Marvell: Acquisition to Fill Gaps, Is the NVIDIA 'Alternative' Path Becoming a Reality?

Marvell Technology (MRVL.O) released its Q3 FY2026 financial report (ending October 2025) in the early morning of December 3rd, Beijing time, after the U.S. stock market closed:

1. Revenue:$Marvell Tech(MRVL.US) This quarter's revenue was $2.07 billion, a quarter-on-quarter increase of 3.4%, meeting market expectations ($2.06 billion). The quarter-on-quarter increase of $60 million was mainly driven by enterprise networking and carrier business.

2. Gross Margin: This quarter's gross margin was 51.6%, a quarter-on-quarter increase of 1.2%. Due to the impact of asset amortization from acquisitions, the gross margin in the financial report does not directly reflect operational conditions. After excluding this impact, Dolphin Research references the adjusted gross margin, which was 59% this quarter, a quarter-on-quarter increase of 0.3%, remaining relatively stable.

3. Data Center Business: A key focus of the market. This quarter's revenue was $1.52 billion, a quarter-on-quarter increase of 1.8%, mainly driven by optical interconnect products, with data center business accounting for 73% this quarter. Dolphin Research estimates the company's AI business revenue this quarter to be approximately $330 million, a quarter-on-quarter decrease of $70 million. Currently in a product transition period, the company's custom ASIC revenue still mainly comes from the Trainium 2 mass-produced in 2024, with demand fluctuations.

Regarding concerns about the company's share in Amazon's Trainium products, the company responded with "no revenue gap." After the financial report, the company raised its growth guidance for the data center next fiscal year to around 25%.

4. Next Quarter Guidance: Revenue of $2.2 billion, meeting market expectations ($2.19 billion), with quarter-on-quarter growth mainly driven by custom ASIC and data center business ; Gross Margin (GAAP) 51.1%-52.1%, remaining relatively stable. Since the company has provided an outlook for the next fiscal year, next quarter's guidance is not very important.

5. Acquisition of Celestial AI: After this financial report, the company announced a strategic acquisition of Celestial AI, which can fill the company's shortcomings in multi-rack scale-up interconnect, thereby enhancing its competitiveness in the AI chip market. The company expects this business to start contributing revenue in the second half of FY2028, with Q4 FY2028 revenue reaching $125 million, and Q4 FY2029 revenue expected to double to $250 million.

Dolphin Research's Overall View: Raising guidance and acquiring Celestial AI are the core highlights

Marvell Technology's financial report and guidance this time both meet market expectations. Since the company has already provided a growth outlook for the next fiscal year, the substantial impact of recent financial report data is not significant.

For the data center business, the quarter-on-quarter increase this quarter was mainly driven by optical interconnect products. The custom ASIC business was affected by demand fluctuations (major customer Amazon's product cycle) and showed a quarter-on-quarter decline, with current revenue still mainly coming from the Trainium 2 mass-produced in 2024. As for the growth of the custom ASIC business next year, it will mainly be driven by the ramp-up of Trainium 3 mass production.

For Marvell Technology's AI business, the main focus points are as follows:

a) Capital expenditure of major customer Amazon: Currently, cloud service giants are the main buyers of AI chips, and in the third quarter, each giant's capital expenditure showed quarter-on-quarter growth, injecting confidence into the AI track again. Combining each company's outlook and industry expectations, Dolphin Research estimates that the combined capital expenditure of the four major cloud vendors (Meta, Google, Microsoft, and Amazon) in 2026 is expected to approach $600 billion, a year-on-year increase of 42%, laying the foundation for the growth of AI chip demand next year.

Although the increase in capital expenditure by vendors such as Google and Meta can drive the growth of the company's optical communication business, Amazon's (major customer) capital expenditure performance will have a greater impact on the company's AI revenue.

Amazon's capital expenditure this quarter reached $35.1 billion, a quarter-on-quarter increase of nearly $3 billion, setting a historical high for a single quarter. If Amazon further raises its capital investment outlook, it will also bring confidence to the growth of the company's AI business.

b) Changes in the company's share among major customers: Amazon chose to cooperate with Marvell and Alchip for its custom ASIC products, so the market was once worried that the company would lose its share due to competition.

The company's CEO mentioned in a fireside chat that "the cooperation between the two parties has visibility across multiple generations of products, and continuous research and development on 2nm technology (Trainium 4) is expected, with no revenue gap in AWS custom AI ASIC cooperation," directly soothing the market's unease (concerns about the company's share in the next generation of products).

In terms of custom ASIC, Amazon's focus is on the Trainium chips for training AI models. Based on company and industry information, Amazon's upcoming Trainium 3 and Trainium 4 are still being advanced simultaneously by Marvell and Alchip, and the company will also face competition from Taiwanese manufacturers.

c) Progress of new customers and company outlook: The company's management provided an outlook at the end of September, and after this financial report, the company raised its expectations again. The company expects the growth of data center business in FY2027 to be around 25% (previously 18%), with the growth rate of custom ASIC exceeding 20% (previously 18%).

