"ASIC giant" Marvell posts record quarterly revenue and raises guidance consecutively; CEO says the data center business is "on fire."
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Record revenue and sharply raised guidance—Marvell delivered a rather impressive report card.
After the US market close on May 27th, AI custom chips, optical communications, and data center interconnect leader Marvell released its FY2027 Q1 financial report and held an earnings conference call. The data center business continues to soar, and the company once again substantially raised its annual guidance. CEO Matt Murphy said directly on the call, "Our data center business is on fire,” and "orders are exceptionally strong.”
For Q1, Marvell’s revenue was $2.418 billion, up 28% year-over-year and 9% quarter-over-quarter, slightly beating analyst estimates of $2.41 billion. Non-GAAP EPS was $0.80, in line with expectations. However, GAAP net profit was $34.5 million, sharply down from $177.9 million a year earlier, mainly due to one-time costs and non-cash amortization from the acquisitions of Celestial AI and XConn.
Data center business contributed $1.83 billion in revenue, accounting for 76% of total revenue, up 27% year-over-year and 11% quarter-over-quarter.
Following the financial report and call, the company’s stock price fell about 1% in after-hours trading. Year to date, the stock had more than doubled before the earnings release; amid sky-high expectations, “meeting expectations" might not be enough to wow the market.
"AI-related orders are too strong," Marvell raises performance guidance again
This is Marvell’s consecutive quarters of raising guidance.
For FY2027 Q2, the company expects revenue of about $2.7 billion (plus or minus 5%), up about 35% year-over-year, higher than previous analyst expectations of $2.6 billion. Non-GAAP EPS guidance is between $0.88 and $0.98, compared to previous expectation of $0.90.
For full-year guidance, Marvell raised FY2027 revenue expectation to about $11.5 billion, up about 40% year-over-year. Three months ago, the guidance was "close to $11 billion."
Even more noteworthy is the FY2028 outlook. Marvell raised its FY2028 revenue target to about $16.5 billion, roughly $1.5 billion higher than last quarter’s guidance, which is about 45% year-over-year growth.
CEO Matt Murphy said in the report statement: "We are seeing exceptionally strong AI-related orders, so we are substantially raising Marvell's FY2027 and FY2028 revenue expectations, a significant improvement over last quarter’s guidance."
Data Center: 76% of Total Revenue, Accelerating Growth
Q1 data center revenue was $1.83 billion, up 27% year-over-year and 11% quarter-over-quarter, accounting for 76% of total revenue.
Marvell’s forecast for the growth rate of this segment:
- FY2026: +46% (already achieved)
- FY2027: about +50%
- FY2028: about +55%
Murphy said:
The data center business is on fire. We expect growth to accelerate both this year and next, starting from an already very high base.
Interconnect Business: Acceleration from 30% → 50% → 70%, CEO Says "There Is Still Upside"
AI data center interconnect business (Interconnect) is Marvell’s largest data center business segment, covering optical interconnects, DCI modules, coherent optics, and other product lines.
Annual growth expectations for this segment have been continuously raised in recent quarters: around 30% in September last year, then raised to 50%, now again raised to over 70%.
When pressed by analysts, Murphy said bluntly:
I believe there is substantial upside here. Our traditional DSP business will see a big jump next year, the 1.6T product line is higher-value, DCI is accelerating, and there are new businesses like retimers and AEC, plus scale-up optics… This marks the start of a major growth cycle for us.
Why is interconnect suddenly so important? Murphy laid out the logic clearly:
Early generative AI mainly addressed compute and memory bottlenecks, with networking secondary. But with the deployment of inference models, Mixture of Experts (MoE), and other complex architectures, the volume of data transfer within AI clusters has soared, making networking far more critical.
Some key numbers:
- TIA and driver chips: expected to surpass $1 billion in annualized quarterly revenue in coming quarters
- DCI module business: already supplying all five top US hyperscale cloud providers; annualized FY2028 revenue expected to exceed $1 billion, about twice that of FY2026 ($500 million)
- Scale-up optics (NPO/CPO optical interconnect): previously expected about $150 million, now raised, FY2028 expected to surpass $300 million
Custom Chips (XPU): Doubling Next Year, $10 Billion+ Target for 2029
Marvell’s custom chip (Custom/XPU) business is another major growth line and one of the market's main focuses.
Current progress:
- FY2027 custom chip revenue: over 20% YoY increase
- FY2028 custom chip revenue: expected to double YoY, higher than last quarter’s forecast
- FY2029 target: over $10 billion (previously about $8 billion)
Analyst Vivek Arya (BofA Securities) pressed on the call: Does this mean FY2028 custom chip revenue will be above $4 billion, then jump to $10 billion in FY2029, i.e., an annual increment over $5 to $6 billion?
Murphy’s answer: Yes, you heard right.
The three major drivers for custom chip growth in FY2028:
- Continued growth of existing XPU flagship programs
- Over 10 XPU sub-projects (NIC, CXL, etc.) enter higher-volume production, with demand persistently above expectations
- A new top-tier XPU project enters mass production—Murphy said “everything is progressing smoothly for the project, and full-year production plans are set”
Murphy also shared that newly won design orders generally take about two years of development to start contributing revenue, but these projects are important as a “guarantee” for longer-term growth; he called them “insurance policies.”
Expanded Collaboration with NVIDIA: Three Directions Implemented
This quarter, Marvell announced an expanded strategic partnership with NVIDIA. On the call, Murphy introduced three core directions in detail:
First, Optical Interconnect Collaboration: Marvell has long provided DSPs, TIAs, and drivers to NVIDIA. Both parties are now cooperating further on silicon photonics, seen as a key enabling technology for scale-up networks.
Second, NVLink Fusion Integration: This allows Marvell to develop custom chips and network semiconductors that seamlessly connect to NVIDIA infrastructure. Murphy noted this gives hyperscale cloud providers greater flexibility to mix-and-match custom chips and NVIDIA chips, "Marvell uniquely provides the bridge between these two architectures," creating new market opportunities for both.
Third, AI-RAN: Marvell will enhance its Octeon base station processors to collaborate directly with NVIDIA GPUs, running 5G/6G wireless workloads and AI applications on the same hardware platform.
Supply Chain: Locked-In Capacity, About $1 Billion in Prepayments This Year
Amid rising demand, supply chain management is a key variable.
CFO Willem Meintjes revealed on the call that the company plans about $1 billion in supplier prepayments in FY2027, with the first payments starting in Q2. These advance payments will offset future material purchases.
COO Chris Koopmans explained Marvell’s supply chain strategy in response to analyst questions:
Everything AI-related has been supply-constrained from start to finish. Our approach is to build very close relationships with a handful of core suppliers, give them five-year demand forecasts, always deliver on our commitments, and back up our forecasts with actions and prepayments.
Financially, Q1 operating cash flow reached a record $639 million. The company repurchased $200 million in stock and paid $54 million in dividends during the quarter. As of end-Q1, total debt was $4.96 billion, with net debt/EBITDA at 0.32x.
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