Disclosure and Author Information - The author has no stock, option, or derivative positions in any mentioned companies and no plans to initiate such positions within the next 72 hours [1] - The article expresses the author's own opinions and is not receiving compensation other than from Seeking Alpha [1] - The author has no business relationship with any company whose stock is mentioned in the article [1] - Seeking Alpha's disclosure states that past performance is no guarantee of future results and no investment recommendations are provided [2] - Seeking Alpha is not a licensed securities dealer, broker, or US investment adviser, and its analysts may not be licensed or certified by any regulatory body [2]

Analyst Background - Uttam is a growth-oriented investment analyst with a primary focus on the technology sector, including semiconductors, artificial intelligence, and cloud software [1] - His research also covers MedTech, Defense Tech, and Renewable Energy sectors [1] - Uttam has prior experience leading teams at major technology firms such as Apple and Google in Silicon Valley [1] - He co-authors The Pragmatic Optimist Newsletter with his wife, Amrita Roy, which is regularly cited by leading publications like the Wall Street Journal and Forbes [1] Disclosure Information - The analyst has no current stock, option, or derivative positions in the mentioned companies but may initiate a long position in CRDO within the next 72 hours [2] - The article expresses the analyst's own opinions and is not influenced by compensation or business relationships with the mentioned companies [2] - Seeking Alpha's disclosure emphasizes that past performance does not guarantee future results and that their analysts are third-party authors, including both professional and individual investors [3]

Investment Rating - The report maintains a "Buy" rating for Credo Technology Group Holding Ltd [2] Core Views - Credo Technology Group Holding Ltd achieved record revenue of $72.034 million in FY25Q2, representing a YoY increase of 63.6% and a QoQ increase of 20.6% [1] - The company expects FY25Q3 revenue to be between $115 million and $125 million, with a midpoint QoQ growth of 67% [1] - The company anticipates double-digit QoQ growth in FY25Q4 and approximately 50% YoY revenue growth in FY26 [1] - The company's AEC products are entering a volume production phase, with cloud vendor ASIC and AI Ethernet trends expected to drive high-speed growth [2] Financial Performance - FY25Q2 GAAP gross margin was 63.2%, while Non-GAAP gross margin was 63.6% [1] - FY25Q2 GAAP net loss was $4.225 million, while Non-GAAP net profit was $12.255 million [1] - The company expects FY25Q3 GAAP gross margin to be between 60.6% and 62.6%, and Non-GAAP gross margin between 61.0% and 63.0% [1] - Revenue is projected to grow from $393 million in FY25 to $765 million in FY27, with GAAP net profit expected to turn positive at $22 million in FY26 and reach $30.37 million in FY27 [2][6] Business Analysis - FY25Q2 revenue breakdown: product sales $64.443 million, product engineering services $4.632 million, IP revenue $2.959 million [2] - Three customers accounted for over 10% of revenue, with Microsoft at 11%, a second AEC large customer at 33%, and a new large customer at 14% [2] - The company has completed tape-out for its single-channel 200G 3nm optical module DSP and released a demo for PCIe GEN6/7 retimer, with sampling expected in CY25 and revenue generation in CY26 [2] Valuation - Current stock price implies FY25-FY27 PS ratios of 20x, 14x, and 10x respectively [2] - FY25-FY27 revenue estimates are $393 million, $586 million, and $765 million respectively [2]

