Investors' concerns

Shares of companies related to artificial intelligence have plummeted this year as investors worry that consumers will spend less. Chinese startup DeepSeek further fueled concerns by releasing an AI model that it said was relatively cheap to produce, suggesting that the industry may not need as many expensive equipment.

Marvell sells a range of chips and hardware products for the data center, 5G infrastructure, networking and storage markets. The company also helps large technology companies design their own AI semiconductors, or ASICS, or application-specific integrated circuits.

Last week, Raymond James analyst Srini Pajjuri reiterated an "outperform" rating on Marvell shares.

"We expect the custom AI accelerator market to grow to over $50 billion by 2028 and believe MRVL is well-positioned to capture a significant share of the market with its strong IP, system-level expertise and execution track record," he wrote.

Stifel Financial Corp

"Investors have been very 'cautious' on AI names over the past few weeks," Stifel Financial Corp. analyst Tore Svanberg said in a note. Marvell's report "may not help calm those nerves."

"The earnings numbers were generally good, but I believe investors were expecting more given all the bullish data points across the AI space and the growth of custom ASICs (artificial intelligence chips) at certain hyperscalers," Tore Svanberg said.

Marvell's data center unit revenue rose 78% year-over-year to $1.37 billion in the fourth quarter, driven by surging demand for custom AI chips from companies looking to optimize AI workloads.

Marvell reiterated that it will focus its investments on data centers more than other end markets to "take full advantage" of the AI boom. Data center revenue accounted for 75% of its total quarterly revenue.

Marvell shares have risen more than 83% through 2024, while rival Broadcom's stock has risen about 107%. But the chipmaker's shares were trading at $77.65 in after-hours trading Wednesday.

"Despite the good results, the stock price fell sharply, and some may be concerned about the magnitude of the earnings beat, geopolitical pressures and broader concerns about the monetization of artificial intelligence," said Angelo Zino, equity analyst at CFRA Research.

The company forecast first-quarter revenue of $1.88 billion, while analysts on average expected $1.87 billion, according to data compiled by the London Stock Exchange.

Shares of Broadcom Inc., another chipmaker tied to the AI boom, also fell after Marvell's results. Its shares fell 3.5% in after-hours trading. Broadcom will release its own quarterly report on Thursday.

Marvell expects first-quarter earnings of 56 cents to 66 cents per share, excluding some items. Analysts had expected earnings of 60 cents per share.

Fourth-quarter earnings per share rose to 60 cents, compared with analysts' expectations of 59 cents. Revenue rose 27% to $1.82 billion, beating estimates of $1.8 billion.

Source: Content compiled from Bloomberg

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