AI drives profits beyond expectations, yet Micron's stock price declines. What are investors worried about?

The AI wave drives record growth, and Marvell has delivered a "perfect" financial report, but the market voted with its feet, pushing the stock price down over 3% in after-hours trading.

Beneath the surface prosperity driven by the AI wave, what investors are truly concerned about is not the impressive financial numbers, but whether the partnership between this chip giant and Amazon can be sustained, as well as the structural risks exposed by excessive reliance on a single customer.

Overnight, Marvell released its Q1 financial report for fiscal year 2026, here are the key performance highlights:

• Financial performance: Q1 net revenue of $1.895 billion set a record high, up 63% year-over-year; net profit of $177 million, GAAP gross margin of 50.3%, non-GAAP gross margin of 59.8%; non-GAAP earnings per share of $0.62, exceeding analysts' expectations of $0.61;

• Business structure: Data center business accounted for 76% of total revenue, growing 76% year-over-year; custom AI chip business is rapidly expanding, with strong shipments of optical products;

• Future guidance: Q2 expected net revenue of $2 billion (plus or minus 5%), non-GAAP gross margin of 59-60%, non-GAAP earnings per share of $0.67;

• Strategic focus: A custom AI investor event will be held on June 17 to showcase technology platforms and long-term market share goals in the custom AI infrastructure field;

• Key concerns: High reliance on the data center market, rising customer concentration risk, partnership with Amazon, and continuously rising inventory levels;

It is worth mentioning that despite the impressive financial report data, Marvell still saw a decline overnight, dropping over 3% in after-hours trading, and has fallen over 40% year-to-date.

Some bullish investors believe there is nothing wrong with the financial report and expect the stock to recover to previous highs by the end of the year, while another bullish investor anticipates a short squeeze.

AI dividends drive explosive performance, but growth structure imbalance intensifies

The $1.895 billion Q1 revenue is indeed impressive, with a year-over-year growth rate of 63% being remarkable in the current semiconductor industry environment. However, a closer analysis of the data structure reveals that Marvell's growth story is highly dependent on a single track: the data center business accounted for 76% of total revenue, further increasing from the same period last year.

The data center business generated $1.441 billion in revenue, growing 76% year-over-year, almost contributing all of the company's growth momentum. In contrast, other business segments showed significant divergence: revenue from carrier infrastructure business was $138.4 million, up 93% year-over-year; however, revenue from automotive/industrial business was $75.7 million, down 2% year-over-year, reflecting that this long-term growth market, which was highly anticipated, still faces challenges This "one-legged growth" model exposes obvious risks. When the AI investment boom cools down or customer demand fluctuates, Marvell's performance may face a cliff-like decline, and the partnership between Marvell and Amazon has become the focus of the market.

The most pressing question on Wall Street: How long can the honeymoon period with Amazon last?

Morgan Stanley analysts bluntly stated in their research report before the earnings call:

"Investors will seek more information about the Amazon partnership during the earnings call, which has become a hot topic on Wall Street."

Marvell provides data center chips and custom AI products, including Trainium chips, for this cloud computing giant's partnership with Amazon Web Services (AWS). However, this seemingly solid partnership is facing uncertainty.

Morgan Stanley's channel research shows:

"Although the Trainium 2 chip is robustly built and optical products are performing strongly, ASIC (Application-Specific Integrated Circuit) revenue 'should be fine in the short term,' the market is debating the chips to be launched later this year, which is clearly not a high-quality business."

Earlier this month, Melius Research analysts indicated that Marvell's collaboration on Amazon's Trainium 3 and Trainium 4 chips casts a shadow over the outlook for 2026 to 2028.

Custom AI Chips: Structural Risks Behind the New Growth Engine

CEO Matt Murphy emphasized the "rapid expansion" of the custom chip business in the earnings report, viewing it as a core driver of growth for Q2 and beyond. The company even scheduled a custom AI investor event on June 17, clearly placing high hopes on this business.

However, the custom ASIC business model itself carries inherent risks. The moat of this business model is relatively shallow and highly dependent on the stability of customer relationships. Once customers begin to develop their own chips or turn to other suppliers, the impact will be direct and profound.

In terms of profitability, a GAAP gross margin of 50.3% and a non-GAAP gross margin of 59.8% are indeed impressive, but R&D expenses of $507.7 million in Q1 accounted for 26.8% of revenue, reflecting cost pressures in the increasingly competitive AI chip landscape.

Outlook: Cautious Optimism Behind Q2 Guidance

The Q2 net revenue guidance of $2 billion implies a 5.5% quarter-over-quarter growth, but operating expenses are expected to rise significantly to about $735 million, compared to $681.8 million in Q1, indicating the intensity of the competitive environment.

Overall, Marvell is at the forefront of the AI wave, and the short-term performance is undoubtedly impressive, but investors need to pay attention to its excessive reliance on the data center market, the sustainability of its custom AI business, and the progress of its diversification efforts in other markets. The custom AI investor event on June 17 will be an important window to observe the clarity of the company's long-term strategy and a critical moment for Marvell to regain Wall Street's trust