TipRanks Smart Value #48: Chip Upside

Shrilekha Pethe on February 3, 2026

Dear Investors,

Welcome to the 48^th edition of our TipRanks Smart Value Newsletter!

This Week’s Top Value Pick: Marvell Technology (MRVL)

Marvell Technology (MRVL) is a U.S.-based semiconductor company specializing in the design and development of data infrastructure and networking chips. Its product portfolio includes solutions for data centers, cloud computing, enterprise networking, carrier infrastructure, automotive, and storage applications. Marvell is a leading provider of high-performance custom and standard silicon platforms that support the global buildout of cloud, AI, and connectivity infrastructure.

Chip Pivot

Marvell Technology has evolved steadily from a storage-focused chip supplier into a diversified semiconductor platform for data infrastructure, with each stage of its transformation linked to expanding markets, higher-value products, and stronger earnings potential. Founded in 1995, it initially concentrated on integrated circuits for data storage applications, particularly controllers for hard disk drives. As global data creation accelerated in the late 1990s and early 2000s, the company’s storage solutions gained widespread adoption among leading drive manufacturers, establishing a foundation of high-volume revenue and operational scale.

A strategic shift began in the mid-2000s when the company expanded beyond storage into networking and embedded processing. The 2006 acquisition of Intel’s XScale processor business added CPU and system-on-chip capabilities, broadening its presence in enterprise networking, communications infrastructure, and embedded applications. This diversification reduced reliance on the cyclical PC and storage markets while positioning the company to benefit from rising broadband usage and growing data traffic.

Through the 2010s, the company increasingly focused on infrastructure-oriented silicon. The 2018 acquisition of Cavium marked a major turning point, bringing multicore ARM-based processors, security, and networking technologies for data centers and carrier networks. The deal materially shifted the company’s revenue mix toward higher-margin, faster-growing end markets and strengthened its competitive position in both standard and custom data center silicon.

Marvell further expanded its networking and cloud portfolio through targeted acquisitions. In 2019, it acquired Aquantia, expanding into high-speed Ethernet connectivity chips, and Avera Semiconductor, adding the ability to design custom-built chips tailored to specific customer needs. These moves enhanced its ability to provide tailored solutions for hyperscale and enterprise customers.

The transformation accelerated in 2021 with the acquisitions of Inphi and Innovium. Inphi contributed industry-leading high-speed optical and mixed-signal interconnect technologies, critical for hyperscale data centers, while Innovium added data center switching silicon, further solidifying the company’s end-to-end cloud networking platform. Together, these deals increased exposure to cloud capital spending and strengthened the company’s long-term growth and margin profile.

More recently, the company has targeted AI infrastructure. Earlier this year, it completed the $3.25 billion acquisition of Celestial AI, with an additional earn-out of up to 27.2 million shares contingent on revenue milestones of $500 million and $2 billion by fiscal 2029. Celestial’s technology enables faster, lower-power chip-to-chip communication, addressing a potential market opportunity of over $10 billion. Revenue from this acquisition is expected to ramp in the second half of fiscal 2028, reaching roughly $1 billion by fiscal 2029. The company also acquired XConn Technologies, adding high-speed networking solutions optimized for AI data centers.

Alongside acquisitions, Marvell has selectively streamlined its portfolio. In 2025, it sold its Automotive Ethernet business to Infineon, refocusing resources on core cloud and AI infrastructure while monetizing a unit that generated roughly $225–250 million in annual revenue with strong gross margins.

Today, the company’s earnings are increasingly driven by cloud, AI, carrier infrastructure, and custom silicon programs rather than legacy consumer and storage markets. Its multi-decade shift toward data infrastructure has produced a portfolio with higher average selling prices, stronger margins, and greater revenue visibility, supporting sustained expansion and structurally improved profitability.

Compute Core

Marvell Technology’s business model centers on designing high-performance semiconductor solutions that enable the movement, processing, storage, and security of data across cloud data centers, enterprise networks, carrier infrastructure, and AI-optimized systems. Rather than competing in commoditized consumer silicon, Marvell focuses on complex, infrastructure-class products where performance, reliability, and system-level integration are critical. This positioning supports higher average selling prices, longer product lifecycles, and structurally stronger margins.

The foundation of Marvell’s revenue base includes standard and custom system-on-chip (SoC) platforms, networking processors, Ethernet solutions, switching silicon, and high-speed optical and electrical interconnect products. These solutions are sold to hyperscale cloud providers, telecom equipment manufacturers, enterprise networking vendors, and storage OEMs. Custom silicon represents a growing share of revenue, with Marvell co-designing chips tailored to specific customer workloads such as AI acceleration, cloud networking, and data processing. These engagements typically span multi-year development and production cycles, creating deep customer integration and long-term revenue visibility.

