Marvell (MRVL) reports earnings tomorrow after the close. The market has already priced in guidance on the custom silicon business. The part that stays underrated is the optical interconnect business. Data movement and data connectivity will be a very big bottleneck over the next few years, so investors should watch this closely.
The Google deal
The Google (GOOGL) announcement confirms Marvell (MRVL) sits inside Google's custom silicon ecosystem. The next thing to watch: whether the company broadens that customer base to other hyperscalers. The deal ties warrants to as much as $120 billion of cumulative custom product revenue across the TPU ecosystem.
Two big trends drive this. First, custom silicon: AI training leans more on TPUs. Second, data connectivity: compute is strong, but the hard part is moving data between GPUs and across data centers. Marvell (MRVL) plays across several layers of that connectivity stack - DSP transceivers, switches, and other key parts.
Crane Shares built an ETF around this connectivity theme called Luma, which invests across the whole connectivity ecosystem. Marvell (MRVL) is one of Luma's top holdings.
How much to model
Custom silicon revenue is set to roughly double by fiscal year 2028. Investors will price that in gradually. The stock jumped on the news, then pulled back, because the market is still working out how much the dilution will hurt the share price. Long term, custom silicon becomes a core business.
On top of that, optical interconnect grows fast. The company guided to over 70% growth for fiscal year 2027, which the market underrates.
If AI capex slows
Question: if hyperscaler capex spending stalls, is the run over for Marvell (MRVL)? No. Guidance stays strong, which shows the company is bullish on its AI capex outlook. More important, Marvell (MRVL) sits at a structural shift inside data center capex. Even if AI capex stays flat, the mix shifts toward more connectivity, more switches, more interconnect. The share of capex going into connectivity grows from 2% to 12%, a large addressable market for Marvell. Quarterly revenue guidance runs at 35% year over year.
Celestial AI and the tech edge
Question: does the Celestial AI acquisition give Marvell (MRVL) a real technology edge as AI moves to much larger scale-up setups? Yes. The company has a strong track record of buying and integrating other firms' technology, and of making smart strategic bets on AI infrastructure bottlenecks. That is how it has won many data connectivity layers, and why it can attack many bottlenecks across the ecosystem.
What to watch tomorrow
Three things: first, guidance on whether the custom silicon customer base widens; second, whether revenue guidance for both custom silicon and optical interconnect looks sustainable; third, how bullish the company sounds on DSPs, transceivers, and silicon photonics. One bullish quarter is not enough - investors already price that in, so revenue growth has to look sustainable across coming quarters.
Priced in?
The implied move after earnings is about 10%. Question: how much good news is already in the stock? Expectations run high after strong Q1 guidance. Still, Goldman projects the total addressable market for data connectivity can grow 9x from today to 2028. With growth that large, there are multiple years of potential ahead. Discount all that future cash flow back to today, and the valuation can move higher.
