Marvell Technology Earnings Preview: Custom Chips and Optical Interconnect Dual Engines Driving, Can Earnings Support High Valuation?

In terms of AI ASICs (customized AI chips), Marvell is the largest partner for Amazon's AWS Trainium series, with approximately 74% of its revenue derived from the data center business.

Revenue from the custom business grew from zero to $1.5 billion in fiscal year 2026, and is expected to grow by more than 20% year-over-year in fiscal year 2027. As hyperscale customers migrate from general-purpose GPUs to customized XPU solutions and Microsoft's Maia chips continue to ramp up, AI ASICs are becoming a definitive engine driving revenue growth.

The market expects total revenue to grow by more than 30% in fiscal year 2027, reaching approximately $11 billion, with the data center business projected to grow about 40% year-over-year.

Regarding optical interconnects, once internal connection distances in AI data centers exceed 10 meters, copper interconnects can no longer meet high-bandwidth requirements, necessitating a transition to optical interconnect systems where Marvell's optical DSPs and optical interconnect products hold a core position.

An Oppenheimer report on May 22 noted that Marvell's optical business has grown at a compound annual growth rate of approximately 50% over the past five years, with growth expected to exceed 60% this year. Management has raised the fiscal year 2027 growth outlook for the optical interconnect business from 30% to 50%.

A week before the earnings release, several investment banks took the rare step of collectively raising their price targets: On May 21, Citigroup raised its target from $118 to $215 (an upward revision of approximately 82%) while maintaining a "Buy" rating, with the new $215 target representing a significant hike of over 80%; on May 22, Stifel analyst Svanberg raised the target from $140 to $210, maintaining a "Buy" rating and expecting Marvell to beat expectations and raise its guidance; Wells Fargo raised its price target from $135 to $195.

Market ratings have shifted comprehensively from a historical "Hold" to the "Buy" range. As of May 22, the stock was trading at approximately $196, a 52-week high.

The stock price has surged 130% year-to-date, with a P/E ratio of approximately 64x, significantly higher than the peer average, indicating that a considerable degree of 'perfect expectations' has already been priced in.

The integration of the Celestial AI and XConn acquisitions, the pace of 1.6T optical module penetration, and the actual mass production progress of Amazon's Trainium 3 are all execution variables that require continuous verification.

Semiconductor supply chain delivery bottlenecks remain a tangible constraint on the earnings realization of AI chip companies, a point clearly highlighted by Evercore's channel checks.

The earnings report on May 27 still needs to verify whether the quality of this performance beat can justify the current 62x valuation. If management raises the full-year outlook, the long-term growth narrative for AI computing infrastructure will be further reinforced; if the guidance shows signs of a marginal slowdown in data center growth, the current high valuation will face renewed market scrutiny.

This content was translated using AI and reviewed for clarity. It is for informational purposes only.