Marvell delivered a strong performance with record revenue and significantly raised guidance.
After hours on May 27, Marvell, a leader in AI-customized chips, optical communications, and data center interconnects, released its first-quarter financial results for fiscal year 2027 and held an earnings conference call. Data center business continued to surge, prompting the company to significantly raise its full-year guidance. CEO Matt Murphy explicitly stated on the call, “Our data center business is on fire,” and “Orders are exceptionally strong.”
In its first quarter of the fiscal year, Marvell reported revenue of $2.418 billion, representing a 28% year-over-year increase and a 9% sequential increase, slightly exceeding analysts’ expectations of $2.41 billion. Non-GAAP earnings per share were $0.80, in line with analyst estimates. However, GAAP net income amounted to $34.5 million, a significant decline from $177.9 million in the same period last year, primarily due to one-time costs and non-cash amortization related to the acquisitions of Celestial AI and XConn.
The data center business generated $1.83 billion in revenue, accounting for 76% of total revenue, representing a 27% year-over-year increase and an 11% quarter-over-quarter increase.
After the earnings report and conference call, the company's stock dipped slightly by about 1%. Since the beginning of the year, the stock had already more than doubled ahead of the earnings report; under high expectations, merely meeting expectations may no longer be enough to impress the market.
01
"AI-related orders are extremely strong," Marvell raises its guidance again.
This is the multiple consecutive quarters in which Marvell has raised its guidance.
For Q2 of fiscal year 2027, the company expects revenue of approximately $2.7 billion (±5%), representing year-over-year growth of about 35%, above analysts’ previous expectation of $2.6 billion. The non-GAAP EPS guidance range is $0.88 to $0.98, compared to analysts’ previous expectation of $0.90.
For full-year guidance, Marvell raised its fiscal 2027 revenue forecast to approximately $11.5 billion, representing a year-over-year growth of about 40%. Three months ago, the company’s guidance was “close to $11 billion.”
More notably, the fiscal 2028 outlook. Marvell raised its fiscal 2028 revenue target to approximately $16.5 billion, an increase of about $1.5 billion from the previous quarter's guidance, representing year-over-year growth of approximately 45%.
CEO Matt Murphy stated in the earnings report: “We are seeing exceptionally strong demand for AI-related orders, and as a result, we are significantly raising our revenue guidance for fiscal years 2027 and 2028 compared to the outlook provided last quarter.”
02
Data center: Accounts for 76% of total revenue, with growth accelerating further
Data Center Q1 revenue was $1.83 billion, representing a 27% year-over-year increase and an 11% sequential increase, accounting for 76% of total revenue.
Marvell's growth forecast for this business is:
FY2026: +46% (achieved)
FY2027: Approximately +50%
FY2028: Approximately +55%
Murphy said:
The data center business is on fire (it has exploded), and we expect revenue growth to accelerate this year and next, starting from an already high base.
03
Interconnected business: Growth rate increased from 30% → 50% → 70%. The CEO said, “There is still room for further upward movement.”
AI data center interconnect (Interconnect) is the largest segment of Marvell’s data center business, encompassing product lines such as optical interconnect, DCI modules, and coherent optics.
The annual growth rate expectation for this business has been consistently raised over the past several quarters: it was around 30% around September last year, then increased to 50%, and has now been raised again to over 70%.
Murphy directly said when pressed by analysts:
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 offerings, DCI is accelerating, and new businesses such as retimers and AEC, along with scale-up optics, are emerging. This marks the beginning of a major growth cycle for us.
Why have interconnected services suddenly become so important? Murphy provided a clear rationale:
Early generative AI primarily addressed compute and memory bottlenecks, with network connectivity being a secondary concern. However, as more complex architectures such as inference models and Mixture of Experts (MoE) are deployed, the volume of data transferred within AI clusters has surged dramatically, significantly increasing the importance of network connectivity.
A few key numbers:
TIA and driver chips: Revenue is expected to exceed $1 billion annually over the next several quarters.
DCI Module Business: Already supplying all five major U.S. hyperscale cloud providers, with projected annualized revenue exceeding $1 billion in FY2028, approximately double that of FY2026 (~$500 million).
Scale-up optics (NPO/CPO optical interconnect): Previously expected at approximately $150 million, now upgraded to exceed $300 million by FY2028.
04
Custom chip (XPU): Doubling next year, targeting over $10 billion by 2029
Marvell's custom chip business (Custom/XPU) is another key growth driver and one of the most closely watched areas by the market.
Current progress:
FY2027 custom chip revenue: Year-over-year growth exceeding 20%
FY2028 custom chip revenue: Expected to double year-over-year, exceeding last quarter's forecast
FY2029 target: Over $10 billion (previously targeted at approximately $8 billion)
Analyst Vivek Arya (Bank of America Securities) pressed further on the call: Does this mean custom chip revenue will exceed $4 billion in FY2028, then jump to $10 billion in FY2029, representing a single-year increase of over $5 to $6 billion?
Murphy's response was: Yes, you heard right.
Three drivers of custom chip growth in FY2028:
The existing XPU flagship project continues to grow.
More than ten XPU-related projects (NIC, CXL, etc.) have entered higher-volume production stages, with demand continuing to exceed expectations.
A new head XPU project has entered mass production—Murphy said, "The project is progressing smoothly, and the full-year production plan has been finalized."
Murphy also revealed that although newly won design orders typically require about a two-year development cycle before contributing to revenue, these projects are significant because they secure longer-term growth, which he calls a "safety net."
05
Expanded collaboration with NVIDIA, with three key initiatives implemented
This quarter, Marvell announced an expanded strategic partnership with NVIDIA, and Murphy detailed three key areas during the earnings call:
I. Optical Interconnect Collaboration: Marvell has long supplied NVIDIA with DSPs, TIAs, and drivers, and the two companies are now further collaborating on silicon photonics technology, which is considered a key enabling technology for scale-up networks.
II. NVLink Fusion Integration: Enables Marvell to build custom chips and network semiconductors that seamlessly integrate with NVIDIA's infrastructure. Murphy stated that this provides hyperscale cloud providers with greater flexibility to freely mix and match custom chips with NVIDIA chips, noting that "Marvell uniquely provides a bridge between these two architectures" and will create new market opportunities for both parties.
III. AI-RAN: Marvell will enhance its Octeon baseband processors to enable direct collaboration with NVIDIA GPUs, allowing simultaneous execution of 5G/6G wireless workloads and AI applications on the same hardware platform.
06
Supply chain: Secure production capacity in advance, with advance payments totaling approximately $1 billion this year.
Faced with continuously rising demand, supply chain management has become a critical factor.
CFO Willem Meintjes revealed on the earnings call that the company plans to make approximately $1 billion in supplier prepayments during the fiscal year 2027, with the first payments beginning in Q2; these prepayments will be offset against future material purchases.
COO Chris Koopmans explained Marvell’s supply chain strategy in response to analyst questions:
Everything related to AI has been supply-constrained from the start. Our approach is to build very close relationships with a select few core suppliers, providing them with five-year demand forecasts, consistently delivering on our commitments, and backing our forecasts with concrete actions and advance payments.
On a financial level, operating cash flow for Q1 reached a record $639 million. The company repurchased $200 million in stock and paid dividends of $54 million during the quarter. As of the end of Q1, total debt stood at $4.96 billion, with net debt/EBITDA at 0.32x.
This article is from the WeChat public account "Wall Street Horizon Max," authored by Long Yue.