Marvell’s portfolio is aligned with several long-term secular trends. Cloud service providers continue to expand data center capacity to support AI training, inference, and data-intensive applications, driving demand for higher-bandwidth interconnects, faster switching, and more efficient processing. In enterprise networking, Marvell supplies Ethernet switching, routers, and network interface controllers used in campus networks, corporate data centers, and Wi-Fi backhaul, supporting speeds from gigabit to multi-hundred-gigabit Ethernet. In carrier infrastructure, the transition to 5G and next-generation wired networks drives demand for Marvell’s baseband, transport, and connectivity solutions. Storage controllers and networking interfaces remain important contributors as global data creation continues to rise.

Outside core infrastructure, Marvell’s consumer exposure is concentrated in connectivity and storage-related silicon used in home gateways, routers, streaming devices, and select storage products, supporting Wi-Fi, Ethernet, and broadband access. In automotive, Marvell focuses on in-vehicle networking and compute connectivity for advanced driver-assistance systems, infotainment, and domain-based vehicle architectures, with automotive Ethernet chips and switches enabling high-speed, low-latency communication between sensors, compute units, and displays. In industrial markets, the company supplies networking and storage controllers for factory automation, robotics, and embedded systems.

Across these markets, Marvell leverages a common set of core technologies, including signal processing, high-speed data transmission between chips, Ethernet, switching, and custom silicon design, allowing it to scale R&D efficiently while maintaining exposure to long-term growth drivers such as AI adoption, cloud expansion, 5G rollout, and vehicle electrification.

Marvell operates an asset-light model focused on design and intellectual property, relying on leading foundry partners for manufacturing. This approach supports strong operating leverage, limits capital intensity, and enables a high conversion of operating income into free cash flow. Over time, a rising mix of cloud, AI, and custom silicon products has contributed to structural gross margin improvement. The company has reinforced this model through disciplined portfolio management, deemphasizing and at time even exiting from lower-growth, lower-margin businesses and reinvesting in networking, interconnect, and custom compute capabilities.

Data Surge

Marvell’s Data Center segment remains the company’s primary growth engine and reflects its expanding role in AI infrastructure. During the quarter, the segment delivered record revenue, driven by strong demand for interconnect, switching, and storage products, which more than offset near-term variability in custom silicon revenue tied to the timing of large customer programs.

Marvell’s scale-out optics and interconnect franchise, strengthened by the Inphi acquisition, continues to exhibit strong momentum, with optical interconnect revenue growing at a compound annual rate above 50% since the acquisition. Pluggable optical products – removable fiber-optic components used to connect servers and switches – remain a durable and growing market for large-scale data center networks. Marvell’s 800-gigabit optical products are now in broad commercial use, while its 1.6-terabit solutions are gaining traction, with volume shipments beginning in the second half of fiscal 2026. Alternative approaches that integrate optics directly into chips are expected to be adopted more slowly in these large data center networks, which extends the runway for Marvell’s pluggable-based product strategy. The company has also demonstrated early 3.2-terabit technology, extending its long-term bandwidth roadmap.

Active electrical cables represent another fast-growing opportunity. These are intelligent copper cables with built-in electronics that improve signal quality over short distances inside data centers. Marvell’s signal-processing technology is a key enabler of these solutions, supports compatibility across multiple system vendors, and increases Marvell’s content per rack and between racks.

Switching silicon is another expanding pillar. Switching revenue is expected to exceed $300 million this year, driven by high-capacity data center deployments. The next-generation 51.2-terabit switch platform is scheduled to ramp next year and is expected to drive switching revenue above $500 million in fiscal 2027. Marvell’s roadmap extends toward 100-terabit-class switching and scale-up switch architectures for AI networks, with early sampling in the second half of fiscal 2027 and production targeted for fiscal 2028.

Custom ASICs and application-specific standard products remain strategically important. The transition to a next-generation XPU platform at Marvell’s lead custom customer is fully covered by purchase orders for fiscal 2027, which reduces the risk of revenue gaps. Momentum is also building in designs that directly connect networking and memory expansion hardware to AI accelerators. Marvell has more than 15 design wins in this area, including intelligent network interface cards and memory expansion solutions based on high-speed interconnect standards, and estimates more than $2 billion of potential revenue by fiscal 2029 from NIC and memory-expansion products alone.

