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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:72Outperform
Price Target:
$116.00
▲(12.19% Upside)
Action:ReiteratedDate:03/18/26
The score is driven primarily by strong financial performance (high margins, strong cash generation, and very low leverage) and a positive earnings-call outlook for continued growth. These strengths are tempered by weak technicals (trading below key moving averages with negative MACD) and a relatively premium valuation (P/E ~35) without dividend support.
Positive Factors
Cash generation & FCF growth
Sustained, large operating and free cash flow gives the company durable internal funding for product ramps, working capital and M&A without reliance on external financing. Strong cash conversion supports reinvestment in R&D and capacity through industry cycles over the next 2–6 months.
Conservative balance sheet
Extremely low leverage and a sizable equity base provide financial flexibility to support rapid production scaling, absorb demand volatility and fund strategic initiatives. A conservative balance sheet lowers refinancing and solvency risk across semiconductor cycles in the medium term.
Product roadmap and IP expansion
Multiple product ramps into hyperscalers and sampling of next‑gen interfaces, combined with the Chimera IP acquisition, broaden TAM and embed system‑level differentiation. This strengthens competitive positioning versus point optical players and creates recurring IP/licensing upside over coming quarters.
Negative Factors
Customer concentration
A handful of large customers account for the majority of revenue, increasing exposure to pricing pressure, order timing shifts and contract reallocation. Such concentration can materially swing revenue and utilization, amplifying risk to margins and cash flow stability within a 2–6 month horizon.
Short track record of sustained profitability
The current high margins and cash flow reflect a recent inflection versus earlier loss‑making years. Without a longer through‑cycle record, profitability could prove sensitive to semiconductor demand swings, testing margin sustainability and cash generation if customer mix or shipment rates soften.
Rising OpEx, inventory & external risks
Elevated R&D and operating spending is necessary for roadmap execution but raises fixed costs and breakeven requirements. The inventory build ties capital and could signal demand or timing mismatch, while tariffs and memory availability add external supply and cost risks that can pressure margins over months.
Credo Technology Group Holding Ltd (CRDO) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$19.07B
Dividend YieldN/A
Average Volume (3M)7.60M
Price to Earnings (P/E)35.2
Beta (1Y)3.35
Revenue Growth224.17%
EPS GrowthN/A
CountryUS
Employees500
SectorTechnology
Sector Strength88
IndustryCommunication Equipment
Share Statistics
EPS (TTM)1.07
Shares Outstanding184,449,940
10 Day Avg. Volume8,027,701
30 Day Avg. Volume7,604,279
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 Cap0.94
Enterprise Value/Revenue16.72
Enterprise Value/Gross Profit24.66
Enterprise Value/Ebitda51.07
Forecast
1Y Price Target
$191.92Price Target Upside85.61% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering13
EPS Forecast (FY)3.26
Revenue Forecast (FY)$1.33B
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 primarily makes money by selling semiconductor connectivity products and by licensing semiconductor intellectual property used in high-speed data links. A key revenue stream is product revenue from the sale of its connectivity chips/components that enable high-bandwidth, power-efficient data transmission within and between systems used in data centers (e.g., server-to-switch and switch-to-switch links). Another revenue stream is IP revenue from licensing its high-speed SerDes and related interface IP to other chipmakers and system-on-chip designers, typically structured as license fees and, where applicable, royalties tied to customer shipments. The company’s earnings are influenced by demand for bandwidth upgrades in hyperscale and enterprise data centers, adoption of faster interconnect standards, and design wins with large equipment manufacturers and chip companies. Specific partnership terms, customer concentration details, and the exact breakdown of revenue by stream are null.
Credo Technology Group Holding Ltd Earnings Call Summary
Earnings Call Date:Mar 02, 2026
(Q3-2026)
| % Change Since: |
Next Earnings Date:Jun 03, 2026
Earnings Call Sentiment Positive
The call conveyed very strong operational and financial momentum: record revenue, robust margins, exceptional cash generation, multiple product ramps (ZeroFlap Optics, AECs, PCIe Gen6, Blue Heron, OmniConnect, ALCs) and an acquisition to expand IP capabilities. Near-term conservatism appears in guidance (lower gross margin midpoint, modest sequential revenue guidance) and there are manageable risks including customer concentration, an inventory build, elevated R&D/OpEx, tariff and memory supply uncertainty, and market noise around CPO/optical competition. On balance, the call emphasized accelerating growth and execution with identifiable but contained risks.Q3-2026 Updates
Positive Updates
Record Revenue and Rapid Growth
Revenue of $407.0M in Q3 FY26, up 52% sequentially and more than 200% year-over-year (tripled YoY). Management highlighted ~6x revenue growth over two years and expects fiscal '27 revenue growth of >50% YoY (mid-single-digit sequential growth).
