Marvell Finds $400B AI Opportunity, But Shares Take a Hit

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Shares of Marvell Technology Inc (NASDAQ:MRVL) tanked in early trading on Wednesday, after the company's Investor Day hosted on Tuesday.

The company announced a "robust" multi-year outlook, with an expansion of nearly 4X in its TAM (total addressable market) and new financial targets through 2030 that supports earnings of more than $30 per share versus current consensus of $24.91 per share, BNP Paribas analyst Karl Ackerman said in a note.

The Marvell Technology Thesis: The company raised its TAM to $400 billion by 2030, Ackerman said in the note.

He added that the TAM for:

  • Data Center is estimated at $385 billion, which is up nearly 4x from the prior projection of around $94 billion by 2028
  • Communications and Other is estimated at $15 billion.
Within Data Center, Marvell estimates:

  • Interconnect at $65 billion, representing 65% CAGR
  • Switching and Storage at around $85 billion, reflecting 40% CAGR
  • Custom at about $235 billion, growing at 55% CAGR
FY28 Outlook: Management raised their revenue guidance for fiscal 2028 from $18 billion to $20 billion, representing 50% growth, the analyst stated.

"The company indicated that the incremental $2B is driven by scale-up optics," he further wrote.

Data Center is expected to reach $18 billion, representing a 70% CAGR from fiscal 2024 to 2028, Ackerman said.

Longer-Term Guide: Marvell expects revenue to grow to $70-90 billion by 2030, the analyst stated.

This includes:

  • Interconnect revenue of $37.5 billion, representing 60%-70% CAGR
  • Switching and Storage revenue of $10 billion, reflecting 40%-50% CAGR
  • Custom revenue of $30 billion, with 75%-85% CAGR
  • Communications and Other contribution of $2.5 billion
"Gross margin is guided to 56%-59% with any outperformance in Custom likely driving margins towards the low-end in the range," Ackerman wrote. Management raised their operating margin guidance to 44%-46%, from 38-40% previously, the analyst added.

The projections imply earnings of around $33.40 per share, above the company's target of $30+ by 2030, he further noted.

"We remain constructive on Marvell as one of three companies offering a complete portfolio across AI compute and networking for scale-in, scale-up, scale-out, and scale-across applications," the analyst wrote in the note.

MRVL Price Action: Shares of Marvell Technology had declined by 1.83% to $281 at the time of publication on Wednesday.