Should Investors Hold or Fold MRVL Stock at a P/S Multiple of 12X?

Marvell Technology MRVL is trading at a Price-to-Sales (P/S) multiple of 12X compared to the Zacks Electronics - Semiconductors industry’s P/S multiple of 5.13X. The stock is trading at a premium, which is further substantiated by the Zacks Value Score of F.

MRVL Forward 12-Month (P/S) Valuation Chart

Image Source: Zacks Investment Research

The premium valuation of MRVL stock has been caused by a year-to-date rise in stock price. Shares of MRVL have rallied 128.1% compared with the Zacks Electronics - Semiconductors industry and the Zacks Computer and Technology sector’s appreciation of 24.3% and 11.7%, respectively, in the same time frame.

MRVL YTD Performance Chart

Image Source: Zacks Investment Research

Given the dynamics, investors must be wondering if it’s the right time to invest, retain or sell the stock. Let’s discuss the fundamentals of the company to get a better insight.

MRVL Emerges as a Key AI Capex Winner

Marvell Technology has laid out an ambitious growth trajectory, with revenues expected to increase approximately 40% year over year in fiscal 2027 and another 45% in fiscal 2028 to roughly $16.5 billion. MRVL expects its data center business to remain the primary growth driver, with revenues projected to rise approximately 50% in fiscal 2027 and accelerate to about 55% growth in fiscal 2028.

Rather than relying on a single product cycle, Marvell Technology is participating across five AI infrastructure growth engines: scale-out optics, scale-across data center interconnect (DCI), scale-up optics, Ethernet switching and custom silicon. Scale-out optics remains a key near-term driver as expanding AI clusters increase demand for high-speed connectivity.

Marvell Technology is benefiting from strong 800G PAM4 demand, while the transition to 1.6T is ramping rapidly. Meanwhile, scale-across networks, which connect AI clusters across separate data centers, could create another major opportunity as power and space constraints limit cluster expansion at single locations. MRVL already supplies DCI solutions to all five major U.S. hyperscalers and expects the business to reach a $1 billion annualized revenue rate in fiscal 2028, roughly double fiscal 2026 levels.

Scale-up optics could become another meaningful fiscal 2028 contributor. MRVL is developing NPO and CPO solutions, while Celestial AI’s technology has already been selected by a Tier-1 hyperscaler. The company expects fiscal 2028 scale-up optics revenues to more than double its prior outlook of approximately $150 million. Ethernet switching is also scaling rapidly. MRVL expects scale-out switching revenues to exceed $600 million in fiscal 2027 and track toward a $1 billion annualized rate in fiscal 2028.

Custom silicon could provide the largest fiscal 2028 step-up. After reaching approximately $1.5 billion in revenues, the business is expected to grow more than 20% in fiscal 2027 and more than double in fiscal 2028. Marvell Technology has been transforming itself as a key contributor to the connectivity hardware solutions for AI infrastructure and data centers. Marvell Technology now expects its interconnect business to grow more than 70% year over year in fiscal 2027, supported by scale-out PAM ramp-ups and scale-up and scale-across networking products. However, the massive demand has also resulted in short-term challenges.

MRVL Grapples Competition and Gross Margin Contraction

Macroeconomic and geopolitical uncertainties remain a meaningful overhang on Marvell Technology’s near-term performance. Global trade tensions, evolving U.S. chip export restrictions and tariffs create operational and demand-side risks, particularly given MRVL’s reliance on hyperscalers and global supply chains. Marvell Technology’s rapid growth in AI-driven custom silicon is heavily tied to hyperscalers, creating concentration risk. In the fourth quarter of fiscal 2026, 74% of total revenues came from data centers, with more than 90% of that tied to AI and cloud hyperscaler demand.

The company faces stiff competition in the networking and custom silicon space from Broadcom AVGO, Astera Labs ALAB and Advanced Micro Devices AMD. Broadcom is a leader in the domain of custom silicon solutions for data centers. Broadcom’s advanced 3.5D XDSiP packaging platform is critical to ensure the performance and efficiency of custom AI XPUs. Advanced Micro Devices is another established player in the custom silicon solutions and AI accelerator market.

Advanced Micro Devices offers semi-custom SoCs and Instinct Accelerators to power data centers. Astera Labs’ Leo CXL smart memory controllers are built for memory expansion up to two terabytes and improve interoperability to accelerate AI performance and cloud computing. The competition from Broadcom, Astera Labs and Advanced Micro Devices has led MRVL to scale up its product delivery faster. While MRVL is scaling into higher-value AI opportunities, the margin profile can vary with the pace of custom ramp-ups, competitive pricing and the mix of optics, switching and silicon content.

If growth tilts toward lower-margin programs or pricing tightens as competitors push for share, earnings leverage may lag revenue growth, even in an expanding AI spending cycle. In the first quarter of fiscal 2027, non-GAAP gross margin declined to 58.9% from 59.8% a year ago and 59% in the previous quarter. Despite the gross-margin pressure, Marvell Technology continues to generate substantial operating leverage. Non-GAAP operating margin expanded to 35% in the first quarter from 34.2% a year earlier.

This indicates that rapid revenue growth is allowing operating expenses to grow more slowly than revenues. However, the near-term gross-margin outlook remains stable rather than expansionary. For the second quarter of fiscal 2027, MRVL expects non-GAAP gross margin of 58.25-59.25%. To conclude, gross-margin expansion is not the main earnings driver for Marvell Technology right now. MRVL is prioritizing rapid growth across custom silicon, optical interconnects and switching. The Zacks Consensus Estimate for MRVL’s bottom-line growth suggests a year-over-year rise of 42.3%. Estimates have remained unchanged in the past 30 days.

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Conclusion: Hold MRVL Stock Now

Marvell Technology continues to benefit from the expanding AI infrastructure market, driven by strong momentum in interconnect, switching, custom silicon and optical networking. Nevertheless, its premium valuation relative to the industry and a highly competitive landscape with players like Broadcom, Astera Labs and Advanced Micro Devices limit upside in the event of execution missteps. We therefore recommend holding this Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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