Muted Q3 Outlook
Commenting on the outlook, CEO Matt Murphy said, “In our third quarter, we face a worsening macro environment along with the ongoing impact from the current restrictions on shipments to Huawei, offset by a stabilizing storage business and the earlier than expected first production shipments of our 5G solutions.”
Q2 Performance
As expected, revenue saw a modest decrease of 1% to $657 million while adjusted earnings dropped 43% to 16 cents per share due to change in income tax rates and lower income. However, the headline numbers came ahead of expectations.
Analysts were anticipating sales of $652 million and adjusted EPS of 15 cents for the second quarter. Last quarter, the chipmaker had guided revenue of $650 million (up/down 3%) and adjusted EPS of 13 to 17 cents.
Storage business and networking products revenues decreased 1% and 3% respectively over last year due to lower demand from the customers. The chip supply ban to Huawei is expected to drag its performance in the latter half of the year.
Marvell is pinning its hopes on the ramp-up of 5G technology from its clients. The 5G production ramp up is expected to start in the latter half of the year as the transition from 4G to 5G networks resume from the customers. The company expects demand to increase for its Fusion processors and custom multiple-input, multiple-output (MIMO) chips.
However, 5G-related deployment benefits would be accretive to the top and bottom line either in the Q4 period or in the next fiscal year.
Looking Ahead
For the fiscal year 2020, analysts are expecting non-GAAP EPS of 79 cents on revenue of $2.76 billion.