Marvell Earnings Preview: Google’s $100 Billion Deal in Focus as Wall Street’s Highest Target Hits $400

The company previously provided Q2 guidance of $2.7 billion in revenue (+/- 5%) and non-GAAP earnings per share of 93 cents (+/- 5%). Wall Street consensus estimates are closely aligned with company guidance, expecting revenue of $2.71 billion, up 35.2% year-over-year, and earnings per share of 93 cents, up 39% year-over-year.

Beyond earnings expectations, Wall Street's ratings on Marvell stock are also leaning optimistic. Data from TipRanks shows a consensus rating of "Strong Buy," based on 24 Buy ratings and 5 Hold ratings.

[Source: TipRanks]

In the first quarter of fiscal 2027, the company reported revenue of $2.418 billion, $18 million above the midpoint of its guidance; non-GAAP earnings per share were $0.80, beating market expectations of $0.79; non-GAAP net income reached $718 million. Operating cash flow reached a record high of $638.8 million.

Meanwhile, during the quarter, the company completed the acquisitions of Celestial AI and XConn Technologies. XConn specializes in PCIe and CXL switching solutions and is expected to contribute approximately $100 million in revenue in fiscal 2028.

The data center business currently accounts for approximately 76% of the company's revenue, with management previously guiding full-year growth for the segment at around 50%. Driven by this, the company raised its overall revenue outlook for fiscal year 2027 to approximately $11.5 billion, representing a year-over-year increase of about 40%, and set a revenue target of $16.5 billion for fiscal year 2028.

On August 19, Marvell and Google announced an expanded partnership, reaching a custom AI chip agreement covering data center chip products such as AI inference accelerators.

As part of the agreement, Google will receive warrants to purchase up to 7% of Marvell's total share capital (approximately 58.97 million shares) at an exercise price of $206.58. The warrants will fully vest if Google's cumulative purchases reach $120 billion prior to fiscal year 2033.

Notably, if Google fully exercises the warrants, it will result in approximately 7% equity dilution, representing a non-negligible impact on existing shareholder equity.

Following the announcement, the stock price briefly surged to $252 before pulling back for two consecutive trading days, falling approximately 5.6% to $237.04 on August 21 and declining a further 3.27% to around $229.29 on August 24.

Options market data shows that investors expect an implied stock price move of approximately 10% in either direction following the earnings release.

[Source: marketchameleon]

Ahead of earnings, several institutions raised their price targets: Wells Fargo raised its target price from $240 to $310, maintaining an "Overweight" rating; Roth Capital raised its target from $275 to $350.

In addition, KeyBanc analyst John Vinh raised Marvell's price target from $385 to a Street-high $400, maintaining an "Overweight" rating, citing that Google custom chip orders have begun contributing revenue, coupled with incremental expectations as Amazon's (AMZN) AWS next-generation AI chips enter mass production, which is expected to continuously benefit its data center business.

However, bearish views also exist. Goldman Sachs (GS), while driven by strong data center growth, only modestly revised its price target from a low of $180 to $195, while maintaining a "Neutral" rating.

Goldman Sachs believes that Marvell's room for market share expansion in the custom AI chip market is limited by fierce competition from giants such as Broadcom (AVGO); moreover, the stock's previous sharp rally has fully priced in the expected growth from its partnership with Google, leaving current valuations under significant pressure and making the risk-reward ratio for further upside unattractive to investors.

Marvell is highly likely to meet or even slightly exceed its $2.7 billion revenue guidance for the quarter, but whether the stock price can regain upward momentum hinges on whether the path to revenue realization from its partnership with Google is clear.

If the earnings report and conference call dispel market concerns over the Google agreement, and Nvidia's earnings scheduled for August 26 boost sector sentiment, Marvell's stock price is expected to move closer to institutional upgraded target price ranges. However, if either of these conditions falls short, profit-taking pressure could further emerge, creating potential for a stock pullback.

This content was translated using AI and reviewed for clarity. It is for informational purposes only.