Outside of the Data Center, the Communications & Other segments, which include end markets like enterprise networking, carrier infrastructure, consumer and automotive, and industrial markets, are recovering as customer inventories normalize and refreshed products gain traction. Enterprise networking revenue is approaching a $1 billion annualized run rate by the fourth quarter, while carrier infrastructure revenue is expected to nearly double year over year.

Management continues to view the AI infrastructure buildout as a multi-year cycle. Marvell reports strong forward visibility into fiscal 2026 and fiscal 2027, supported by multi-year design wins, backlog, and purchase orders already in place for key programs. While guidance assumes potential supply constraints and periodic digestion phases, multiple growth engines, including optics, switching, custom silicon, XPU-attach, and emerging photonics, are ramping simultaneously, underpinning confidence in sustained multi-year expansion.

Chip Momentum

Marvell Technology has delivered strong top-line expansion over the past several years, with revenue growing at a compound annual rate of roughly 22% and earnings per share increasing at a 5.4% CAGR. This growth has been driven primarily by a shift in the company’s revenue mix, as the Data Center segment now accounts for more than 70% of total revenue. Rising AI-related demand for custom silicon, high-speed interconnect, and wins with large hyperscale customers have been the central contributors to this transformation. At the same time, earnings growth has begun to accelerate, reflecting increasing operating leverage as higher-margin AI and data infrastructure products scale.

The company’s most recent third quarter reinforced this trajectory. Marvell reported revenue of $2.08 billion, representing 3% sequential growth and 37% year-over-year growth, and exceeding both consensus expectations and the midpoint of management’s guidance range. Excluding the impact of the Automotive Ethernet divestiture, revenue growth would have been approximately 6% sequentially and 41% year over year, underscoring the underlying strength of the core business.

The Data Center segment remained Marvell’s primary growth engine, generating $1.52 billion, or 73% of total revenue. Segment revenue increased 2% sequentially and 38% year over year, reaching a new record as demand for custom silicon and electro-optical solutions tied to AI workloads continued to expand. The company’s remaining businesses, Enterprise Networking, Carrier Infrastructure, Consumer, and Automotive/Industrial, are reported within Communications & Other and together produced $557 million in revenue. This segment grew 8% sequentially and 34% year over year, with growth rising to roughly 50% on an ex-divestiture basis, reflecting a recovery in carrier infrastructure and improving enterprise networking demand.

Profitability metrics demonstrated the benefits of operating leverage. Adjusted gross margin increased to 59.7%, up 30 basis points sequentially, while adjusted operating margin expanded by 150 basis points to 36.3%. Adjusted earnings per share rose to $0.76, up 13% sequentially and 77% year over year, and exceeded market expectations. Cash flow from operations reached a record $582 million, an increase of 8.5% year over year, highlighting the cash-generating strength of Marvell’s asset-light, high-margin model.

Marvell also maintained a solid balance sheet. Net debt-to-EBITDA stood at 0.58x, providing substantial financial flexibility and placing the company among the top 40% of the more conservatively leveraged semiconductor peers. The company carries long-term credit ratings of “BBB-” from S&P, “BBB” from Fitch, and “Baa2” from Moody’s. Cash and equivalents totaled $2.7 billion at quarter-end, supported in part by proceeds from the Automotive Ethernet divestiture.

Looking to the fourth quarter, management expects revenue of approximately $2.2 billion. Adjusted gross margin is guided to a range of 58.5% to 59.5%, and adjusted EPS is expected to be $0.79, plus or minus $0.05. Data Center revenue is projected to grow at a high-single-digit percentage sequentially and around 20% year over year, driven by a rebound in custom silicon and continued strength in interconnect, switching, and storage. Communications & Other revenue is expected to increase at a low single-digit percentage sequentially and about 25% on a year-over-year reported basis, or roughly 40% excluding Automotive Ethernet.

Beyond the near term, management indicated that fiscal 2026 revenue is implied at approximately $10 billion, in line with analyst expectations. Data Center revenue is expected to grow more than 25% year over year, exceeding prior outlooks, while Interconnect is projected to grow faster than cloud capital expenditures, implying growth above 30%. Custom silicon revenue is expected to increase at least 20% year over year, with stronger momentum in the second half of the year. Switching, Storage, and other infrastructure businesses are now expected to grow at least 15% annually, while Communications & Other is projected to grow around 10%.

