Marvell Technology (MRVL Quick QuoteMRVL - Free Report) reported better-than-expected results for the second quarter of fiscal 2024, wherein the top and bottom lines outpaced the Zacks Consensus Estimate. Additionally, the chipmaker’s second-quarter revenues and earnings came above the midpoint of management’s guidance range.

Wilmington, DE-based Marvell reported non-GAAP earnings of 33 cents per share, beating the Zacks Consensus Estimate by a penny. The bottom line was also above the midpoint of the company’s previous forecast of 32 cents (+/- 5 cents).

The semiconductor company reported revenues of $1.34 billion, which surpassed the consensus mark of $1.33 billion. The top line was also higher than the midpoint of management’s guidance of $1.33 billion (+/- 5%).

However, non-GAAP earnings per share and revenues fell 42.1% and 12%, respectively, from the year-ago quarter. This decline can primarily be attributed to customer inventory reduction actions and a weakening enterprise market amid the ongoing macroeconomic uncertainty, which is weighing on the demand for its chips and networking hardware.

Quarter Details

Data center revenues decreased 28.5% year over year to $459.8 million. The segment accounted for 34% of the quarter’s total revenues, highlighting that it is currently MRVL’s largest end market.

Revenues from enterprise networking declined 3.7% year over year to $327.7 million and accounted for 24% of the total revenues. The year-over-year decline was primarily due to inventory corrections, which impacted customer demand in this end market.

Carrier infrastructure revenues, which constituted 21% of the total revenues, fell 3.4% year over year to $275.5 million. The decline was mainly due to ongoing demand weakness and inventory correction actions by customers.

Automotive/Industrial revenues grew 32% year over year to $110.2 million, mainly driven by strong growth in the automotive business, which continued to benefit from the growing adoption of Ethernet in cars. Revenues from this segment constituted 8% of the total revenues.

Consumer revenues, representing 13% of the total revenues, increased to $167.7 million from $164.4 million in the year-ago quarter.

Marvell’s non-GAAP gross profit of $808.1 million reflected a year-over-year decline of 18%. However, the non-GAAP gross profit improved approximately 2% sequentially. The non-GAAP gross margin of 60.3% contracted 470 basis points (bps) on a year-over-year basis but expanded 30 bps sequentially. The sequential increase in the non-GAAP gross margin was mainly driven by cost improvements, partially offset by a weaker revenue mix.

Non-GAAP operating expenses of $448 million increased 3.8% year over year but declined 2.3% sequentially.

Marvell’s non-GAAP operating margin of 26.9% contracted 960 bps from the year-ago quarter but improved 170 bps sequentially. The quarter-over-quarter expansion in the non-GAAP operating margin was mainly driven by an improved gross margin and lower operating expenses.

Balance Sheet and Cash Flow

Marvell exited the second quarter with cash and cash equivalents of $423 million compared with the previous quarter’s $1.03 billion. The company’s long-term debt totaled $3.13 billion, slightly lower than the previous quarter’s $3.15 billion.The company generated cash worth $112.5 million through operational activities in the second quarter and $320.9 million in the first half of fiscal 2024.

Marvell returned $51.7 million to shareholders through dividend payouts in the second quarter and $103.1 million in the first half of fiscal 2024.

Guidance

For the third quarter of fiscal 2024, Marvell expects revenues of $1.4 billion (+/- 5%). The non-GAAP gross margin is likely to be approximately 60.3%-61.3%, while non-GAAP operating expenses are estimated between $435 million and $440 million.

The company projects non-GAAP earnings per share for the third quarter to be approximately 40 cents (+/- 5 cents).

Zacks Rank & Other Stocks to Consider

Currently, Marvell carries a Zacks Rank #2 (Buy). Shares of MRVL have risen 54.6% year to date (YTD).

Some other top-ranked stocks from the broader technology sector are Palo Alto Networks (PANW Quick QuotePANW - Free Report) , Manhattan Associates (MANH Quick QuoteMANH - Free Report) and Salesforce (CRM Quick QuoteCRM - Free Report) . Palo Alto Networks and Manhattan Associates each sport a Zacks Rank #1 (Strong Buy), while Salesforce carries a Zacks Rank #2 at present. You can see the complete list of today's Zacks #1 Rank stocks here.

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