Revenue Performance - For the three months ended November 2, 2024, total revenue was $72.0 million, a 63.6% increase from $44.0 million for the same period in 2023[106]. - The company generated $131.7 million in total revenue for the six months ended November 2, 2024, a 66.5% increase from $79.1 million for the same period in 2023[107]. - Product sales revenue for the six months ended November 2, 2024, increased by $30.2 million, primarily due to a significant increase in unit shipments of AEC and Optical products, contributing over 95% of the revenue increase[111]. - Total revenue for the six months ended November 2, 2024, increased by $28.0 million compared to the same period in fiscal year 2024, despite a $4.4 million decrease in IP license revenue[111]. Profitability and Margins - The company reported a net loss of $4.2 million for the three months ended November 2, 2024, compared to a net loss of $18.3 million for the same period in 2023[106]. - Gross profit for the three months ended November 2, 2024, was $45.5 million, representing a 74.3% increase compared to $26.1 million in the same period last year[116]. - The gross margin improved to 63.2% for the three months ended November 2, 2024, up from 59.3% in the same period of 2023[106]. - Gross margin for the three months ended November 2, 2024, increased by 3.9 percentage points to 63.2%, driven by improved economies of scale and higher gross margin AEC products[116]. Expenses - Research and development expenses were 44.1% of total revenue for the three months ended November 2, 2024, compared to 49.4% in the same period of 2023[106]. - Research and development expenses for the six months ended November 2, 2024, increased by $17.8 million, primarily due to an $8.2 million increase in share-based compensation and a $5.7 million increase in personnel costs[120]. - Selling, general and administrative expenses for the six months ended November 2, 2024, increased by $17.7 million, mainly due to an $8.9 million increase in share-based compensation and a $4.0 million increase in personnel expenses[122]. Cash Flow and Liquidity - Cash and cash equivalents as of November 2, 2024, were $239.2 million, up from $66.9 million as of April 27, 2024[126]. - Net cash provided by operating activities for the six months ended November 2, 2024, was $3.0 million, with cash outflows for working capital primarily driven by a $22.1 million increase in accounts receivable[130]. - The company believes its existing cash and cash equivalents will be sufficient to meet its needs for at least the next 12 months[127]. - Net cash provided by operating activities was $29.6 million for the six months ended October 28, 2023, primarily due to $23.7 million of cash inflows for working capital purposes[131]. Investing and Financing Activities - Net cash used in investing activities was $9.7 million for the six months ended October 28, 2023, primarily due to purchases of property and equipment of $7.4 million[135]. - Net cash provided by financing activities was $0.7 million for the six months ended October 28, 2023, attributed to $3.7 million in proceeds from exercises of employee share options[137]. - Cash inflows from investing activities for the six months ended November 2, 2024, were $171.5 million, primarily from maturities of certificates of deposit[134]. Market and Operational Insights - The company expects to derive a significant portion of its revenue from a limited number of customers for the foreseeable future[100]. - The company operates a fabless business model, focusing on engineering and design while outsourcing manufacturing[102]. - The company continues to monitor and assess its critical accounting estimates in light of the current macroeconomic environment, which may lead to material changes in future periods[138]. - There were no material changes in market risk assessment during the three and six months ended November 2, 2024, compared to the previous assessment[139].

Shares of data center cable company Credo Technology (CRDO 45.10%) rocketed on Tuesday, with shares up 47.3% as of 1:11 p.m. ET.The company reported earnings last night that not only beat analyst estimates but also delivered blowout guidance, suggesting Credo has emerged as a new artificial intelligence (AI) winner.An inflection point in AI interconnectCredo makes a unique cable product called an active electrical cable (AEC), which connects data center servers to networking switches. The company claims its ...

Credo Technology Group Holding Ltd CRDO reported better-than-expected second-quarter financial results and issued strong guidance on Monday.Credo Technology reported quarterly earnings of 7 cents per share which beat the analyst consensus estimate of 5 cents per share. The company reported quarterly sales of $72.000 million which beat the analyst consensus estimate of $66.789 million.Bill Brennan, Credo’s President and Chief Executive Officer, stated, “In the fiscal second quarter ended November 2, 2024 Cre ...

