marvell technology

Marvell Technology (NYSE: MRVL) stock is trading sharply lower in US premarket price action today after the company missed earnings estimates for the third quarter of the fiscal year 2023 and also provided weak guidance for the fourth quarter.

Marvell reported revenues of $1.54 billion in the quarter. While revenues rose 27% YoY, they fell slightly short of what Wall Street was expecting. Notably, semiconductor companies are witnessing pressure on their topline amid the slowdown in chip sales.

Chipmakers like AMD and Nvidia have disappointed markets with their revenue numbers in recent quarters.

Commenting on the revenue growth, Matt Murphy, Marvell CEO said, that the record revenue was “driven by our key growth drivers of cloud, 5G and automotive, as well as share and content gains in our enterprise networking end market.”

Meanwhile, like fellow semiconductor companies, Marvell also pointed to inventory overhang. Murphy said, “Inventory reductions, in particular at our storage customers, are impacting our near-term results and guidance, and we are working closely with them to manage their change in demand in an orderly fashion to clear the path to a resumption of growth.”

Marvell Technology Earnings Miss Estimates, Stock Sinks

Marvell Technology posted an adjusted EPS of 57 cents, which was below the 59 cents that analysts were expecting. It generated operating cash flows of $411 million in the quarter. It ended the quarter with total debt of $4.5 billion and had a net debt to EBITDA multiple of 1.6x.

Along with the earnings miss, Marvell also provided soft guidance for the fiscal fourth quarter. It forecast revenues of $1.4 billion at the midpoint for the fourth quarter which is below what analysts were expecting. It forecast an adjusted GAAP profit margin of 64% which is similar to what it posted in the third quarter.

Marvell expects its fiscal fourth quarter EPS to come in between 41-51 cents which is below what it posted in the third quarter.

The company meanwhile sounds bullish on its long-term forecast. In his prepared remarks, Murphy said, “Our design win pipeline remains strong, our new cloud-optimized products are starting to ramp, and we are well positioned to navigate the current environment successfully and remain confident in our long-term growth drivers.”

5G is a Key Growth Area for Chipmakers

5G is a key growth driver for Marvell. Earlier this week, it extended its 5G collaboration with Nokia. Nokia is working to increase its market share in the 5G market. There is a list of companies to watch and invest in the 5G ecosystem.

Meanwhile, in the short term, the slowdown in China is negatively impacting Marvell. It expects its revenues from OEMs in China to fall by over one-third in the fourth quarter as compared to the second quarter.

While Marvell said that the US chip export restrictions have not had a meaningful impact on its business, it expects sales to China OEMs to contribute less than 10% of its fiscal fourth quarter revenues.

Notably, Chinese EV maker NIO also said that the chip sales restrictions would not impact its operations. The company delivered a record number of cars in November even as Xpeng Motors’ deliveries plunged in the month.

NIO stock has crashed this year amid the sell-off in Chinese EV stocks. However, last month, Deutsche Bank said that the worst looks over for the company and reiterated its bullish call on the company. There is a guide on how beginners can buy NIO stock.

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