Marvell raises its long-term revenue forecast, and its stock price rises

Marvell revised its earnings forecast at an investor conference on October 6th, setting a revenue target of $20 billion for fiscal year 2028, surpassing the $18.2 billion anticipated by market analysts. Upon the announcement, the company's stock price rose by 6% during the trading session. Its peers also followed suit and strengthened their performance. The stock price of Broadcom rose by about 4% as well, and the overall sentiment of the AI chip sector was boosted.

As early as 2021, Marvell had determined its business focus, emphasizing custom chips for cloud providers and data centers. Over the course of several years, the AI computing construction wave made this business the company's main source of growth. The company expects that the revenue from the custom chip business can reach $12 billion by the fiscal year 2029, a figure higher than the original target of $10 billion.

The giants are self-developing AI processors, and the chip orders for their accompanying products have been released in large quantities. Marvell is a direct beneficiary. Since 2021, the company's stock price has more than doubled. Before this Investor Day, the company had already raised its full-year revenue expectation. In August this year, Marvell raised its full-year revenue expectation from $16.5 billion to $18 billion. In just two months, it again revised upward the target for the fiscal year 2028.

In August this year, Marvell officially announced a deep cooperation with Alphabet, the parent company of Google. The two parties signed a customized chip supply agreement. By the fiscal year 2033, this cooperation could bring in a maximum sales volume of $120 billion. Google iterates on its self-developed TPU computing power chips, which requires a large number of supporting silicon components.

Marvell is responsible for the development and delivery of corresponding customized chips. The agreement includes equity-related arrangements. The completion rate of the order will affect the unlocking of Google's stock options. This binding method makes the cooperation between the two parties more stable, not a one-time short-term supply.

Apart from the target for the fiscal year 2028, Marvell provided a more long-term performance outlook, predicting that the revenue for the fiscal year 2031 would fall within the range of $70 billion to $90 billion. Compared with the consensus expectation of $46.85 billion from analysts, the gap is quite significant. Market funds will show a clear divergence in their attitudes towards the long-term targets. Bullish funds believe that the capital expenditure for AI by global cloud providers remains at a high level, and the custom chip sector is still in the early stage of expansion. Cautious funds, however, argue that the time period is too long and the long-term targets are uncertain.

In the past, the AI computing power market mainly focused on GPU manufacturers. But in recent years, leading cloud providers have been promoting the development of their own chips. Cloud enterprises do not want to completely rely on external procurement. They will split the computing architecture and purchase a large number of custom-made chips. This has brought new opportunities for chip companies like Marvell and Broadcom. They do not directly compete with Nvidia in the GPU market but instead provide supporting chips for cloud providers' self-developed computing platforms, sharing the benefits of AI computing power expansion.

The competition within the sector is also intensifying. More chip design companies are entering the field of custom data center chips. The competition for future orders will be even more intense. If Marvell's product iteration speed cannot keep up with the technological updates of cloud providers, orders will also be diverted. At the same time, the chip foundry capacity is tight, which will limit the delivery speed. Even if they receive customer orders, if the production supply is insufficient, the revenue realization pace will also slow down.