Marvell Technology's MRVL top line is growing on the back of custom AI silicon chips that are experiencing massive traction among hyperscalers. This traction comes from custom AI XPUs, electro-optics solutions and custom high bandwidth memory chips, which enable longer reach scale-up fabric connections for custom AI servers and improved bandwidth.
However, Marvell Technology’s gross margin has been moving inconsistently for the past several quarters, with a long-term declining trend. MRVL’s non-GAAP gross margin has declined 10 basis points sequentially to 58.9% in the first quarter of fiscal 2027.
For the second quarter of fiscal 2027 MRVL has projected a non-GAAP gross margin range of 58.25% to 59.25% (58.75% in the midpoint), indicating flat growth rate. Marvell Technology’s recent direction suggests that scaling into newer interconnect and custom ramps does not automatically expand gross margin.
Marvell Technology’s custom AI silicon, including XPUs, which are driving its revenue growth, comes with higher costs associated with manufacturing these chips. The margin in the AI-focused custom silicon semiconductor business is fundamentally lower, which might further slow down the rate of growth in MRVL’s gross margin.
Furthermore, if the mix tilts further toward lower-margin programs or pricing tightens as competition increases, it could hurt the company’s overall profitability. MRVL faces competition from large semiconductor players in the AI-data center market.
How Competitors Fare Against MRVL
The contraction in gross margin is not the only challenge faced by MRVL stock at present. The company also faces massive competitive pressure from Broadcom AVGO and Advanced Micro Devices AMD in the custom silicon solutions space.
Broadcom’s advanced 3.5D XDSiP packaging platform is specifically designed to enhance the performance and efficiency of custom AI XPUs. Broadcom’s Semiconductor segment, which accounts for its custom silicon solutions, grew 11% year over year in the first quarter of fiscal 2025.
Advanced Micro Devices’ custom silicon solutions and AI accelerators, like Instinct Accelerators, power numerous data centers. Advanced Micro Devices’ reconfigurable Alveo Adaptable Accelerator Cards are used to speed up compute-intensive applications in data centers.
MRVL's Price Performance, Valuation and Estimates
Shares of Marvell Technology have gained 141.1% year to date compared with the Zacks Electronics - Semiconductors industry’s appreciation of 51.7%.
MRVL YTD Performance Chart
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From a valuation standpoint, Marvell Technology trades at a forward price-to-sales ratio of 15.16X, lower than the industry’s average of 9.90X.
MRVL Forward 12-Month (P/S) Valuation Chart
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The Zacks Consensus Estimate for MRVL’s fiscal 2027 and 2028 earnings implies year-over-year growth of 34.5% and 41.13%, respectively. The estimate for fiscal 2027 and 2028 has been revised upward in the past 30 days.
Image Source: Zacks Investment Research
Marvell Technology currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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