Chipmaker Marvell Technology edged above Wall Street's targets for its fiscal second quarter and provided an in-line outlook for the current period. MRVL stock fell Friday on the news.
The Santa Clara, Calif.-based company late Thursday said it earned an adjusted 33 cents a share on sales of $1.34 billion for the quarter ended July 29. Analysts polled by FactSet had expected Marvell earnings of 32 cents a share on sales of $1.33 billion. However, on a year-over-year basis, Marvell earnings declined 42% while sales shrank 12%.
Marvell's earnings have now fallen for three straight quarters while sales have dropped for the last two quarters.
For the current quarter, Marvell predicted adjusted earnings of 40 cents a share on sales of $1.4 billion. Analysts called for earnings of 40 cents a share on sales of $1.39 billion in the fiscal third quarter. In the same period last year, Marvell earned 57 cents a share on sales of $1.54 billion.
MRVL Stock Drops After Report
On the stock market today, MRVL stock dropped 6.6% to close at 53.50. During the regular session Thursday, MRVL stock crumpled 6.9% to close at 57.29 amid a rough day for semiconductor stocks.
Ahead of the earnings report, MRVL stock had been consolidating for the past 13 weeks at a buy point of 67.99, according to IBD MarketSmith charts.
Marvell makes networking and data storage chips used in cloud computing, automotive, communications and other applications.
In a news release, Chief Executive Matt Murphy said the company's revenue picture is improving thanks to demand for artificial intelligence and cloud infrastructure.
"Demand from AI applications continues to strengthen, driving our overall revenue outlook from AI for this fiscal year even higher than previously outlined," Murphy said. "Our strategy to focus on data infrastructure across a diverse set of end markets is serving us well despite the backdrop of a softening macroenvironment."
AI Chip Demand Is A Bright Spot
Ongoing weakness in Marvell's legacy business segments, such as networking and data storage, overshadowed growth in the company's AI business.
"Accelerating AI demand, particularly for electro-optic components, is driving growth and offsetting inventory digestion across multiple segments that will not end by calendar year-end 2023," Needham analyst Quinn Bolton said in a note to clients.
He added, "Weak demand and high inventory levels are pushing out recoveries for the Storage and Enterprise Networking segments markets until the first half of 2024."
Bolton reiterated his buy rating on MRVL stock with a price target of 65.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
