Lumentum Holdings (NASDAQ:LITE) did just about everything right this morning, and its stock got punished anyway. Shares of the laser and optics specialist were down 14.9% as of 12:55 p.m. ET.
Q1 2027 results beat Wall Street’s expectations and the company agreed to be acquired by Marvell Technology (NASDAQ:MRVL) in an all-stock deal. Marvell’s stock fell 9.5% and both stocks are down significantly from the middle of last week, when the rumor mill started suggesting a deal was afoot.
Missed AI’s “Act 1”? Act 2 Could Be 16x Bigger. Most investors think they missed the AI boat because they didn’t buy Nvidia in 2005. But according to our analysts, we’re only at the end of “Act 1″—the R&D phase. “Act 2” is the global rollout. Continue »
A strong quarter, overshadowed
On a normal day, I’d spend this whole article gushing over Lumentum’s Q1 report. Revenue more than doubled, rising 136.5% year over year to $1.26 billion. Adjusted earnings of $4.57 per share sailed past the $4.21 consensus. Second-quarter guidance points to about $1.6 billion in sales, well above the $1.48 billion analysts expected.
The company also landed its second major near- or co-packaged optics (NPO/CPO) contract, backed by more than $5 billion in purchase commitments.
That’s a tremendous quarter. It also barely matters now.
The Marvell deal sets Lumentum’s price now
Under the merger terms, Lumentum shareholders will receive 4.5 Marvell shares for each Lumentum share. Closing date? The first half of calendar year 2028. The companies valued the deal at $115 billion, or about $1,132 per Lumentum share, based on prices from Oct. 28 (just before the deal rumors started flying).
With a fixed exchange ratio, Lumentum’s stock now moves largely with Marvell’s. At Monday’s midday prices, the offer is worth about $800 per Lumentum share, or roughly $81.2 billion in total. Lumentum trades about 10.6% below that implied value, compared with a 4.9% gap at Friday’s close. Together, the two stocks erased nearly $28 billion of market value on Monday.
The bright side is that Lumentum’s stock has still nearly doubled in 2026. But anyone buying it today is really buying Marvell stock, with a 10.6% discount and a long regulatory wait. I’d want to like Marvell a lot before signing up for that, and even then, I’d rather just buy Marvell stock.
Marvell wants to pair its electrical connectivity chips with Lumentum’s lasers and optical components, as AI data centers shift from copper to light-based connections. The companies expect more than $1 billion in annual cost savings and estimate a combined market opportunity of $550 billion.
