What Happened:
Shares of networking chips designer Marvell Technology (NASDAQ: MRVL) jumped 18.9% in the afternoon session after the company reported first quarter results that beat analysts' revenue and earnings per share (EPS) estimates. Inventory levels also improved. On the other hand, it was less good to see deterioration in gross and operating margin. Regardless, guidance for the next quarter was slightly ahead for both revenue and EPS. Additionally, management provided bullish comments on the rest of the year, stating that "we are expecting revenue growth to accelerate in the second half of this fiscal year, accompanied by gross and operating margin expansion" and arguing that AI is a tailwind for the company. Overall, it was a mixed quarter, but the outlook and accompanying commentary were bright spots.
What is the market telling us:
Marvell Technology's shares are very volatile and over the last year have had 34 moves greater than 5%. But moves this big are very rare even for Marvell Technology and that is indicating to us that this news had a significant impact on the market's perception of the business. The previous big move was 2 days ago, when the company gained 6.41% on the news that competitor, Nvidia, delivered an exceptional quarter that topped analysts' estimates across key metrics. Revenue surpassed expectations by an impressive 10.3%, driven by a record-breaking data center revenue of $4.28 billion. Notably, the company exhibited improved profitability, with both gross margin and operating margin outperforming expectations. Earnings per share beat by an impressive 18.8%. Inventory levels experienced a meaningful decrease during the quarter. In addition to the outstanding quarterly results, the revenue guidance for the next quarter surpassed expectations by over 50%. Similarly, the operating profit guidance exceeded Consensus estimates. Founder and CEO Jensen Huang emphasized the ongoing transformations in the computer industry, particularly the advancements in accelerated computing and generative AI. He highlighted Nvidia's readiness to seize the opportunities presented by the anticipated trillion-dollar shift in global data center infrastructure from general-purpose to accelerated computing, as firms implement generative AI into their business operations. Overall, the company's blowout quarter, with its impressive revenue growth, enhanced profitability, and positive guidance, underscored its strength in the market. Marvell is a semiconductor company, and considered a peer of Nvidia.
Marvell Technology is up 79.6% since the beginning of the year. Investors who bought $1,000 worth of Marvell Technology's shares 5 years ago would now be looking at an investment worth $2,950.
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