Marvell Stock: The AI Growth Story Is Getting Bigger, But the Google Deal Is Still a Problem

Marvell Technology (MRVL) has raised the bar for its own growth story. The company reported a strong second quarter while raising the revenue forecast for fiscal 2027 and 2028. Yet, the market’s reaction was anything but enthusiastic. Although a 10% drop barely puts a dent in Marvell stock’s 2026 rally of 137% so far, it exposed a problem that matters more than the AI opportunity. The reason is the deal with Google (GOOG) (GOOGL).

Let’s find out what led to the sell-off and if MRVL stock is a buy now.

Marvell Is Also Becoming More Profitable as Revenue Scales

Marvell’s second quarter of fiscal 2027 was strong, with revenue up 37% year-over-year (YoY) to $2.74 billion, while adjusted earnings per share (EPS) rose 40% to $0.94. Both revenue and EPS surpassed consensus estimates. The data center business accounted for 79% of total company revenue, which increased 46% YoY to $2.17 billion. The company expects the segment to grow another 75% in the third quarter driven by strength in interconnect, switching, and custom silicon products. Marvell said demand for its 800G optical products remains strong, while its 1.6T business is ramping rapidly. Its scale-out switching business is expected to more than double this year, helped by the rollout of 51.2T products, while demand for its broadband analog components also remains ahead of expectations.

Furthermore, optical DSP, broadband analog TIA and driver, and scale-out switching businesses are each on track toward roughly $1 billion in annualized revenue. This indicates that Marvell has multiple ways to benefit from AI infrastructure spending. The outlook was even more impressive, with management now expecting fiscal 2027 revenue of roughly $12 billion, a YoY increase of 45%. For fiscal 2028, management raised the revenue forecast from $16.5 billion to $18 billion while also increasing expected growth from roughly 45% to about 50%.

Yet, MRVL stock fell sharply following the earnings report.

The Google Problem Overshadowed the Robust Quarter

Recently, Marvell expanded its commercial relationship with Google around custom silicon. The expanded agreement covers a range of products supporting Google's TPU ecosystem, including “AI inference accelerators, storage controllers, network interface controllers, memory interface controllers, and near-memory compute.” As part of the arrangement, Marvell granted Google a warrant to purchase up to 58,970,907 shares of Marvell at an exercise price of $206.58 per share. The agreement is structured around 240 tranches, each tied to $500 million in cumulative Custom Products revenue, through fiscal 2033.

According to Reuters, the deal could generate as much as $120 billion in revenue through fiscal 2033, potentially making Google one of Marvell's largest investors, with a stake worth up to $12.2 billion. While the Google opportunity is enormous, the challenge is timing. Investors expected to see substantial benefit in this fiscal year. However, CEO Matt Murphy said that revenue from the agreement through fiscal 2028 is already incorporated into the company's existing custom revenue expectations. The much larger impact will be seen in fiscal 2029 and beyond. 

Although Marvell raised its revenue guidance for fiscal 2027 and 2028, it wasn’t enough to convince investors who expected the Google deal to materialize sooner. The disappointment is evident in the stock’s recent 10% decline. The market appears to have already been pricing in a much faster conversion of the opportunity into revenue, which is also evident in Marvell’s rich valuation. MRVL stock is currently trading at a premium of 51x forward earnings, which are expected to increase by 47.8% in fiscal 2027. Furthermore, for fiscal 2028, analysts expect EPS to rise to $6.67, implying 58.9% growth.

Analysts are expecting extraordinary earnings growth, and investors are paying a substantial premium today for that future growth. This mismatch caused the shares to drop. 

Is Marvell Stock a Buy Now?

No doubt, Marvell's stock remains expensive now despite the recent selloff. Investors might want to wait for the upcoming investor day on Oct. 6, wherein management plans to provide more detail on the long-term trajectory of the custom business and the opportunities it sees beyond the current forecasts. Before taking a position in MRVL stock, it could also give investors more clarity on the Google relationship and how quickly the massive custom-chip opportunity could translate into revenue.

Overall, analysts remain strongly bullish about MRVL stock. Out of the 36 analysts covering shares, 26 have a “Strong Buy,” three have a “Moderate Buy” recommendation, and seven suggest a “Hold” rating. The average price target of $290.94 suggests the stock can climb by 43% from current levels. However, the high target price of $400 implies a potential upside of 90.3% from current levels.