Networking chips designer Marvell Technology (NASDAQ: MRVL) met Wall Streets revenue expectations in Q3 CY2025, with sales up 36.8% year on year to $2.07 billion. The company expects next quarter’s revenue to be around $2.2 billion, coming in 1% above analysts’ estimates. Its non-GAAP profit of $0.76 per share was 3% above analysts’ consensus estimates.

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StockStory’s Take

Marvell Technology’s third quarter delivered results that met Wall Street’s expectations, with the market reacting positively following management’s detailed discussion of drivers behind the company’s 36.8% year-over-year sales growth. Management attributed this momentum to robust demand in the data center market, particularly for high-speed connectivity solutions supporting artificial intelligence workloads. CEO Matthew Murphy highlighted that “momentum in our data center business remains strong with revenue growing 38% year-over-year, fueled by robust AI demand,” while also noting a recovery in the communications and other end markets as customer inventory levels normalized and new products gained traction across enterprise and carrier customers.

Looking forward, Marvell’s guidance reflects optimism for continued revenue growth, underpinned by ongoing strength in AI-driven data center demand and the anticipated impact of its recently announced Celestial AI acquisition. Management believes that next-generation photonic interconnect technologies will be increasingly critical as accelerated systems move toward multi-rack designs, enabling large-scale AI clusters. CFO Willem Meintjes added that “we intend to continue to invest in growing our business while driving operating leverage,” and management expects incremental contributions from both new product cycles and a robust customer pipeline, with Celestial AI’s technology expected to drive revenue starting in the second half of 2028.

Key Insights from Management’s Remarks

Management attributed the quarter’s strong growth to surging data center demand, the strategic acquisition of Celestial AI, and broad-based product adoption in both data center and communications markets.

• Data center demand surge: Management pointed to ongoing strength in AI infrastructure investments, with high-speed connectivity products like PAM DSPs, TIAs, and drivers driving double-digit sequential growth. This segment benefited from expanding adoption by hyperscale customers building out large AI clusters.

• Celestial AI acquisition: The company announced the acquisition of Celestial AI, which brings a photonic fabric platform designed for next-generation, high-bandwidth optical interconnects. Management expects this technology to be a key differentiator, enabling Marvell to address emerging customer needs as copper-based interconnects approach their physical limits.

• Custom silicon momentum: Marvell highlighted new design wins and growing customer interest in custom XPU and XPU attach solutions, which offload networking and memory functions from AI accelerators. Management noted these programs are expected to drive meaningful revenue growth in 2027 and beyond.

• Communications market recovery: The communications and other end markets experienced a strong rebound as customer inventory normalization and the refreshed product portfolio led to improved enterprise and carrier demand. Management expects this business to grow in line with broader IT and carrier spending trends going forward.

• Strategic capital deployment: Marvell executed a $1 billion accelerated share repurchase and continued to return capital through ongoing buybacks and dividends, supported by robust operating cash flow and proceeds from divestitures. This financial flexibility allowed for continued investment in organic growth and acquisitions.

Drivers of Future Performance

Marvell’s outlook is shaped by accelerating AI infrastructure buildout, new product ramps, and the integration of Celestial AI’s photonic technology.

• AI infrastructure expansion: Management expects continued growth in data center revenue, driven by hyperscale customers expanding AI clusters and increased adoption of high-speed optical and PAM-based interconnects. The company anticipates its interconnect and custom silicon businesses will outpace broader cloud capital expenditure growth.

• Celestial AI integration: The acquisition is expected to position Marvell at the forefront of next-generation optical interconnect technology, with management forecasting meaningful revenue contributions starting in the second half of 2028. The photonic fabric platform is seen as a catalyst for new applications beyond current data center architectures.

• Risks and visibility: While management emphasized strong customer backlog and purchase orders for next-generation programs, they acknowledged that the concentration of custom business in a few large programs and evolving technology transitions could introduce volatility. Management stated that multi-year customer visibility and close collaboration with hyperscalers are helping to mitigate these risks.

Catalysts in Upcoming Quarters

In upcoming quarters, the StockStory team will focus on (1) the pace of adoption and initial revenue contribution from Celestial AI’s photonic fabric products; (2) sequential growth in data center and custom silicon programs as new hyperscaler deployments ramp; and (3) normalization and sustained momentum within communications end markets. Execution of new product cycles, integration of acquired technologies, and continued customer design wins will be key milestones to watch.

Marvell Technology currently trades at $100.14, up from $93.04 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members).

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