Marvell Technology announced on Thursday that its first-quarter results will be below market estimates because of the company’s wireless infrastructure, consumer, and corporate industries’ weak demand.
In extended trading, shares dropped by around 7%.
Due to the weak demand in its enterprise and wireless carrier segments, the company had warned in November that it expected about half of its revenue to decrease in the first quarter.
Customers, including cloud service providers and telecom operators, have been working on clearing their excess chip inventory after rapidly stocking up during the pandemic to avoid supply constraints.
These inventory corrections hinder the prospects of new orders from Marvell.
But the company’s data center artificial intelligence hardware was a bright spot, and executives said they expect revenue from AI and standard cloud data center products to grow sequentially in the fiscal first quarter.
In an interview with Reuters, CEO Matt Murphy said that AI as a total percentage of revenue was 10% last fiscal year and would grow “meaningfully” in the company’s current fiscal year.
“AI is a key contributor to the total data center number, now north of 50% of the company total,” Murphy said. “It’s a huge transformation.”
Revenue for the company’s data center segment, which includes its custom AI chip business and networking equipment, rose 54% to $765.3 million, compared with estimates of $759.8 million.
The company forecast first-quarter adjusted earnings per share of 23 cents, plus or minus 5 cents, compared with estimates of 40 cents per share, according to LSEG data.
Marvell said it expects first-quarter net revenue to be $1.15 billion, plus or minus 5%, compared with estimates of $1.37 billion.
The company reported fourth-quarter revenue of $1.43 billion on earnings of 46 cents per share, adjusted for stock-based compensation, among other things.
Marvell also announced a $3 billion stock buyback authorization on Thursday.
“We have tremendous confidence in our business and the outlook for the company, in particular with this architectural shift to accelerated computing and infrastructure and AI,” Murphy said.
