What Could Surprise Marvell Stock Investors On The Upside?

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Marvell Technology (MRVL) stock returned 184.2% over the past year, against 14.0% for the S&P 500. Following a gain of that size, you want to know what could still surprise investors. That is difficult to judge at Marvell. Management already counts its newest custom chip deal in its sales outlook through fiscal 2028, and says the bigger payoff comes later. So what is that deal, and how far along is it?

Marvell Expanded A Custom Chip Deal With A Hyperscaler

Marvell disclosed an expanded commercial agreement, which includes a warrant, with a key hyperscaler during the week before its August 27, 2026 call. Management described the customer as one of the largest adopters of custom silicon, adding that the warrant reflects the scale and long-term potential of the relationship. The chips include parts that attach to the TPU ecosystem, such as AI inference accelerators, storage controllers and network interface controllers.

Custom work spans years, and the agreement reflects that timeline. It covers programs awarded to Marvell over the past several years that are currently in execution, along with new design wins and future potential programs. Management said the revenue these programs bring through fiscal 2028 is already in its custom revenue target. The big impact, management noted, would arrive in fiscal 2029 and beyond. This later period represents the opportunity still ahead of the reported numbers.

Early evidence indicates the custom business is selling today. Management named custom, alongside interconnect and switching, among the data center businesses seeing strong tailwinds in fiscal Q2 2027. The company expects custom to ramp significantly in the second half of fiscal 2027.

How Fast Could Marvell’s Custom Business Grow?

Management expects custom to more than double in fiscal 2028. Custom belongs to the data center business, which accounted for 79% of Marvell’s revenue in fiscal Q2 2027. On the August call, however, management named interconnect rather than custom as the business leading Marvell’s growth.

During the August call, management raised its fiscal 2028 revenue outlook by $1.5 billion from the projection provided a quarter earlier. Executives said some of that raise comes from custom without putting a number on it. News reports indicated Marvell established a revenue target of $70 billion to $90 billion for fiscal 2031 at its October 6, 2026 Investor Day. That target covers all of Marvell rather than custom alone. The same reports said Marvell also lifted its fiscal 2028 sales outlook at that event, to about $20 billion.

The share price appears to assume a good deal of that growth already. Marvell stock trades at 23.9 times its sales over the last twelve months, against 3.2 for the S&P 500. Yet the stock’s October 28, 2026 close sat 20.4% below its 52-week high reached on June 4. Following the October 28 close, news reports indicated Marvell was in advanced talks to acquire Lumentum, sending its shares down roughly 10% in after-hours trading.

What Has To Go Right For Marvell’s Custom Chips?

Marvell must grow its custom business without giving up more gross margin. Management said the faster growth of custom represents a headwind to gross margin from fiscal Q2 to fiscal Q3 2027. Using its own adjusted measure, Marvell reported a gross margin of 58.9% in fiscal Q2 and guided 57.5% to 58.5% for fiscal Q3. Management expects gross margin in fiscal 2028 to stay in the same range as the second half of fiscal 2027.

The later years also must prove as large as management suggests. The size of the deal after fiscal 2028 came up more than once during the August 27 call. Management said the opportunity with this customer greatly increases the revenue Marvell could earn in custom, noting some of it could potentially start in fiscal 2029.

Counting on future promises to justify today’s valuation isn’t unique to chipmakers; Tesla investors face an even wider chasm between today’s numbers and tomorrow’s expectations. For a look at how a multi-trillion-dollar valuation hangs on unlocking consumer adoption for autonomous software, see our analysis on Musk’s Massive Marketing Miss Cost $10 Trillion.

In the near term, management expects data center revenue to grow roughly 75% from a year earlier in fiscal Q3 2027, up from 46% in fiscal Q2. Data center revenue growth against that guide is the measure to watch when Marvell reports its fiscal third quarter.

Sitting On A Big Gain In Marvell Technology?

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