Marvell to buy Lumentum in $115 billion all-stock deal

Marvell Technology Inc. has signed a definitive merger agreement to acquire Lumentum for an enterprise value of $115 billion, combining two of the biggest players in the data center optics market into one company. According to a joint press release on November 2nd, Lumentum shareholders will receive 4.5 Marvell shares for each share they own, which the companies put at about $1,132 per share. This figure represents a 23.9% premium over the company's unaffected closing price on October 28, the last trading day before reports of the deal affected prices.

The agreement — which leaves Marvell's current shareholders with about 67% of the combined company and Lumentum's with about 33% — is reportedly the second-largest tech transaction deal ever after the SpaceX-xAI merger, according to Bloomberg. Both boards have approved the deal unanimously, and it is expected to close in the first half of 2028, pending regulatory and shareholder approval.

The acquisition represents another significant expansion of Marvell's optical infrastructure portfolio, following its $10 billion acquisition of Inphi in 2021 and its $3.5 billion upfront purchase of optical interconnect startup Celestial AI, completed in February 2026. All three mergers and acquisitions involved companies handling different parts of one of the most critical AI infrastructures: optical connectivity.

As AI infrastructure continues to scale, optical connectivity is becoming increasingly important for moving vast amounts of data between processors, racks, data centers, and even on the accelerator board itself. With the acquisition of Lumentum, Marvell, which already supplies optical DSPs, silicon photonics, and high-speed SerDes, is positioning itself as one of the industry's major suppliers of optical interconnect technologies, spanning scale-across and scale-out networking to emerging scale-up and scale-in connections.

Why AI infrastructure is moving towards optical connectivity

Modern AI data centers house thousands of interconnected accelerators exchanging enormous volumes of data. As data volume, speed, and travel distance scale, copper interconnects, the conventional medium for inter-rack connections, hit physical limits, becoming impractical at around one to two meters. The industry's solution has been a transition to optics, moving data as light instead of electrical signals.

First, optical transceivers and fiber optics replaced copper for inter-rack connections and beyond. Pluggable transceivers containing a laser chip, digital signal processor (DSP) chips, and several optical components convert the accelerator's electrical signals into light for transmission over fiber, then convert them back into electrical signals at the receiving end.

The industry is also looking to bring optics into the accelerator package itself with co-packaged optics and near-packaged optics. In conventional packages, signals from the logic chip have to travel inches along copper traces across the board to reach the transceiver. Co-packaged optics takes the optical engine out of the pluggable module and places it as a photonic integrated circuit (PIC) chip directly on the switch or accelerator package, shrinking the electrical path.

These shifts to optics have made optical interconnects one of the most critical AI infrastructure markets, driving several multi-billion-dollar deals and major partnerships among industry players across the different technologies and processes involved.

From silicon to lasers: What Marvell and Lumentum bring to the table

The optical interconnects market encompasses several critical technologies. On the electronics side, semiconductor chips such as high-speed serializer / deserializers (SerDes) and optical DSPs prepare and process electrical data signals. Electronics also include analog components such as drivers and transimpedance amplifiers (TIAs) that interface with the optical hardware. Photonic integrated circuits (PICs) use microscopic optical components such as waveguides, modulators, and photodetectors to manipulate light, encode information onto it, and convert received light back into electrical signals, combining all of this into a single chip.

Whether an optical engine sits inside a pluggable transceiver or directly on the board, it still needs a laser, either integrated into the assembly or supplied externally, which brings us to another specialized branch of semiconductor manufacturing: laser technology. Lastly, fiber optic cables and associated passive optical components transmit and distribute light while optical circuit switches redirect optical connections through a network.

Marvell already covers most of the electrical and electronics side, with a portfolio that includes custom AI accelerators, Ethernet switches, high-speed SerDes interfaces, DSPs, optical drivers, TIAs, and silicon photonics. Lumentum, on the other hand, supplies many optical components, including high-performance lasers, modulators, photodetectors, optical transceivers, and optical circuit switches. Combining these portfolios and processes allows Marvell to develop more complete solutions, designing and optimizing electrical and optical components as part of the same system.

