Marvell Technology raised its fiscal year 2027 and 2028 revenue outlook, driven by strong data center growth and custom AI chip demand, including a significant potential deal with Google. Despite the positive outlook, the stock fell due to investor expectations for even faster profitable growth and concerns over temporary gross margin pressure from lower-margin custom AI chips.
Marvell Technology announced an increase in its fiscal year 2027 and 2028 revenue outlook, citing strong demand in its data center segment, particularly from custom AI chips and interconnect solutions. A key highlight is the potential for a $120 billion revenue contribution over six years from its commercial agreement with Google, indicating significant long-term growth opportunities in the AI sector. However, the stock experienced a decline despite the positive news, as investors had even higher expectations following a substantial rally and are concerned about the near-term impact on gross margins from the rapid growth of lower-margin custom AI chips. This creates a short-term trading opportunity for those betting on a rebound once margin concerns subside, while long-term investors might see this dip as an entry point given the robust revenue outlook and major AI partnerships.