Marvell Technology Group(NASDAQ: MRVL) has borne the brunt of the stock market sell-off in 2022 so far, but shares of the chipmaker were soaring following the release of its fiscal 2023 first-quarter results (for the three months ended April 30) on May 26.
The company, whose chips are used in several fast-growing areas such as data centers, automotive, enterprise networking, and carrier infrastructure, reported impressive growth in revenue and earnings. Even better, Marvell's guidance showed investors that its impressive growth is here to stay, which explains why the stock price popped 6.7% after the results were out.
Let's take a closer look at Marvell's quarterly performance and check why this semiconductor stock could sustain its impressive growth for a long time to come.
Marvell Technology is growing at a red-hot pace
Marvell Technology's fiscal 2023 first-quarter revenue shot up 74% year over year to a record $1.45 billion, driven mainly by a stronger-than-expected performance from the data center market. As it turns out, 88% of Marvell's quarterly revenue came from selling chips to the data infrastructure end market, which is witnessing healthy demand thanks to cloud computing, 5G wireless networks, and automotive applications.
The chipmaker also reported a sharp jump in the bottom line, with non-GAAP earnings coming in at $0.52 per share as compared to $0.29 per share in the prior-year period. Wall Street would have settled for earnings of $0.51 per share on $1.43 billion in revenue. Marvell's guidance was the icing on the cake, as the company expects revenue to increase 41% year over year to $1.51 billion in fiscal Q2, while non-GAAP net income is expected to land at $0.56 per share. That would be a big improvement over the prior-year period's adjusted earnings of $0.34 per share.
What's more, analysts are upbeat about Marvell's long-term prospects, and expect its earnings to grow at a compound annual rate of 42% for the next five years. It won't be surprising to see the chipmaker achieve such an impressive pace of growth over the long run given the end markets it serves.
The chipmaker can sustain its high pace of growth
A closer look at Marvell suggests that the data center market is a key growth hotspot for the company, as it accounted for 44% of its top line last quarter.
Revenue from the data center business increased 131% year over year to $640 million thanks to the deployments of Marvell's chips in high volumes to support faster connectivity and more bandwidth. Marvell expects more customers to deploy its data center chips going forward, and it also anticipates that its next-generation high-speed chips will help it gain more content in data center servers.
At the same time, Marvell is witnessing robust demand for its data center storage solutions. The company points out that the demand for its solid-state drive (SSD) and hard-disk drive (HDD) controllers is increasing thanks to the growing demand for high-capacity storage in the cloud. With Marvell winning contracts to supply next-generation storage controllers to memory OEMs (original equipment manufacturers), its data center storage business should continue to remain in good health.
More importantly, the data center chip market is expected to clock 21% annual growth through 2027 and hit $19 billion in revenue. Marvell supplies different types of data center chips that include data processing units (DPUs), ethernet controllers, switches, and storage solutions, among others, which should pave the way for robust growth in this segment thanks to the secular opportunity at hand.
Meanwhile, the company is also winning big from the 5G wireless infrastructure market, which is evident from the growth of the carrier infrastructure business, which produced 18% of its top line last quarter. Revenue from this segment jumped 50% year over year to $252 million last quarter, driven mainly by an increase in 5G deployments of Marvell's chips at multiple base station customers.
Marvell counts the top 5G infrastructure providers as its clients. As a result, the company is in a solid position to take advantage of the fast-growing 5G base station market, which is expected to grow at an annual pace of 37% through 2030, according to a third-party estimate.
In all, the fast-growing nature of the markets that Marvell serves tells us that it could keep growing at an eye-popping pace for a long time to come. As such, Marvell is a top semiconductor stock to buy, especially considering that it is trading at 25 times forward earnings, as compared to last year's multiple of 38.
10 stocks we like better than Marvell Technology Group
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now... and Marvell Technology Group wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of April 27, 2022