Marvell Technology (MRVL) stock fell about 10% on August 28, closing at $216.62, even after the chipmaker reported fiscal second-quarter results that came in ahead of expectations.
The drop looked harsh for a company that raised its outlook. But the selling had more to do with how high expectations had climbed than with anything Marvell did wrong.
That is the setup Morgan Stanley leaned into.
The firm raised its price target while keeping a neutral rating, and it spent most of its note explaining why the data center business is the part investors should watch.
Why Morgan Stanley sees good news inside Marvell’s data center numbers
Morgan Stanley analyst Joseph Moore raised his Marvell price target to $246 from $224, keeping an Equal-weight rating, in a Morgan Stanley research note shared with me.
Moore has covered semiconductors at Morgan Stanley for years, and is one of the most closely followed chip analysts on Wall Street, so his read on Marvell carries weight even when he stays neutral.
The headline change was simple. Marvell now expects its data center segment to grow about 60% in calendar 2027, up from a prior estimate of about 50%.
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That single revision drives roughly 10% of added earnings power, according to the note.
Data center revenue already makes up close to 79% of Marvell’s total sales, so faster growth there moves the whole company.
Data center capital spending at companies like Alphabet’s Google and Amazon feeds Marvell directly, which is why analysts track those budgets so closely.
What Marvell actually reported in its fiscal second quarter
Marvell delivered fiscal second-quarter revenue of $2.74 billion, up 13% from the prior quarter and 37% from a year earlier, according to the note and Marvell‘s investor relations page.
Non-GAAP earnings came in at $0.94 a share, slightly above both Morgan Stanley’s estimate and the broader Wall Street consensus.
Data center revenue hit $2.17 billion, up 18% sequentially and 46% year over year.
Here is the plain version of what those numbers mean:
The quarter at a glance
- Revenue beat expectations, with data center growth the main engine.
- Earnings edged past estimates at $0.94 a share.
- Guidance for the October quarter points to about $3.15 billion in revenue, up roughly 52% from a year earlier.
Non-GAAP figures strip out items like stock-based compensation to show underlying operations. For Marvell, that gap matters, and we will come back to it.
Why the stock dropped even though the news was good
The confusing part for investors is why a beat-and-raise quarter sent the stock lower.
The answer sits in the Google deal announced days before earnings.
Marvell disclosed its expanded custom-chip partnership with Google on August 19.
Related: Broadcom stands to gain from new cloud deal
The agreement lets Google buy up to 58.97 million Marvell shares at $206.58 each, worth as much as $12.2 billion.
Investors expected that deal to add a fresh layer of growth on top of guidance.
Instead, Marvell’s management made it clear that the revenue from Google through fiscal 2028 was already priced into earlier forecasts.
So the number that excited traders turned out to be already counted, and the stock gave back its recent gains.
How Marvell is changing what it sells
The main focus here is a shift in Marvell’s business model, and Morgan Stanley likes the direction.
For years, Marvell’s growth leaned heavily on large custom chips known as ASICs, which are processors built for a single customer’s exact needs.
Competing head-to-head with Nvidia (NVDA) in that space is difficult, and big custom wins do not always land.
Now Marvell is spreading its bets across a wider set of products, which reduces the risk of a deal falling through.
That mix includes:
- Optical DSPs, chips that keep data moving quickly across networks.
- Data center switching and interconnects.
- A group of smaller “attach” products such as network cards and storage controllers.
Marvell’s interconnect business is expected to grow more than 70% this fiscal year, well above its earlier target.
A more spread-out product line gives Marvell steadier growth, which is exactly what long-term investors tend to reward.
What still has to happen before the stock catches up
Morgan Stanley stayed Equal-weight for a reason, and it comes down to price.
Marvell trades at a rich valuation, and the firm noted that heavy stock-based compensation cuts into the case.
For the shares to work from here, a few things need to line up:
- Estimate revisions need to keep moving higher, not just hold steady.
- Marvell has to show it is winning more networking share over time.
- Custom and attach revenue must grow faster than the current model assumes.
There are real risks as well.
A smaller-than-expected AI market or a slowdown in enterprise data center and networking demand could pressure results, according to the note.
Marvell’s October investor day is the next event that could shift the story, and Morgan Stanley said it would turn more positive on any meaningful pullback.
How Marvell’s run stacks up against the market
Marvell has been one of 2026’s standout chip names, up roughly 195% year to date before earnings.
That run outpaced the broader market by a wide margin, with the S&P 500 posting far smaller gains over the same stretch.
The pullback after earnings trimmed some of that lead, though the stock still sits well above where it started the year.
The bottom line for investors
Marvell gave investors a strong quarter and a better long-term outlook, and Morgan Stanley responded by lifting its target to $246.
The stock fell anyway because the exciting Google numbers were already counted, not because the business weakened.
For investors, the useful signal is the shift toward a broader, steadier product mix, which lowers the odds that one lost deal sets the company back.
The catch is valuation. At current prices, much of the good news is already reflected, so the bigger opportunity may come if the stock cools off before the October investor day.
Marvell looks like a healthy business trading at a demanding price, and patience could matter more than speed here.
Related: Citi renews Nvidia stock forecast ahead of earnings
