Marvell Technology (MRVL.US) Q3 Earnings Beat Expectations but Shares Still Drop; Google's $10 Billion Order Offers Little Immediate Relief

According to Zhitong Finance APP, Marvell Technology (MRVL.US) released its Q2 FY2026 financial report after the market closed on Thursday. Both adjusted earnings per share and revenue slightly exceeded market expectations, and guidance for the third fiscal quarter also surpassed analysts' forecasts. However, the stock still saw a sharp decline in after-hours trading, falling more than 7% as of this writing. Marvell Technology (MRVL.US) released its Q2 FY2026 financial report after the market closed on Thursday, with both adjusted EPS and revenue slightly beating market expectations, and Q3 guidance also better than analysts predicted.

Recently, Marvell Technology has entered into a major AI chip partnership with Google. However, the company's long-term revenue outlook did not receive a significant upward revision. Market concerns about the timing of Google order revenues outweighed the positive impact of raised forecasts for FY2027 and FY2028, disappointing investors who had hoped the deal would accelerate performance growth. Driven by the AI boom, the stock has tripled so far this year.

Financial report data show that the company's Q2 revenue increased by 37% year-over-year to $2.74 billion, surpassing the market expectation of $2.71 billion; adjusted earnings per share were $0.94, also higher than the expected $0.92.

For the current quarter, the company expects adjusted EPS of $1.10 and revenue of around $3.15 billion, compared to Wall Street's previous expectations of $1.08 and $3.04 billion, respectively. For the same period last year, adjusted EPS was $0.76 and revenue was $2.07 billion.

CEO Matt Murphy stated in the press release that Q2 results "benefited from continued strong demand for data center product portfolio," with revenue in this segment accelerating to 46% year-over-year growth. He further pointed out that AI-related orders remain exceptionally strong, and revenue growth is expected to accelerate throughout the remainder of FY2027. Based on the current momentum, the company has again raised its revenue outlook for FY2027 and FY2028, higher than the guidance provided last quarter.

Last week, Marvell Technology reached a custom chip agreement with Google, a subsidiary of Alphabet, which is expected to bring in about $120 billion in revenue by FY2033, and Google will become one of the company's major shareholders with a holding of up to $12.2 billion.

On the earnings call, when analysts pressed for reasons why Google-related revenue would not contribute more substantially by FY2028, CEO Matt Murphy stated that the company's custom chip revenue target through FY2028 already partially includes this revenue, saying the business will see a more significant ramp in FY2029. He further noted that custom chip revenue will more than double next year and that the previously announced "over $10 billion for FY2029" target has "upside potential," but he declined to give a new target, leaving detailed guidance for the Investor Day on October 6.

Bob O'Donnell, chief analyst at TECHnalysis Research, said: "Market expectations for custom AI accelerator projects are already sky-high, especially following news of Broadcom (AVGO.US) working with OpenAI on the 'Jalapeno' project. Clearly, expectations have gotten ahead of reality, making it difficult for most companies—except for Nvidia (NVDA.US)—to meet them; even Nvidia's stock price fell temporarily after earnings before releasing its blockbuster annual outlook."

Major tech companies are increasing investment in in-house chip development to reduce reliance on Nvidia's expensive and supply-constrained processors, pushing up demand for Marvell Technology's custom silicon business and making it one of the key beneficiaries of the data center expansion wave. Meanwhile, as AI applications shift from model training to inference deployment, custom chips have advantages over general-purpose processors in both performance and efficiency, further boosting related demand.

Accordingly, Marvell Technology raised its revenue growth forecast for FY2027 to around 45%, corresponding to about $12 billion in revenue, up from the previous forecast of around $11.5 billion. It also revised its FY2028 revenue outlook from about $16.5 billion to approximately $18 billion, mainly due to increased contributions from its data center business.