Written by: Rita

The market is still debating AI ASIC competition and optical communication share, and J.P. Morgan has raised its earnings per share forecast for Marvell Technology's CY28 to $11, which is 14% higher than the market consensus of $9.64. On August 24, J.P. Morgan published a forward-looking report for Marvell Technology's second quarter of fiscal year 2027 (July quarter), reaffirming its overweight rating, believing that its data center growth algorithm has only strengthened in the past 90 days.

Google's custom chip collaboration has been implemented, AWS Trainium 3 is beginning to ramp up, and Microsoft's Maia XPU order book is strong, with all three major cloud providers appearing on Marvell's client list. J.P. Morgan believes that the market has not yet fully priced in the company’s full-stack capabilities from optical communication DSP to XPU ASIC to switch chips.

July quarter performance expected to meet or slightly exceed expectations

Marvell Technology's second quarter of fiscal year 2027 (July quarter) performance is expected to meet or slightly exceed market expectations. Demand for optical communication DSP remains strong, with both the 1.6T and 800G generations ramping up simultaneously, Teralynx 10 switch chips continue to gain customer adoption, and the custom chip business is beginning to benefit from the initial ramp-up of the AWS 3nm Trainium 3 project.

J.P. Morgan expects that Trainium 3 shipments will accelerate in the second half of the year, while Trainium 2 will gradually phase out, resulting in a generational switch. The overlapping of the two generations of products will have a significant positive effect on Marvell's data center revenue. The growth trends for optical communication DSP and switches are also stable.

October quarter revenue guidance expected to exceed expectations

The market consensus for revenue in the third quarter of fiscal year 2027 (October quarter) is $3.028 billion, while J.P. Morgan expects that Marvell's official guidance will be close to $3.1 billion, implying a total revenue growth of 13% to 14% quarter-over-quarter. The growth rate of the data center segment is expected to be even faster, reaching a quarter-over-quarter growth rate of 16% to 18%.

Growth momentum comes from four aspects: a larger ramp-up in Trainium 3 shipments, continued strong demand for optical communication DSPs and switches, expanded XPU-related opportunities, and the Maia 3nm project advancing as planned. The order book for Maia 3nm for the 2027 calendar year is already quite solid, and design work around the next-generation Maia 2nm has also commenced.

Data center revenue outlook likely to be revised upward

The market's focus is on the revenue guidance for data centers in the 2027 calendar year. Currently, the company's expectation is for a 55% year-over-year growth, but J.P. Morgan believes this figure is conservative. The continuous ramp-up of optical communication DSP, customer expansion for Teralynx 10, the ramp-up of storage and CXL controllers, the scale of Trainium 3, visibility of Maia, and the widening pipeline of XPU supporting chips, combined, suggest that the revenue and earnings per share outlook for the 2026 to 2028 calendar years should exceed the current consensus.

The public establishment of the partnership with Google further validates Marvell's strategic value in the custom chip ecosystem of cloud vendors. J.P. Morgan emphasizes that this is not just a victory for a single XPU project, but represents a comprehensive enhancement of the company's position as an independent chip partner among large-scale clients.

Allocation recommendations and risk warnings

J.P. Morgan reaffirms its overweight rating with a target price of $240. Achieving earnings per share of $11 in the 2028 calendar year means a 14% increase over the current market consensus of $9.64, and this pathway is becoming increasingly clear.

The focus of risk includes several points: any marginal slowdown in AI capital expenditures would directly impact data center business; changes in the ASIC competitive landscape could affect market share; fluctuations in the optical communication market share need to be continuously monitored; and high customer concentration remains a structural discussion topic. J.P. Morgan believes that these risk points have been sufficiently discussed in the market, and the current valuation has already incorporated a considerable degree of cautious expectations, providing more upside potential than downside risks.

Disclaimer

This article is an organization and interpretation of third-party brokerage research reports (J.P. Morgan, August 24, 2026) by Chao Xiang Research, combined with public market information compilation. The ratings, target prices, earnings forecasts, and related judgments cited in the text represent the opinions of the brokerage's analysts and only reflect the position of their respective institutions, not the views of Chao Xiang Research, nor does it constitute any investment advice.

The market has risks, and decisions must be made independently. This article should not be used as the basis for buying or selling any securities.