Networking chips designer Marvell Technology (NASDAQ: MRVL) reported Q4 FY2022 results that beat analyst expectations, with revenue up 68.3% year on year to $1.34 billion. Guidance for next quarter's revenue was $1.42 billion at the midpoint, 3.14% above the average of analyst estimates. Marvell Technology made a GAAP profit of $6.16 million, down on its profit of $16.5 million, in the same quarter last year.
Is now the time to buy Marvell Technology? Access our full analysis of the earnings results here, it's free.
Marvell Technology (MRVL) Q4 FY2022 Highlights:
- Revenue: $1.34 billion vs analyst estimates of $1.32 billion (1.4% beat)
- EPS (non-GAAP): $0.50 vs analyst estimates of $0.48 (3.56% beat)
- Revenue guidance for Q1 2023 is $1.42 billion at the midpoint, above analyst estimates of $1.38 billion
- Free cash flow of $307.4 million, up 63.6% from previous quarter
- Inventory Days Outstanding: 100, up from 92 previous quarter
- Gross Margin (GAAP): 51.1%, down from 52.7% same quarter last year
"Marvell delivered record revenue of $1.34 billion in the fourth quarter of fiscal 2022, growing 11 percent sequentially and 68 percent year over year, exceeding the midpoint of guidance. The Marvell team continued to rack up design wins, securing additional sockets at key customers leveraging our advanced technology platforms," said Matt Murphy, Marvell's President and CEO.
Moving away from a low margin storage device management chips in one of the biggest semiconductor business model pivots of the past decade, Marvell Technology (NASDAQ: MRVL) is a fabless designer of special purpose data processing and networking chips used by data centers, communications carriers, enterprises, and autos.
The semiconductor industry is driven by demand for advanced electronic products like smartphones, PCs, servers and data storage. The growth of data and technologies like artificial intelligence, 5G networks and smart cars are also creating a next wave of growth for the industry. To keep up with ever changing customer needs requires new tools that can design, fabricate and test at ever smaller sizes and more complex architectures, and that is driving the demand for semiconductor capital manufacturing equipment.
Marvell Technology's revenue growth over the last three years has been solid, averaging 18.3% annually. But as you can see below, last year has been stronger for the company, growing from quarterly revenue of $797.8 million to $1.34 billion. Semiconductors are a cyclical industry and long-term investors should be prepared for periods of high growth, followed by periods of revenue contractions (which can sometimes offer opportune times to buy).
This was a fantastic quarter for Marvell Technology with 68.3% revenue growth, beating analyst estimates by 1.4%. This marks 8 straight quarters of revenue growth, which means the current upcycle has had a good run, as a typical upcycle tends to be 8-10 quarters.
However, Marvell Technology believes the growth is set to even accelerate, and is guiding for revenue to grow 71.2% YoY next quarter, and Wall St analysts are estimating growth 35.6% over the next twelve months.
There are others doing even better than Marvell Technology. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 150% since the IPO last December. You can find it on our platform for free.
Product Demand & Outstanding Inventory
Days Inventory Outstanding (DIO) are an important metric for chipmakers, as it reflects the capital intensity of the business and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise the company may have to downsize production.
This quarter, Marvell Technology’s inventory days came in at 100, 20 days above the five year average, suggesting that that inventory has grown to higher levels than what we used to see in the past.
Key Takeaways from Marvell Technology's Q4 Results
With a market capitalization of $57 billion, more than $613.5 million in cash and with free cash flow over the last twelve months being positive, the company is in a very strong position to invest in growth.
We were very impressed by the strong improvements in Marvell Technology’s operating margin this quarter. And we were also excited to see the really strong revenue growth. On the other hand, it was less good to see the inventory levels increase and gross margin deteriorated a little. Overall, this quarter's results still seemed pretty positive and shareholders can feel optimistic. But investors might have been expecting more and the company is down 1.62% on the results and currently trades at $64.16 per share.
Should you invest in Marvell Technology right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.
One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.
The author has no position in any of the stocks mentioned.