Marvell Technology Earnings Preview: Custom Chips and Optical Interconnect Dual Engines Driving, Can Earnings Support High Valuation?

TradingKey - After the market close on May 27 ET, Marvell Technology ( MRVL.US) will release its first-quarter results for fiscal 2027. A leader in the AI ASIC and optical interconnect space, the company's stock has surged approximately 130% year-to-date, with its market capitalization surpassing $170 billion, making it one of the top performers among the Philadelphia Semiconductor Index components.

Market expectations are highly optimistic. The consensus forecast for first-quarter revenue is approximately $2.4 billion, with adjusted earnings per share projected between $0.75 and $0.79, representing year-over-year growth of about 26% and 21%, respectively. In the previous quarter, the company reported revenue of $2.219 billion, while full-year revenue reached $8.195 billion, a 42% year-over-year increase; the data center segment contributed over $6.1 billion, rising 46% year-over-year.

Performance Drivers: AI ASIC and Optical Interconnect Dual-Engine Resonance

In terms of AI ASICs (customized AI chips), Marvell is the largest partner for Amazon's AWS Trainium series, with approximately 74% of its revenue derived from the data center business.

Revenue from the custom business grew from zero to $1.5 billion in fiscal year 2026, and is expected to grow by more than 20% year-over-year in fiscal year 2027. As hyperscale customers migrate from general-purpose GPUs to customized XPU solutions and Microsoft's Maia chips continue to ramp up, AI ASICs are becoming a definitive engine driving revenue growth.

The market expects total revenue to grow by more than 30% in fiscal year 2027, reaching approximately $11 billion, with the data center business projected to grow about 40% year-over-year.

Regarding optical interconnects, once internal connection distances in AI data centers exceed 10 meters, copper interconnects can no longer meet high-bandwidth requirements, necessitating a transition to optical interconnect systems where Marvell's optical DSPs and optical interconnect products hold a core position.

An Oppenheimer report on May 22 noted that Marvell's optical business has grown at a compound annual growth rate of approximately 50% over the past five years, with growth expected to exceed 60% this year. Management has raised the fiscal year 2027 growth outlook for the optical interconnect business from 30% to 50%.

Institutions raise target prices in quick succession.

A week before the earnings release, several investment banks took the rare step of collectively raising their price targets: On May 21, Citigroup raised its target from $118 to $215 (an upward revision of approximately 82%) while maintaining a "Buy" rating, with the new $215 target representing a significant hike of over 80%; on May 22, Stifel analyst Svanberg raised the target from $140 to $210, maintaining a "Buy" rating and expecting Marvell to beat expectations and raise its guidance; Wells Fargo raised its price target from $135 to $195.

Market ratings have shifted comprehensively from a historical "Hold" to the "Buy" range. As of May 22, the stock was trading at approximately $196, a 52-week high.

Earnings Validation Pressure: High Valuations and Execution Risks Coexist

The stock price has surged 130% year-to-date, with a P/E ratio of approximately 64x, significantly higher than the peer average, indicating that a considerable degree of 'perfect expectations' has already been priced in.

The integration of the Celestial AI and XConn acquisitions, the pace of 1.6T optical module penetration, and the actual mass production progress of Amazon's Trainium 3 are all execution variables that require continuous verification.

Semiconductor supply chain delivery bottlenecks remain a tangible constraint on the earnings realization of AI chip companies, a point clearly highlighted by Evercore's channel checks.

The earnings report on May 27 still needs to verify whether the quality of this performance beat can justify the current 62x valuation. If management raises the full-year outlook, the long-term growth narrative for AI computing infrastructure will be further reinforced; if the guidance shows signs of a marginal slowdown in data center growth, the current high valuation will face renewed market scrutiny.