(Reuters) — Chipmaker Marvell Technology (MRVL) surpassed expectations for quarterly revenue and forecast third-quarter results above Wall Street estimates on Thursday, on the back of strong demand for its electro-optics products and an increase in custom AI programs.
The company's shares were up over 7% in after-hours trading on Friday.
Increased investments by big tech companies in generative AI applications are driving cloud customers to develop new data centers. This trend is fueling the demand for cloud-optimized silicon solutions, such as those offered by Marvell.
"Marvell's results and outlook clearly indicated the worse is now behind the company. While demand remained robust in the datacenter market, there are now early signs of demand recovery in the carrier and enterprise end-markets," Kinngai Chan, senior research analyst at Summit Insights, said.
Revenue for the company's data center segment, which includes its custom AI chip business and electro-optics portfolio, rose 92% to $880.9 million in the second quarter, compared with analysts' estimates of $865.2 million, according to LSEG data.
For the third quarter, Marvell forecast revenue to be $1.45 billion, plus or minus 5%, compared with an estimate of $1.40 billion.
On an adjusted basis, it expects income per share of 40 cents, plus or minus 5 cents, compared with estimates of 38 cents.
"Next quarter, we expect our combined enterprise networking and carrier end markets to return to growth, while our data center end market growth accelerates," CEO Matt Murphy said. Marvell, in April, announced it has won new business contracts to assist large U.S.-based cloud computing companies in designing custom chips for artificial intelligence.
The company counts major corporations such as Amazon.com among its clients, aiding in the development of custom chips for their cloud operations.
Revenue for the second quarter ended Aug. 3 was $1.27 billion, beating estimates of $1.25 billion.
(Reporting by Juby Babu in Mexico City; Editing by Mohammed Safi Shamsi)