Credo Technology's Q1 FY2026 Results Showcase Strong Growth in AI-Driven Data Center Market

An under-the-radar AI play that's doubled in six months has even more room to run, BofA says

Credo Technology just posted the strongest set of financial results among its AI-leveraged peers, including Nvidia , according to Bank of America. The bank remains bullish. Analysts led by Vivek Arya reiterated a buy rating on Credo, a maker of active electrical cables (AEC), and hiked his price by $45, or 38%, to $165 from $120 previously. That new target suggests the stock, which has soared 130% in just the past six months, could gain another 32%. Shares popped more than 12% in early trading Thursday. CRDO 1Y mountain Credo Technology stock performance over the past year. Arya is particularly bullish on Credo's cables business. Rapid hyperscaler adoption led the analyst to forecast the AEC market will double to $2 billion by 2027-2028, and still only account for 10% to15% of the $15 billion optical transceiver market. Credo also makes connectivity products such as optical devices and data networking chips that are used in data centers. "Reiterate Buy on CRDO, a top SMidcap and key part of our top 4 AI-levered stocks (along with NVDA, AVGO, AMD), as its active electrical cables (AEC) are delivering on the sweet spot of high-speed and low-cost/low-power connectivity in AI clusters," Arya wrote in a 14-page report to clients. "In addition, the company continues to diversify its customer base (4th hyperscaler added on top of Amazon, xAI, Microsoft, 5th on the way) and work on expanding its pipeline (optical)." "We note continued operating leverage as the AEC/optics businesses gain scale, while faster speeds (1.6T/3.2T) may further expand margins," he added. Arya noted that Credo is tapping into the optical systems market, which has established incumbent players in AECs including Broadcom , Astera Labs and Marvell Technology . Arya noted that Credo's "premium multiple" is a risk for the stock, but he remains confident given that the company's management has kept expectations conservative. His new price target comes after Credo on Wednesday reported better-than-expected financial results in its first quarter. The company, based in the Cayman Islands, earned 52 cents per share on revenue of $223.1 million, while analysts polled by FactSet expected 36 cents per share on $190.6 million.

