Detailed Narrative
Strategic Acquisitions and AI Scale-Up Networking
Marvell completed the acquisitions of Celestial AI and XConn, which are expected to significantly enhance its position in the rapidly emerging AI scale-up networking market. These additions strengthen the technology platform, with Celestial AI's photonic fabric technology enabling large-scale commercial deployment of CPO for scale-up connectivity and XConn expanding Marvell's switch team with deep PCIe switching expertise. The acquisitions are not expected to contribute meaningfully until fiscal 2028, but are key to future growth.
Data Center Growth Drivers
The company's data center business is experiencing very strong demand across its portfolio, with bookings accelerating at a record pace. This robust demand is driving significant upward revisions to revenue forecasts for FY27 and FY28, with all key product lines in data center expected to be stronger than prior outlooks. The interconnect business, custom silicon, and Ethernet switching are all contributing to this accelerated growth, fueled by increasing cloud CapEx expectations and AI infrastructure investments.
Interconnect Technology Leadership
Marvell maintains technology leadership in interconnects, particularly with its PAM franchise, where demand for 800-gig products remains robust and 1.6T solutions are seeing strong bookings and rapid ramp in FY27. The company is also pioneering 200-gigabit per lane technology for 1.6T and has demonstrated 400-gig per lane technology for future 3.2T transitions. New innovations include Secure 1.6T ZR and ZR+ DCI modules and a 2-nanometer 800-gig DSP, positioning Marvell to lead in next-generation DCI.
Custom Business Expansion
The custom business has scaled rapidly from zero to $1.5 billion in FY26, doubling year-over-year. It is expected to grow over 20% in FY27 and at least double in FY28, driven by continued growth from existing programs, multiple XPU attach programs (CXL and NIC products), and a new Tier 1 XPU program ramping into high-volume production. Marvell is deeply engaged in new design engagements with hyperscalers for custom compute, especially for inference-optimized hardware and 2-nanometer process technologies.
Scale-Up Interconnects and Switching
The emerging scale-up interconnect market, potentially exceeding $10 billion by 2030, is a key focus. Celestial AI's CPO technology is expected to reach a $500 million annualized run rate by Q4 FY28 and $1 billion by Q4 FY29. In AEC and retimers, Marvell has secured design wins with three Tier 1 U.S. hyperscalers and expects revenue to more than double in FY27. Data center switch revenue is projected to surpass $600 million in FY27, with strong engagement for 51.2T and upcoming 100T platforms. XConn's PCIe and CXL switch solutions add a new TAM, with strong customer engagement.
Capital Allocation and Shareholder Returns
Marvell significantly increased capital returns in FY26, returning $2.245 billion to stockholders through share repurchases and dividends, an increase of approximately $1.3 billion from the prior year. The company expects to continue this program, demonstrating a commitment to shareholder value while also investing in growth. The divestment of the automotive Ethernet business for a double-digit revenue multiple allowed for strategic redeployment of proceeds into the Celestial AI and XConn acquisitions.