Marvell Q2 Net Income Soars 154%, Shares Fall 7.8%

According to Marvell, the U.S. network chip and ASIC design company, the company reported its fiscal 2027 second-quarter results after the U.S. market close on August 27. Although revenue, earnings and third-quarter guidance all exceeded market expectations, Marvell’s shares fell 7.8% in after-hours trading as investors appeared to expect even stronger growth.

Marvell’s Q2 revenue reached $2.739 billion, up 37% year over year and 13% quarter over quarter, exceeding the market estimate of $2.71 billion. GAAP net income rose 154% year over year to $308 million, while diluted EPS increased to $0.33 from $0.13 a year earlier. GAAP gross margin improved to 53.1%, compared with 50.8% in the same quarter last year.

On a non-GAAP basis, net income increased 47% year over year to $865.9 million, while diluted EPS rose 40% to $0.94, above analysts’ average estimate of $0.92. Non-GAAP gross margin was 58.9%, slightly below 59.4% a year earlier but up from 58.5% in the previous quarter.

Data center remained Marvell’s main growth engine, generating $2.172 billion in Q2 revenue, or 79% of total revenue. The segment grew 46% year over year and 18% quarter over quarter, driven primarily by AI-related connectivity and custom silicon demand. By comparison, communications and other end markets generated $567.8 million, up 10% year over year but down 3% sequentially.

Marvell expects fiscal Q3 revenue of approximately $3.15 billion, plus or minus 5%, with non-GAAP EPS of $1.10. Both forecasts are above analysts’ estimates of $3.03 billion and $1.07, respectively. Management also expects data center revenue to increase by more than 20% sequentially and about 75% year over year.

The company raised its full-year revenue outlook for the second consecutive quarter. Fiscal 2027 revenue is now expected to reach about $12 billion, representing roughly 45% annual growth, while fiscal 2028 revenue is projected at $18 billion, up from the previous forecast of $16.5 billion. Marvell expects data center revenue to grow more than 60% in fiscal 2028.

Connectivity is becoming an increasingly important contributor to this growth. Marvell raised its fiscal 2027 connectivity growth forecast from 50% to more than 70%. Strong demand for 800G optical DSPs, the ramp-up of 1.6T products and Ethernet switching products is supporting the business. The company also expects its 51.2T switching products to generate more than double the revenue this fiscal year.

Marvell is also seeing growing opportunities in cross-data-center connectivity and scale-up architectures for AI clusters. Its 1.6T ZR/ZR+ coherent DCI modules are expected to support a DCI business that reaches a $1 billion annualized revenue run rate in fiscal 2028. Meanwhile, scale-up optical technologies, including NPO and CPO, are moving toward broader deployments as AI clusters require higher bandwidth than copper interconnects can provide.

Custom silicon is another major growth area. Marvell expects the business to grow more than 20% in fiscal 2027 and more than 100% in fiscal 2028, with growth accelerating significantly in the second half of fiscal 2027. Increasing demand for AI inference is also boosting interest in CXL and other memory-related technologies.

Marvell’s expanded partnership with Google is expected to provide additional long-term visibility. The agreement covers custom products for Google’s TPU ecosystem, including AI inference accelerators, storage controllers, NICs, memory interface controllers and near-memory computing solutions. As part of the agreement, Marvell issued Google warrants to purchase about 58.97 million shares at $206.58 per share, with vesting largely tied to cumulative revenue from Google’s custom products.

According to Marvell CEO Matt Murphy, the partnership covers existing projects, new design wins and potential future programs, strengthening the company’s confidence in significantly larger custom silicon revenue from fiscal 2029 onward. Market estimates suggest the agreement could represent up to $120 billion in potential revenue over roughly 6.5 years if all milestones are achieved.