Marvell’s AI Business Is Accelerating. The Stock Sell-Off Is a Gift.

The AI infrastructure trade has entered a new phase. Investors are no longer satisfied with companies simply benefiting from rising data center spending. They want growth that exceeds already enormous expectations. 

This creates a strange dynamic for semiconductor stocks. A company can deliver record revenue, raise its outlook, and still watch its shares fall. 

That's exactly what happened this morning with Marvell Technology (MRVL). After reporting fiscal second-quarter results Thursday evening, shares fell more than 6% in morning trading. The reaction looks harsh, but for long-term investors, it may be precisely the kind of pullback worth paying attention to.

The Numbers Are Hard to Dispute

Marvell delivered. According to the company's fiscal Q2 earnings release, revenue climbed 37% year-over-year (YOY) to a record $2.739 billion, while non-GAAP earnings per share jumped 40% to $0.94. Both figures exceeded Wall Street's expectations of roughly $2.72 billion and $0.93, respectively.

The real engine was data centers. Revenue from that business increased 46% to $2.17 billion, showing that AI infrastructure demand isn't merely holding up. It's accelerating. In addition, Marvell raised its fiscal 2027 revenue outlook to approximately $12 billion from $11.5 billion and lifted its fiscal 2028 target to $18 billion from $16.5 billion.

Wall Street Wanted More

So why sell the stock? Expectations had become enormous. Marvell shares had gained 180% over the past year before the latest decline, leaving the company trading at a forward price-to-earnings ratio of 79.82 times, compared with 34.72 times for Broadcom (AVGO) .

That valuation meant a small beat wasn't enough. Investors wanted evidence that Marvell's newly expanded custom-chip relationship with Alphabet (GOOG)(GOOGL) would immediately transform results.

It won't. Management said the more meaningful revenue contribution from the Google relationship is weighted toward fiscal 2029 and beyond, while the company is providing more details at its Oct. 6 investor day.

There is also a near-term margin wrinkle. Marvell expects non-GAAP gross margin of 57.5% to 58.5% in fiscal Q3, down from 58.9% in Q2, as the business mix shifts toward custom silicon.

The Sell-Off Could Be the Opportunity

Ironically, the disappointment may create a better entry point. Morgan Stanley raised its Marvell price target to $246 from $224 while retaining an “Equal Weight” rating, citing the stronger long-term data center growth outlook. The firm now expects calendar 2027 data center growth of 60%, up from 50%.

More importantly, Marvell expects revenue to reach approximately $18 billion in fiscal 2028, while management says its custom business should more than double as AI opportunities convert into revenue. The company also expects fiscal 2027 revenue growth of roughly 45%.

Granted, valuation remains the biggest risk. A stock priced for perfection can fall even when the underlying business is performing perfectly.

But that's precisely why this decline matters. Investors aren't getting a weaker Marvell. They're getting a stronger Marvell at a lower price with an extended, multi-year growth ramp.

Bottom Line

In short, Marvell's 8.73% pullback in the past five trading days is more about expectations than deteriorating fundamentals. Revenue is growing 37%, data center revenue is growing 46%, and management just raised its fiscal 2028 revenue target by $1.5 billion.

The Google deal may take years to reach its full potential, but investors don't need that revenue today. They need evidence that Marvell is building a larger, more profitable AI infrastructure business.

So far, the numbers say it is. For long-term investors, this pullback looks less like a warning and more like a gift.