Credo Technology’s Record Earnings and Growth Outlook

Credo Technology Group Holding Ltd. ((CRDO)) has held its Q2 earnings call. Read on for the main highlights of the call.

Credo Technology Group Holding Ltd. recently held an earnings call that showcased a remarkable financial performance, with a positive outlook for future growth. The company reported record-breaking results, highlighted by substantial growth in key product segments and strategic expansions into new market opportunities. However, the call also addressed potential challenges, such as supply chain constraints and a planned increase in operating expenses, which need careful management to sustain the positive momentum.

Record Revenue and Growth

Credo Technology Group reported record revenue of $268 million, marking a 20% sequential growth from Q1 and an extraordinary 272% increase year-over-year. The non-GAAP gross margin stood at 67.7%, and the non-GAAP net income was $128 million, representing the strongest financial results in the company’s history. This impressive performance underscores Credo’s successful strategies and market positioning.

Strong Performance in AEC and IC Segments

The Active Electrical Cables (AEC) product line emerged as the fastest-growing segment, with significant contributions from multiple hyperscalers. The Integrated Circuit (IC) business, which includes retimers and optical DSPs, also demonstrated strong performance. Credo expects substantial growth in these areas throughout the fiscal year, driven by increasing demand and technological advancements.

New Growth Pillars Announced

Credo announced three new growth pillars: Zero Flap optics, Active LED Cables (ALCs), and OmniConnect gearboxes. These initiatives represent multibillion-dollar market opportunities, significantly expanding the company’s total addressable market. The introduction of these new products is expected to drive further growth and diversification of Credo’s revenue streams.

Positive Customer Engagement

Credo’s customer base continues to expand, with a fifth hyperscaler contributing initial revenue. The company maintains strong strategic partnerships, and customer forecasts have strengthened across the board. This positive customer engagement is a testament to Credo’s ability to deliver innovative solutions that meet the evolving needs of its clients.

Supply Chain Concerns

The earnings call highlighted potential future supply chain constraints, particularly related to wafer foundry capacity. Credo acknowledged the need to manage possible advanced node capacity issues to ensure continued growth and stability. Addressing these concerns will be crucial for maintaining the company’s operational efficiency and meeting customer demands.

Significant Planned Increase in Operating Expenses

Credo anticipates a significant increase in non-GAAP operating expenses in Q3, driven by project-related spending and increased hiring. While this may impact operating margins, these investments are necessary to support the company’s growth initiatives and long-term strategic goals.

Forward-Looking Guidance

For the third quarter of fiscal 2026, Credo projects revenue between $335 million and $345 million, marking a 27% sequential increase. The company expects a non-GAAP gross margin ranging from 64% to 66% and non-GAAP operating expenses between $68 million and $72 million. For the full fiscal year 2026, Credo forecasts more than 170% year-over-year growth, driven by strengthened customer forecasts and the ramp-up of a fifth hyperscale customer. The company aims for a non-GAAP net margin of approximately 45%, with net income expected to more than quadruple compared to the previous year.

In summary, Credo Technology Group Holding Ltd.’s earnings call reflected a strong financial performance and a positive business outlook. The company is poised for continued growth, driven by record revenue, strategic expansions, and robust customer engagement. However, managing supply chain constraints and increased operating expenses will be critical to sustaining this momentum. Investors and stakeholders can look forward to Credo’s ambitious growth targets and strategic initiatives in the coming quarters.