Although Marvell Technology provided AI business growth rates, which can alleviate concerns about the company's share among major customers, the 20-30% figures are still relatively weak compared to the increase in cloud vendor investment. This also indicates that the company is relatively weak in the competition in the AI chip market and has not obtained additional large orders.

In the current AI chip market, Marvell Technology's market share is only in the low single digits. According to the company's guidance on AI business growth next year, the core customer next year is still Amazon.

Because the company is relatively on the edge of the AI chip track, the company announced the acquisition of Celestial AI to further enhance its competitiveness. After completing the acquisition, Marvell will also become a manufacturer covering "scale out + scale up" full scenarios.

【Celestial AI's main products include rack-level products Photonic Fabric, PF chiplet (photon architecture small chip) on the GPU/XPU side, and optical interconnect HBM/memory modules on the memory side. The company does not focus on ordinary optical devices but is a "provider of optical interconnect solutions" for AI infrastructure—through full-stack optical technology to reconstruct AI data centers (the core goal is to replace traditional copper interconnect with optical interconnect technology), allowing large-scale AI computing power to move from "single rack limitation" to "multi-rack cluster"】

Combining Marvell Technology's current market value ($80.1 billion), it roughly corresponds to about 30x PE of the company's adjusted net profit for FY2027 (assuming revenue growth of +24%, adjusted gross margin of 58.3%, adjusted tax rate of 10.4%). Referring to the historical situation of the company's stock price, the market mostly gives the company a valuation consideration of 25x PE-35x PE, currently in the middle of the range.

In the absence of other major customers, the market's biggest concern for Marvell Technology is competition from Alchip. The emphasis by the company's management on "no revenue gap" indirectly indicates that the company is still Amazon's core supplier, alleviating market concerns to some extent.

Although the company raised next year's guidance after the meeting, the growth rate of the custom ASIC business is still only slightly above 20%, significantly lower than the growth rate of the AI chip market, which also reflects that the company's performance next fiscal year does not have significant increments brought by other major customers. The company's management previously set a goal of obtaining a 20% share in the custom ASIC market, which requires the company to strive for a larger share of Amazon's orders while also needing the assistance of other new major customers. And the current competitive market situation between the two companies will still be a factor that disturbs the company's stock price.

The current valuation corresponding to FY2027 is still close to 30x PE, which already includes part of the expectation of upward share acquisition in the future. Since the company has not been able to show competitive performance or progress with new customers, the company's stock price has been difficult to break through $100 for a long time.

The company's announcement of the acquisition of Celestial AI is the biggest highlight of this financial report. This can bring the company an expansion of technical capabilities and reuse of customer resources, enhancing the company's competitiveness in the AI chip market. After completing the acquisition of Celestial AI, Marvell Technology will also become a manufacturer covering "scale out + scale up" full scenarios, bringing more imagination space to the company's future. Only by improving the competitiveness of its products can it alleviate concerns about competition from Taiwanese manufacturers while also gaining more opportunities for customers and orders, allowing the stock price to truly stabilize and rise.

Dolphin Research's specific analysis of Marvell Technology (MRVL.O) financial report is detailed below:

I. Marvell Technology Business

Marvell Technology started with storage technology and later expanded its business through a series of "external acquisitions," with data center business becoming the company's largest source of revenue.

Specific business situation:

1) Data Center Business (approximately 75%): High-growth business, benefiting from the demand for data centers and ASIC, is the main focus of the current market. The business includes optoelectronic interconnect products, SSD controllers, custom ASIC business (Amazon AWS, Google Axion CPU, etc.), mainly used in cloud servers, edge computing, and other scenarios;

2) Other Business (approximately 25%): Starting from the third quarter, "enterprise networking, carrier infrastructure, consumer, automotive + industrial" are integrated into the "communication and other" segment. Among them, ① Enterprise networking and carrier infrastructure business showed a significant decline after large-scale 5G infrastructure; ② Consumer electronics business is affected by the demand for downstream electronic products and home broadband; ③ Automotive and industrial, after divesting the automotive Ethernet business, this business will mainly focus on the industrial terminal market, accounting for a low single-digit percentage.

II. Core Data: Revenue & Gross Margin, Meeting Expectations

2.1 Revenue

Marvell Technology achieved revenue of $2.07 billion in Q3 FY2026, a quarter-on-quarter increase of 3.4%, meeting market expectations ($2.06 billion). The company's revenue growth this quarter was mainly driven by enterprise networking and carrier business. Due to the quarter-on-quarter decline in custom ASIC business, data center business showed a slight quarter-on-quarter increase.

