Marvell Technology, Inc.’s MRVL shares tumbled nearly 20% following its fourth-quarter fiscal 2025 earnings report. This was because the company’s first-quarter fiscal 2026 sales outlook failed to impress investors.

While the sell-off reflects investors' concern over slowing growth, the market reaction appears overdone. Marvell's long-term investment case remains intact, driven by its leadership in custom AI silicon, data center networking solutions and high-speed interconnects.

Should investors take advantage of this sharp decline and buy the dip? Despite near-term headwinds, Marvell's fundamentals remain strong, making it a compelling long-term opportunity.

One-Year Price Return Performance

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MRVL Q4 Results Beat, But Q1 Sales View Hurts Sentiment

On March 5, Marvell posted solid results for the fourth quarter of fiscal 2025, with revenues climbing 27% year over year and 20% sequentially to $1.82 billion. The figure surpassed the Zacks Consensus Estimate by 0.7%. The company’s non-GAAP earnings per share (EPS) of 60 cents also exceeded the consensus mark by 1.7%, reflecting a year-over-year increase of 30% and sequential growth of 40%.

Marvell Technology, Inc. Price, Consensus and EPS Surprise

Marvell Technology, Inc. price-consensus-eps-surprise-chart | Marvell Technology, Inc. Quote

Data center revenues surged 78% year over year to $1.37 billion, accounting for 75% of Marvell’s total sales. This growth was fueled by strong demand for its custom AI silicon programs, electro-optics products and Teralynx Ethernet switches. However, despite these robust results, the company’s first-quarter fiscal 2026 sales forecast of $1.875 billion (+/- 5%) barely meets the consensus mark, triggering the sharp stock decline.

Revenue Summary By End Market

Image Source: Marvell Technology, Inc.

The plunge in MRVL stock following dismal sales guidance reflects that investors were concerned over AI demand and lofty valuations. The negative reaction to Marvell's first-quarter sales guidance also spurred sell-offs for semiconductor and AI stocks on Thursday. Major semiconductor stocks, such as Broadcom Inc. AVGO, NVIDIA Corporation NVDA and Advanced Micro Devices, Inc. AMD fell 6.3%, 5.7% and 2.8%, respectively.

Marvell’s AI-Driven Data Center Growth: A Long-Term Catalyst

Despite the weak guidance, Marvell’s long-term trajectory remains strong. The company is benefiting from hyperscalers’ increasing reliance on custom silicon for AI workloads. In fiscal 2025, Marvell’s AI revenues exceeded its $1.5 billion target, and the company expects to “very significantly” surpass its $2.5 billion AI revenue projection in fiscal 2026.

Custom AI silicon and electro-optics products have positioned Marvell as a critical player in high-performance computing. The company’s partnerships with leading hyperscalers ensure sustained growth, with management confident that revenues from its custom XPU (accelerated computing) solutions will continue expanding in fiscal 2027 and beyond.

MRVL’s Growing Market Opportunities in High-Speed Networking

As AI workloads grow, data centers require more advanced networking and interconnect solutions. Marvell is capitalizing on this shift with its high-speed optical interconnects, including 800G PAM, 400ZR DCI, and its industry-first 1.6T PAM DSP (digital signal processor), which reduces optical module power consumption by 20%.

Additionally, the transition from copper to optical connectivity in AI infrastructure represents a massive opportunity. Marvell’s Co-Packaged Optics (CPO) technology and its development of the industry's first 2nm silicon IP for cloud and AI workloads solidify its position in next-generation networking.

MRVL’s Valuation Discount Creates an Attractive Entry Point

Following the post-earnings drop, Marvell is trading at a forward 12-month price-to-earnings (P/E) multiple of 25.98x, significantly below its one-year median of 59.25x as well as the Zacks Electronics – Semiconductors industry’s average of 27.12x. This valuation discount makes Marvell an appealing buy for investors looking for exposure to AI and high-performance computing at a more reasonable price.

Conclusion: Buy the Dip in Marvell Stock

While Marvell’s softer first-quarter guidance triggered a steep sell-off, its long-term fundamentals remain robust. Its leadership in AI-driven data center infrastructure, custom silicon and high-speed networking provides strong revenue visibility for years to come.

With the stock down nearly 20%, long-term investors should view this as a prime buying opportunity. As AI adoption accelerates, Marvell’s growth trajectory remains intact, making it a compelling investment at current levels. MRVL carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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