Marvell Technology (MRVL.US) held its fourth-quarter earnings call for fiscal year 2026. The company now expects total revenue for FY2027 to approach $11 billion, representing year-over-year growth exceeding 30%. This is an increase from previous targets of $9.5 billion set in September 2025 and $10 billion set in December 2025. Data center revenue is projected to grow 40% year-over-year, while communications and other business revenue is expected to increase by 10%. Quarterly revenue is forecast to grow sequentially, with Q4 FY2027 revenue surpassing $3 billion and year-over-year growth accelerating each quarter.
For FY2028, total revenue is projected to reach approximately $15 billion, a nearly 40% increase year-over-year, representing an upward revision of about $2 billion from the December 2025 target. Data center revenue is anticipated to grow nearly 50%, with communications and other business growing at a low-single-digit percentage. Non-GAAP earnings per share are expected to exceed $5. Contributions from Celestial AI and XConn are forecast to total approximately $250 million in revenue for FY2028, indicating acquired businesses are beginning to deliver results.
Company executives stated that growth in FY28 will be supported by three core drivers. First, continued contributions from existing custom projects. Second, volume production ramps for multiple XPU companion projects, with particularly strong performance in custom NICs and CXL-related applications. Third, the company's new leading-edge XPU project entering high-volume production. The primary XPU project is transitioning to the next generation, with firm orders secured for the full year. A second top-tier cloud provider's XPU project is progressing smoothly and is expected to enter volume production in FY28. Demand for CXL expanders and custom NICs is accelerating, with these two applications alone projected to contribute over $2 billion in revenue by FY29.
During the Q&A session, management addressed several topics. Regarding customer concentration concerns in the custom business, the company emphasized its deep involvement across the ecosystem and strong positioning with all four major US hyper scalers and secondary providers. While revenue mix varies by customer, custom business does not represent an excessively high portion of the total $11 billion revenue target and is not the primary cause of concentration. The company highlighted its high degree of diversification within these core customers, offering distinct and extensive product portfolios to each. With over 20 design projects in production or nearing production, customer diversity within the custom business itself is expected to increase further in FY28 and FY29. Recent acquisitions have enhanced capabilities in PCIe, UAL, and key silicon photonics technologies, strengthening the company's service scope with top customers.
Discussing the impact of OpenAI's partnership with a leading XPU customer, which is expected to consume approximately 2GW of next-generation XPU capacity, management viewed it as a positive signal of accelerating AI compute demand. With 15-20 XPU companion custom projects slated for deployment over the next two years and the leading customer's next-gen XPU project ramping, custom business growth is expected to be stronger in the second half of the year. The previously stated $2 billion annualized revenue target remains intact, with potential upside. The overall company quarterly revenue target now points to over $3 billion (Q4), with custom business contributing significant potential增量. Growth drivers for FY28 include increased product value, layered introduction of XPU companion products, and the launch of projects with a new first-tier hyper scaler. Current production plans with the supply chain are substantially higher than stated forecasts, suggesting strong potential for upward revisions if trends continue.
The electro-optics business is significantly outperforming cloud provider capital expenditure growth, which is around 60%, with its own growth reaching over 50% this year. This strength is a core driver behind the raised guidance. The momentum is expected to persist into FY28, supported by increased attach rates with new XPU and GPU generations, higher average selling prices from 1.6T product penetration, and a pipeline of new projects. Growth in this segment, bolstered by the Inphi acquisition, remains strong, driven by technological evolution.
For FY2027 (calendar 2026), the growth rate for the custom business is now expected to exceed the previously guided 20%, suggesting an adjustment upwards towards 30% is appropriate. Confidence is high regarding the volume production timeline and "doubling" growth target for the second major customer's XPU project, based on Marvell's successful history with large-scale custom projects, aligned production plans with the customer, and reserved capacity that exceeds current market expectations.
The $2 billion upward revision to the FY28 revenue outlook (from ~$13B to ~$15B) stems from increased visibility and concrete project execution, particularly in the interconnect business. Previous forecasts were conservative, merely pegging growth to overall cloud CapEx. Strong order flow and customer supply planning confirm that interconnect growth is more closely tied to GPU/XPU demand, leading to significant forecast increases.
The AEC and Retimer business is expected to more than double this fiscal year, albeit from a base of approximately $200 million. This emerging product area is part of the company's end-to-end interconnect strategy. While currently small, it is experiencing rapid growth and complements the overall portfolio, aiming to make Marvell a one-stop interconnect partner.
Regarding the XPU companion business scale, while precise figures were not disclosed, the total addressable market (TAM) for XPU companions is estimated at $15 billion for calendar 2028, with Marvell targeting a 20% share (~$3 billion). The business was in the hundreds of millions last year, is expected to double this year, and double again next year, potentially reaching a ~$1 billion run rate.
For the electro-optics product mix in FY2027, 800G is expected to remain the volume leader throughout the year and into next year. However, 1.6T, which began meaningful shipments late last year, is on a very steep ramp. Demand revisions from customers, especially for 1.6T, are a key factor behind the raised interconnect guidance. Exact percentage splits are difficult due to dynamic order patterns.
On supply chain management, while areas like advanced wafer fabrication, advanced packaging, and large substrates for AI have been tight since ChatGPT's launch, Marvell achieved over 40% revenue growth last year, demonstrating strong supplier relationships. Early forecasting and multi-year visibility provided to suppliers have prepared the ground for the current ramp. Based on secured capacity, management is confident in obtaining the supply needed to support near and long-term growth plans.
Addressing the EPS guidance of "over $5" for next year against the $15 billion revenue target, management clarified it is a baseline. Modeling from the year-end quarterly run-rate of over $3 billion, using provided operating expense guidance and gross margin trends, suggests EPS would calculate to a figure above $5. There is no indication of margin degradation or operating leverage loss; in fact, operating leverage is improving, with operating margins around 35% currently and expected to increase through the year, likely sustaining at year-end levels into next year.
Regarding Co-Packaged Optics (CPO), the view remains that its deployment scale in scale-out architectures will be limited compared to pluggables. While technically capable of integrating Celestial AI technology with switch platforms, the current focus is not there. The inflection point is in scale-up architectures, like those using UA Link, where CPO offers significant value. The acquisition provides a key design win, with a product for scale-up applications targeting production ramp by the end of next year, integrating photonic fabric chiplets on both XPU and switch sides. While most scale-up switching currently uses copper, strong interest exists for CPO in this area in the coming years. Volume shipment for a scale-up CPO product to a major customer is planned for next year.
Finally, management defended the strategic importance of continuing investment in the competitive custom ASIC/XPU processor business alongside the high-margin interconnect segment. The processor business forces the company to remain at the forefront of advanced process nodes, packaging, and core IP development, transforming Marvell from a fast-follower to a technology leader. Despite market "noise" affecting valuation multiples, the business has grown from zero to $1.5 billion, is growing again this year, and is projected to double next year. Development is conducted with significant customer NRE funding and deep involvement, validating its strategic necessity. Management remains committed to driving Marvell as a full-stack AI player from electrical to optical, and interconnect to compute.
Comments