v3.26.1
Business Combinations
 3 Months Ended
May 02, 2026
Business Combination, Asset Acquisition, Transaction between Entities under Common Control, and Joint Venture Formation [Abstract]  
Business Combinations Business Combinations
The following acquisitions were accounted for as business combinations under ASC 805. In accordance with U.S. GAAP requirements for business combinations, the Company allocated the fair value of the purchase consideration, including any contingent consideration, to the tangible assets, liabilities and intangible assets acquired, including in-process research and development (“IPR&D”), generally based on their estimated fair values. The excess purchase price over those fair values is recorded as goodwill. The accounting for business combinations requires management to make significant estimates and assumptions, especially with respect to the fair value of intangible assets and contingent consideration. Acquisition-related costs are expensed in the periods in which such costs are incurred, and recorded in selling, general and administrative expense in the unaudited condensed consolidated statements of operations. See “Note 5 – Goodwill and Acquired Intangible Assets, Net” for additional information.

Celestial AI

On February 2, 2026, the Company completed the acquisition of Celestial AI, Inc. (“Celestial”), a provider of a Photonic FabricTM technology platform purpose-built for next-generation scale-up interconnect, for a total purchase consideration of $3.5 billion. The acquisition of Celestial is expected to accelerate the Company’s connectivity strategy for next-generation AI and cloud data centers. In accordance with the terms of the Agreement and Plan of Reorganization dated December 2, 2025 (the “Celestial Merger Agreement”), the Company issued shares of its common stock and paid cash in exchange for all outstanding equity of Celestial, including shares of Celestial’s preferred and common stock, employee equity awards and warrants.

Contingent on the achievement of specified revenue milestones, the Company may be required to pay additional cash and issue additional shares of its common stock through fiscal 2029. Contingent consideration liability was initially measured at fair value at the acquisition date and included as part of consideration transferred. The contingent consideration liability will be remeasured at fair value at each reporting date with changes recognized in Other expense, net in the Company’s unaudited condensed consolidated statements of operations. See “Note 6 – Fair Value Measurement” for additional information.

The factors contributing to the recognition of goodwill were based upon the Company's conclusion that there are strategic and synergistic benefits that are expected to be realized from the acquisition. Goodwill recorded for the Celestial acquisition is not expected to be deductible for tax purposes.
The following table summarizes the total purchase consideration for Celestial (in millions):

Cash consideration$1,279.7 
Common stock issued (24.5 million shares of the Company's common stock)
1,929.0 
Stock consideration for replacement equity awards attributable to pre-combination service12.9 
Contingent consideration315.8 
Total purchase consideration3,537.4 
Less: Cash and cash equivalents acquired(302.8)
Total purchase consideration, net of cash acquired$3,234.6 

The purchase consideration allocation set forth herein is preliminary and may be revised with adjustments to goodwill as additional information becomes available during the measurement period from the closing date of the acquisition to finalize such preliminary estimates. Any such revisions or changes may be material.

The purchase price allocation for Celestial is as follows (in millions):

Cash and cash equivalents$302.8 
Goodwill2,404.4 
Acquired intangible assets, net951.0 
Deferred tax liabilities(94.3)
Other, net(26.5)
Total purchase consideration$3,537.4 

In connection with the Celestial acquisition, the Company recognized $29.1 million of acquisition-related transaction costs, which primarily consisted of legal and professional fees, during the three months ended May 2, 2026.

Revenue and earnings of Celestial since the acquisition date were not material.

Unaudited Supplemental Pro Forma Information

The unaudited supplemental pro forma financial information presents the combined results of operations as if Celestial had been acquired as of beginning of fiscal 2026. The pro forma information includes non-recurring adjustments for (i) amortization and depreciation for property and equipment and technology licenses, (ii) stock-based compensation expense, and (iii) acquisition related costs. For the three months ended May 2, 2026 and May 3, 2025, pro forma net income was $82.2 million and $96.8 million, respectively.

The unaudited supplemental pro forma financial information is for illustrative purposes only and is not necessarily indicative of the financial position or results of operations that would have been realized if the Celestial acquisition had been completed on the date indicated, does not reflect synergies that might have been achieved, nor is it indicative of future operating results or financial position. The pro forma adjustments are based upon currently available information and certain assumptions the Company believes are reasonable under the circumstances.

XConn

On February 10, 2026, the Company completed the acquisition of XConn Technologies Holdings, Ltd. (“XConn”), a provider of advanced PCIe and CXL switching silicon, for a total purchase consideration of $469.0 million. The acquisition of XConn expands the Company's switching portfolio and augments the Company's UALinkTM scale-up switch team. In accordance with the terms of the Agreement and Plan of Reorganization dated January 5, 2026 (the “XConn Merger Agreement”), the Company issued shares of its common stock and paid cash in exchange for all outstanding equity of XConn, including shares of XConn’s preferred and common stock and employee equity awards.

The factors contributing to the recognition of goodwill were based upon the Company's conclusion that there are strategic and synergistic benefits that are expected to be realized from the acquisition. Goodwill recorded for the XConn acquisition is not expected to be deductible for tax purposes.
The following table summarizes the total purchase consideration for XConn (in millions):

Cash consideration$272.1 
Common stock issued (2.1 million shares of the Company's common stock)
168.9 
Stock consideration for replacement equity awards attributable to pre-combination service20.5 
Settlement of pre-existing contractual relationship7.5 
Total purchase consideration469.0 
Less: Cash acquired(0.6)
Total purchase consideration, net of cash acquired$468.4 

The purchase consideration allocation set forth herein is preliminary and may be revised with adjustments to goodwill as additional information becomes available during the measurement period from the closing date of the acquisition to finalize such preliminary estimates. Any such revisions or changes may be material.

The purchase price allocation for XConn is as follows (in millions):

Goodwill$394.9 
Acquired intangible assets, net81.0 
Other, net(6.9)
Total purchase consideration$469.0 
Acquisition-related transaction costs in connection with the XConn acquisition were not material for the three months ended May 2, 2026. Pro forma financial information, as well as the revenue and earnings of XConn since the acquisition date, were not material for the periods presented.