Credo Revenue Jumps 274% in Fiscal Q1 | The Motley Fool

Credo Technology Group (CRDO 10.20%), a provider of high-speed connectivity solutions for the data infrastructure market, delivered a standout fiscal 2026 first quarter on Sept. 3, 2025. Revenue hit $223.1 million, a sizable upside compared to the company's revenue forecast of $185 million-$195 million for Q1 FY2026. Adjusted EPS reached $0.52. The quarter showcased robust sales, strong margins, and a healthy balance sheet, while also flagging important risks in customer concentration and future margin pressure. Source: Credo Technology. Note: Fiscal 2026's first quarter ended Aug. 2, 2025. Fiscal 2025's Q1 ended Aug. 3, 2024. Credo Technology Group specializes in designing and delivering advanced hardware and intellectual property for data center networking. Its core products include SerDes chips (serializer-deserializer circuits that enable high-speed data transfer), data signal processors (DSPs), Active Electrical Cables (AECs), and retimer components. These technologies are crucial in moving large volumes of data quickly and efficiently across AI, cloud, and hyperscale data centers. Recently, the company has focused on three core drivers: rapid innovation in next-gen connectivity, deepening relationships with major hyperscale customers, and expanding its product portfolio across Ethernet and PCIe standards. Key factors for success include sustaining its technology leadership and maintaining performance advantages in power efficiency. Its strategy hinges on continued research and development investment, an expanded intellectual property (IP) portfolio, and strong partnerships in the industry. During Q1 FY2026, sales set new records, reflecting the fast-growing demand for high-speed, energy-efficient networking products. Product sales surged to $217.1 million (GAAP), up 279% from a year ago. The company's connectivity solutions for AI and cloud networking, such as Active Electrical Cables and retimer chips, found broader adoption among hyperscalers -- very large tech companies running massive data centers. IP licensing revenue, now less than 3% of the total in FY2025, has been overtaken by hardware sales, emphasizing a successful pivot toward physical products. This surge was enabled by rapid scaling and, as CEO Bill Brennan noted, "deep, strategic partnerships with hyperscalers and key customers." Gross margin -- how much profit remains from sales after the direct cost of goods -- is a key performance metric in semiconductors. Credo's non-GAAP gross margin expanded 4.7 percentage points to reach 67.6%, compared to Q1 fiscal year 2025. This was above its earlier guidance and reflected favorable product mix, especially in high-value chips and cables. Operating income, a measure of profit after all operating costs (but before interest and tax), ballooned from $2.2 million in Q1 fiscal year 2025 to $96.2 million, thanks to operating leverage, where rising sales outpaced increases in expenses. Net income on a non-GAAP basis reached $98.3 million for Q1 FY2026, underlining robust profitability improvements. The earnings release highlighted the breadth of the company's solutions, spanning Active Electrical Cables, retimer chips that help restore signal quality in high-speed circuits, optical DSPs that process data transmitted via light, and SerDes IP. This range supports a large and growing set of applications in AI, cloud, and networking. New design wins and technology advances, such as 112G SerDes and 800G DSPs, provided momentum for future quarters. However, the quarter also brought some points of caution. Inventory rose to $116.7 million from $90 million in the previous quarter. While expenses rose more slowly than revenue, both R&D and selling, general and administrative (SG&A) costs climbed rapidly. Customer concentration is another concern. Past filings indicate that one customer brought in 67% of revenue in FY2025, and no new quantitative data confirmed increased diversification this quarter. GAAP gross margin is expected to decrease to the 63.5%-65.5% range for Q2 FY2026, possibly due to product or customer mix. The company's IP licensing, once a more material contributor, has become a minor revenue stream, representing 3% of total revenue in FY2025 and 15% in FY2024, confirming the pivot away from licensing toward hardware products. For Q2 FY2026, Credo forecasts GAAP revenue of $230 million-$240 million. This implies continued top-line growth of 3%-8% compared to the previous quarter, though a decline from recent levels. Non-GAAP operating expenses are projected to rise modestly to $56-58 million for Q2 FY2026. No annual outlook or long-term projections were offered beyond Q2 FY2026. Credo does not currently pay a dividend. Looking ahead, investors should monitor customer concentration risk, trends in gross margin, and whether the recent pace of R&D spending yields continued leadership in next-generation connectivity. Any inventory buildup will also be important to track if demand were to slow, and the anticipated decrease in GAAP gross margin for Q2 FY2026 bears watching as market dynamics shift in the highly competitive semiconductor sector.

