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Credo Technology Group Holding Ltd (CRDO)
NASDAQ:CRDO
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Credo Technology Group Holding Ltd
(NASDAQ:CRDO)
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Rating:70Outperform
Price Target:
$141.00
▲(16.69% Upside)
Action:ReiteratedDate:02/13/26
The score is driven primarily by strong financial performance and very upbeat earnings-call guidance (rapid growth and strong margins outlook). This is tempered by weak-to-mixed technical momentum (below key moving averages with negative MACD) and a steep valuation (P/E above 100) that raises execution sensitivity.
Positive Factors
High Profitability & Margins
Sustained high gross and net margins indicate durable product pricing power and strong engineering differentiation in semiconductors/optical connectivity. These margins provide long-term cash flow buffer for R&D and scaling, supporting reinvestment without eroding profitability.
Improving Cash Generation
Rapid free cash flow improvement and >1x cash conversion show the business is turning profits into real cash. That strengthens funding for capital expenditures, working capital and customer ramps, reducing reliance on external financing during multi-quarter growth phases.
Low Leverage & Strong ROE
Minimal leverage and a high ROE point to conservative financial structure and efficient capital allocation. Low debt lowers bankruptcy and refinancing risk while ROE reflects strong returns on shareholder capital as the company scales its semiconductor and optical product lines.
Negative Factors
Foundry / Supply Constraints
Structural foundry capacity limits can cap the firm's ability to fulfill large hyperscaler orders and sustain high growth. Persistent capacity bottlenecks could force lead-time extensions, higher component costs, or lost share to competitors, impairing revenue and margin targets.
Steep Planned OpEx Increase
Material, sustained rises in operating expenses to support product development and hiring increase the fixed cost base. If revenue ramps or gross margins underperform expectations, elevated OpEx could compress operating margins and reduce free cash flow over multiple quarters.
Concentration on Hyperscaler Customers
Heavy dependence on a small group of hyperscale customers amplifies revenue volatility and bargaining leverage. Large order shifts or forecast changes from these customers could materially affect results and make growth more execution-sensitive over the medium term.
Credo Technology Group Holding Ltd (CRDO) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$21.83B
Dividend YieldN/A
Average Volume (3M)6.22M
Price to Earnings (P/E)107.8
Beta (1Y)3.35
Revenue Growth224.17%
EPS GrowthN/A
CountryUS
Employees500
SectorTechnology
Sector Strength88
IndustryCommunication Equipment
Share Statistics
EPS (TTM)0.67
Shares Outstanding180,631,710
10 Day Avg. Volume5,465,790
30 Day Avg. Volume6,222,804
Financial Highlights & Ratios
PEG Ratio-0.51
Price to Book (P/B)10.58
Price to Sales (P/S)16.51
P/FCF Ratio248.47
Enterprise Value/Market Cap1.00
Enterprise Value/Revenue27.31
Enterprise Value/Gross Profit40.91
Enterprise Value/Ebitda97.98
Forecast
1Y Price Target
$213.67Price Target Upside76.84% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering14
EPS Forecast (FY)N/A
Revenue Forecast (FY)N/A
Credo Technology Group Holding Ltd Business Overview & Revenue Model
Company DescriptionCredo Technology Group Holding Ltd provides various high-speed connectivity solutions for optical and electrical Ethernet applications in the United States, Mexico, Mainland China, Hong Kong, and internationally. Its products include integrated circuits, active electrical cables, and SerDes chiplets that are based on its serializer/deserializer and digital signal processor technologies. The company also offers intellectual property solutions consist of SerDes IP licensing. The company was founded in 2008 and is headquartered in San Jose, California.
How the Company Makes MoneyCredo Technology generates revenue through the sale of its semiconductor products and optical connectivity solutions. Key revenue streams include the sale of integrated circuits, optical modules, and related hardware that facilitate high-speed data transmission. The company also engages in partnerships with major technology firms and data center operators, which can lead to long-term contracts and bulk orders. Additionally, Credo may benefit from revenue generated through licensing agreements for its proprietary technology and ongoing support services for its products.
Credo Technology Group Holding Ltd Earnings Call Summary
Earnings Call Date:Dec 01, 2025
(Q2-2026)
| % Change Since: |
Next Earnings Date:Mar 02, 2026
Earnings Call Sentiment Positive
The earnings call highlighted record-breaking financial performance, strong growth in key product segments, and strategic expansions into new market opportunities, indicating a positive business outlook. However, potential supply chain constraints and a significant planned increase in operating expenses present challenges that need to be managed effectively.Q2-2026 Updates
Positive Updates
Record Revenue and Growth
Credo reported record revenue of $268 million, representing a 20% sequential growth from Q1 and an extraordinary 272% increase year-over-year. Non-GAAP gross margin was 67.7%, and non-GAAP net income was $128 million, marking the strongest results in Credo's history.
Strong Performance in AEC and IC Segments
The Active Electrical Cables (AEC) product line remains the fastest-growing segment, with multiple hyperscalers contributing significantly to revenue. The IC business, including retimers and optical DSPs, also showed strong performance, with significant growth expected in the fiscal year.
New Growth Pillars Announced
Credo announced three new growth pillars: Zero Flap optics, Active LED Cables (ALCs), and OmniConnect gearboxes, each representing multibillion-dollar market opportunities that significantly expand the company's total addressable market.
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.
Negative Updates
Supply Chain Concerns
Potential future supply chain constraints, particularly related to wafer foundry capacity, were discussed, indicating a need to manage through possible advanced node capacity issues.
Significant Planned Increase in Operating Expenses
Non-GAAP operating expenses in Q3 are expected to increase significantly, driven by project-related spend and increased hiring, which may impact operating margins.