Strong Profitability and Margin Expansion
Q3 non-GAAP gross margin 68.6% (up 92 bps sequential). Non-GAAP operating income $201.8M (vs $124.1M in Q2). Non-GAAP net income $208.8M, a 63% sequential increase and ~4x YoY. Non-GAAP operating margin 49.6% (up 327 bps sequential) and non-GAAP net margin 51.3%.
Record Cash Generation and Solid Liquidity
Operating cash flow was a record $166.2M (up $104.6M sequential). Free cash flow $139.7M (up >$100M sequential). Cash & equivalents $1.3B at quarter end, up $487.9M sequential (ATM proceeds + strong FCF). CapEx was $26.5M.
Product Wins and Product Roadmap Momentum
Secured a fifth hyperscaler and multiple large customer engagements. ZeroFlap Optics: production shipments to first Neocloud customer (Tensor Way) and qualification with 3 additional customers; management expects a significant production ramp beginning Q1 FY27. PCIe Gen6 AECs sampling; mass production H1 FY27. Blue Heron 200G retimer, OmniConnect (Weaver gearbox) and ALC roadmap (sampling FY27, production FY28) expand TAM.
Operational Execution and Supply-Chain Readiness
Management credited silicon and system ops for scaling production and meeting upside demand. Company reports supply alignment across wafer nodes (12nm, 7nm, 5nm, 3nm) and confidence in supporting 2027 ramp and upside.
Strategic M&A and IP Integration
Closed acquisition of Chimera (protocol, error-correction and security IP) to accelerate end-to-end connectivity roadmap and strengthen system-level offerings.
Negative Updates
Guidance Shows Lower Near-Term Margins
Q4 FY26 guidance: revenue $425M–$435M (modest sequential increase from $407M) and non-GAAP gross margin guided to 64%–66% (midpoint implies a ~360 bps decline from Q3's 68.6%), indicating conservative near-term margin expectations and mix effects.
Rising Operating Expenses and Elevated R&D Spend
Q3 non-GAAP operating expenses were $77.4M, up 35% sequentially and above guidance due to higher R&D/project spend and hiring. Q4 OpEx guided $76M–$80M (near-flat quarter-to-quarter despite many new initiatives).
Customer Concentration Risk
Top customers remain concentrated: the largest customer was 39% of Q3 revenue, the second 32%, and the third 17%. Management expects 3–4 customers >10% of revenue in coming quarters, which presents concentration risk.
Inventory Build and External Uncertainties
Ending inventory increased to $208M, up $57.8M sequentially. Management also cited a fluid tariff regime and industry-wide memory cost/availability concerns that could be gating factors despite internal supply assurances.
Market Noise and Competitive Uncertainty Around CPO/Optics
Transcript notes significant market 'noise' around CPO and increased activity from optical peers (including NVIDIA investments in optical companies). While management argues AEC and new optical products are complementary, CPO timing and competitive dynamics add uncertainty to long-term mix.
Dependence on Forward-Looking and Non-GAAP Measures
Heavy emphasis on non-GAAP metrics and numerous forward-looking statements subject to risks and uncertainties; management warned results may differ materially from forward-looking commentary.
Company Guidance
Credo guided Q4 FY2026 revenue of $425–$435 million, non‑GAAP gross margin of 64–66%, non‑GAAP operating expenses of $76–$80 million, and a diluted weighted‑average share count of ~197 million (assumptions include the current tariff regime); management described this as a conservative outlook versus Q3’s record results (Q3 revenue $407M; non‑GAAP gross margin 68.6%; non‑GAAP OpEx $77.4M; non‑GAAP operating income $201.8M; non‑GAAP net income $208.8M; non‑GAAP net margin 51.3%; cash from operations $166.2M; free cash flow $139.7M; cash & equivalents $1.3B; ending inventory $208M; CapEx $26.5M). For FY2027, they expect mid‑single‑digit sequential revenue growth that translates to greater than 50% year‑over‑year growth and reiterated a long‑term non‑GAAP gross margin framework around the mid‑60% range.Credo Technology Group Holding Ltd Financial Statement Overview
Summary
Strong turnaround in TTM fundamentals: rapid revenue growth (+34.2%) with very high profitability (gross margin ~67.8%, net margin ~31.8%, EBIT margin ~32.0%), conservative balance sheet (debt-to-equity ~0.007), and robust cash generation (TTM operating cash flow ~$339.9M; free cash flow ~$283.7M; FCF growth +97.5%). Primary risk is the relatively short track record of sustained profitability/cash flow versus earlier volatility.Income Statement
