Marvell Technology (MRVL) stock rallied 8.7% in after-hours trading yesterday after beating Q3FY26 expectations and announcing a definitive agreement to buy AI startup Celestial AI. The deal values Celestial AI at about $3.25 billion upfront, with additional earnouts tied to product milestones, and is expected to close in Q1 of calendar year 2026, subject to closing conditions.
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Marvell designs and develops semiconductors for data infrastructure solutions. Celestial AI develops photonic technology that uses light instead of copper wires to accelerate data transfer inside data centers, speeding up data movement within AI systems, crucial for handling large and complex AI models.
Marvell Exceeds Q3 Estimates
Marvell posted adjusted earnings per share (EPS) of $0.76, exceeding the consensus of $0.74 and much better than Q3FY25’s figure of $0.43. Revenue rose 37% year-over-year to $2.08 billion and also beat the consensus of $2.07 billion. Marvell also offered upbeat guidance for Q4 and raised its full-year data center revenue growth to exceed 40%.
Details of Celestial AI Buyout
Marvell will pay $1 billion in cash and issue about 27.2 million shares as part of the upfront consideration, valued at roughly $3.25 billion in total. An incremental contingent consideration could bring the total to as much as $5.5 billion, based on Celestial AI hitting revenue milestones, including a milestone of $500 million in cumulative revenue by fiscal 2029’s end and a potential full earnout if revenue surpasses $2 billion by that year.
Marvell expects Celestial AI to contribute meaningfully starting in the second half of fiscal 2028, aiming for a $500 million annualized run rate by Q4FY28 and a $1 billion run rate by Q4FY29.
How Celestial AI Will Boost Marvell’s Offerings
Celestial AI’s photonic interconnect technology could enhance Marvell’s data-center connectivity by combining optical and electrical interconnects, potentially reducing reliance on third-party optics and expanding Marvell’s addressable market in AI infrastructure. The initial integration is expected to connect systems built around large XPUs, with broader adoption anticipated in custom AI chips and related switches as customer traction grows.
Marvell competes with larger custom chipmakers such as Broadcom (AVGO) and Nvidia (NVDA) in the rapidly growing AI hardware market, and Celestial’s acquisition could change the competitive landscape for powerful AI chips.
Marvell CEO Matt Murphy and Amazon Web Services (AMZN) VP Dave Brown also highlighted that the acquisition will enable further acceleration of optical scale-up innovation for next-generation AI deployments.
Is MRVL Stock a Buy, Hold, or Sell?
Analysts remain divided about Marvell’s long-term outlook. On TipRanks, MRVL stock has a Moderate Buy consensus rating based on 14 Buys and six Hold ratings. The average Marvell Technology price target of $99.39 implies 7% upside potential from current levels. Year-to-date, MRVL stock has lost 15.6%.