Company Guidance
In the recent earnings call, Credo provided guidance for the third quarter of fiscal 2026, projecting revenue between $335 million and $345 million, marking a 27% sequential increase. The company anticipates a non-GAAP gross margin ranging from 64% to 66% and expects non-GAAP operating expenses between $68 million and $72 million. The diluted weighted average share count is projected to be approximately 194 million shares. For the entirety of 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.Credo Technology Group Holding Ltd Financial Statement Overview
Summary
Strong fundamentals across statements: TTM revenue growth of 32.66% with high profitability (gross margin 66.76%, net margin 26.63%). Balance sheet leverage is minimal (debt-to-equity 0.01) with strong ROE (25.18%) and a high equity ratio (88.76%). Cash generation is improving materially with free cash flow growth of 53.64% and solid cash conversion (operating cash flow to net income 1.27).Income Statement
Credo Technology Group has demonstrated strong revenue growth with a TTM revenue growth rate of 32.66%. The company maintains a healthy gross profit margin of 66.76% and a net profit margin of 26.63%, indicating robust profitability. The EBIT and EBITDA margins are also strong at 26.28% and 27.88%, respectively. These metrics reflect a solid financial performance with significant improvements over previous periods.85
Very Positive
Balance Sheet
The balance sheet is stable with a low debt-to-equity ratio of 0.01, suggesting minimal leverage and financial risk. The return on equity is impressive at 25.18%, indicating efficient use of equity capital. The equity ratio stands at 88.76%, reflecting a strong equity base relative to total assets. Overall, the balance sheet shows a healthy financial position with low leverage and strong equity returns.78
Positive
Cash Flow
Cash flow analysis reveals a significant improvement in free cash flow with a growth rate of 53.64%. The operating cash flow to net income ratio is 1.27, indicating strong cash generation relative to net income. The free cash flow to net income ratio is 0.81, showing effective conversion of earnings into cash. These metrics highlight a positive cash flow trajectory and efficient cash management.82
Very Positive
| Breakdown | TTM | Apr 2025 | Apr 2024 | Apr 2023 | Apr 2022 | Apr 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 796.13M | 436.77M | 192.97M | 184.19M | 106.48M | 58.70M |
| Gross Profit | 531.53M | 282.91M | 119.43M | 106.19M | 64.02M | 38.28M |
| EBITDA | 221.95M | 59.94M | -22.52M | -9.31M | -14.04M | -23.02M |
| Net Income | 211.98M | 52.18M | -28.37M | -16.55M | -22.18M | -27.51M |
Balance Sheet | ||||||
| Total Assets | 1.45B | 809.26M | 601.93M | 397.29M | 375.69M | 155.49M |
| Cash, Cash Equivalents and Short-Term Investments | 813.58M | 431.34M | 410.00M | 217.81M | 259.32M | 103.76M |
| Total Debt | 12.81M | 16.04M | 13.87M | 15.50M | 17.19M | 0.00 |
| Total Liabilities | 163.20M | 127.67M | 61.73M | 49.65M | 41.53M | 210.92M |
| Stockholders Equity | 1.29B | 681.58M | 540.20M | 347.63M | 334.16M | -55.43M |
Cash Flow | ||||||
| Free Cash Flow | 143.61M | 29.02M | 17.09M | -46.33M | -48.41M | -48.42M |
| Operating Cash Flow | 177.87M | 65.08M | 32.74M | -24.61M | -30.83M | -42.36M |
| Investing Cash Flow | -219.11M | 111.99M | -249.49M | -130.94M | -17.58M | -6.06M |
| Financing Cash Flow | 369.62M | -7.73M | 175.28M | 4.88M | 204.18M | 77.89M |
Credo Technology Group Holding Ltd Technical Analysis
Negative
120.83
Price Trends
135.52
Negative
145.88
Negative
124.86
Negative
Market Momentum
-3.46
Negative
44.60
Neutral
36.73
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For CRDO, the sentiment is Negative. The current price of 120.83 is below the 20-day moving average (MA) of 121.69, below the 50-day MA of 135.52, and below the 200-day MA of 124.86, indicating a bearish trend. The MACD of -3.46 indicates Negative momentum. The RSI at 44.60 is Neutral, neither overbought nor oversold. The STOCH value of 36.73 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for CRDO.
Credo Technology Group Holding Ltd Risk Analysis
Credo Technology Group Holding Ltd disclosed 65 risk factors in its most recent earnings report. Credo Technology Group Holding Ltd reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Credo Technology Group Holding Ltd Peers Comparison
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
74 Outperform | $45.92B | 51.70 | 136.08% | 0.49% | 36.77% | 102.83% | |
71 Outperform | $48.48B | 415.98 | 4.45% | ― | 18.79% | 49.53% | |
70 Outperform | $21.83B | 107.77 | 22.87% | ― | 224.17% | ― | |
70 Outperform | $36.93B | 12.71 | ― | 2.51% | 1.04% | ― | |
61 Neutral | $37.18B | 12.37 | -10.20% | 1.83% | 8.50% | -7.62% | |
59 Neutral | $41.75B | 57.13 | 3.20% | 2.26% | 5.05% | 115.92% |
* Technology Sector Average
CRDO
Credo Technology Group Holding Ltd
123.46
62.17
101.44%
CIEN
Ciena
353.33
272.56
337.45%
ERIC
Telefonaktiebolaget LM Ericsson
11.19
3.11
38.56%
NOK
Nokia
7.57
2.78
58.00%
UI
Ubiquiti Networks
755.43
417.34
123.44%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.