Shares of Marvell Technology Inc. witnessed a dramatic turnaround in late trading, surging more than 15%, after the semiconductor company delivered an optimistic outlook for its artificial intelligence (AI) chip business and unveiled a major multi-billion dollar acquisition.
Bullish Forecast and Repeat Orders Boost Confidence
During a conference call following its earnings report, Marvell's leadership expressed increased confidence about revenue growth for the coming year. The company specifically highlighted strength in its custom chip-design unit, which creates specialised processors for large clients. Marvell predicted that sales in this custom chip segment will grow by a significant 20%.
Key to this optimism are repeat orders from major customers. The company assured investors that it does not expect a recurrence of past "air pockets"—periods where sales in this division unexpectedly declined. Chief Executive Officer Matt Murphy indicated that Marvell's total revenue could reach $10 billion in the next fiscal year, surpassing the average analyst projection of $9.47 billion. "We're very optimistic about our outlook over the next couple of years," Murphy stated.
Strategic $3.25 Billion Acquisition of Celestial AI
In a bold move to strengthen its AI capabilities, Marvell announced plans to acquire the startup Celestial AI for at least $3.25 billion. The deal structure involves $1 billion in cash and Marvell stock valued at $2.25 billion. Furthermore, Celestial AI's investors could receive up to an additional $2.25 billion in Marvell shares if the startup achieves specific revenue milestones.
Founded in 2020 and based in Santa Clara, California, Celestial AI has developed a pioneering technology called photonic fabric. This technology uses light to connect components within AI infrastructure, enabling faster and more efficient data movement to accelerate AI systems. The startup, which completed a $255 million funding round in August 2024, counts Fidelity Management & Research Co., BlackRock Inc., and Advanced Micro Devices Inc. among its backers.
Financial Performance and Market Reaction
For the fiscal fourth quarter ending in January, Marvell provided a revenue forecast of approximately $2.2 billion, aligning with Wall Street's expectations. The company anticipates an adjusted gross margin of about 59% and earnings per share of 79 cents, matching estimates.
The positive commentary and acquisition news sparked a powerful rally, reversing the stock's year-to-date decline. Prior to the announcement, Marvell's shares had been down 16% for the year through Tuesday's close. This rally reflects growing investor belief that Marvell is successfully positioning itself to capitalise on the massive spending boom in AI computing, even as it competes with giants like Nvidia Corp.
The acquisition of Celestial AI is expected to be finalised in the first calendar quarter of 2026. The additional payout conditions for Celestial AI's investors will activate if the startup achieves a cumulative revenue of at least $500 million by the end of Marvell's fiscal 2029, with the full amount payable if cumulative revenue exceeds $2 billion by that time.
