Marvell lands a $120 billion Google deal and the stock drops 8%
A chip company announces a Google order that could be worth $120 billion, beats its own quarter, and then watches the stock fall 8%. Marvell just gave a clinic on the difference between a big contract and near-term cash.
Three Key Facts
The quarter was genuinely good. Marvell posted roughly $2.74 billion in revenue against a $2.71 billion consensus, with earnings of $0.94 a share, also slightly ahead. Data center sales grew 46% year over year, and the company guided to about $12 billion for fiscal 2027 and about $18 billion for fiscal 2028.
The Google deal has a $120 billion ceiling. On August 19 Marvell announced a $12.2 billion custom-silicon agreement with Google, which Stifel analysts modeled as up to $120 billion of revenue over seven years. Google received warrants for as many as 58.97 million Marvell shares, most vesting across 240 tranches — one tranche for every $500 million of custom-product revenue, running through fiscal 2033.
The money does not arrive until fiscal 2029. CEO Matt Murphy said plainly that Google revenue only becomes substantially meaningful in fiscal 2029. The stock had already run more than 220% over the past year and trades at roughly 58.4 times forward earnings against Broadcom's 32.2. With expectations borrowed from 2029, the print handed the shares back to gravity.
WangDou's Take
That $120 billion figure is a $12.2 billion contract multiplied by seven years and then by the most generous assumptions available. The market priced in the ceiling first; once the CEO said out loud that the meaningful revenue starts in fiscal 2029, the 8% drop was just the subtraction catching up.
The real story sits in the warrant structure. One tranche unlocks for every $500 million of custom-product revenue, 240 tranches, grinding out to fiscal 2033. That is not an order book, it is a seven-year wager — and the counterparty is one of the few companies on earth best equipped to design its own silicon. Google paid in its supplier's stock and moved a healthy share of the risk across the table.
58.4 times versus 32.2 times: that gap is not a technology premium, it is a narrative premium. Custom AI silicon is a real business, but it is structurally lower margin, deeply locked in, and the pricing power sits with the customer. This selloff is not bad news. It is the market finally separating who is earning money from AI and who is merely standing in line for it.
Source: Yahoo Finance, Benzinga