Perhaps the most strategically important part of Lumentum's business is its expertise in compound semiconductors, particularly indium phosphide (InP), which is critical for laser and other optical chips. Unlike conventional silicon, which has an indirect bandgap and is inefficient at generating light, InP-based semiconductor structures can efficiently emit and detect light, making the material well suited for manufacturing high-performance lasers and other optical components used in high-speed communication systems.

Lumentum is also bringing its manufacturing experience to the merger. Unlike Marvell's predominantly fabless semiconductor business, Lumentum directly controls its front-end semiconductor fabrication processes, owning and operating specialized InP fabrication facilities, which its CEO Michael Hurlston described as the world's largest InP manufacturing footprint during the acquisition announcement. If the deal closes in 2028, Marvell will transition into a hybrid model, inheriting Lumentum's internal factories while keeping its chip side outsourced. The combined company would also gain access to gallium arsenide (GaAs) technologies.

A $115 billion bet and a long road to 2028

Over the years, Marvell — already one of the biggest custom ASIC suppliers, with clients such as Google, AWS, Meta, and Microsoft — has also strategically positioned itself as a major player in the optical interconnects market, supplying the largest optical transceiver manufacturers. In March 2026, Nvidia invested $2 billion directly in Marvell in a partnership that brings Marvell’s custom XPUs and scale-up networking into Nvidia’s NVLink Fusion ecosystem.

Marvell's biggest optics competitor, Broadcom, also supplies custom AI accelerators, networking silicon, and optical connectivity components, offering both the electronic chips and the optical components. Acquiring Lumentum would give Marvell a more comprehensive portfolio similar to Broadcom's. Nvidia’s separate $2 billion stake in Lumentum would also convert into Marvell shares, consolidating its two $2 billion bets into a single holding.

A key question is how vertical integration affects existing customers, as Marvell supplies optical module manufacturers, while Lumentum sells optical components to companies that also compete with its transceiver business. Merging operations could create concerns among customers that depend on the companies for critical components. Marvell CEO Matt Murphy addressed this issue during the company's November 2 investor conference call, stating that the company intends to maintain its existing component supply model. Lumentum CEO Michael Hurlston also emphasized that supplying competitors is already an established part of the optical industry's business model.

Financially, Marvell expects the combined company’s total addressable market to reach about $550 billion by 2030 — roughly $60 billion more than the two companies’ standalone estimates combined. The companies also expect more than $1 billion in annual run-rate cost synergies, primarily from cost of goods sold. Combining Marvell’s current-quarter guidance with Lumentum’s latest results, the companies put the merged business at about $17.7 billion in annualized revenue.

According to Murphy, pairing Lumentum’s next-quarter guidance with analyst consensus for Marvell’s next quarter lifts that figure to more than $21 billion. Lumentum's recent performance shows the growing demand behind these projections. The company reported $1.26 billion in revenue for its first fiscal quarter of 2027, a 136.5% year-over-year increase. It also announced a second major near-packaged and co-packaged optics design win, which Hurlston said he expects to generate more than $5 billion in revenue.

However, the merger's huge valuation raises questions about whether future growth will justify the acquisition price. Investors reacted negatively to the announcement, with Marvell shares closing down 12.7% at $171.41 on November 2 and Lumentum falling 18.6% to $684.40. For now, the agreement is subject to a lengthy review, with an outside date of November 1, 2027, and options to extend to February 1, May 1, and finally August 1, 2028, if regulatory approvals are still pending. If the deal then fails on regulatory grounds alone, Marvell owes Lumentum $3.2 billion. However, if either board backed out or took a rival offer, Marvell would pay $5.8 billion, and Lumentum $2.9 billion.