Shares in Marvell Technology (MRVL) dropped in premarket trading on Friday after third-quarter data centre demand outlook missed estimates.
Marvell stock fell significantly on Friday morning as investors reacted to the company’s weaker-than-expected outlook for data centre demand. Marvell Technology (MRVL) shares dropped around 13% in premarket trading, adding to a 30% yearly decline.
While its second-quarter revenue of $2.01 billion met Wall Street expectations, its third-quarter outlook disappointed. The chipmaker forecasts revenue of $2.06 billion, plus or minus 5%, falling below analysts’ estimates of $2.11 billion.
Shares of the company, which designs custom AI chips for big tech firms including Microsoft and Amazon, have continued to decline in 2025. Investors remain doubtful about Marvell’s overall position in the data centre market.
How did Marvell’s CEO respond to Q3 results?
On a post-earnings call on Thursday, Matt Murphy, CEO of Marvell, revealed that Q3 data centre revenue would stay flat on a sequential basis. He stated that “lumpiness” was normal when large customers rolled out new infrastructure. However, he failed to elaborate on the exact reasons behind the weakness.
“Marvell’s growth is being fuelled by strong AI demand for our custom silicon and electro-optics products, as well as a significant increase in the pace of recovery in our enterprise networking and carrier infrastructure end markets,” Murphy said.
He added, “Our custom AI design activity is at an all-time high, with the Marvell team now engaged in over 50 new opportunities across more than 10 customers.”
What is the future outlook for Marvell stock?
Marvell’s reliance on custom application-specific integrated circuits leaves it more exposed to swings in orders from large cloud companies. Microsoft and Amazon are among its biggest clients, but both are dealing with slower expansion and changing strategies.
Recent reports have indicated that Microsoft has delayed its in-house AI chip rollout until at least 2028. This could have an impact on Marvell’s future prospects, as it supplies key components to the big tech giant.
Meanwhile, Amazon Web Services (AWS), another important customer for Marvell, has also underperformed. AWS has lost ground to key rivals including Google Cloud and Microsoft Azure, reducing visibility for Marvell’s future sales.
Analysts express concern for MRVL stock going forward
Morgan Stanley analysts admitted their surprise at the scale of the revenue decline in Marvell’s chip business this year. They warned that weakness in custom chips could continue to weigh on overall performance despite strong activity in other areas.
Marvell’s Q3 report showed a year-on-year rise in both earnings and revenue, driven by strong demand for AI-related products. Despite this, its growth still trails key industry peers such as Broadcom, which enjoys stronger scale and greater diversification across multiple business lines.
Summit Insights analyst Kinngai Chan said Marvell lacks the size to compete effectively with its largest rivals in the chip industry. He added that large customers prefer to use several suppliers, which could further reduce Marvell’s future margins.
Generally speaking, investors remain cautious about whether AI demand will benefit all chipmakers equally. Marvell’s results suggest smaller players with a narrower focus may face more volatility than larger, more diversified competitors.
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