Marvell Technology forecast Q3 revenue below analyst expectations, leading its shares to fall 12% after hours on August 28, 2025.

The US-based chipmaker, which designs custom chips for AI workloads for companies like Microsoft and Amazon, has seen its stock drop 30% in 2025 amid concerns about its data center market position.

Marvell expects Q3 revenue of US$2.1 billion, plus or minus 5%, while analysts had estimated US$2.1 billion.

In Q2, Marvell reported revenue of US$2 billion, matching estimates, and data center revenue rose 69% to US$1.5 billion, slightly below the US$1.5 billion forecast.

CEO Matthew Murphy said on a call that Q3 data center revenue will be flat compared to the previous quarter, with improvement expected in Q4.

🔗 Source: Reuters

🧠 Food for thought

1️⃣ Custom chip business faces inherent volatility from hyperscale customer cycles

Marvell’s “lumpy” custom ASIC performance reflects a structural challenge in serving hyperscale cloud providers, where deployment cycles create unpredictable revenue patterns.

The company’s CEO described this volatility as normal when large cloud providers build infrastructure, but the timing creates particular pressure given Microsoft’s delay of in-house AI chip releases and Amazon’s AWS losing market share to competitors1.

This lumpiness is compounded by Marvell’s heavy concentration in data centers, which comprised over 70% of the company’s total revenue in fiscal year 20252.

When individual hyperscale customers shift their deployment schedules or face competitive pressures, the impact on chip suppliers like Marvell becomes magnified1.

2️⃣ Technical execution challenges threaten customer relationships in competitive AI chip market

Beyond the cyclical challenges, Marvell appears to be facing fundamental technical issues with its SerDes technology, which is critical for networking and AI chip applications3.

These performance problems are reportedly straining relationships with major clients like Microsoft and Amazon, creating delays in product launches at a time when the AI chip market is projected to grow from $83.8 billion in 2025 to $459 billion by 20324.

The technical setbacks are particularly damaging in a market where customer relationships with top-tier cloud providers typically create strong barriers to entry and ensure stable revenue streams5.