Key Takeaways
- Marvell agreed today Monday to buy Lumentum in an all-stock deal worth about $115 billion, three days after Jim Cramer said on Mad Money that the deal wouldn’t surprise him.
- Lumentum shareholders come out ahead: they get a 24% premium, and they’re paid in Marvell stock, so they share in the move from copper to fiber that Cramer expects.
- Lumentum says it’s sold out through early 2029, and analysts expect its revenue to more than quadruple from $3.01 billion in fiscal 2026 to $13.9 billion in fiscal 2029.
- Copper won’t disappear quickly: Lumentum’s first optics for inside the rack ship in the second half of 2027, and Coherent is adding laser capacity that could ease the shortage.
Marvell Technology (MRVL) agreed on Monday to buy Lumentum (LITE) in an all-stock deal worth about $115 billion.
Jim Cramer saw it coming. On Friday’s episode of Mad Money, he said “it would not surprise me if Marvell Technologies, MRVL, announces a deal to acquire Lumentum, which would be one of the largest tech deals ever.”
His reason was the bigger call. Cramer said Marvell CEO Matt Murphy “wants to dominate the fiber portion of the data center,” and that Murphy knows “all the copper in data centers will eventually be replaced by fiber optics, which transport data faster and give off much less heat.”
If he’s right, demand for Lumentum’s lasers lasts well beyond today’s data center build-out. (Which is also good news for Coherent (COHR)).
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Cramer called it
Lumentum shareholders will get 4.5 Marvell shares for each share they own. At the Oct. 28 closing prices, that’s about $1,132 a share and a 24% premium. That was the last close before Bloomberg reported the talks, which sent Lumentum up 11% in a week. Lumentum holders will own about a third of the combined company.
The companies expect more than $1 billion a year in cost savings, and they say the deal will add to Marvell’s adjusted earnings per share in its first year. Murphy’s reason matches Cramer’s: “AI infrastructure is undergoing a fundamental architectural shift toward optical connectivity, creating an opportunity that comes along once in a generation.”
Sold out before the copper even goes
CEO Michael Hurlston said in October that Lumentum’s parts are sold out through early 2029. In August, management said it was short of demand for its EML laser chips by more than 30%.
Analysts expect revenue to keep climbing right through fiscal 2029:
That’s $3.01 billion in fiscal 2026 rising to $13.9 billion by fiscal 2029, though only 10 analysts go out that far. And most of the copper story comes after that. Lumentum’s biggest bet on fiber inside the rack is lasers for optics that link chips across racks, and the first of those ship in the second half of 2027, with the larger builds in 2028.
The shortage is also helping its gross margin, which has climbed back from a low of 24.7% in fiscal 2024:
In the June quarter alone, its adjusted gross margin reached 50.4%.
Copper won’t go quietly
Cramer said “eventually,” and he chose that word carefully. Copper still costs less over the shortest links inside a rack. Lumentum’s own schedule is slow too: its first external light source module for co-packaged optics has slipped to the second half of 2027.
The shortage may not last either. Coherent, Lumentum’s biggest independent rival, set out to double its indium phosphide laser output by the end of September and to more than double it again before 2028. If Cramer is right about copper, Coherent benefits from the same shift. The extra lasers it makes will also push against the prices Lumentum has been able to charge.
Marvell is paying for the future today
Lumentum wasn’t cheap going in. On Oct. 30 it traded at 39x forward earnings, above its five-year average of 30x:
(It was even higher in May, at 80x.) Marvell’s offer is 24% above the Oct. 28 close, so it puts an even higher multiple on those earnings.
Cramer brought up the obvious comparison himself: JDS Uniphase paying $41 billion for SDL in mid-2000, when, as he put it, SDL was doing about $300 million in sales. Then he said, “Ultimately, I reject the analogy, though.” I agree. Lumentum brought in $3.01 billion last fiscal year and has sold out its output for years ahead.
The way I see it, Lumentum shareholders are the winners here. They get a premium today for demand that mostly arrives after 2028. Because they’re paid in Marvell stock, they keep about a third of the gain if copper does give way to fiber. Marvell’s shareholders take on the risk that the shift happens later than expected.
Of course, the deal still has to close. Lumentum’s fiscal first-quarter report on Nov. 5 will show whether the shortage is still as tight as management says.
So what is Lumentum stock actually worth if the deal doesn’t go through?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
