Earnings Call Highlights: Marvell (MRVL) | FY26 Q3

Summary

Once again driven by AI data center demand, Marvell delivered a strong FY26 Q3 report card:

Revenue of $2.075B (YoY +37%, QoQ +3%), EPS of $0.76, beating expectations.

Within that, data center revenue grew 38% YoY, making up as much as 73% of the total.

The company announced the acquisition of Celestial AI, moving into scale-up optical interconnect (Photonic Fabric) technology, expected to start contributing revenue in FY28H2 and reach annualized revenue of $1B in FY29.

Marvell expects FY27 revenue to reach $10B, with data center growing 25%+ YoY, formally entering multiple growth cycles of the AI Rack-Scale Era.

Financials (Non-GAAP)

• Revenue: $2.075B (QoQ +3%; YoY +37%)

• Gross margin: 59.7% (+30 bps QoQ)

• Operating expenses (Opex): $485M

• Operating income: $753M (operating margin 36.3%, QoQ +150 bps)

• EPS (Non-GAAP): $0.76 (YoY +77%, QoQ +13%)

• Cash flow: operating cash flow of $582M (an all-time high)

• Cash and equivalents: $2.7B (QoQ +$1.5B)

• Leverage: net debt / EBITDA of only 0.58x

Outlook (Q4 FY26)

• Revenue: $2.2B ±5% (QoQ +6%, YoY +21%)

• Gross margin: 58.5-59.5%

• Opex: $515M

• EPS (Non-GAAP): $0.74-0.84

Product Segment Updates

Data Center

• Revenue of $1.52B (YoY +38%), another record, accounting for 73% of total revenue.

• Optical interconnect and switches saw strong demand; Custom ASIC dipped in the short term due to timing fluctuations.

• Expects Q4 data center revenue to grow another high-single-digit percentage, +20% YoY.

Optical Interconnect

• The 800G platform is ramping steadily, and the 1.6T DSP began shipping in FY26H2.

• 3nm products are in volume production, with a 2nm version expected to enter the 3.2T generation in 2028.

• Holds a leadership position across a complete PAM DSP, TIA, driver and LPO ecosystem.

• Coherent Light 1.6T → 3.2T roadmap has launched, targeting campus-level AI clusters.

AEC & Retimer

• 100G / 200G per lane PAM-based AECs are entering volume production,

  with design wins at two US Tier-1 hyperscalers.

• AEC + retimer revenue is expected to double in FY27.

• PCIe Gen6 Retimer: working with >30 customers, ramping from FY28.

Switch

• The 12.8T family is the current workhorse;

  51.2T is shipping, with a strong ramp in FY27;

  100T will be introduced in FY27.

• FY27 data center switch revenue is expected to exceed $500M.

• Moving into scale-up UALink 57T / 115T switches, entering volume production in FY28H2.

Custom / XPU-Attached

• Currently has 18 XPU/attached socket design wins, several already in volume production.

• Added XPU-attached NIC and CXL memory applications,

  expected to contribute > $2B in revenue in FY29.

• CXL memory expansion: five sockets confirmed, adopted by two large US hyperscale customers.

Celestial AI Acquisition and Technology Integration

• Celestial AI: Photonic Fabric platform → for scale-up AI interconnect.

• PF Chiplet: a single chip provides 16 TB/s of bandwidth, 10x today's 1.6T.

• Can be vertically integrated into XPU 3D packaging without using die edge → improving HBM integration efficiency.

• Thermal stability is a key advantage, allowing direct co-packaging with multi-kilowatt XPUs.

• Already secured a design win at a Tier-1 hyperscaler (presumed to be AWS).

• Shipments start in FY28H2, reaching $1B annualized revenue in FY29.

• Long-term applications extend to:

  • Disaggregated pooled memory

  • Die-to-die optical links

Outlook

• FY27 revenue target of ~$10B, led by Data Center +25% YoY.

• Custom ASIC: expected to double again in FY28.

• Interconnect: outgrowing CapEx, sustaining high double-digit annual growth.

• Switching: 100T / UALink products will start ramping in FY28.

• Celestial AI: opens a new growth curve for FY28-FY30.

• CapEx guidance: multiple hyperscalers expect increases of >30% over 2025-2028.

• Long-term CAGR (2023-2028E): Data Center +50%.

Q&A Highlights

• FY27 revenue outlook: about $10B, growing sequentially every quarter.

• Data center mix growth:

  • Interconnect > CapEx

  • Custom +20% YoY (doubling again in FY28)

  • Switch +15% YoY

• Celestial AI contribution:

  • Revenue starts in FY28H2; $1B annualized in FY29; growth accelerates further in FY30.

  • A large engagement with a Tier-1 hyperscaler (AWS) is confirmed, along with the issuance of warrants for 1 million shares.

• 2nm roadmap:

  • Already engaged in XPU and XPU-attached designs;

  • volume production in FY28-FY29, with significant power savings.

• Custom visibility:

  • FY27 flat in the first half, ramping strongly in the second half.

  • Customers have already placed purchase orders for all of FY27.

• Systems strategy:

  • Aims to build a "Rack-Scale End-to-End Solution"

  • Marvell becomes an integrated supplier spanning XPU → Retimer → Switch → Optics.

Risks and Watch Points

• High customer concentration (top two customers account for over 60%)

• Progress and cost pressure on new process nodes (2nm / 3nm)

• Celestial AI integration risk and regulatory approval timeline

• Possible slowdown in data center CapEx growth

• Competition in optical interconnect technology (Broadcom, NVIDIA, Ayar Labs)

• Global supply chain and geopolitical risks

Bottom Line

Marvell has completed its transformation from a general-purpose semiconductor vendor into an AI data center infrastructure giant.

Its portfolio spans scale-out (PAM DSP / Switch) and scale-up (Photonic Fabric / UALink), combined with a Custom XPU + XPU-attached + CXL + Coherent Optics architecture

to form a full-stack solution. The acquisition of Celestial AI signals that Marvell intends to become a core supplier for the AI rack-scale optics era. Amid rapidly expanding AI CapEx and accelerating photonic-electronic integration,

Marvell's long-term growth trajectory is clear:

Steady growth in FY27 → optical interconnect takes off in FY28 → co-packaged optics lands in FY29.