“ASIC giant” Marvell Technology reports record quarterly revenue and raises guidance for the second consecutive time; CEO says data center business is 'on fire'

Record revenue and significantly raised guidance, $Marvell Technology (MRVL.US)$ delivered what appears to be an exceptionally strong performance.

On May 27, after U.S. market hours, Marvell Technology—the leader in AI-customized chips, optical communications, and data center interconnect solutions—released its Q1 fiscal year 2027 earnings report and held an earnings call. With continued explosive growth in its data center segment, the company once again substantially raised its full-year guidance. During the call, CEO Matt Murphy directly remarked, 'Our data center business is on fire,' and 'orders are exceptionally strong.'

Marvell Technology reported Q1 FY2027 revenue of $2.418 billion, up 28% year-over-year and 9% quarter-over-quarter, slightly exceeding analysts’ expectation of $2.41 billion. Non-GAAP earnings per share came in at $0.80, in line with analyst forecasts. However, GAAP net income declined sharply to $34.5 million from $177.9 million a year earlier, primarily due to one-time expenses and non-cash amortization related to the acquisitions of Celestial AI and XConn.

The data center segment contributed $1.83 billion in revenue, accounting for 76% of total revenue, up 27% year-over-year and 11% quarter-over-quarter.

Following the earnings release and conference call, the company’s stock price dipped modestly by about 1%. Year-to-date, the stock had already more than doubled ahead of the earnings announcement; under such elevated expectations, merely meeting forecasts may no longer be enough to impress the market.

‘AI-related orders are extremely strong’—Marvell Technology raises its outlook once again

This marks another consecutive quarter in which Marvell Technology has raised its guidance.

For Q2 of fiscal year 2027, the company expects revenue of approximately $2.7 billion (±5%), representing roughly 35% year-over-year growth—above analysts’ prior estimate of $2.6 billion. The non-GAAP EPS guidance range is $0.88 to $0.98, compared to the previous analyst consensus of $0.90.

Regarding full-year guidance, Marvell Technology raised its fiscal year 2027 revenue outlook to approximately $11.5 billion, representing a year-over-year increase of about 40%. Three months ago, the company’s guidance was for revenue to be 'close to $11 billion.'

Of greater interest is the outlook for fiscal year 2028. Marvell Technology has raised its FY2028 revenue target to approximately $16.5 billion, up by about $1.5 billion from last quarter’s guidance, implying a year-over-year growth of roughly 45%.

In the earnings statement, CEO Matt Murphy stated: 'We are witnessing exceptionally strong AI-related orders, prompting us to significantly raise Marvell Technology’s revenue expectations for both fiscal years 2027 and 2028, marking a substantial upward revision from the guidance provided last quarter.'

Data Center: Accounts for 76% of total revenue, with growth accelerating further

Q1 data center revenue reached $1.83 billion, up 27% year-over-year and 11% quarter-over-quarter, accounting for 76% of total revenue.

Marvell Technology’s growth forecast for this segment is as follows:

• FY2026: +46% (already achieved)

• FY2027: approximately +50%

• FY2028: approximately +55%

Murphy stated:

Data center business is on fire; we expect revenue growth to accelerate this year and next, starting from an already high base.

Interconnect business: growth rate revised upward from 30% → 50% → 70%; the CEO stated, 'There is still room for further upside.'

AI data center interconnect (Interconnect) is the largest segment within Marvell Technology’s data center business, covering product lines such as optical interconnects, DCI modules, and coherent optics.

The annual growth forecast for this business has been successively raised over the past few quarters: around 30% in September last year, subsequently increased to 50%, and now further revised upward to over 70%.

When pressed by analysts, Murphy stated directly:

“I believe there is significant upside potential here. Our traditional DSP business will see a substantial leap next year, the 1.6T product line represents higher-value content, DCI is accelerating, and we have new businesses such as retimers and AEC, along with scale-up optics… This marks the beginning of a major growth cycle for us.”

