Marvell's Blowout Quarter: Why the Street Is Cheering a $15B Revenue Roadmap
Global AI interconnect chip giant $Marvell Technology(MRVL)$
Three Things to Watch
Raised FY27 and FY28 Revenue Guidance, with FY28 EPS Expected Above $5
The real catalyst behind the after-hours surge was management's decision to raise a series of forward-looking targets. FY27 revenue guidance was lifted from $10 billion to $11 billion, with management projecting similarly strong sequential growth in each quarter of the fiscal year, culminating in FY27 Q4 revenue exceeding $3 billion.
What excited the market even more was the FY28 guidance calling for revenue above $15 billion and EPS above $5, pointing to accelerating growth compared to FY27. Management made clear that the entire upward revision to revenue expectations is attributable to the data center business.
Data Center Interconnect Market Growth Expected to Outpace Hyperscaler CapEx Growth
Data center revenue came in at $1.65 billion this quarter, up 21% year over year and 9% sequentially, slightly above the consensus estimate of $1.64 billion. At 74% of total revenue, this remains the company's largest segment.
Currently, Marvell's data center revenue growth is primarily driven by electro-optical interconnect products. The company has previously stated that electro-optical interconnect products account for 50% of data center revenue, with XPU contributing 25%. The remainder comes from data center storage, switching, and security product portfolios. Marvell's full suite of electro-optical interconnect products includes DSPs for active electrical cables (AEC) and active optical cables (AOC), Retimers for PCIe, Ethernet, and UALink, as well as silicon photonics technology for near-packaged and co-packaged XPU optics.
This quarter, within the scale-out PAM product line, demand for 800G products remained very strong, while multiple Tier 1 customers showed very strong bookings for 1.6T solutions. These products entered volume production in FY2026 H2. Management expects 1.6T product revenue to ramp quickly in FY2027 and continue to grow significantly in FY2028. However, 800G will prove more resilient and longer-lasting than expected, with 800G shipments still accounting for the majority this year. In the scale-across interconnect product line, the company expects to supply DCI modules to all five major U.S. hyperscalers this year. In the scale-up interconnect product line, Celestial AI's Photonic Fabric technology is driving large-scale CPO deployments beginning next year, with projected run-rate revenue of $500 million by FY28 Q4 and $1 billion by FY29 Q4. Management expects the scale-up interconnect TAM to exceed $10 billion by 2030. In the AEC market, the company has secured design wins with three U.S. Tier 1 hyperscalers, and Retimer product demand is also strong. Combined AEC and Retimer revenue is expected to double in FY27.
In summary, management explicitly stated that interconnect business growth will significantly outpace cloud CapEx growth. Against a backdrop of growing market anxiety over potential hyperscaler CapEx deceleration, this is exactly what investors wanted to hear.
XPU Business to Ramp in FY28, with XPU Attach Revenue Expected to Double Year Over Year
Despite the ongoing controversy surrounding the loss of the $Amazon (AMZN.US)$ AWS Trainium 3 contract, the company's XPU business still doubled revenue year over year in FY26. Management projects XPU revenue to grow more than 20% year over year in FY27 and to double again in FY28, primarily as new Tier 1 XPU programs enter high-volume production and several XPU attach projects begin to ramp in FY27.
Regarding the XPU attach business, which the market has largely overlooked until now, management noted that CXL demand is accelerating, partly due to memory supply constraints. Custom CXL expanders can help customers continue using previous-generation DRAM with next-generation XPUs, GPUs, and CPUs, while also enabling near-memory compute operations. XPU attach revenue is projected at approximately $200 million in FY26, doubling to $500 million in FY27, $1 billion in FY28, and $2 billion in FY29, establishing itself as a significant new growth driver for the company.
Q4 Core Financial Indicators
– Revenue was $2.22 billion, up 22% year over year and 7% sequentially, falling short of the consensus estimate of $2.26 billion. The company's prior guidance was $2.2 billion.
– GAAP gross margin was 51.7%, up 1.2 percentage points year over year and 0.1 percentage points sequentially, above the consensus estimate of 51.3%. The company's prior guidance ceiling was 52.1%. Non-GAAP gross margin was 59%, down 1.1 percentage points year over year and 0.7 percentage points sequentially, slightly below the consensus estimate of 59.1%. The company's prior guidance ceiling was 59.5%.
– GAAP net income was $396 million, up 98% year over year, above the consensus estimate of $297 million. The company's prior guidance ceiling was $309 million. Non-GAAP net income was $685 million, up 29% year over year, above the consensus estimate of $678 million. The company's prior guidance ceiling was $677 million.
Q1 Guidance
The company guides Q1 revenue of $2.4 billion, up 27% year over year and 8% sequentially, above the consensus estimate of $2.27 billion. Non-GAAP gross margin is expected at 59.3%, with Non-GAAP operating income of $847 million (up 31% year over year) and Non-GAAP net income of $698 million, up 29% year over year and 2% sequentially, above the consensus estimate of $660 million.
For Q1, data center revenue is expected at $1.82 billion, up 26% year over year and 10% sequentially, above the consensus estimate of $1.72 billion. On-premise data center business is expected to see a seasonal sequential decline. Communications and other revenue is expected at $580 million, up 28% year over year.
Summary
All in all, the market had been concerned that $Marvell Technology (MRVL.US)$ faced a prolonged earnings gap before FY28. Management responded with guidance showing sequential growth every quarter and provided far more detail on the FY28 outlook. The message was clear: the company is seeing robust growth across its existing scale-out, scale-across AI, and XPU businesses, while simultaneously making a rapid push into the emerging AI scale-up market.
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