Credo Technology Group Holding Ltd. (NASDAQ:CRDO) stock edged lower in Thursday’s premarket trading after plunging 20.04% in the previous session, as investors weighed rapid growth against shrinking margins and rising costs.
The stock’s modest gain suggested it was stabilizing after a post-earnings pullback.
Credo reported fiscal 2027 first-quarter revenue of $479 million, beating the $471.77 million estimate. Adjusted earnings of $1.20 per share topped the $1.17 estimate.
However, GAAP gross margin fell to 64.5% from 68.2% in the previous quarter. GAAP operating expenses more than doubled to $188.4 million from $89.6 million.
AI Spending Drives Connectivity Demand
CEO Bill Brennan said rising artificial intelligence infrastructure spending remains a key growth driver. Larger data center clusters require faster, more reliable and energy-efficient connections.
Credo offers copper and optical connectivity products that span distances from millimeters to kilometers. Brennan expects future AI systems to use a mix of architectures and connection technologies, creating opportunities across the company’s portfolio.
Active Electrical Cables remain Credo’s largest business. The company has relationships with five hyperscalers and continues to gain NeoCloud customers. Brennan expects deeper customer penetration, new accounts and the shift toward 200-gig-per-lane and 1.6-terabit connections to support growth.
Optics Emerges As Second Growth Engine
Brennan said Credo’s optical business is growing faster than its Active Electrical Cables business.
Management expects fiscal 2027 optical revenue to exceed $600 million. ZeroFlap Optics, silicon photonics photonic integrated circuits and optical digital signal processors should each contribute more than $100 million.
Credo also recorded its first silicon photonics revenue following its acquisition of DustPhotonics. Brennan said the acquired team secured two major next-generation design wins that should ramp mainly in fiscal 2028.
The company also joined an Open Compute Project consortium as it develops near-package optics for scale-up AI networks.
New Products Target Fiscal 2028 Growth
Brennan identified Active LED Cables and OmniConnect as additional growth drivers. Both products should begin generating revenue in fiscal 2028.
OmniConnect addresses memory capacity and bandwidth limits in AI inference systems. Management believes it could eventually generate thousands of dollars in Credo content per graphics processing unit. Positron is the first announced customer.
Brennan called Active LED Cables a “big multibillion-dollar opportunity.”
Credo Forecasts More Than 85% Growth
Chief Financial Officer Dan Fleming forecast fiscal second-quarter revenue of $525 million to $535 million. Credo expects adjusted gross margin of 67% to 69%.
For fiscal 2027, management expects revenue growth of more than 85%, supported by a stronger optical ramp in the second half. Fleming also expects adjusted net margin to remain near 50%.
Brennan described fiscal 2027 as a “stepping stone” for optics. He expects outsized growth to continue into fiscal 2028 and beyond.
Top ETF Exposure
- Invesco NASDAQ Next Gen 100 ETF (NASDAQ:QQQJ): 2.14% weighting
- Fundstrat Granny Shots US Small- & Mid-Cap ETF (NYSE:GRNJ): 2.10% weighting
- Corgi Lithography & Semiconductor Photonics ETF (NASDAQ:EUV): 3.12% weighting
Significant inflows or outflows from these ETFs could trigger automatic buying or selling of Credo shares.
Analyst Consensus & Recent Actions: The stock carries a Buy rating with an average price forecast of $273.07. Recent analyst moves include:
- JP Morgan: Overweight (Lowers Target to $310.00) (Sept. 2)
- Evercore ISI Group: Outperform (Lowers Target to $292.00) (Sept. 2)
- Rosenblatt: Neutral (Raises Target to $235.00) (Sept. 2)
Price Action
CRDO Price Action: Credo Technology Group shares were down 0.05% at $165.13 during premarket trading on Thursday, according to Benzinga Pro data.
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