Why has the interconnect business suddenly become so critical? Murphy provided a clear rationale:

Early generative AI primarily addressed compute and memory bottlenecks, with network interconnect being a secondary concern. However, with the deployment of more complex architectures—such as inference models and Mixture-of-Experts (MoE)—data traffic within AI clusters has surged dramatically, significantly elevating the importance of network interconnect.

Key figures:

• TIA and driver chips: quarterly revenue expected to exceed an annualized $1 billion run rate in the coming quarters

• DCI module business: Already supplying all five major hyperscale cloud providers in the U.S.; annualized revenue is expected to exceed $1 billion in FY2028, roughly double that of FY2026 (approximately $500 million).

• Scale-up optics (NPO/CPO optical interconnects): Previously projected at approximately $150 million; now revised upward, with expectations exceeding $300 million in FY2028.

Custom chips (XPUs): Expected to double next year, with a target exceeding $10 billion by 2029.

Marvell Technology’s custom chip business (Custom/XPU) represents another key growth driver and is one of the areas receiving the most market attention.

Current progress:

• FY2027 custom chip revenue: Year-over-year growth exceeding 20%.

• FY2028 custom chip revenue: Expected to double year-over-year, surpassing last quarter’s forecast.

• FY2029 target: Exceeding $10 billion (previously targeted at approximately $8 billion).

During the earnings call, analyst Vivek Arya (Bank of America Securities) pressed further: 'Does this imply that FY2028 custom chip revenue will exceed $4 billion, then jump to over $10 billion in FY2029—representing a single-year increase of more than $5–6 billion?'

Murphy responded: 'Yes, you heard that correctly.'

Three key drivers for custom chip growth in FY2028:

1. Continued growth of existing flagship XPU programs

2. More than 10 XPU-adjacent programs (e.g., NICs, CXL) have entered higher-volume production stages, with demand consistently exceeding expectations

3. A new leading XPU program has entered volume production—Murphy stated, “Everything is progressing smoothly, and the full-year production plan has been secured.”

Murphy also noted that while newly won design wins typically require approximately two years of development before contributing revenue, their strategic value lies in securing longer-term growth, which he described as an “insurance policy.”

Expanded collaboration with NVIDIA materializes across three key areas

This quarter, Marvell Technology announced an expanded strategic partnership with NVIDIA. On the earnings call, Murphy outlined three core focus areas in detail:

1. Optical interconnect collaboration: Marvell Technology has long supplied NVIDIA with DSPs, TIAs, and drivers. The two companies are now further collaborating on silicon photonics technology, which is considered a critical enabler for scale-up networking.

2. NVLink Fusion integration: This enables Marvell Technology to develop custom chips and networking semiconductors that seamlessly integrate with NVIDIA’s infrastructure. Murphy stated this provides hyperscale cloud providers greater flexibility to freely mix and match custom chips with NVIDIA chips, adding, “Marvell uniquely bridges these two architectures,” thereby creating new market opportunities for both companies.

3. AI-RAN: Marvell Technology will enhance its Octeon baseband processors to enable direct collaboration with NVIDIA GPUs, allowing 5G/6G wireless workloads and AI applications to run concurrently on the same hardware platform.

Supply Chain: Securing production capacity in advance, with approximately $1 billion in prepayments this year

Amid continuously rising demand, supply chain management has become a critical variable.

During the earnings call, CFO Willem Meintjes disclosed that the company plans to make approximately $1 billion in supplier prepayments in fiscal year 2027, with the first payments beginning in Q2. These prepayments will be offset against future material purchases.

In response to an analyst’s question, COO Chris Koopmans explained Marvell Technology’s supply chain strategy:

“Everything related to AI has been supply-constrained from the very beginning. Our approach is to build very close relationships with a select group of core suppliers, provide them with five-year demand forecasts, consistently fulfill our commitments, and back up those forecasts with concrete actions and prepayments.”

On the financial front, operating cash flow reached a record $639 million in Q1. The company repurchased $200 million worth of shares and paid $54 million in dividends during the quarter. As of the end of Q1, total debt stood at $4.96 billion, with net debt/EBITDA at 0.32x.

Editor/Jayden