Marvell Technology Posts Lower FCF Margins, But Revenue Is Could Surge Next Year - Is MRVL Stock Too Cheap?

Marvell Technology (MRVL) , the custom system-on-a-chip designer, had lower-than-expected Q2 FCF and FCF margins, as in Q1. Nevertheless, analysts expect revenue to surge over 51% next year. As a result, MRVL stock could have over 34% upside using conservative FCF margin and FCF yield analysis.

MRVL closed down over 2.2% on Monday, Aug. 31, at $211.66 . That's below its pre-earnings release peak of $251.01 on Aug. 20.

Marvell Technology's Aug. 27 Q2 earnings release shows revenue was higher than expected, according to Seeking Alpha, but earnings per share were just 1 cent better than forecasts.

As Barchart reported, its record growth in revenue and earnings was propelled by data center demand, which is expected to stay strong.

But here is why I think the stock is down. Free cash flow (FCF), FCF growth, and FCF margins were much lower than the high performance achieved in Q1. In short, the market was disappointed that the company didn't repeat these high growth rates and margins.

Marvell Technology doesn't report its FCF numbers. But Stock Analysis data shows that in Q2 it generated $478.8 million, compared to $414.1 million a year ago. That was 15.62% higher. However, in Q1, FCF growth YoY was higher at 125.6%.

Moreover, compared to last year's Q2, the FCF margin was lower. For example, in Q2, its FCF as a percent of revenue was 17.48% compared to 20.64% a year ago, and 19.98% in Q1.

The culprit was flat operating cash flow compared to Q1 and high capex requirements. For example, operating cash flow was $605 million in Q2 vs. $638.8 million in Q1. Investors don't like to see lower OCF, especially when revenue was higher in Q2 (i.e., $9.45 billion, +8.4% in Q2 over Q1 8.717 billion).

The point is that this has led to fears about ongoing OCF and FCF margins. But is this overdone?

For one, over the past year, as of Q2, its FCF margins have remained strong. For example, Stock Analysis reports that the trailing 12-month (TTM) FCF margin in Q2 was 18.31%. That's only slightly lower than the Q1 TTM FCF margin of 19.11%, but much higher than the 17.04% 2026 FCF margin.