Episode Details

Marvell Technology (MRVL) Q2 FY2027 — Shares fell 10.3% to $216.62 the next session, gapping down 6.7% at the open and never trading back - the session high was still 5.2% below Thursday, and it closed within half a per cent of its own low. Revenue grew 36.5% to a record $2.739bn and the adjusted gross margin FELL, to 58.9% from 59.4%. Marvell guides it lower again next quarter. Twelve days after the quarter closed it issued Google a warrant over 59.0m shares - 6.4% of the company - which its own accounting books as a REDUCTION TO REVENUE. THE CALL: BEARISH (3/5, MODERATE) — base-case value ~$123 vs ~$217 today. KEY METRICS: - Revenue $2,739.3M, +36.5% YoY, a record, and $39.0M above the guided midpoint - Data center $2,171.5M, +45.7%, now 79% of revenue vs 74% a year ago - Communications and other $567.8M, +10.1% YoY but -3.0% sequentially - Adjusted EPS $0.94 vs $0.67; reported EPS $0.33; the gap is $0.61 a share - Adjusted gross margin 58.9%, DOWN from 59.4%; Q3 guided to 57.5-58.5% - Adjusted operating margin 36.6% from 34.8%; reported operating margin 16.8% - Stock compensation $326.2M, +112.4%, or 11.9% of revenue vs 7.7% a year ago - That $326.2M exceeds the $308.0M of reported net income by $18.2M - Buybacks $200.0M covered 61% of it; diluted shares +5.8% to 921.2M - Google warrant: 59.0M shares at $206.58, issued August 18, 2026, 6.4% of diluted - It vests in 240 tranches of $500M of custom revenue - $120bn at full vest - Marvell books a customer warrant as a REDUCTION TO REVENUE as it vests - Our estimate of its fair value: $7.49bn, or 6.2% of that revenue - OUR ESTIMATE - One distributor is 44% of revenue, up from 34%; Asia is 84% of revenue - Balance sheet: $3.93bn cash, $4.96bn debt, $13.87bn goodwill of $27.55bn assets - Q3 guide: revenue $3.15bn, adjusted EPS $1.10, diluted shares 921M - Valuation $123 blended - DCF $134, 30x economic EPS $121, EV/EBIT $114 - The price implies 33.8% revenue growth for five years, to $50.7bn What to watch: Adjusted gross margin back above 59% for two prints while custom revenue accelerates, or stock compensation under 7% of revenue, would break our thesis Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.