2.2 Gross Margin

Marvell Technology achieved a gross profit of $1.07 billion in Q3 FY2026, a quarter-on-quarter increase of $60 million. Marvell's gross margin this quarter was 51.6%.

Due to the impact of asset amortization from acquisitions, the gross margin in the financial report does not directly reflect operational conditions. After excluding this impact, Dolphin Research references the adjusted gross margin, which was 59% this quarter. The slight quarter-on-quarter increase in gross margin was mainly due to the structural impact of the quarter-on-quarter decline in the custom ASIC business, which has a lower gross margin.

2.3 Operating Expenses and Profit

Marvell Technology achieved a net profit of $1.9 billion in Q3 FY2026, mainly affected by the sale of the automotive Ethernet business.

Excluding the impact of non-recurring factors, from the EBITDA perspective, the company's EBITDA this quarter was $688 million, with EBITDA% continuing to rise to 33.2%. The company's operating expenses this quarter remained stable with a slight decrease, and the overall improvement in operating conditions was mainly driven by the increase in revenue and gross margin.

III. Business Situation: Raising AI Guidance, Acquiring Celestial AI

Since 2018, Marvell Technology has successively acquired companies such as Cavium and Innovium, thereby enhancing its capabilities related to ASIC and data centers. With the growth in demand for custom ASIC and optoelectronic interconnect products from companies like Amazon and Google, the company's data center business is showing an upward trend, being the largest impact item on the company's performance.

In addition, the revenue share of traditional businesses such as enterprise networking, carrier infrastructure, consumer electronics, and automotive and industrial has all declined to around 10% or below.

3.1 Data Center Business

Marvell Technology's data center business achieved revenue of $1.52 billion in Q3 FY2026, a quarter-on-quarter increase of 1.8%, meeting market expectations ($1.5 billion). The growth of the company's data center business this quarter was mainly driven by the growth of optoelectronic interconnect products.

This quarter's quarter-on-quarter increase in data center business continued to narrow to $30 million, mainly dragged down by the quarter-on-quarter decline in custom ASIC business, while optical interconnect products continued to contribute steady increments, with double-digit quarter-on-quarter growth this quarter.

Currently, AI business already occupies a large part of the data center business, Dolphin Research expects the company's AI revenue this quarter to be approximately $850 million, a quarter-on-quarter decrease of $10 million; while non-AI business storage and other products achieved quarter-on-quarter growth this quarter. Currently, the AI business accounts for over 40% of total revenue, and the company's management's previous goal was to increase the AI revenue share to over 50%.

The company's management provided an outlook at the end of September, and after this financial report, the company raised its expectations again. The company expects the growth of data center business in FY2027 to be around 25% (previously 18%), with the growth rate of custom ASIC exceeding 20% (previously 18%)

Unlike NVIDIA, which has narratives such as sovereign AI, startups, and robots, Marvell will rely more on the capital expenditure of CSP cloud service giants. The company's main logic is to revolve around the needs of cloud service giants, providing custom ASIC products and optical interconnect products, striving for a certain share in the AI chip market.

After the third quarter financial reports of each giant, the market raised the growth rate of capital expenditure of core cloud vendors to around 40%. Although the company raised its outlook for the next fiscal year this time, the 25% growth rate of the data center is still relatively weak. This also indicates that the company is still difficult to see increments brought by other major customers in the next fiscal year, and the company is currently relatively on the edge of the AI chip market.

The company's announcement of the acquisition of Celestial AI in this financial report is the biggest highlight. This can bring the company an expansion of technical capabilities and reuse of customer resources, enhancing the company's competitiveness in the AI chip market. After completing the acquisition of Celestial AI, Marvell Technology will also become a manufacturer covering "scale out + scale up" full scenarios, bringing more imagination space to the company's future.

Marvell Technology expects this business to start contributing revenue in the second half of FY2028, with Q4 FY2028 revenue reaching $125 million, and Q4 FY2029 revenue expected to double to $250 million.

3.2 Other Business

1) Marvell Technology's enterprise networking business and carrier infrastructure business achieved revenue of $237 million and $168 million respectively in Q3 FY2026. Both businesses continued to grow quarter-on-quarter this quarter, reflecting the demand for the company's and campus network products, and the related demand for optical communication chips and 5G base station chips from carriers.

2) Marvell Technology's consumer electronics business achieved revenue of $117 million in Q3 FY2026, a year-on-year increase of 20.8%. The company's consumer electronics business mainly includes storage controllers, WiFi chips, and other products, which are greatly affected by seasonal factors.

3) Marvell Technology's automotive/industrial business achieved revenue of $35 million in Q3 FY2026. The company has already divested the automotive Ethernet business, and the current business mainly focuses on the industrial market, expected to remain relatively stable, with long-term annual revenue expectations of around $100 million, accounting for a relatively small percentage.