Marvell Technology's (MRVL) in-line Q1 results were driven by strength from its artificial intelligence data centers and carrier and a "recovery in carrier and enterprise," Morgan Stanley said in a Friday research report.

The company's optical business faced headwinds not priced in from the ban of Nvidia's (NVDA) H20 and AMD's (AMD) Mi308, limiting upside, according to analysts.

Amid debates of whether the Trainium 3 chip will become available before the end of the year, there could be potential market share losses to competitor AIchip, but sources within Marvell said the company has major ASIC projects lined up for 2026, the brokerage said. Trainium 3 is a computer chip for training large language models and other forms of AI that was developed by Amazon's (AMZN) Amazon Web Services.

Marvell's optical segment fell short of expectations despite projecting "strong" demand compared with deceleration at peers like Nvidia, driven by China export controls. However, the growth trajectory appears to be clear, according to Morgan Stanley.

For fiscal 2026, the brokerage models EPS of $2.76 on revenue of $8.2 billion compared with a prior forecast of $2.67 on revenue of $8.04 billion. It also modeled fiscal 2027 EPS of $3.15 on revenue of $9.3 billion compared with a prior view of $3.06 on revenue of $9.2 billion.

"We think the company is still clearly in the [AI] winner camp long term, even if we appreciate the optical aspect much more than the ASIC portion, given the higher defensibility and margin of optical," analysts said, adding they see scope for the stock to rebound around the upcoming AI event.

Morgan Stanley reiterated an equalweight rating on the stock and increased its price target to $73 from $70.

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