Marvell Technology Issues Soft Quarterly Gross Margin Outlook on Greater Custom Mix, B. Riley Says

03:43 PM EDT, 08/28/2026 (MT Newswires) -- Marvell Technology's (MRVL) fiscal third-quarter gross margin outlook came in a bit soft amid a higher custom product mix, following "solid" results for its just-concluded quarter, B. Riley Securities said in a note e-mailed Friday. Late Thursday, the chip designer's second-quarter results rose above Wall Street's estimates amid a surge in data center revenue. For the ongoing quarter, the company expects non-GAAP gross margin between 57.5% and 58.5% versus 58.9% reported for the prior quarter. "Revenue levels and product mix remain key determinants of gross margin in any given quarter, with the forecasted acceleration of our custom business creating the sequential headwind in the fiscal third quarter," Marvell Technology Chief Financial Officer Dan Durn said on an earnings conference call, according to a FactSet transcript. The company expects to maintain fourth-quarter gross margin "in this range," Durn said. The third-quarter gross margin outlook was below B. Riley's estimates amid "greater custom mix," analyst Craig Ellis said in a note to clients. "Overall, a solid (second) quarter in our view, with the diversifying data center base led by interconnect strength." Gross margin for the second half of fiscal 2027 is likely "a little below" on mix, while operating expenditures are a little higher on growth investments for Amazon (AMZN) Web Services Trainium, Alphabet's (GOOG, GOOGL) Google XPU, and Nvidia (NVDA) NVLink Fusion deals, Ellis said. "While (operating margins) should still strongly enter the 38%-to-40% range in (the fourth quarter), that's a little below our prior forecast given (gross margin) action," the analyst wrote. B. Riley lowered its price target on the Marvell Technology stock to $315 from $345, with a buy rating. The company's shares were down 9.9% in Friday late-afternoon trade. The stock has jumped about 156% so far this year. "We believe investors will get much more of the long-term growth outlook they'd like in six weeks at analyst day, with the model now defensively set on (gross margin) and OpEx," Ellis said. "We thus see a buy-the-dip opportunity, though acknowledged shares could trade sideways or even a bit lower into early (fourth quarter)." Earlier in the week, Morgan Stanley said chipmaking giant Nvidia offered a surprisingly strong fiscal 2028 revenue outlook, while its gross margin guidance provided clarity amid rising memory costs. Semiconductor manufacturer Broadcom (AVGO) is scheduled to report its fiscal third-quarter results Wednesday. "Overall, (Marvell Technology's) leverage is dented a bit near term as large customer programs get going, though longer-term growth and EPS seem strongly on track to what could be $10 to $11 in (2029 EPS), and much greater thereafter," Ellis said. Price: 217.54, Change: -23.91, Percent Change: -9.90