Commodities

Marvell posts solid earnings by turning from the consumer to the cloud


Marvell Technology (MRVL) reported better-than-expected quarterly earnings Thursday after the closing bell. The semiconductor company posted a record revenue of $1.45 billion for the first quarter of its fiscal 2023, up 74% from a year earlier and exceeding Street expectations of $1.43 billion. Adjusted earnings per share of 52 cents edged out the consensus estimate of 52 cents. Additionally, the company reported adjusted gross margin of 65.5% that was in line with expectations. Bottom line It was another solid release from Marvell. Management’s determination to decrease its exposure to the consumer market while increasing its focus on end markets such as 5G, the cloud, automotive, enterprise and networking is clearly paying off. Supply side challenges remain a hinderance to growth, but the chipmaker’s management is working diligently to secure additional capacity and we expect to see the company succeed in coming quarters. With 88% of sales coming from data infrastructure projects, we believe Marvell’s multi-year transition provides the revenue resiliency and pricing power to navigate this difficult environment. The chipmaker has positioned itself to be a priority supplier for customers. This means clients will prioritize purchases from Marvell when considering any needed budget cuts in the face of macroeconomic headwinds. Supporting this view, management called out its “very strong” bookings — purchase orders or commitments to buy — over the past two quarters, adding the “demand outlook for the year continues to be strong.” Guidance In addition to the solid results, guidance also came in above expectations. For the second quarter of fiscal 2023, management forecasts revenue of $1.52 billion, plus or minus 3%, nicely above the $1.49 billion expected by the Street. Adjusted earnings per share guidance also beat expectations at 56 cents, plus or minus 3 cents, compared to the consensus 55 cents. On the other hand, the adjusted gross margin guide between 65% and 65.5% was slightly below the 65.6% consensus at the midpoint. Here’s how management said it created this guidance: Data center sales to advance low-single digits on a percentage basis sequentially and increase roughly 50% over the year-ago period, with cloud-based offerings expected to “grow significantly” faster than the on-premise market, both sequentially and year-over-year. Carrier infrastructure is expected to grow high-single digits sequentially on a percentage basis, rising about 40% annually. Enterprise networking revenue growth is expected to see mid-teens sequential growth on a percentage basis, up about 45% year over year. Automotive and industrial revenues are expected to increase mid-single digits sequentially on a percentage basis and to rise 60% versus the same time last year. Consumer revenue is expected decline in the mid-single digits sequentially on a percentage basis, and be “flattish” versus a year ago. Quarterly sales breakdown Data center sales came in at $640.5 million, up 131% year over year, with management calling out broad-based strength across multiple product lines. It added that the cloud remains the primary driver of the segment. Notably, this strength came despite ongoing supply constraints. Carrier infrastructure sales of $252 million, up 50%, were driven by growth in 5G deployments. Enterprise networking sales, which came in below management’s expectations due to “supply chain related impacts,” were $286.6 million, up 64% year over year. On the call, management noted they are working closely with partners to secure additional capacity in order to enable sustained revenue growth. “Growth has been driven by [market] share gains,” they added, citing an increase in content as customers begin to ship new platforms developed to support “enterprise network modernization.” Recall: Last quarter management said the current network infrastructure was simply not built to handle a remote work setup that requires a need to connect from anywhere and transmit data at high speeds to support video conferencing. Automotive/industrial sales were $89.3 million, up 94% year over year, as OEMs, or original equipment manufacturers, continue to adopt Marvell’s Britghtlane ethernet solutions. OEMs rely on Marvell’s Brightlane offering to help them make cars that are more connected with less latency to process data faster. Consumer sales of $178.5 million, up 7%, were driven by sales of Marvell’s solid-state drive (SSD) controllers, which are found in consumer-oriented platforms such as gaming consoles. Partially offsetting the SSD controller strength was a decline in PC HDD sales (think traditional hard drives) as the former is displacing the latter. “From our perspective, the shift from HDDs to SSDs in the notebook PC market is almost complete, and our revenue from notebook HDDs in the first quarter of fiscal 2023 was less than 1% of consolidated Martel revenue,” Marvell’s management said on the call. (Jim Cramer’s Charitable Trust is long MRVL. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.Matt Murphy, CEO, Marvell TechnologyScott Mlyn | CNBCMarvell Technology (MRVL) reported better-than-expected quarterly earnings Thursday after the closing bell. The semiconductor company posted a record revenue of $1.45 billion for the first quarter of its fiscal 2023, up 74% from a year earlier and exceeding Street expectations of $1.43 billion.Adjusted earnings per share of 52 cents edged out the consensus estimate of 52 cents. Additionally, the company reported adjusted gross margin of 65.5% that was in line with expectations.

Show More

Related Articles

Close