Credo Technology’s Earnings Call Highlights Record Growth

Credo Technology Group Holding Ltd. ((CRDO)) has held its Q3 earnings call. Read on for the main highlights of the call.

Credo Technology Group Holding Ltd. recently held its earnings call, which was marked by a strong positive sentiment. The company reported record-breaking revenue growth and significant advancements in its product lines, particularly in connectivity solutions and PCIe product introductions. Despite some concerns about high customer concentration and dependence on a single hyperscale customer, the overall outlook remains optimistic, with expectations of diversifying revenue streams in the coming quarters.

Record-Breaking Revenue Growth

Credo reported an impressive revenue of $135 million, representing an 87% sequential increase and a 154% year-over-year growth. This remarkable performance highlights the company’s strong market position and ability to capitalize on growth opportunities.

Strong Gross Margin Performance

The company achieved a non-GAAP gross margin of 63.8%, benefiting from economies of scale and the roll-off of contra revenue associated with a warrant with Amazon. This strong margin performance underscores Credo’s operational efficiency and financial health.

Hyperscale Customer Expansion

Credo has successfully achieved volume production with three hyperscalers and is in the qualification process with two additional hyperscalers, with production expected in fiscal 2026. This expansion is a strategic move to broaden its customer base and reduce dependency on a single customer.

Innovation in Connectivity Solutions

Credo’s multi-tiered innovation in SerDes technology, integrated circuit design, and system-level approach provides a competitive advantage. These innovations are crucial in maintaining Credo’s leadership in connectivity solutions.

PCIe Product Line Introduction

The company is set to introduce a comprehensive suite of PCIe products, which will expand its total addressable market. This move aligns with the growing demand for AI scale-out and scale-up networks, positioning Credo for future growth.

Advancements in Optical DSP Business

Credo’s optical DSP business is progressing well, with opportunities across a global customer base. Recent advancements in 3-nanometer tape-out for leading-edge opportunities highlight Credo’s commitment to technological innovation.

Positive Feedback for PCIe Retimers

Credo has received its first platform commitment from a large AI server ODM for PCIe retimers, with production revenue anticipated in calendar year 2026. This feedback is a testament to the quality and demand for Credo’s PCIe solutions.

High Customer Concentration Risk

The largest end customer accounted for 86% of Credo’s revenue, which is significantly higher than typical and highlights the concentration risk. This dependency underscores the need for revenue diversification.

Dependence on a Single Hyperscale Customer

Credo’s significant revenue dependence on a single hyperscale customer raises concerns about future revenue diversification. The company is aware of this risk and is actively working towards expanding its customer base.

Forward-Looking Guidance

Looking ahead, Credo remains confident in its ability to scale revenue and diversify its customer base across more accounts in the coming quarters and years. The company anticipates significant revenue opportunities with the introduction of PCIe products and the expansion of its hyperscale customer base.

In summary, Credo Technology Group Holding Ltd.’s earnings call was overwhelmingly positive, with record-breaking revenue growth and strategic advancements in product lines. While there are concerns about customer concentration and dependence, the company’s proactive steps towards diversification and innovation paint a promising picture for the future.