As Google Allegedly Considers an AI Chip Deal with Marvell, Should You Load Up on MRVL Stock?

Shares of Marvell Technology (MRVL) ended almost 6% higher in yesterday's trading session after news reports emerged that Google parent Alphabet (GOOG) (GOOGL) is looking to partner with the company for its new set of custom chips. According to The Information, while one chip will be a memory processing unit (MPU) that will assist the workload of the tech titan's tensor processing units, or TPUs, the other chip will be a TPU itself, built for AI inference workloads.

Notably, this is not the only piece of good news that has been driving the MRVL stock price higher this year (+79% on a YTD basis), as a growing set of marquee customers, and a strong set of quarterly numbers, along with several upgrades by leading brokerages of the company's stock, have contributed to the rally.

The question: can this marvelous run of Marvell continue? That seems to be the case, and here's why.

Roaring End to 2025

Marvell Technology delivered an impressive finish to its fiscal year, with both revenue and earnings clearing Wall Street's estimates in the fourth quarter. The company has now beaten analyst expectations in eight of the last nine quarters, and over the past decade, it has grown its top line at a CAGR of 12.15%.

Notably, the quarter produced record net revenues of $2.2 billion, a 22.1% jump from the same period a year ago. AI continued to be a powerful tailwind for the business, as data center revenues climbed 21% year-over-year (YoY) to reach $1.65 billion. On the bottom line, the company posted earnings of $0.80 per share, a meaningful step up from the $0.60 it earned in the prior year period and a penny ahead of the consensus forecast of $0.79.

One area that drew some attention was operating cash flow, which came in at $373.7 million for the quarter, compared to $514 million during the same stretch a year earlier. The pullback was largely attributable to a significant buildup in working capital. Accounts receivable increased to $640.2 million from $30.5 million, while inventory levels rose to $370.5 million from $169.8 million. Despite this, the balance sheet remains in solid shape, with the company ending the period with $2.64 billion in cash, a figure that comfortably exceeds its short-term debt obligations of roughly $500 million.

Looking ahead to the first quarter of fiscal 2027, management guided for revenues between $2.28 billion and $2.52 billion, alongside earnings in a range of $0.74 to $0.84 per share. At the midpoints of both ranges, those projections imply YoY growth of approximately 26.6% in revenue and 27.4% in earnings, signaling continued confidence in the strength of demand across its core markets.

Marvell at the Right Place, at the Right Time

In an earlier analysis, a few weeks ago, I had mentioned how Marvell has some strengths unique to it and what makes it a notable competitor against its larger peer Broadcom (AVGO) in the burgeoning custom ASIC market.

What will certainly play a crucial role in Marvell's ascendancy is a deliberate and well-calculated strategic pivot by its leadership team. Rather than spreading resources thin across the XPU market, management has chosen to concentrate its efforts on AI connectivity, with particular emphasis on co-packaged optics and silicon photonics solutions that are being deployed within scale-up networks. To reinforce this direction, Marvell completed two significant acquisitions. The first, the takeover of Celestial AI, strengthens the company's standing in the co-packaged optics and silicon photonics space. The second, the acquisition of XConn Technologies, advances its capabilities in CXL and PCIe-based solutions for scale-up network environments. Together with a deliberate reallocation of internal resources toward its XPU attach solutions market, these moves collectively open the door to a total addressable market of about $94 billion by 2028.

Beyond the custom silicon opportunity, Marvell stands to gain considerably from the broader surge in demand for networking infrastructure. As AI buildouts intensify, both scale-out and scale-up deployments require more connection points across GPUs and ASICs, which translates directly into stronger demand for switches, optical transceivers, and digital signal processors. Alongside the growth in port count, there is an equally important dynamic at play, which is the steady rise in average selling prices that accompanies each new generation of higher bandwidth requirements. Even in scenarios where port volumes remain flat, the natural progression of the industry toward greater bandwidth capacity drives pricing upward, which benefits Marvell regardless.

Thus, this pricing tailwind gives Marvell a meaningful edge even where it does not necessarily lead on the ASIC side of the business. CEO Matt Murphy underscored this confidence on the earnings call, stating that the company expects its interconnect business to expand by more than 50% on a YoY basis, far ahead of the 30% growth it had previously anticipated. The momentum behind these numbers is structural in nature, rooted in a broad and ongoing transition across the AI infrastructure landscape, and Marvell appears to be exceptionally well-positioned to capitalize on what lies ahead.

Analyst Opinion on MRVL Stock

Considering this, analysts have deemed MRVL stock a consensus “Strong Buy.” While the mean target price has already been surpassed, the high target price of $170 indicates an upside potential of about 11% from current levels. Out of 36 analysts covering the stock, 27 have a “Strong Buy” rating, three have a “Moderate Buy” rating, and six have a “Hold” rating.

On the date of publication, Pathikrit Bose did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com