Marvell to buy Lumentum in $115 billion all-stock deal as AI data centres drive demand for optics

US chipmaker Marvell Technology has agreed to acquire optical components maker Lumentum in an all-stock deal that gives Lumentum an enterprise value of about $115 billion. The deal is a major bet on the networking hardware behind artificial intelligence data centres.

Under the terms announced on Monday, Lumentum shareholders will receive 4.5 Marvell shares for each share they hold, worth about $1,132 a share. The companies said that is a premium of about 23.9% over the October 28 closing prices, the last trading day before reports of talks emerged. Marvell shareholders will own about 67% of the combined company on a fully diluted basis, and Lumentum shareholders about 33%.

Leadership and timeline

Both boards approved the deal unanimously. Marvell chairman and chief executive Matt Murphy will continue to lead the company. Three Lumentum directors, including chief executive Michael Hurlston, will join Marvell's board. The deal needs shareholder and regulatory approvals and is expected to close in the first half of 2028.

The companies expect more than $1 billion a year in run-rate cost savings. They also say the deal will add to Marvell's adjusted earnings per share in the first year after it closes. They put the combined addressable market at about $550 billion.

Why optics matter for AI

Large AI clusters link thousands of processors that must exchange data at very high speeds. This increasingly relies on lasers, optical transceivers and optical switches rather than copper wiring. Marvell designs the chips for such networking equipment, while Lumentum makes the optical parts. Combining them would let one company supply much of the connectivity inside AI data centres.

Lumentum's latest numbers show how fast that demand is growing. Alongside the deal, it reported fiscal first-quarter revenue of $1.26 billion, more than double the $533.8 million of a year earlier, and forecast revenue of $1.575 billion to $1.625 billion for the current quarter. Hurlston said all of its businesses grew, led by pump lasers and optical circuit switches.

Not everyone is convinced. Axel Rudolph of IG Group called the tie-up an enormous bet and questioned whether Marvell is overpaying and taking on too much at once.

The India angle

For India, the deal shows that value in the AI boom is spreading beyond the processors themselves to the hardware that connects them. Companies building data centres in India rely on imported optical components, and a more concentrated supplier market could affect what they pay. The long closing timeline also suggests a lengthy review by competition regulators in several countries.