Goldman Sachs raises MRVL target price to $125 but keeps a Neutral rating, with the focus on upside in the data center business

Overview

This report is Goldman Sachs' preview of Marvell Technology Inc. ahead of its 1Q earnings release. The core view is that the market already has a constructive expectation heading into MRVL's earnings, primarily driven by higher hyperscale cloud customer capex, improvement in the optical networking business, and a potential Google custom ASIC partnership. Goldman Sachs expects the company to raise CY26/27 revenue growth guidance, with growth mainly driven by the data center business.

Core views

Goldman Sachs maintains a Neutral rating on MRVL while raising its target price and earnings estimates. The report argues that the data center business remains the most important source of upside, with custom ASICs, optical communications, and future custom CPU demand potentially benefiting from the spread of AI and agentic AI. However, investor expectations are already high, and the current share price is well above the target price, so the risk/reward does not justify a more positive rating.

Analysis framework

The report combines an earnings preview with a valuation update: first assessing market expectations ahead of the results and the likely call topics that could move the stock, then raising FY27/28 EPS estimates and re-evaluating risk/reward using a 12-month target price method based on P/E multiples. It also compares Goldman Sachs' estimates with consensus for revenue, margins, EPS, and data center segment revenue.

Methodology notes

• Valuation methodsP/E target price method

  The 12-month target price is based on 28x P/E multiplied by normalized EPS of $4.50.

  Goldman Sachs raised the P/E multiple from 25x to 28x because peer valuation multiples have increased; normalized EPS was raised from $4.00 to $4.50, reflecting upward revisions to earnings estimates.

• Fundamental factorGS Factor Profile

  Assesses stock characteristics across growth, financial returns, valuation multiples, and composite percentile ranks.

  Growth uses forward sales, EBITDA, and EPS growth; financial returns use ROE, ROCE, and CROCI; multiples use metrics such as P/E, P/B, and EV/EBITDA; composite percentile ranks combine growth, financial returns, and valuation factors.

• M&A evaluationM&A Rank

  MRVL's M&A Rank is 3.

  Goldman Sachs' M&A Rank measures the likelihood of a company becoming an acquisition target on a scale from 1 to 3; 3 indicates a low probability and is typically not included in target price calculations.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• MRVL.US

  Core coverage name

  Strengths

  The data center business benefits from AI capex, demand for optical communications, and custom ASIC opportunities; Goldman Sachs expects FY27/28 revenue, operating profit, and EPS to be above consensus.

  Weaknesses

  The current share price is above Goldman Sachs' target price, and market expectations are already high; near-term gross margins may be affected by changes in the mix of custom ASIC and optical communications businesses.

  Comparison

  Goldman Sachs' FY2027E and FY2028E revenue, operating profit, EPS, and data center revenue forecasts are generally above consensus, with FY2028E EPS about 5% above market expectations.

  Risks

  Slower AI spending, loss of share in custom compute, weaker-than-expected recovery in legacy businesses, and gross margin volatility.

Key data

• RatingNeutralGoldman Sachs maintains a Neutral rating on MRVL.
• 12-month target price$125The target price was raised from $100 to $125.
• Current share price$164.50The price is the closing price on 2026-05-12.
• Implied returnAbout -24%The target price implies downside relative to the current price.
• FY27/28 EPS revisionUp about 5%Mainly driven by higher data center revenue forecasts.
• CY26/27 forecast versus marketRevenue about 3% higher, EPS about 5% higherGoldman Sachs' updated revenue and EPS forecasts are, on average, above consensus.
• FY2027E revenue$11,117mnGoldman Sachs' new forecast, about 2% above consensus.
• FY2028E revenue$15,356mnGoldman Sachs' new forecast, about 3% above consensus.
• FY2028E EPS ex-SBC$5.70Goldman Sachs' new forecast, up 9% from the prior forecast of $5.25 and about 5% above consensus.

Impact & implications

Near-term stock price reaction may depend on whether the company confirms a stronger data center growth path, discloses or hints at a Google custom ASIC partnership, and how gross margin fluctuates as the mix shifts toward custom ASICs and optical communications. Medium term, if Microsoft-related custom ASIC revenue scales in the second half of 2026 and in 2027, and a potential Google partnership materializes, Marvell's data center revenue elasticity could continue to be revised upward; however, if AI spending slows or custom compute share is lost, valuation support will face pressure.

Risks

• A broad slowdown in AI spending could weaken upside in data center revenue.
• The custom compute business could lose share.
• Upside in custom ASIC and optical communications could lead to short-term gross margin volatility.
• Investor expectations are high heading into the earnings release, and the stock could come under pressure if guidance or partnership progress disappoints.
• A weaker-than-expected recovery in legacy businesses would limit the recovery in revenue and earnings.

What to watch

• Whether the earnings call confirms a potential Google custom ASIC partnership and its revenue contribution.
• The pace of scaling for Microsoft-related custom ASIC revenue in the second half of 2026 and in 2027.
• Whether the company raises CY26/27 or FY27/28 revenue growth guidance.
• Whether the optical networking business continues to outperform expectations.
• Whether gross margin fluctuates as the mix shifts toward custom ASICs and optical communications.
• Whether the spread of agentic AI drives growth in custom CPU revenue.