Detailed Narrative
AI Infrastructure Evolution and Agentic AI Impact
The initial focus of generative AI was on compute and memory bottlenecks, but the deployment of more complex architectures like reasoning modules and mixture of experts has significantly increased the importance of networking. Marvell anticipates massive expansion in scale-up networks, requiring high radix, low latency switches and high-bandwidth optical interconnects. The emergence of agentic AI is expected to further supercharge demand, as single user requests will require agents to query AI models multiple times, substantially increasing data traffic volume and memory requirements, providing a significant tailwind for interconnect, switching, and XPU attach franchises.
Interconnect Leadership and Technology Platform
Marvell's interconnect business is accelerating, with FY27 revenue growth expectations raised to over 70% year-over-year. The company maintains leadership across high-speed connectivity solutions, including PAM4 (800G, 1.6T, and 400G/lane technology demonstrated for the next generation). Its broadband analog TIAs and drivers business is scaling rapidly, expected to exceed a $1 billion annualized run rate soon. Marvell is also pioneering coherent light products for longer reach data center applications, with first-generation 1.6T products shipping and next-generation solutions featuring integrated MACsec security.
DCI Market Transition and Scale-Across Networks
The DCI market is undergoing a major architectural transition driven by scale-across networks, where AI clusters span multiple data centers. This requires massive amounts of data to move continuously between XPUs, with aggregate bandwidth requirements projected to be over 10x higher than current front-end DCI networks. Marvell is well-positioned with the industry's first secure 1.6T ZR and ZR+ DCI modules, powered by its new 2-nanometer coherent DSP, expected to begin sampling this year. This leadership is translating into strong revenue momentum, with the DCI module business projected to reach a $1 billion annualized revenue during fiscal 2028, doubling from FY26.
Comprehensive Scale-Up Optics Strategy
Marvell is uniquely positioned in scale-up interconnects, enabling both NPO and CPO implementations with a broad silicon photonics platform spanning all three mainstream modulator technologies (MZM, EAM, MRM). The acquisition of Polariton further extends its technology platform to 3.2T and beyond with plasmonic-based silicon photonics. The Celestial AI acquisition added photonic fabric technology, already selected by a Tier 1 hyperscaler. Marvell expects its scale-up optics business to ramp significantly next fiscal year, with revenue forecasted to more than double its prior outlook of approximately $150 million.
Data Center Switching Momentum and Scale-Up Opportunities
Marvell continues to benefit from sustained demand for its 12.8T and 51.2T switches for scale-out networking, with the business tracking to over $1 billion in annualized revenue in fiscal 2028. In scale-up switching, an emerging market, Marvell is uniquely positioned to support UALink, ESUN, and NVLink solutions through internal development and the expanded NVIDIA partnership. The company has multiple engagements with Tier 1 customers, each representing a multi-billion dollar lifetime revenue opportunity, leveraging decades of experience in large reticle size switch silicon and high-performance SerDes technology.
Custom Silicon Growth Drivers and Long-Term Targets
Custom revenue is on track to grow over 20% year-over-year in FY27, led by its flagship XPU program. For FY28, custom revenue is expected to more than double year-over-year, driven by continued growth from existing programs, over 10 XPU attach programs (including CXL and NIC products) reaching high production volumes due to increasing inference KV caching requirements, and the ramp of a new Tier 1 XPU program. Marvell remains confident in achieving its target of over $10 billion in custom business revenue by fiscal 2029.
Strategic Capacity Investments and Supply Chain Management
Marvell is aggressively locking in additional capacity to support its growth, employing a successful playbook established during prior supply crunches. This involves sharing long-term demand outlooks with key suppliers and making strategic prepayments, with approximately $1 billion forecasted for FY27. This approach has enabled Marvell to scale revenue significantly while the broader industry faced supply constraints, ensuring alignment with robust customer demand for AI infrastructure.