Technology and AI

A warrant worth 12.18 billion dollars only vests if the revenue arrives, and the maker says it starts arriving now

By Staff Writer  |  28 August 2026

Marvell issued Google a warrant over 58,970,907 shares on 18 August. Almost all of it vests one tranche at a time, one tranche for every 500 million dollars of custom product revenue. On 27 August the chairman said the custom business accelerates from the second half of this financial year.

Two filings ten days apart set out one of the more instructive commercial structures in the current chip cycle, and it is worth reading them together rather than separately. On 29 July 2026 Marvell Technology and Google LLC entered a commercial agreement covering custom semiconductor products that attach to Google's tensor processing unit ecosystem: inference accelerators, storage controllers, network interface controllers, memory interface controllers and near-memory compute. On 18 August the company issued Google a warrant to purchase up to 58,970,907 shares of its common stock at 206.58 dollars a share. At that exercise price the grant covers 12.18 billion dollars of stock.

The vesting schedule is the contract

The number that matters is not the headline figure but the condition attached to it. Only 1,360,867 of those shares vest on the passage of time, in equal quarterly instalments across the first year after the agreement and the warrant were executed. Everything else vests on purchases. From Marvell's third quarter of fiscal 2027 to the end of its fiscal year 2033, the remaining shares vest in 240 equal tranches, and one tranche is released for each 500 million dollars of custom products revenue bought by or on behalf of Google and its affiliates. The arithmetic is straightforward and the filing does not spell it out: 240 tranches at 500 million dollars apiece means the grant only vests in full if 120 billion dollars of custom product is purchased inside seven years. The warrant is exercisable, so far as it has vested, until 18 August 2033.

Anyone who drafts supply arrangements will recognise the shape. The customer is given equity that it has to earn by buying, so the incentive to keep ordering is written into the instrument rather than into a minimum purchase covenant that would have to be enforced. There is no obligation to buy anything. The purchases are described in the filing as discretionary. What the structure does is align the customer with the supplier's share price for as long as the customer keeps placing orders, and it costs the supplier nothing at all if the orders never come.

The quarter that has to fill it

That is why the results published on 27 August matter more than a routine quarter would. Net revenue for the second quarter of fiscal 2027 was 2.739 billion dollars, a record, 37 per cent higher than a year earlier and 39.0 million dollars above the mid-point of the guidance given on 27 May. The data centre end market produced 2,171.5 million dollars of that, 46 per cent up on the year and 79 per cent of the total. Reported net income was 308.0 million dollars, or 0.33 dollars a diluted share, and cash from operations was 605.5 million dollars. Guidance for the third quarter is 3.150 billion dollars, plus or minus 5 per cent.

We are seeing broad-based strength across our Data Center portfolio, including strong demand in Connectivity and a significant acceleration in our Custom business beginning in the second half of fiscal 2027.

Matt Murphy, Chairman and Chief Executive of Marvell Technology

The custom business is the line the warrant is bolted to. An acceleration beginning in the second half of fiscal 2027 is also, in the language of the warrant, the point at which tranches start to release. The company did not connect the two in its announcement and neither filing mentions the other. The connection is on the face of the documents.

What to take from it

Three points are worth carrying into other negotiations. First, an equity instrument can do the work of a volume commitment without creating one, which changes where the risk sits if demand disappoints. Second, a tranche mechanic tied to a revenue unit is a measurement problem before it is a legal one, and the definition of custom products revenue is what the whole 120 billion dollars turns on. Third, a seven-year vesting window on a technology supply agreement is a long time to hold a definition steady across product generations that change every eighteen months.

The company reports again after an investor day it has set for 6 October. The custom line is the one to read.