Why are Marvell and Lumentum share prices down over $115 billion acquisition?

Synopsis

Marvell and Lumentum shares have dropped after Marvell announced that it will be acquiring Lumentum in a $115 billion all stock deal. Marvell will be able to expand its AI data centre and optical networking technologies after the acquisition. The acquisition will help Marvell compete with Broadcom successfully. The investors are now looking at the cost of the acquisition, debt, dilution and integration risks.

Marvell and Lumentum share prices are down after Marvell Technology agreed to buy optical components firm Lumentum Holdings in an all stock deal worth $115 billion. The deal will help Marvell to expand its AI data centre business and compete with Broadcom. Both the companies shares have fallen as questions have been raised about how much this deal will cost and how much it will affect current shareholders.

Marvell Technology and Lumentum Holdings deal

Marvell Technology (NASDAQ: MRVL) has agreed to buy Lumentum Holdings (NASDAQ: LITE) in a $115 billion all stock deal. This is one of the biggest corporate deals of 2026. The deal is expected to complete in the first half of 2028.

Marvell and Lumentum share price

Marvell shares are trading at around $198.51. It is down by approximately 9.08%. The Lumentum shares are at around $862. It is down by around 6.26%. Marvell's shares have dropped by about 22% while Lumentum's shares have slipped by about 8% since the talks about the acquisition were first reported last month, a Reuters report said.

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How will the $115 billion deal work?

Lumentum shareholders will receive 4.5 Marvell shares for each Lumentum share they own. Existing Marvell shareholders will own around 67% of the new company and Lumentum shareholders will own around 33%. Marvell CEO Matt Murphy will run the new business.

Why did Marvell want to buy Lumentum?

Marvell designs custom AI chips, digital signal processors and switches for large tech firms. Marvell’s Data Centre business brought in $2.17 billion in the last reported quarter, which was 79% of revenue. Lumentum designs lasers and optical switches for connecting AI data centres. Its revenue rose by 109.3% in its latest quarter.

This acquisition will help Marvell provide more components for AI data centres. Marvell has already expanded its photonics business with its $3.5 billion Celestial AI acquisition in February.

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Financial and business risks

Marvell has a market cap of around $172.2 billion, while Lumentum's stands at around $76.2 billion. It already has a debt of $4.96 billion. It has also raised $2 billion from preferred securities and has a Google warrant agreement for up to 7% of its shares.

Lumentum has a high P/S ratio of around 25.27, compared to Marvell’s 18.68. This deal may cause more financial pressure as costs may increase during integration and the revenue growth may not be as expected. There is also a risk of being over reliant on a few hyperscalers, pressure on gross margins and competition from firms designing their own optical tech.

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