TTM (Trailing-Twelve-Months) results show a sharp profitability inflection with strong revenue growth (+34.2%) and very high margins (gross margin ~67.8%, net margin ~31.8%, EBIT margin ~32.0%). This is a major improvement versus the prior annual periods (loss-making from 2021–2024, modest profitability in 2025), indicating the business has moved into a much stronger earnings phase. Key watch-out is the relatively short track record of profitability and the large year-over-year step-up, which can be more volatile in cyclical hardware demand.86
Very Positive
Balance Sheet
The balance sheet is conservatively positioned with extremely low leverage in TTM (Trailing-Twelve-Months) (debt-to-equity ~0.007) and a sizable equity base ($1.85B equity vs. $2.04B assets). Returns have also improved materially (TTM return on equity ~29.6%) versus low/negative levels in prior annual periods. The main caution is that earlier years included weaker profitability (and even negative equity in 2021), so the current strength appears driven by a more recent operating turnaround.92
Very Positive
Cash Flow
Cash generation is strong in TTM (Trailing-Twelve-Months), with operating cash flow (~$339.9M) closely matching net income and robust free cash flow (~$283.7M). Free cash flow growth is very strong (+97.5% in TTM), highlighting improving cash conversion versus earlier years that included negative operating and free cash flow (notably 2021–2023). A key risk is consistency—cash flow quality has varied historically, so sustaining current free-cash-flow levels through cycles is the key proof point.84
Very Positive
| Breakdown | TTM | Apr 2025 | Apr 2024 | Apr 2023 | Apr 2022 | Apr 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 1.07B | 436.77M | 192.97M | 184.19M | 106.48M | 58.70M |
| Gross Profit | 724.47M | 282.91M | 119.43M | 106.19M | 64.02M | 38.28M |
| EBITDA | 349.77M | 59.94M | -22.52M | -9.31M | -14.04M | -23.02M |
| Net Income | 339.76M | 52.18M | -28.37M | -16.55M | -22.18M | -27.51M |
Balance Sheet | ||||||
| Total Assets | 2.04B | 809.26M | 601.93M | 397.29M | 375.69M | 155.49M |
| Cash, Cash Equivalents and Short-Term Investments | 1.30B | 431.34M | 410.00M | 217.81M | 259.32M | 103.76M |
| Total Debt | 12.62M | 16.04M | 13.87M | 15.50M | 17.19M | 0.00 |
| Total Liabilities | 188.45M | 127.67M | 61.73M | 49.65M | 41.53M | 210.92M |
| Stockholders Equity | 1.85B | 681.58M | 540.20M | 347.63M | 334.16M | -55.43M |
Cash Flow | ||||||
| Free Cash Flow | 283.69M | 29.02M | 17.09M | -46.33M | -48.41M | -48.42M |
| Operating Cash Flow | 339.87M | 65.08M | 32.74M | -24.61M | -30.83M | -42.36M |
| Investing Cash Flow | -139.74M | 111.99M | -249.49M | -130.94M | -17.58M | -6.06M |
| Financing Cash Flow | 720.99M | -7.73M | 175.28M | 4.88M | 204.18M | 77.89M |
Credo Technology Group Holding Ltd Technical Analysis
Negative
103.40
Price Trends
123.68
Negative
139.91
Negative
129.39
Negative
Market Momentum
-4.77
Positive
41.96
Neutral
15.16
Positive
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 103.4 is below the 20-day moving average (MA) of 112.02, below the 50-day MA of 123.68, and below the 200-day MA of 129.39, indicating a bearish trend. The MACD of -4.77 indicates Positive momentum. The RSI at 41.96 is Neutral, neither overbought nor oversold. The STOCH value of 15.16 is Positive, 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 |
|---|---|---|---|---|---|---|---|
77 Outperform | $54.28B | 59.35 | 8.26% | ― | 18.79% | 49.53% | |
74 Outperform | $46.31B | 35.83 | 120.56% | 0.49% | 36.77% | 102.83% | |
72 Outperform | $19.07B | 35.18 | 29.56% | ― | 224.17% | ― | |
70 Outperform | $37.83B | 11.10 | 29.57% | 2.51% | 1.04% | ― | |
63 Neutral | $44.75B | 49.36 | 4.38% | 2.26% | 5.05% | 115.92% | |
61 Neutral | $37.18B | 12.37 | -10.20% | 1.83% | 8.50% | -7.62% |
* Technology Sector Average
CRDO
Credo Technology Group Holding Ltd
103.40
52.87
104.63%
CIEN
Ciena
383.89
314.36
452.12%
ERIC
Telefonaktiebolaget LM Ericsson
11.18
3.15
39.28%
NOK
Nokia
7.98
2.77
53.14%
UI
Ubiquiti Networks
765.27
434.12
131.09%
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.