Driven by the robust wave of artificial intelligence (AI) data center construction, semiconductor manufacturer Marvell Technology (MRVL.US) delivered a first-quarter fiscal year 2027 earnings report after the U.S. market closed on May 27 that comprehensively exceeded expectations. The company also substantially raised its performance outlook for the full year and coming years. This news propelled the company's stock price to surge nearly 10% in after-hours trading.
Q1 results exceeded expectations across the board, and Q2 guidance is strong. The earnings report shows Marvell Technology's first-quarter revenue grew 28% year-over-year to $2.42 billion, surpassing the market consensus of $2.41 billion. Adjusted earnings per share were 80 cents, higher than the analyst consensus of 79 cents. Adjusted gross margin reached 58.9%, essentially in line with market expectations.
As the company's core growth engine, the Data Center business generated revenue of $1.83 billion in the first quarter, a 27% increase year-over-year, also exceeding the market expectation of $1.81 billion. This performance continues the strong momentum from the previous quarter, with the Data Center segment's contribution to total revenue rising from 74% last quarter to 76%.
Looking ahead to the second quarter, Marvell's guidance further energized the market. The company expects second-quarter revenue at a midpoint of $2.7 billion, plus or minus 5%, significantly above the analyst average estimate of $2.6 billion. Adjusted EPS guidance at a midpoint of 93 cents, plus or minus 5 cents, also exceeded the market expectation of 90 cents.
"Marvell delivered first-quarter fiscal 2027 revenue at a record high," said Matt Murphy, Chairman and Chief Executive Officer, in the earnings statement. "Second-quarter revenue guidance at a midpoint of $2.7 billion represents 35% year-over-year growth. We are seeing strong momentum in AI-related orders, leading us to significantly raise our revenue outlook for both fiscal 2027 and 2028."
The company's ongoing upward revisions to its performance outlook further boosted market confidence. Marvell now expects full-year fiscal 2027 revenue of approximately $11.5 billion, representing about 40% growth year-over-year, higher than the previous analyst and company expectation of $11 billion. The company also raised its fiscal 2028 revenue expectation to approximately $16.5 billion, up from the prior expectation of about $15 billion. This implies an additional 44% growth in fiscal 2028 compared to fiscal 2027.
The outlook for the custom silicon business is even more striking. Marvell Technology anticipates that its custom silicon business revenue will surpass the $10 billion mark by fiscal year 2029. Morningstar analyst William Kerwin noted that this guidance implies "an incremental $5 billion of revenue from this business line alone from fiscal 2028 to 2029, signaling another strong year of growth in fiscal 2029."
Murphy stated on the earnings call that the company has "custom silicon programs with all of the U.S. hyperscale cloud providers," highlighting Marvell's deep positioning in this high-growth segment.
The consistent outperformance of Marvell's results is underpinned by the powerful dual engines of AI custom silicon (ASIC) and optical interconnect. As cloud giants accelerate their AI data center build-outs, an increasing number of companies are opting for customized AI chip solutions for cost efficiency and performance optimization, reducing reliance on general-purpose GPU processors from Nvidia (NVDA.US). Marvell and its larger competitor Broadcom (AVGO.US) are key beneficiaries of this trend—industry analysis suggests the two companies collectively control about 95% of the custom AI ASIC co-design market.
Marvell's custom silicon business is rapidly becoming a significant revenue source. In fiscal 2026, which ended in February this year, its custom silicon business had an annualized revenue run rate of about $1.5 billion, with 18 cloud provider design wins. Citi analyst Atif Malik pointed out that surging demand for Amazon's (AMZN.US) Trainium 2 AI accelerator is a core driver of Marvell's profits. Marvell collaborated with Amazon Web Services (AWS) to design the Trainium 2 chip, establishing a direct and deepening revenue relationship with one of the world's largest AI spenders. Concurrently, Marvell is also collaborating with Microsoft (MSFT.US) on the Maia AI chip, further expanding its influence in the custom silicon market.
In the optical interconnect domain, as AI clusters scale from single racks to multi-rack "AI factories," traditional copper-based interconnects are reaching physical limits in data transfer rates and power consumption, accelerating the transition towards optical interconnects in data center networking. Marvell, with its leading position in 800G and 1.6T digital signal processors (DSPs), is firmly positioned in this critical area. HSBC analyst Frank Lee noted that "the market is still underestimating the revenue growth from the optical interconnect business," and he believes Marvell will be a "key beneficiary" of this "multi-year super-cycle."
Marvell's strong performance is a microcosm of the ongoing wave of AI infrastructure investment. Estimates suggest that U.S. tech giants, including Google (GOOGL.US) and Amazon, are expected to spend over $700 billion on AI infrastructure this year, a significant increase from approximately $400 billion in 2025. The continued acceleration in capital expenditures by hyperscale cloud service providers is creating a vast and growing market for custom chip vendors like Marvell and Broadcom.
Murphy stated, "We expect revenue growth to accelerate throughout fiscal 2027, driven by continued strength in our data center business."