Marvell Technology Inc. shares rallied sharply in late trading after the semiconductor company reassured investors about the momentum of its custom chip business and announced a multibillion-dollar acquisition aimed at strengthening its position in the artificial intelligence market.
The company’s upbeat commentary followed its third-quarter earnings release and signaled more confidence in its growth prospects heading into next year.
Marvell moves to acquire Celestial AI
In a major strategic move, Marvell announced it will acquire Celestial AI for at least $3.25 billion in cash and stock.
The total value could climb to $5.5 billion if Celestial meets a series of revenue milestones outlined in the agreement.
The startup’s investors may receive as much as $2.25 billion in additional Marvell shares if cumulative revenue reaches $2 billion by the end of Marvell’s fiscal 2029.
Founded in 2020 and based in Santa Clara, California, Celestial AI specializes in optical interconnect technology known as “photonic fabric,” which uses light to transfer data more efficiently between components in AI systems.
Its approach addresses a growing bottleneck in advanced AI computing, where traditional copper-based connections are struggling to support rapidly rising data demands.
Celestial completed a $255 million funding round in August and has been backed by investors including Fidelity Management & Research Co., BlackRock Inc., Advanced Micro Devices Inc., and Intel CEO Lip-Bu Tan, who joined the company’s board earlier this year.
Positioning for the AI infrastructure boom
Marvell described the acquisition as a way to broaden its networking capabilities and expand its addressable market in AI connectivity.
Murphy said the deal enhances the company’s roadmap and will help deliver a “complete connectivity platform” for AI and cloud customers.
Executives noted that Celestial’s technology could be integrated into custom chips, switches, and systems built around large AI processors, sometimes referred to as XPUs.
Amazon Web Services Vice President Dave Brown said the acquisition will “help further accelerate optical scale-up innovation for next-generation AI deployments.”
The takeover is expected to close in early 2026, with performance-based payouts tied to long-term revenue milestones.
Custom chip business shows renewed strength
On its post-earnings conference call, Marvell told analysts it now expects custom chip revenue to grow 20% next year, supported by renewed orders from major clients.
Executives said the division will not see a repeat of prior “air pockets”, periods when sales abruptly softened, and highlighted fresh customer wins, including from an “emerging hyperscaler,” a term used for large data-center operators.
The improved tone represented a shift for the company, which has sought to tap the surge in AI-related spending by helping cloud providers such as Amazon.com Inc. design specialized chips.
While those products have not achieved the same scale as Nvidia’s widely used processors, Marvell said it anticipates “accelerated growth” in its custom chip operations.
Chief Executive Officer Matt Murphy also indicated that revenue in the next fiscal year could reach $10 billion, exceeding analyst expectations of about $9.47 billion. “We’re very optimistic about our outlook over the next couple of years,” he said.
The remarks helped push Marvell’s shares up more than 15% in late trading, reversing earlier losses.
At the time of writing, the stock was trading at $102.22 in late trading.
For the current fiscal fourth quarter, which runs through January, Marvell forecast revenue of roughly $2.2 billion — in line with Wall Street projections.
It expects adjusted gross margin of about 59% and earnings of 79 cents per share, matching analyst estimates.
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