Credo Posts Record Q1 Profit Surge | The Motley Fool

Credo Technology Group Holding(CRDO 10.20%) reported first-quarter fiscal 2026 results on September 3, 2025, posting $223.1 million in revenue (up 31% quarter over quarter, 274% year over year) and a non-GAAP net margin of 44.1%. Robust demand for Active Electrical Cables (AECs), continued optical segment growth, and expanding hyperscaler relationships drove record profitability. Management issued revenue guidance of $230 million to $240 million for fiscal 2026 and projected full-year revenue growth of approximately 120% year over year. Non-GAAP operating income reached $96.2 million, up from $62.5 million in the prior quarter, reflecting a 31% quarter-over-quarter revenue gain and high incremental operating leverage. Free cash flow totaled $51.3 million, with quarter-end cash and equivalents of $479.6 million and non-GAAP gross margin at 67.6%. "Our non-GAAP net income was $98.3 million in the quarter, a record high, and a 51% sequential increase compared to non-GAAP net income of $65.3 million in Q4. And our non-GAAP net margin was 44.1% in the quarter, as we drove significant leverage in the business." -- Dan Fleming, Chief Financial Officer This margin expansion demonstrates that Credo's product mix and operational strategy are delivering substantial operating leverage, supporting sustained profit growth as hyperscaler deployments accelerate. Three separate hyperscalers each comprised over 10% of revenue, with a fourth hyperscaler generating its first material contribution and on track to exceed 10% of annual revenue, indicating deepening customer penetration and decreasing end-market concentration. The largest customer accounted for 35% of revenue, the second-largest for 33%, and the third-largest for 20%, with management expecting all three to grow significantly year over year. "Three hyperscalers each contributed over 10% of our revenue, and we expect our customer diversification to continue to broaden over the upcoming quarters. Based on customer forecasts, we anticipate significant year-over-year growth. While shipment timing may lead to nonlinear growth patterns at a customer level, we see every data center partner scaling their deployments. We're making strong progress with new customers as well, highlighted by the first material revenue contribution from a fourth hyperscaler in Q1. We anticipate this revenue to grow throughout the fiscal year, further strengthening our market position." -- Bill Brennan, Chief Executive Officer This hyperscaler ramp-up and diversification reinforce Credo's insulation from individual customer risk, expand its total addressable market as hyperscaler spending cycles shift, and reflect rising adoption of AECs for both inter-rack and rack-to-rack connectivity in AI infrastructure buildouts. Credo's 2026 roadmap prioritizes advancement in optical digital signal processor (DSP) products, with new three-nanometer node development launching soon to address power efficiency and enable full DSP and linear receive optical (LRO) solutions at 1.6 terabit per second. Management reiterated that more than half of current R&D operating expenses support forthcoming optical initiatives, confirming optical as a key strategic pillar alongside AECs. "For several years, the industry has debated the shift from copper to optical connectivity solutions. While consensus holds that copper will remain prevalent in the foreseeable future, Credo is strategically prioritizing optical solutions as a cornerstone of our product roadmap. We see an expanding TAM for both copper and optical connectivity solutions. We're excited by the opportunity to bring our system-level expertise to bear in the optical market, further diversifying our position." -- Bill Brennan, Chief Executive Officer Credo's dual-track innovation and system integration in both copper (AEC) and optical (DSP/LRO) segments position the company to capture multiple waves of growth as bandwidth, reliability, and power efficiency remain critical for hyperscale AI deployments. Revenue guidance for fiscal 2026 is $230 million to $240 million, with non-GAAP gross margin of 64% to 66% for Q2 and non-GAAP operating expenses of $56 million to $58 million for Q2. Sequential revenue growth in the mid-single digits is expected throughout the year, cumulatively reaching approximately 120% year over year, with customer concentration declining as a fourth hyperscaler crosses the 10% revenue mark. Full-year non-GAAP net margin is expected to be around 40%, with non-GAAP operating expense growth below 50% year over year.

Why Credo Technology Stock Was a Winner This Week

The company is fully capitalizing on an explosive trend in the tech world. Next-generation data center equipment specialist Credo Technology Group (CRDO 5.09%) had an excellent week on the market with its stock. According to data compiled by S&P Global Market Intelligence, it surged by over 14% over the period after posting quite an impressive set of quarterly results. Massive improvements Arguably the most impressive facet of Credo's fiscal first quarter of 2026 was its revenue line. This ballooned nearly fourfold year over year to over $233 million for the period. Both of its main top-line sources saw notable improvements with the larger one -- product sales -- zooming to over $217 million from the $57 million of 2025's Q1. IP licensing brought in $6 million from the year-ago $2.4 million. Compounding that, the top-line figure trounced the average analyst estimate. Collectively, pundits tracking Credo stock were expecting the company to book less than $191 million. These dynamics were similar for non-GAAP (adjusted) profitability. In the quarter, Credo netted $98.3 million ($0.52 per share), easily bettering the $65.3 million in the same period of fiscal 2025. We're in something of a data center arms race, with many operators of such facilities eager to build them out to accommodate artificial intelligence (AI) functionalities. So this is something of a boom time for data center equipment companies, and Credo is clearly taking good advantage of the opportunity. A beat on guidance too Credo also proffered guidance for its current (second) quarter, forecasting that its revenue will come in at $230 million to $240 million. That's well above the analyst consensus of $199 million. The company's adjusted gross margin should range from 64% to 66%. It did not provide any bottom-line projections.