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Networking chips designer Marvell Technology (NASDAQ: NASDAQ:MRVL) reported results in line with analysts' expectations in Q4 FY2024, with revenue flat year on year at $1.43 billion. On the other hand, next quarter's revenue guidance of $1.15 billion was less impressive, coming in 16% below analysts' estimates. Its non-GAAP profit of $0.46 per share was flat year on year.
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Marvell Technology (MRVL) Q4 FY2024 Highlights:
- Revenue: $1.43 billion vs analyst estimates of $1.42 billion (small beat)
- EPS (non-GAAP): $0.46 vs analyst expectations of $0.46 (small miss)
- Revenue Guidance for Q1 2025 is $1.15 billion at the midpoint, below analyst estimates of $1.37 billion
- EPS (non-GAAP) Guidance for Q1 2025 is $0.23 per share at the midpoint, well below analyst estimates of $0.40
- Free Cash Flow of $475.6 million, similar to the previous quarter
- Inventory Days Outstanding: 103, up from 99 in the previous quarter
- Gross Margin (GAAP): 46.6%, down from 48.4% in the same quarter last year
- Market Capitalization: $70.34 billion
Moving away from a low margin storage device management chips in one of the biggest semiconductor business model pivots of the past decade, Marvell Technology (NASDAQ: MRVL) is a fabless designer of special purpose data processing and networking chips used by data centers, communications carriers, enterprises, and autos.
Semiconductor ManufacturingThe semiconductor industry is driven by demand for advanced electronic products like smartphones, PCs, servers, and data storage. The need for technologies like artificial intelligence, 5G networks, and smart cars is also creating the next wave of growth for the industry. Keeping up with this dynamism requires new tools that can design, fabricate, and test chips at ever smaller sizes and more complex architectures, creating a dire need for semiconductor capital manufacturing equipment.
Sales GrowthMarvell Technology's revenue growth over the last three years has been strong, averaging 26.5% annually. But as you can see below, this quarter wasn't particularly strong, with revenue growing from $1.42 billion in the same quarter last year to $1.43 billion. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions (which can sometimes offer opportune times to buy).
This was a sluggish quarter for the company as its revenue dropped 0.6% year on year, in line with analysts' estimates. Marvell Technology's growth, however, flipped from negative to positive this quarter. This encouraging sign will likely be welcomed by shareholders.
Although Marvell Technology returned to positive revenue growth this quarter, its management team expects revenue to decline 13% next quarter. On the other hand, Wall Street expects the favorable trend to continue, projecting 9.7% revenue growth over the next 12 months.
Product Demand & Outstanding InventoryDays Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business' capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.
This quarter, Marvell Technology's DIO came in at 103, which is 10 days above its five-year average, suggesting that the company's inventory has grown to higher levels than we've seen in the past.
Key Takeaways from Marvell Technology's Q4 Results We struggled to find many strong positives in these results. Both Its revenue and EPS guidance for next quarter missed analysts' expectations and its operating margin shrunk. Overall, the results could have been better. The company is down 11.1% on the results and currently trades at $75.5 per share.