Marvell narrows focus to data center amid revenue shift

Marvell Technology management has stopped leading with a recovery narrative for its markets outside the data center, narrowing the company's public story to AI infrastructure growth. The shift reflects a significant change in revenue composition, with data centers now accounting for the vast majority of sales.

In March 2025, while reporting fiscal fourth-quarter 2025 results, management highlighted a continued recovery in demand across carrier, enterprise networking, and automotive and industrial sectors. At that time, those markets represented a substantial portion of the business. By fiscal second quarter 2026, however, management stated that data centers drove three-quarters of total revenue. The company subsequently sold its auto business, further reducing the share of revenue from non-data center markets. In fiscal third quarter 2026, Marvell consolidated these remaining sectors into a single reporting group labeled "communications and other."

The strategic pivot is evident in the latest financials. In fiscal second quarter 2027, data center revenue reached a record $2.17 billion, a 46% increase from the prior year. This segment now constitutes 79% of Marvell's total revenue. In contrast, the markets outside the data center generated $568 million, up only 10% from a year earlier. Data center sales are now nearly four times larger than those of the combined other segments.

Management has raised its outlook for fiscal 2027, expecting data center revenue to grow by approximately 60%, up from a previous expectation of about 50%. This implies accelerated growth in the latter part of the fiscal year. A key driver is the custom business, which produces custom AI silicon. Management expects this segment to ramp significantly in the second half of fiscal 2027 and to more than double in fiscal 2028.

While the non-data center markets remain smaller, they are not in decline. They still grew year-over-year in fiscal second quarter 2027. However, management cautions that revenue from these segments may remain lumpy quarter-to-quarter. Indeed, revenue in this group fell 3% from the previous quarter in fiscal second quarter 2027.

The primary risk for investors is concentration. With most revenue tied to data centers, Marvell depends heavily on a single market. If data center growth slows, the smaller segments are unlikely to offset the decline. The stock has also demonstrated higher volatility than the broader market; it fell approximately 56% during the 2025 US Tariff Shock, compared to a 19% drop for the S&P 500.

Marvell stock returned 201% over the past year, significantly outperforming the S&P 500's 17.7% gain. Investors currently value the company at 85.6 times earnings, versus 22.1 for the S&P 500.

The next major update will come at Investor Day on October 6, where management plans to provide more detail on longer-term growth targets. Following that, the fiscal third quarter 2027 report is expected. Management has guided total revenue for that period at $3.15 billion, plus or minus 5%, which represents an increase of about 15% from the $2.74 billion reported in fiscal second quarter 2027.