Morgan Stanley believes that Marvell Technology (MRVL.US) may provide better-than-expected guidance when reporting its latest quarterly results, following the recent divestiture of its Automotive Ethernet business and amid market concerns about Amazon's Trainium chips.

Marvell Technology is scheduled to announce its second quarter fiscal 2026 financial results after market close on August 28 (early morning August 29, Beijing time). Market consensus expects the company to report adjusted earnings per share of $0.67 and revenue of $2.01 billion for the quarter.

Earlier this month, Marvell Technology completed the sale of its Automotive Ethernet business to Infineon for $2.5 billion. This business was expected to contribute between $225 million and $250 million in revenue for fiscal 2026.

Morgan Stanley analysts led by Joseph Moore stated: "We expect upside potential from the optical business this quarter; while we have slightly lowered our expectations following the automotive business divestiture, excluding that impact, we anticipate guidance to be positive."

Moore added: "AI business revenue is projected at $876 million for the July quarter (up 6.6% sequentially) and $955 million for the October quarter (up 9.0% sequentially), with faster growth coming from Application-Specific Integrated Circuits (ASIC). We believe optical business performance may exceed our expectations driven by strong AI growth momentum, and we are more optimistic about optical business prospects compared to ASIC... Beyond short-term supply issues, we believe the optical business is stronger than commonly perceived, more durable and higher-margin than the ASIC business... While debates about Trainium 3 may continue, we believe we have passed the stage of overly high expectations and expect ASIC business revenue to steadily reach $2 billion this year."

Regarding other AI stocks, Morgan Stanley believes Micron Technology (MU.US) will face negative sentiment in the coming quarters. Moore stated: "For Micron, current HBM 3e high bandwidth memory pricing will undergo a hard reset with at least one customer—NVIDIA (NVDA.US)—next year, as NVIDIA has committed to full-year 2025 pricing. Market sentiment is quite negative, and we expect HBM to maintain a meaningful premium over DDR5, although the premium is narrowing."