Credo Technology Group Holding Ltd. (NASDAQ:CRDO) stock fell in premarket trading Tuesday after the company reported fiscal fourth-quarter 2026 results that topped Wall Street estimates but highlighted lofty investor expectations following the stock’s strong run.

Revenue, Earnings Surge On AI Connectivity Demand

The high-speed connectivity solutions provider reported fourth-quarter revenue of $437 million, ahead of analyst estimates of $432.05 million. Adjusted earnings came in at $1.16 per share, beating expectations of $1.03 per share.

Highlighting the pace of growth, Chief Executive Officer Bill Brennan said on the earnings call that fiscal fourth-quarter revenue reached a record $437 million. “Notably, our revenue in the quarter exceeded our entire fiscal 25 revenue,” Brennan said.

Revenue surged 157% year over year and increased 7.4% sequentially, underscoring strong demand for the company’s AI infrastructure connectivity products.

Growth was driven by strong demand for AI infrastructure connectivity products, including active electrical cables (AECs), optical digital signal processors (DSPs) and retimers.

Adjusted gross margin was 68.3%, above the company’s guidance range. Operating income rose to $216.7 million, resulting in an operating margin of 49.6%.

Credo generated $182.2 million in operating cash flow during the quarter. The company ended fiscal 2026 with approximately $1.4 billion in cash and short-term investments.

Outlook Signals Continued Growth

For the fiscal first quarter, Credo expects revenue between $465 million and $475 million, above analyst estimates of $461.61 million. The company forecast adjusted gross margin of 67% to 69%.

Management also pointed to a significant growth opportunity in its optical business in fiscal 2027 as customer adoption accelerates. The portfolio includes optical DSPs, silicon photonics technology acquired through Dust Photonics and the company’s Zero Flap optics platform.

Credo expects its optical business to generate more than $600 million in fiscal 2027 revenue, with optical DSPs, silicon photonics PICs and Zero Flap optics each projected to contribute more than $100 million in annual revenue.

CRDO Price Action: Credo Technology Group shares were down 4.02% at $217.00 during premarket trading on Tuesday, according to Benzinga Pro data.