Marvell’s Strategic Acquisition and Strong Earnings Fuel Analyst Optimism

Marvell Technology US5738741041

Marvell Technology has captured market attention this week, delivering robust quarterly results alongside a major strategic move. The semiconductor firm announced a $3.25 billion agreement to acquire Celestial AI, positioning itself at the forefront of next-generation artificial intelligence infrastructure. This bold bet triggered a swift response from Wall Street, with numerous analysts raising their price targets within a 48-hour period.

The company's financial report for its third fiscal quarter of 2026 surpassed market forecasts. Revenue surged 37% to reach $2.08 billion, while adjusted earnings per share came in at $0.76, two cents above consensus estimates. This performance was largely propelled by Marvell's data center segment, which saw revenue expand by 38% year-over-year.

Following the earnings release, a wave of analyst upgrades swept through. Roth Capital Markets increased its price objective to $135 from $105. In an even more bullish move, Evercore ISI lifted its target to $156 from $122. The consensus rationale centers on Marvell's successful capture of market share within the rapidly growing AI infrastructure sector.

Betting on Silicon Photonics for AI's Future

The planned acquisition of Celestial AI represents a significant strategic wager on silicon photonics technology. This innovation uses light rather than electricity to transmit data, a capability considered critical for powering advanced AI clusters where traditional copper-based interconnects are becoming a bottleneck. The deal includes an additional potential $2.25 billion in stock-based payouts contingent upon Celestial AI achieving specific revenue milestones.

According to CEO Matt Murphy, the data center business is projected to grow by more than 25% in fiscal 2027, even without any contribution from the newly acquired company. While Celestial AI is not expected to contribute materially to revenue until 2028, management views the deal as a necessary strategic step to remain competitive with industry giants like Nvidia and Broadcom in the optical connectivity market.

Guidance and Forward-Looking Statements

For the current fourth quarter, Marvell has provided revenue guidance of approximately $2.20 billion, with adjusted earnings anticipated to be around $0.79 per share. Looking further ahead, the company's custom AI chip division is projected to double its revenue by fiscal 2028, driven by new major customers ramping up production.

The market's initial reaction included a 6% share price advance on Wednesday, followed by a period of slight consolidation as some investors took profits. Management now faces the dual challenge of seamlessly integrating Celestial AI while sustaining the strong organic growth momentum within its core operations.