Marvell Technology, Inc.

NASDAQ Global Select
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Bullish +65

Marvell Stock Sits Far Below Its High, But Its Operating Margin Has Kept Climbing

📈 Marvell Technology (MRVL) shares are up 116% over the trailing twelve months, trading at $163.40 against a 52-week high of $316.35.

💰 Reported operating margin has climbed from negative 8.6% two years ago to 16.4% over the trailing twelve months.

🚀 Fiscal 2026 guidance includes 42% revenue growth and 81% adjusted earnings per share growth.

📉 Management plans for adjusted operating expenses to grow in the mid-to-high teens through fiscal 2028, well below projected revenue growth.

🎯 The company targets an adjusted operating margin of 38% to 40% by fiscal 2028 on an adjusted basis.

⚠️ Supply constraints are identified as the primary risk, with $1 billion in supplier prepayments made for fiscal 2027 capacity.

💵 Projected revenue includes nearly $11.5 billion for fiscal 2027 and $16.5 billion for fiscal 2028.

📊 Adjusted gross margin is guided at roughly 59% for fiscal Q2 2027, consistent with recent performance.

🏦 The company maintains a strong balance sheet with net debt of only about 0.3 times EBITDA.

📉 Operating cash flow covered approximately four-fifths of net income over the trailing twelve months.

💹 Stock valuation stands at 57 times trailing earnings, near the top of its ten-year history.

🔍 Key confirmation points for fiscal Q2 2027 include extending the operating margin climb and closing the cash flow gap.

Bullish Signals
  • Dramatic improvement in reported operating margin from negative territory to 16.4% over the trailing twelve months demonstrates successful cost management.
  • Projected revenue growth of roughly 45% for fiscal 2028 significantly outpaces planned expense growth, creating a wide spread to drive margin expansion.
  • Strong balance sheet with net debt of only 0.3 times EBITDA provides ample funding for the $1 billion in supplier prepayments required to secure capacity.
  • Adjusted earnings per share are expected to grow at 81% in fiscal 2026, roughly double the top-line revenue growth rate.
  • Management's plan to keep operating expense growth in the mid-to-high teens while revenue grows at 45% supports a path to a 38%-40% target adjusted margin.
  • Projected revenues of $11.5 billion for fiscal 2027 and $16.5 billion for fiscal 2028 indicate robust demand in the AI infrastructure sector.
  • Stable gross margins around 59% suggest the company can maintain profitability as it scales production without significant margin compression.
Risk Factors
  • Stock trades at 57 times trailing earnings, which is near the top of its ten-year historical range and suggests a premium valuation.
  • Operating cash flow currently covers only about four-fifths of net income, indicating that reported profits are not yet fully backed by cash generation.
  • Supply constraints remain the primary risk, requiring significant $1 billion in prepayments to suppliers to secure necessary production capacity.
  • Gross margins must hold steady at roughly 59% for the operating leverage model to work; any decline would compress the target margin expansion.
Full Analysis
Marvell Technology (MRVL) shares have surged over 116% in the trailing twelve months to $163.40, significantly outpacing the S&P 500, though they remain roughly half of their 52-week high. Despite the stock price rally, the company's reported operating margin has dramatically improved from negative 8.6% two years ago and 0.6% a year prior to 16.4% over the trailing twelve months. Management projects continued expansion in fiscal 2026 with revenue rising 42% and adjusted earnings per share increasing 81%. The company plans to maintain this operating leverage by growing adjusted operating expenses at only mid-to-high single digits through fiscal 2028, while guiding revenue growth of roughly 45% for the same period. This strategy aims to push the adjusted operating margin toward a target range of 38% to 40%. However, execution risks center on supply constraints rather than demand, with Marvell securing approximately $1 billion in supplier prepayments to lock in capacity for projected revenues of $11.5 billion in fiscal 2027 and $16.5 billion in fiscal 2028. Investors should monitor whether the reported operating margin continues its upward trajectory and if operating cash flow closes the gap with net income when fiscal Q2 2027 results are released. The stock currently trades at 57 times trailing earnings, near the top of its ten-year historical range, indicating that the valuation does not reflect a cheap entry despite being below its recent peak. The investment thesis relies on the durability of the improved cost structure and the ability to sustain high gross margins around 59% as the company ramps up production for AI infrastructure.