For fiscal 2028, management’s bottom-up base case, excluding any contribution from the Celestial acquisition, assumes roughly 40% growth in Data Center, a doubling of Custom silicon revenue from the fiscal 2027 base, and continued Interconnect growth that outpaces cloud capital expenditures. Combined with mid-teens growth in Switching and Storage and modest expansion in Communications, this framework implies a potential company-wide growth rate approaching 30%, underscoring Marvell’s positioning as a long-term beneficiary of AI-driven infrastructure investment.

Embedded Value

MRVL initiated dividend payments 14 years ago and has consistently delivered small but stable payments ever since, signaling stability and responsible financial management. It has declared a quarterly dividend of $0.06 for the most recent quarter.

As at most technology companies, buybacks remain the primary vehicle for shareholder compensation. Last year, the company announced that its Board of Directors authorized a $5 billion increase to the balance of its existing stock repurchase program. During the quarter, MRVL executed its $1 billion accelerated repurchase program and additionally repurchased $300 million of stock through its ongoing capital return program. The company also returned $51 million to shareholders through cash dividends in the quarter.

Shares of Marvell Technology have declined by roughly 31% over the past year, reflecting a mix of company-specific concerns and broader technology-sector volatility. Investor sentiment has been weighed down by fears that large hyperscale customers such as Microsoft and Amazon could shift portions of their AI ASIC spending toward internally developed silicon, potentially reducing third-party chip demand. These worries are amplified by Marvell’s relatively concentrated customer base and intense competition from larger peers such as Broadcom, contributing to sharper share-price declines despite continued signs of robust long-term AI infrastructure spending.

At the same time, several of these concerns appear overstated. Marvell continues to deepen its exposure to hyperscale AI platforms, including serving as a key silicon supplier for Microsoft’s Maia 200 accelerator and participating in large-scale data center expansions such as Microsoft’s Mount Pleasant project. In these deployments, Marvell supplies critical connectivity and infrastructure components, including Ethernet ASICs and optical DSPs, reinforcing its strategic position in next-generation data center architecture.

From a valuation perspective, the recent share price weakness has pushed Marvell’s stock to levels that appear materially below both its own historical norms and those of key peers. Based on commonly used metrics, including non-GAAP trailing and forward P/E, forward EV/EBITDA, price-to-book, and price-to-cash-flow, MRVL is trading at more than a 20% discount to its long-term averages. For investors, this suggests that the market is currently assigning a more cautious outlook to Marvell’s growth and profitability profile than it has historically, even as the company remains positioned in structurally attractive markets such as data center networking, custom silicon, and AI infrastructure.

Compared with companies such as Broadcom, Astera Labs, and AMD, MRVL sits toward the lower end of the group based on forward EV/EBITDA, price-to-book, price-to-cash-flow, PEG, and forward P/E ratios. If Marvell continues to execute on its AI and data-center roadmap, the current valuation discount offers value-oriented investors an attractive entry point, with the potential for meaningful multiple expansion over time alongside compounding earnings growth.

Analysts remain optimistic about MRVL as the company’s revenue mix continues to shift toward long-cycle, high-volume customers and supporting higher average selling prices for networking and storage silicon. Strong gross margins and improving net margins underscore pricing power and operating efficiency, enabling continued investment in R&D and selective M&A. Meanwhile, the Celestial AI acquisition strengthens Marvell’s AI compute and interconnect capabilities, deepening product differentiation and reinforcing its competitive position in AI infrastructure.

Consensus estimates suggest roughly 51% upside from current levels, while more optimistic projections point to potential gains of up to 98%. The wide dispersion in forecasts reflects differing views on how quickly and profitably Marvell’s AI-driven data center business will scale, with bullish scenarios centered on sustained high growth and margin expansion, while more cautious views emphasize execution risk and competitive intensity.

Against this backdrop, discounted cash flow analysis indicates that MRVL is trading at an estimated 17% discount to its intrinsic value, supporting the case that the stock offers an attractive long-term value opportunity.

Investing Takeaway

Marvell presents a compelling value opportunity for long-term investors. The company has transformed from a storage-focused chip supplier into a diversified provider of high-performance semiconductor solutions for cloud, AI, and data center infrastructure. Its focus on custom silicon, networking, and interconnect technologies supports higher margins, recurring revenue, and strong operating leverage. Recent share-price weakness, driven by short-term market concerns and sector volatility, has pushed valuation below historical norms and relative to peers, creating a potential entry point for disciplined investors. With a robust asset-light business model, strong cash generation, and a disciplined capital-return program, the company combines growth exposure with financial stability. Strategic acquisitions in AI and cloud infrastructure further reinforce its competitive position, making the stock attractive for investors seeking both undervaluation and participation in a multi-year technology growth cycle.

Category: Smart Value