Networking chips designer Marvell Technology (NASDAQ: MRVL) announced better-than-expected revenue in Q4 CY2024, with sales up 27.4% year on year to $1.82 billion. The company expects next quarter’s revenue to be around $1.88 billion, close to analysts’ estimates. Its non-GAAP profit of $0.60 per share was in line with analysts’ consensus estimates.
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Marvell Technology (MRVL) Q4 CY2024 Highlights:
- Revenue: $1.82 billion vs analyst estimates of $1.80 billion (27.4% year-on-year growth, 1.2% beat)
- Adjusted EPS: $0.60 vs analyst estimates of $0.59 (in line)
- Adjusted EBITDA: $461.6 million vs analyst estimates of $658.9 million (25.4% margin, 29.9% miss)
- Revenue Guidance for Q1 CY2025 is $1.88 billion at the midpoint, roughly in line with what analysts were expecting
- Adjusted EPS guidance for Q1 CY2025 is $0.61 at the midpoint, above analyst estimates of $0.60
- Operating Margin: 12.9%, up from -2.3% in the same quarter last year
- Free Cash Flow Margin: 24.4%, down from 33.3% in the same quarter last year
- Inventory Days Outstanding: 104, up from 97 in the previous quarter
- Market Capitalization: $76.43 billion
"We closed fiscal year 2025 on a high note, delivering record fourth-quarter revenue of $1.817 billion – an increase of 20% sequentially and 27% year-over-year. This performance was driven by strong growth in our data center end market, where revenue increased 78% year-over-year in the fourth quarter, along with a continued recovery in our multi-market businesses. For the full fiscal year, we delivered a record $1.68 billion in operating cash flow and returned $933 million to stockholders through stock repurchases and dividends," said Matt Murphy, Marvell's Chairman and CEO.
Company Overview
Moving away from a low margin storage device management chips in one of the biggest semiconductor business model pivots of the past decade, Marvell Technology (NASDAQ: MRVL) is a fabless designer of special purpose data processing and networking chips used by data centers, communications carriers, enterprises, and autos.
Semiconductor Manufacturing
The semiconductor industry is driven by demand for advanced electronic products like smartphones, PCs, servers, and data storage. The need for technologies like artificial intelligence, 5G networks, and smart cars is also creating the next wave of growth for the industry. Keeping up with this dynamism requires new tools that can design, fabricate, and test chips at ever smaller sizes and more complex architectures, creating a dire need for semiconductor capital manufacturing equipment.
Sales Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Thankfully, Marvell Technology’s 16.4% annualized revenue growth over the last five years was excellent. Its growth beat the average semiconductor company and shows its offerings resonate with customers. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions.
Long-term growth is the most important, but short-term results matter for semiconductors because the rapid pace of technological innovation (Moore's Law) could make yesterday's hit product obsolete today. Marvell Technology’s recent history marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 1.3% over the last two years. 
This quarter, Marvell Technology reported robust year-on-year revenue growth of 27.4%, and its $1.82 billion of revenue topped Wall Street estimates by 1.2%. Company management is currently guiding for a 61.5% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 42.8% over the next 12 months, an improvement versus the last two years. This projection is eye-popping and indicates its newer products and services will fuel better top-line performance.
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Product Demand & Outstanding Inventory
Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business’ capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.
This quarter, Marvell Technology’s DIO came in at 104, which is 5 days above its five-year average, suggesting that the company’s inventory has grown to higher levels than we’ve seen in the past.
Key Takeaways from Marvell Technology’s Q4 Results
It was encouraging to see Marvell Technology beat analysts’ EPS expectations this quarter. We were also happy its revenue narrowly outperformed Wall Street’s estimates. On the other hand, its inventory levels materially increased and its EBITDA missed. Overall, this was a weaker quarter. The stock traded down 13.3% to $78.23 immediately after reporting.
Should you buy the stock or not? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
