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Why Marvell's 19% Drop Could Be a Big Buy-the-Dip Opportunity
Written by Leo Miller. Published 9/5/2025.
Key Points
- Marvell's Q2 revenue and EPS were solid, but slightly missed data center expectations.
- Q3 guidance was underwhelming, but skewed by a completed divestiture that distorted numbers.
- Long-term AI growth remains intact, with 50+ custom chip opportunities and strong analyst support.
In recent years, Marvell Technology (NASDAQ: MRVL) has emerged as a popular pick for investors betting on the artificial intelligence (AI) revolution.
Marvell is challenging a dominant AI player—Broadcom (NASDAQ: AVGO)—with its custom silicon, known as application-specific integrated circuits (ASICs). These chips are tailored to a customer's specific AI workloads.
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However, Marvell's latest earnings report fell short of expectations. After releasing Q2 fiscal 2026 results on Aug. 28, the stock plunged nearly 19% as investors reacted to what appeared to be lackluster numbers. A deeper look suggests the selloff may have been more emotional than rational.
Marvell's Revenue Miss Was Real—but Overstated
Marvell reported Q2 revenue of $2.006 billion, just shy of the $2.01 billion analysts expected. For a company of its size, a sub-$4 million miss is almost negligible. Adjusted EPS of $0.67 also matched consensus.
The primary drag on the shares was a miss in its most critical segment: data centers. Sales came in at $1.49 billion versus the $1.51 billion-plus analysts were forecasting.
Another disappointment was the Q3 outlook. At the midpoint, Marvell guided to $2.06 billion in revenue—implying nearly 37% year-over-year growth—but below the approximately $2.11 billion Wall Street anticipated.
A key caveat: Marvell sold its automotive Ethernet business earlier than expected. Management noted that, had the transaction closed later, Q3 revenue guidance would have been about $60 million higher—enough to align with or slightly exceed analyst estimates.
Custom Silicon Headwinds Mask Long-Term Strength
Marvell's custom silicon division remains both a catalyst and a source of volatility. Management expects sequential Q3 revenue weakness before a "substantially stronger" Q4.
Investors worry about Marvell's dependence on Amazon.com (NASDAQ: AMZN) for custom silicon, potential delays from Microsoft (NASDAQ: MSFT), and the threat of smaller rivals encroaching on its Amazon relationship.
Most of these concerns were known pre-earnings. The real takeaway is that Marvell continues to win new business. In Q2 alone, it secured several custom silicon design wins, adding to the 18 announced at its Custom AI Investor Event in June. These partnerships diversify its customer base—a crucial step in derisking its AI exposure—and point to a robust future pipeline despite near-term softness.
Analyst Forecast Suggests a Buy-the-Dip Opportunity
Following the earnings release, many Wall Street analysts trimmed their price targets. The average of updated targets stands just under $91 per share, in line with the MarketBeat consensus of $90.50—and implying roughly 40% upside. That suggests Marvell's selloff could present a buying opportunity.
Moreover, the average price target cut was around 8%—less than half the stock's 18.6% drop on Aug. 29. This gap indicates the market may have overreacted.
Although shares recovered about 3% on Sept. 2, Marvell's pullback still looks like a noteworthy entry point. Investors should remain mindful of intensifying competition in custom silicon. Marvell is not the outright leader—that distinction belongs to Broadcom, which remains a safer long-term play due to its scale and deeper hyperscaler relationships.
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