Marvell to Buy Lumentum in $115 Billion All-Stock Deal for AI Connectivity

Marvell agreed on Monday to buy Lumentum, a maker of lasers and optical parts that move data as light, in an all-stock deal valuing Lumentum at about $115 billion.

Lumentum stockholders will receive 4.500 shares of Marvell common stock for each share they own. The exchange ratio is fixed in the agreement. That means the value delivered at closing will rise or fall with Marvell's share price.

A fixed ratio and a 23.9% premium

The terms imply about $1,132 for each Lumentum share. They carry a premium of about 23.9% over the unaffected closing prices of October 28. That was the last trading day before speculation about a deal began.

Both boards approved the agreement unanimously. After closing, current Marvell stockholders would own about 67% of the combined company. Lumentum stockholders would own about 33%, on a fully diluted basis.

Enterprise value is not equity value

The $115 billion headline figure is an implied enterprise value. Enterprise value counts the equity plus debt taken on in the deal. Reuters calculated the equity value alone at $102.54 billion. The two figures measure different things, and they are not interchangeable.

In premarket trading on Monday, Marvell shares rose 2.8%, the same report said. Trading in Lumentum shares was halted. A premarket move is an early snapshot, not a closing verdict.

Why Marvell wants light, not just silicon

AI data centers are hitting the physical limits of copper wiring. The companies say demand for bandwidth is pushing the industry toward optical links. Optical links move data as pulses of light instead of electrical signals.

Marvell brings electrical and optical interconnect, network switching and custom silicon. Lumentum brings high-performance lasers, optical transceivers and optical circuit switching. It also brings specialized compound semiconductor manufacturing, including indium phosphide.

After closing, the combined portfolio would span silicon photonics, compound semiconductors and advanced packaging. The companies say that breadth would let them design electrical and optical parts together. They call that approach extreme co-design.

The companies plan to sell the combination as a full-stack connectivity portfolio. That means pre-validated optical solutions built from both companies' parts. They say it should get products to customers faster.

"AI infrastructure is undergoing a fundamental architectural shift toward optical connectivity," said Matt Murphy, Marvell's chairman and chief executive. He called the shift "an opportunity that comes along once in a generation."

"Surging AI data traffic requires rapid hardware innovation," said Michael Hurlston, Lumentum's president and chief executive. He said the combination would help the two companies deliver next-generation solutions at scale.

The financial claims are the companies' own

The companies say the combined company would address a total market of $550 billion. That total addressable market figure is their estimate, not reported revenue. They also claim line of sight to more than $1 billion in annual run-rate cost savings.

The companies expect the deal to add to Marvell's non-GAAP earnings per share in its first year after closing. They also expect stronger long-term revenue growth and wider non-GAAP margins. Each of those outcomes is a company expectation, not a result.

Two prints arrived with the deal

Lumentum reported fiscal first-quarter revenue of $1.26 billion on the same morning. Revenue rose 136.5% from a year earlier, in the quarter ended September 26. Non-GAAP earnings were $4.57 a diluted share, and reported earnings were $3.54.

Components brought in $754.2 million of Lumentum's quarterly revenue. Systems brought in $508.4 million. The company held $2.0 billion in cash, equivalents and short-term investments at quarter-end.

Lumentum's non-GAAP gross margin was 53.2% in the quarter. Its non-GAAP operating margin was 42.3%. The reported gross margin was 51.0%.

For the fiscal second quarter, Lumentum guided revenue to $1.575 billion to $1.625 billion. It guided non-GAAP earnings to $5.90 to $6.20 a diluted share. Hurlston also said a second major optics design win carried purchase commitments above $5 billion.

Marvell used the same release to update its own quarter. Preliminary fiscal third-quarter revenue was consistent with its earlier guidance. The company kept the guidance midpoint and narrowed the range to plus or minus 2%. The earlier range was plus or minus 5%. Those preliminary figures are unaudited, and they may change when the quarter closes.

Leadership and the long road to closing

Murphy will stay on as chairman and chief executive of the combined company. Three Lumentum directors will join Marvell's board after closing. They include Lumentum chief executive Michael Hurlston. Marvell's board currently has seven directors.

The two companies will file a joint proxy statement with regulators before either vote. That filing will also serve as the prospectus for the Marvell shares being issued. It has not been filed yet.

Closing is expected in the first half of calendar 2028. It needs approval from both companies' stockholders. It also needs regulatory approvals and other customary conditions. Until then, the two companies keep operating separately.

The deal is Marvell's largest since its $10 billion purchase of Inphi in 2021, the independent report noted. Qatalyst, J.P. Morgan and Goldman Sachs advised Marvell on the transaction. Citigroup and Evercore advised Lumentum.

What remains unknown

What remains unknown starts with the regulatory path. The release does not name the jurisdictions that must clear the deal. It also does not give a termination fee or a walk-away date. How customers react to a supplier merger of this size is also untested.

The tests that come next

What to watch begins with the joint proxy filing. It will carry the full merger agreement and each board's reasoning. Stockholder votes and the first regulatory filings come after that. The closing test is the first half of 2028.