Marvell Technology (MRVL)

Networking chips designer Marvell Technology (NASDAQ: MRVL) reported revenue ahead of Wall Street’s expectations in Q1 CY2025, with sales up 63.3% year on year to $1.90 billion. Guidance for next quarter’s revenue was better than expected at $2 billion at the midpoint, 1% above analysts’ estimates. Its non-GAAP profit of $0.62 per share was in line with analysts’ consensus estimates.

Company Overview

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.

Marvell’s peers and competitors include AMD (NASDAQ:AMD), Broadcom (NASDAQ:AVGO), Intel (NASDAQ:INTC), and Nvidia (NASDAQ: NDVA).

Longer manufacturing duration allows analog chip makers to generate greater efficiencies, leading to structurally higher gross margins than their fabless digital peers. The downside of vertical integration is that cyclicality can be more pronounced for analog chipmakers, as capacity utilization upsides work in reverse during down periods. Read More. The semiconductor industry is broadly divided into analog and digital semiconductors. Digital chips are what most people think of as the brains of almost every electronic device. Their primary purpose is to either store (memory chips) or process (CPUs/GPUs) data. By comparison, analog chips regulate real world signals, such as temperature, speed, sound, or electrical current, converting them into a stream of digital data that can be processed by digital semiconductors. Analog semiconductors are also used to manage power in any electronic device; they convert, store and distribute the electrical energy that comes from a battery or wall plug. Analog chips are found everywhere from household appliances like refrigerators or washing machines, to smartphones, cars and factory production lines.

Examining a company’s long-term performance can provide clues about its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, Marvell Technology grew its sales at an exceptional 18.9% compounded annual growth rate. Its growth beat the average semiconductor company and shows its offerings resonate with customers, a helpful starting point for our analysis. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions.

We at StockStory place the most emphasis on long-term growth, but within semiconductors, a half-decade historical view may miss new demand cycles or industry trends like AI. Marvell Technology’s annualized revenue growth of 5.9% over the last two years is below its five-year trend, but we still think the results were respectable.

This quarter, Marvell Technology reported magnificent year-on-year revenue growth of 63.3%, and its $1.90 billion of revenue beat Wall Street’s estimates by 0.9%. Beyond the beat, we believe the company is still in the early days of an upcycle as this was the third consecutive quarter of growth - a typical upcycle tends to last 8-10 quarters. Company management is currently guiding for a 57.1% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 31% over the next 12 months, an improvement versus the last two years. This projection is eye-popping and implies its newer products and services will catalyze better top-line performance.

Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business’ capital intensity 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 DIO came in at 103, which is 3 more days than its five-year average. These numbers suggest that despite the recent decrease, the company’s inventory levels are slightly above the long-term average.

Gross profit margin is a key metric to track because it shows how much money a semiconductor company gets to keep after paying for its raw materials, manufacturing, and other input costs.

Marvell Technology’s unit economics are roughly in line with other semiconductor businesses, pointing to a lack of significant pricing pressure and the effectiveness of its products. As you can see below, it averaged a decent 45.8% gross margin over the last two years. Said differently, Marvell Technology paid its suppliers $54.18 for every $100 in revenue.

In Q1, Marvell Technology produced a 50.3% gross profit margin, marking a 4.8 percentage point increase from 45.5% in the same quarter last year. Marvell Technology’s full-year margin has also been trending up over the past 12 months, increasing by 6.3 percentage points. If this move continues, it could suggest a less competitive environment where the company has better pricing power and leverage from its growing sales on the fixed portion of its cost of goods sold (such as manufacturing expenses).

Although Marvell Technology was profitable this quarter from an operational perspective, it’s generally struggled over a longer time period. Its expensive cost structure has contributed to an average operating margin of negative 7% over the last two years. Unprofitable semiconductor companies require extra attention because they could get caught swimming naked when the tide goes out.

On the plus side, Marvell Technology’s operating margin rose by 3.3 percentage points over the last five years, as its sales growth gave it operating leverage. Still, it will take much more for the company to show consistent profitability.

This quarter, Marvell Technology generated an operating margin profit margin of 14.3%, up 27.4 percentage points year on year. The increase was solid, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, R&D, and administrative overhead.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Marvell Technology’s EPS grew at a remarkable 23.5% compounded annual growth rate over the last five years, higher than its 18.9% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into the nuances of Marvell Technology’s earnings can give us a better understanding of its performance. As we mentioned earlier, Marvell Technology’s operating margin expanded by 3.3 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q1, Marvell Technology reported EPS at $0.62, up from $0.24 in the same quarter last year. This print beat analysts’ estimates by 1.1%. Over the next 12 months, Wall Street expects Marvell Technology’s full-year EPS of $1.95 to grow 52.2%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Marvell Technology has shown robust cash profitability, and if it can maintain this level of cash generation, will be in a fine position to ride out cyclical downturns while investing in plenty of new products and returning capital to investors. The company’s free cash flow margin averaged 21.4% over the last two years, quite impressive for a semiconductor business.

Taking a step back, we can see that Marvell Technology’s margin expanded by 4.2 percentage points over the last five years. This is encouraging because it gives the company more optionality.

Marvell Technology’s free cash flow clocked in at $214.1 million in Q1, equivalent to a 11.3% margin. The company’s cash profitability regressed as it was 8.8 percentage points lower than in the same quarter last year, but we wouldn’t read too much into it because capital expenditures can be seasonal and companies often stockpile inventory in anticipation of higher demand, causing quarter-to-quarter swings. Long-term trends are more important.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Although Marvell Technology has shown solid business quality lately, it struggled to grow profitably in the past. Its five-year average ROIC was negative 2.1%, meaning management lost money while trying to expand the business.

Marvell Technology reported $885.9 million of cash and $4.23 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $948.3 million of EBITDA over the last 12 months, we view Marvell Technology’s 3.5× net-debt-to-EBITDA ratio as safe. We also see its $170.2 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see Marvell Technology provide revenue guidance for next quarter that slightly beat analysts’ expectations. We were also happy its EPS narrowly outperformed Wall Street’s estimates. Overall, this print had some key positives. The market seemed to be hoping for more, and the stock traded down 3.4% to $61.63 immediately after reporting.

Updated: June 19, 2025 at 10:18 PM EDT

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Marvell Technology.

We think Marvell Technology is a solid business. First off, its revenue growth was exceptional over the last five years and is expected to accelerate over the next 12 months. And while its relatively low ROIC suggests management has struggled to find compelling investment opportunities, its remarkable EPS growth over the last five years shows its profits are trickling down to shareholders. On top of that, its strong free cash flow generation allows it to invest in growth initiatives while maintaining an ample cushion.

Marvell Technology’s P/E ratio based on the next 12 months is 25.2x. Looking at the semiconductor landscape right now, Marvell Technology trades at a pretty interesting price. If you believe in the company and its growth potential, now is an opportune time to buy shares.

Wall Street analysts have a consensus one-year price target of $89.24 on the company (compared to the current share price of $75.35), implying they see 18.4% upside in buying Marvell Technology in the short term.