Chipmaker Marvell Technology (MRVL) said on Tuesday that it will acquire semiconductor startup Celestial AI in a $3.25 billion deal and also issued a bullish outlook for its next fiscal year.
Marvell’s shares rose nearly 10% in premarket trading on Wednesday following its quarterly earnings report released after market close. Moreover, the generative AI boom has accelerated chipmakers’ development cycles as they race to build the fastest and most energy-efficient hardware for advanced data centers.
Marvell and rival Broadcom (AVGO) support cloud-computing companies by designing custom chips tailored to their specific data center needs, and that demand has expanded into a significant business for both firms. Marvell expects to generate approximately $10 billion in total revenue next fiscal year, including a 25% increase in data center revenue, CEO Matthew Murphy said. It does not foresee any major quarterly fluctuations in its custom chip revenue next year.
Additionally, Murphy said in a conference call that Marvell expects its revenue from its custom chip business to grow 20% next year. The Santa Clara, California-based company helps Amazon (AMZN) and Microsoft (MSFT) develop their in-house AI chips, according to JP Morgan analyst Harlan Sur.
The Celestial acquisition will allow Marvell to leverage the startup’s work in photonics, which uses light instead of electrical signals to link AI chips and memory chips—an area where it competes with Broadcom and Nvidia, the world’s most valuable company. Murphy told that Marvell will integrate Celestial’s technology into its next-generation photonics infrastructure products, enabling the company to enter a new $10 billion market.
“We’re going to have a silicon photonics powerhouse at Marvell when this is all done,” he said.
Murphy said big cloud computing companies will begin adopting photonics technology in 2027 or 2028 for large-scale applications. Eventually, he said, the technology will become widely used.
Under the terms of the deal, Celestial AI will receive $1 billion in cash and 27.2 million shares of Marvell common stock valued at $2.25 billion.
Marvell said it expects Celestial AI to contribute meaningful revenue beginning in the second half of fiscal 2028, reaching a $500 million annualized run rate in the fourth quarter of fiscal 2028 and doubling to a $1 billion run rate by the fourth quarter of fiscal 2029. The company expects the transaction to close in the first quarter of calendar year 2026.
