- Marvell Technology completed its $3.25 billion acquisition of Celestial AI on February 2, 2026, paying $1 billion in cash and issuing approximately 27 million shares in Marvell stock.
- Celestial AI’s Photonic Fabric technology uses light instead of electrical signals for chip-to-chip and chip-to-memory data transfer, addressing the interconnect bottleneck in AI data centers.
- The deal could reach $5.5 billion total if Celestial AI hits revenue milestones, including $500 million in cumulative revenue by the end of Marvell’s fiscal year 2029.
- Marvell projects Celestial AI contributing a $500 million annualized run rate by Q4 FY2028, doubling to $1 billion by Q4 FY2029.
What Happened
Marvell Technology completed its acquisition of Celestial AI on February 2, 2026, in a deal valued at $3.25 billion at closing. The transaction, first announced in December 2025, was structured as $1 billion in cash and approximately 27 million shares of Marvell common stock. Celestial AI now operates within Marvell’s Data Center Group.
Matt Murphy, Marvell’s Chairman and CEO, stated that “Celestial AI will enable us to advance Marvell’s long-term strategy to deliver the industry’s most comprehensive data infrastructure platforms.” The deal represents one of the largest acquisitions in the optical interconnect space to date.
Why It Matters
The acquisition addresses one of the most critical constraints in AI infrastructure: data movement speed. Training frontier AI models requires moving petabytes of data between thousands of processors simultaneously, and the speed of this data transfer — not raw processor speed — increasingly determines training time and total cost. Copper-based electrical interconnects are reaching their physical limits on bandwidth and power efficiency at the scale required by modern AI training clusters.
Celestial AI’s Photonic Fabric technology replaces electrical signals with light for data transfer between processors, memory, and accelerators. Optical interconnects deliver higher bandwidth, lower latency, and significantly lower power consumption than copper alternatives. These advantages become decisive at scale, where thousands of GPUs must communicate continuously and data movement bottlenecks translate directly into idle compute time and wasted energy.
Dave Lazovsky, Celestial AI’s co-founder and CEO, founded the company in 2020 specifically to solve the scaling limitations of electronic interconnects for exascale computing environments. Lazovsky brings 30 years of semiconductor industry experience, including founding Intermolecular in 2004 and serving as a Venture Partner at Khosla Ventures.
Technical Details
Photonic Fabric provides on-chip compute-to-compute and compute-to-memory optical links designed to support disaggregated, exascale computing clusters. The technology enables scale-up connectivity — linking processors within and across packages and racks — at bandwidths that electrical interconnects cannot match without incurring prohibitive power costs. This creates a foundation for optical scale-up networks that overcome the physical limitations inherent in electronic data movement.
The deal includes a significant earnout provision that could increase the total acquisition price to $5.5 billion. Marvell will pay up to an additional 27.2 million shares if Celestial AI reaches cumulative revenue of $500 million by the end of fiscal year 2029, which triggers one-third of the earnout. The full earnout is paid if cumulative revenue exceeds $2 billion by the same deadline.
Financially, the acquisition reduces Marvell’s cash position by $1 billion, adds approximately $50 million in annual operating expenses, and decreases annual interest income by roughly $38 million. Marvell expects initial revenue contributions from Celestial AI to begin in the second half of fiscal year 2028, reaching a $500 million annualized run rate by Q4 FY2028 and doubling to $1 billion by Q4 FY2029.
Who’s Affected
Hyperscale cloud providers building next-generation AI training clusters are the primary target customers for this combined capability. Marvell already supplies networking chips, storage controllers, and custom silicon to these companies. Adding optical interconnect technology allows Marvell to offer a complete data movement stack from chip-to-chip interconnects to rack-scale networking, positioning it against NVIDIA‘s internal interconnect development through NVLink and NVSwitch technologies.
NVIDIA’s recent $2 billion investment in Marvell signals confidence in the combined company’s interconnect roadmap and suggests the two companies view their technologies as complementary rather than competitive in the near term.
What’s Next
Celestial AI was pre-revenue at the time of acquisition, meaning Marvell is betting on the technology’s transition from prototype to high-volume production deployment. The aggressive revenue projections — $500 million annualized within approximately two years of closing — will test whether photonic interconnects can move from laboratory demonstrations to manufacturing scale on that timeline. Production-scale optical interconnect deployment at data center volumes remains an unproven proposition, and the earnout structure reflects that uncertainty by tying a substantial portion of the purchase price to actual revenue milestones rather than technology promises.
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