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Benzinga
Benzinga
Rishabh Mishra

Marvell Technology Sells Auto Unit For $2.5 Billion To Go All-In On Data Center Business Amid AI Boom

Marvell Technology

Marvell Technology Inc. (NASDAQ:MRVL) has completed the $2.5 billion all-cash sale of its automotive Ethernet business, a strategic move that sharpens its focus on the booming data center and artificial intelligence markets.

Check out MRVL’s stock price here.

MRVL Prioritizes Data Center And AI Business

The sale underscores Marvell's commitment to prioritizing its most significant growth engine. The data center segment, fueled by explosive demand for AI infrastructure, now accounts for 74% of the company’s total revenue, growing an immense 69% year-over-year.

“The auto divestiture aligns with our strategy to focus the company on what we do best… purposefully redirecting our investments towards data center,” Chairman and CEO Matt Murphy said on the call. He noted the company sees a “massive AI opportunity in front of us.”

To reflect its intensified focus, Marvell will streamline its financial reporting next quarter into two segments: “Data Center” and the newly consolidated “Communications and Other,” further cementing its identity as an AI-first enterprise.

Plans To Continue Buy Back Program

Proceeds from the transaction provide Marvell with significant financial flexibility. The company plans to use the capital to bolster its technology and continue its stock repurchase program, where approximately $2 billion remains authorized.

“The proceeds from this transaction provide us flexibility to continue to drive our ongoing stock repurchase program and deploy capital to further bolster our technology platform,” Murphy added.

See Also: Marvell Stock Slips After Q2 Earnings Report: Here’s Why

Expects ‘Lumpiness’ In Q3 Custom Silicon Chips Business

MRVL guided for a temporary sequential dip in custom silicon business, which it termed a “digestion” quarter. CEO Murphy attributed this not to a fundamental problem, but to the natural timing of massive build-outs by its large hyperscale customers.

He described it as a normal “timing issue” in fulfilling large-scale orders and reassured investors that the pause is temporary, forecasting that the business will be “substantially stronger” in the fourth quarter.

Marvell Q2 Earnings Snapshot

It reported second-quarter earnings of 67 cents per share, which beat the analyst estimate of 66 cents, whereas quarterly revenue came in at $2.006 billion, which missed the Street estimate of $2.009 billion.

Marvell is looking for third-quarter adjusted earnings of between 69 cents and 79 cents per share, versus the 72 cent estimate, and revenue in a range of $1.957 billion to $2.163 billion, versus the $2.105 billion analyst estimate.

Price Action

Marvell’s shares closed 3.26% higher on Thursday and fell 11.28% after hours. It was down -31.99% year-to-date but up 10.58% over the year.

Benzinga’s Edge Stock Rankings indicate that MRVL maintains a stronger price trend in the medium term but a weaker trend over the short and long terms. The stock also scores poorly on value and growth rankings. Additional performance details are available here.

Benzinga's Edge Stock Rankings for MRVL stock.

The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 index and Nasdaq 100 index, respectively, rose on Thursday. The SPY was up 0.35% at $648.92, while the QQQ advanced 0.63% to $577.08, according to Benzinga Pro data.

On Friday, the futures of the S&P 500, Dow Jones, and Nasdaq 100 indices were trading lower.

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

Photo courtesy: JHVEPhoto / Shutterstock.com

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