Jensen Huang Praises Marvell Technology — Can Optical Stocks Continue Their Strong Run?
Marvell Earnings Review: The Big AI Growth Is Still Ahead
Marvell delivered a solid Q1, but the real earnings story is not the quarter that just ended. It is the growth curve management laid out for the next two fiscal years.
Key Financial Highlights
– Revenue of $2.42 billion, up 28% year-over-year, beating the consensus estimate of $2.41 billion and the company's prior guidance of $2.4 billion.
– GAAP gross margin of 52.1%, up 1.8 percentage points year-over-year, above the consensus estimate of 52%, with the high end of the company's guidance at 52.4%. Non-GAAP gross margin of 58.9%, down 0.9 percentage points year-over-year, above the consensus estimate of 58.8%, with the high end of the company's guidance at 59.3%.
– GAAP net income of $34.5 million, down 81% year-over-year, below the consensus estimate of $286 million and the high end of the company's prior guidance of $274 million. Non-GAAP net income of $720 million, up 33% year-over-year, above the consensus estimate of $705 million and the high end of the company's prior guidance of $698 million.
Revenue breakdown by platform
– Data center remains the center of the story. Q1 data center revenue was $1.833 billion, up 27% YoY and 11% QoQ, accounting for 76% of total revenue. Marvell said its data center business includes AI systems, Ethernet switching, AI servers, general-purpose servers, storage systems and data center interconnect.
– Communications and Other revenue was $585.1 million, up 29% YoY and 3% QoQ. This segment now contributes 24% of total revenue. It is no longer the main stock driver, but it gives Marvell a non-AI base while the data center business becomes increasingly dominant.
Three Things to Watch
The real beat was the FY2027 and FY2028 roadmap
The most important update was guidance, not Q1. Management now expects FY2027 revenue to grow about 40% YoY to nearly $11.5 billion. More importantly, it expects FY2028 revenue to reach $16.5 billion, about $1.5 billion higher than the outlook provided last quarter. Data center revenue is now expected to grow about 50% in FY2027 and about 55% in FY2028.
That changes the debate around Marvell. The stock is no longer trading only on whether the latest quarter beat by a few cents. Investors are now valuing the company on whether AI infrastructure demand can drive a much larger revenue base over the next two years.
Optical interconnects and silicon photonics are becoming the second engine
Marvell's optical story became more concrete. Management now expects FY2027 interconnect revenue to grow more than 70%, well above the prior 50% expectation. It also said 1.6T demand, scale-up optics, scale-across networking and DCI modules should help interconnect outgrow cloud capex in FY2028.
This is why the market has been paying more attention to Marvell's optical interconnects and silicon photonics story. Management said Celestial AI's Photonic Fabric has already been selected by a tier-1 hyperscaler for next-generation XPU scale-up networks. It also said Marvell is engaged with multiple tier-1 customers on its 6.4T light engine for NPO and CPO implementations.
Custom AI chips are broader than one XPU
Custom silicon remains the core of Marvell's AI story. Management said custom revenue is still on track to grow more than 20% YoY in FY2027 and should more than double in FY2028. The growth is expected to come from existing custom programs, a new tier-1 XPU program entering volume production, and more than 10 XPU attach programs reaching higher production volumes.
The XPU attach point matters. Even when Marvell is not supplying the main accelerator, it can still monetize the surrounding AI system through NIC, CXL memory attach, PCIe switching, retimers and high-speed I/O. Management also reaffirmed a target of more than $10 billion in custom revenue in FY2029, based on programs already won or in execution.
Guidance
Marvell's Q2 guide calls for revenue of $2.7 billion, plus or minus 5%, GAAP gross margin of 52.1% to 53.1%, non-GAAP gross margin of 58.25% to 59.25%, and non-GAAP EPS of $0.88 to $0.98. Management expects at least 10% sequential revenue growth in Q2, Q3 and Q4, with quarterly revenue reaching about $3 billion in Q3.
The longer-term guide is the real headline. Management now expects nearly $11.5 billion of FY2027 revenue and $16.5 billion of FY2028 revenue. It also expects FY2028 non-GAAP operating expense to grow in the mid-to-high teens, much slower than the expected 45% revenue growth, supporting a path toward the upper end of its 38% to 40% operating margin target model.
Summary
Marvell's Q1 was good, but the quarter itself was not the main event.
The bigger message is that management significantly raised the company's AI growth roadmap for FY2027 and FY2028, with custom AI chips, optical interconnects, silicon photonics, switching and XPU attach all becoming part of the same data center platform story.
Check out moomoo's past insights on MRVL:
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