Marvell Technology has confirmed its acquisition of artificial intelligence startup Celestial AI in a $3.25 billion deal, coinciding with the release of its third-quarter financial results and an optimistic fiscal year forecast. The announcement sent Marvell shares soaring 8.73%, trading at $101 in extended trading, up from Tuesday’s close of $92.89, reflecting investor confidence in the company’s expanding footprint in AI computing.

The financial structure of the deal includes a $1 billion cash payment and Marvell shares valued at $2.25 billion. Celestial AI will receive 27.2 million shares of Marvell common stock as part of the equity component. Founded in 2020 and based in Santa Clara, California, Celestial AI specializes in photonic fabric technology, which aims to connect AI chips and memory chips more efficiently using light signals rather than traditional electrical signals, a key area where Marvell competes with industry giants like Broadcom and Nvidia.

CEO Matt Murphy highlighted the transformative potential of the acquisition, stating that Celestial AI’s photonics technology will be integrated into Marvell’s next-generation infrastructure products. He projected that this move could create a $10 billion market opportunity, envisioning Marvell as a “silicon photonics powerhouse” in the near future.

Marvell anticipates revenue contributions from Celestial AI beginning in the second half of fiscal 2028, with an annualized run rate of $500 million by Q4 2028, doubling to $1 billion by Q4 2029. The acquisition is expected to close in the first quarter of calendar 2026. Additional provisions allow Celestial AI investors to receive up to $2.25 billion in Marvell shares if revenue milestones are achieved, including $500 million by the end of fiscal 2029 and the full $2 billion payout at that same milestone threshold.

Prior to the acquisition, Celestial AI completed a $255 million funding round in August, supported by investors including Fidelity Management & Research Co., BlackRock Inc., and Advanced Micro Devices Inc. Intel CEO Lip-Bu Tan also joined Celestial AI’s board earlier this year, further strengthening the startup’s governance and expertise.

Marvell has been strategically positioning itself to capitalize on the rapid growth in AI spending. The Celestial acquisition is widely seen as a pivotal move that will influence the company’s trajectory in AI infrastructure. On a post-earnings call, Marvell reassured investors about repeat orders in its custom chip-design unit, forecasting a 20% increase in custom chip sales and wins with an “emerging hyperscaler” client, reinforcing confidence in future growth.

Looking ahead, CEO Matt Murphy projected Marvell’s revenue to reach $10 billion in the next fiscal year, exceeding analysts’ estimates of $9.47 billion. For the fiscal fourth quarter, ending January, Marvell expects revenue of roughly $2.2 billion, an adjusted gross margin of about 59%, and earnings of 79 cents per share, largely meeting Wall Street expectations.