Marvell Raises Fiscal 2028 Revenue Outlook to $18 Billion as Google Warrant Deal Signals Custom Silicon Business Could Dwarf Prior Targets
Q2 fiscal 2027 earnings call, August 27, 2026
Marvell Technology delivered another quarter of accelerating growth and, more importantly, gave investors a glimpse into just how large its custom silicon opportunity could become. The company posted record second-quarter revenue of $2.739 billion, up 37% year-over-year, and raised its fiscal 2028 revenue outlook to approximately $18 billion, a $1.5 billion increase from the $16.5 billion guidance provided just one quarter ago. Growth is now expected to accelerate to roughly 50% year-over-year in fiscal 2028, up from the prior 45% forecast, even as the revenue base expands.
The Google Warrant: A Number Too Big to Fully Model Yet
The most consequential disclosure on the call centered on Marvell's expanded commercial agreement and associated warrant with a major hyperscaler, widely understood to be Google. Analysts pressed CEO Matthew Murphy repeatedly on the math behind the deal, which Melius Research's Ben Reitzes framed bluntly: at $120 billion in cumulative revenue over roughly 6.5 years, the agreement implies annualized revenue of nearly $18.5 billion, effectively "adding a FY28 Marvell every year." Murphy did not push back on the arithmetic. "Your math is not wrong," he told Reitzes. "If you took the full performance and the full opportunity, then you're right, it's just a monster number." Crucially, management indicated that revenue tied to programs already in execution under the warrant is already embedded in current guidance, meaning the bulk of the incremental upside lands in fiscal 2029 and beyond. Murphy was careful not to size the number precisely, saving details for the company's Investor Day on October 6 in New York, but he gave investors a directional anchor: "You should assume starting in FY29 and beyond, whatever you've modeled previously prior to the warrant for custom numbers definitely goes higher." He added that skepticism the company could even reach its previously stated $8 billion to $10 billion custom target in fiscal 2029 should now be replaced with confidence that Marvell has "secured a pretty big set of programs, not just here, but across the broad range of our customer set."
Data Center Business Broadens Beyond Custom
While the Google warrant dominated analyst attention, management was emphatic that the upgrade cycle is not a single-customer story. Data center revenue grew 46% year-over-year in the second quarter to $2.17 billion, accelerating from 27% growth in the prior quarter, and is now guided to grow more than 20% sequentially and roughly 75% year-over-year in the third quarter. Marvell now expects data center revenue to grow approximately 60% in fiscal 2027, up from a prior 50% estimate, and more than 60% again in fiscal 2028. Murphy pointed to scale-out interconnect, switching, and broadband analog as businesses that are each on or ahead of a $1 billion annualized run-rate trajectory, with 800 gig optical DSP demand remaining strong and 1.6T ramping rapidly. Scale-out switching, powered by 51.2T products, remains on track to more than double this year.
Scale-Up Optics Emerges as an Unexpected Growth Driver
Perhaps the more surprising upward revision came from scale-up optics, an area Marvell entered through its Celestial AI acquisition. Just one quarter ago, management sized the Celestial CPO photonic fabric opportunity at roughly $150 million for next year, with total scale-up optics, including NPO, at about $300 million. On this call, Murphy said that number has moved meaningfully higher and is now a significant driver of the $1.5 billion fiscal 2028 raise. "The magnitude of our scale-up optics opportunity next year is much larger than we thought just a quarter ago," he said. "The year after is going to be way larger than I could have ever comprehended even last year when we were looking at Celestial." Murphy was explicit that this is not a binary technology transition. Customers are pursuing NPO and CPO simultaneously across different architectures, alongside three separate modulator technologies (MZM, EAM, and MRM), and Marvell's breadth across all of them is a deliberate positioning strategy. "This is not an or, it's an and," he said, drawing a contrast with the cleaner cutover from 800-gig to 1.6T DSPs. Marvell is also engaged in "multiple deep discussions with Tier 1 customers" on scale-up switching, with each engagement representing what Murphy called a multibillion-dollar lifetime revenue opportunity.
CXL and Memory Expansion Quietly Becoming a Real Business
Wells Fargo's Aaron Rakers drew out commentary on Marvell's CXL memory expansion business, which Murphy described as evolving from an original server-centric compute architecture into something far more valuable amid the current memory scarcity environment. "This is turning out to be a home run," Murphy said, noting that the technology is now deploying at multiple hyperscalers with varying architectures and in high volumes, partly because customers are actively modifying their designs to use more memory-expansion technology given tight supply. Marvell has secured additional design wins in this category over the past several quarters and plans a dedicated memory expansion section at its Investor Day.
Margins Take a Near-Term Mix Hit, But Operating Leverage Still Intact
New CFO Dan Durn, who joined from Marvell's board after Willem Meintjes' June departure, addressed the roughly 90 basis point sequential decline in gross margin guidance for the third quarter, attributing it primarily to a strong ramp in the lower-margin custom business. Non-GAAP gross margin guidance for the third quarter sits between 57.5% and 58.5%, and Durn indicated fourth-quarter margins should hold in a similar range, with fiscal 2028 margins likely tracking the same band as the back half of fiscal 2027. Despite the mix pressure at the gross margin line, Durn reiterated that operating margin still has "significant leverage embedded in it," with non-GAAP operating margin expected to enter the company's 38% to 40% long-term target range by the fourth quarter of this fiscal year and reach the high end of that range as fiscal 2028 progresses. Marvell also plans to reset its long-term operating model at the October Investor Day.
Leadership Transition Adds Execution Risk to Watch
The call also marked a notable changing of the guard, with Durn's first appearance as CFO following Meintjes' departure "to spend more time with his family," and incoming IR head Ross Seymore, formerly a 25-year semiconductor analyst at Deutsche Bank, replacing the retiring Ashish Saran. Durn used his opening remarks to stake out a clear mandate: "My goal as CFO is to help Marvell scale efficiently and effectively to capture what I expect to be a tremendous opportunity," while flagging that expanding operating margins and disciplined capital allocation will remain his priority as the revenue base scales rapidly. Investors will be watching for continuity in financial discipline given the magnitude of capacity investment ahead, with Marvell on pace for roughly $1 billion in capacity prepayments to suppliers in fiscal 2027 alone.