Group 1 - Credo Technology Group Holding Ltd (CRDO) shares surged nearly 40% in early trading, reflecting improved visibility into the company's growth in the latter half of the year [1] - Analyst Vivek Arya upgraded Credo Technology's rating from Underperform to Buy and raised the price target from $27 to $80, citing a "solid beat and material raise" in the recent quarter [1] - The outlook for Credo Technology indicates the beginning of a multi-year adoption cycle for its Active Electrical Cable (AEC) product, which supports power-efficient AI clusters [2] Group 2 - The earnings call addressed market concerns for AEC, highlighting key customers such as Microsoft Corp, Amazon.com Inc, and Tesla Inc, along with growing momentum in adjacent areas like optical DSP and retimer [2] - Credo Technology is expected to deliver strong results in the latter half of fiscal 2025, driven by significant AI growth at Amazon Web Services, a key customer and investor [3] - At the time of publication, shares of Credo Technology had increased by 49.24% to $71.34 [3]

Key TakeawaysCredo Technology Group Holding beat second-quarter profit and sales estimates as the boom in artificial intelligence boosted demand for its connectivity solutions for data centers.The company also predicted better-than-expected current-quarter revenue.Shares of Credo traded at an all-time high Tuesday. Shares of Credo Technology Group Holding (CRDO) soared 40% to an all-time high Tuesday, a day after the provider of high-speed connectivity solutions for data centers posted better-than-expected ...

More than 15 years of professional investment experience in global equities across all sectors. My investment style is fundamental, bottom-up, long-term, and quality growth-oriented. I am seeking companies specializing in niche markets, with strong growth potential, a solid management team, a sound capital allocation policy, and, most importantly, reasonable valuation. I do not chase quarterly results, nor do I follow the herd mentality. I do not use short-term stock performance as the measure of a company' ...

Financial Data and Key Metrics Changes - Credo generated revenue of $72 million in Q2, representing a 21% sequential increase and a 64% year-over-year increase [8][28] - Non-GAAP gross margin for Q2 was 63.6%, showing a sequential increase of 73 basis points [32] - Non-GAAP operating income was $8.3 million in Q2, compared to $2.2 million in Q1, with a non-GAAP operating margin of 11.5% [32] - Non-GAAP net income for Q2 was $12.3 million, up from $7 million in Q1 [33] - Cash flow from operations was $10.3 million, with a decrease in cash and equivalents to $383 million [34] Business Line Data and Key Metrics Changes - The product business generated $69.1 million in revenue for Q2, up 21% sequentially and 88% year-over-year [28] - AEC product line achieved record revenue driven by strong demand from top customers [14] - Optical DSP revenues also reached record levels, fueled by 50-gig and 100-gig per lane solutions [19][20] - Line card retimer business generated record revenue driven by 400-gig and 800-gig applications [24] Market Data and Key Metrics Changes - The company anticipates continued growth in the AEC market, driven by AI deployments and increasing customer relationships [27] - The optical DSP market is expected to present significant long-term growth opportunities, particularly with the introduction of 200-gig per lane solutions [22][20] - The company expects Q3 revenue to be between $115 million and $125 million, indicating a strong market demand [35] Company Strategy and Development Direction - Credo is focused on delivering innovative Ethernet connectivity solutions and is well-positioned as a market leader in AECs [15][9] - The company aims to maintain a non-GAAP gross margin of 63% to 65% and an operating margin of 30% to 35% in the long term [31] - Credo is actively pursuing opportunities in the PCIe market, with plans to sample PCIe products to customers in calendar '25 [26] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the anticipated revenue inflection point in the second half of fiscal '25, with greater momentum than initially projected [27] - The company is seeing healthy design activity across several customers and expects continued growth over time [42] - Management noted that the competitive landscape for AECs remains stable, with a focus on delivering unique, differentiated products [46] Other Important Information - The company reported a significant increase in customer diversification, with seven end customers contributing more than 5% of revenue in Q2 [31] - The company is well-capitalized to continue investing in growth opportunities while maintaining a substantial cash buffer [34] Q&A Session Summary Question: What is driving the significant upside in Q3 guidance? - Management indicated that stronger project forecasts and increased visibility into customer programs contributed to the upside [41] Question: How is the competitive landscape for AECs evolving? - Management noted that while competition exists, the market is large enough to support multiple players, and Credo aims to be first in delivering unique products [46][47] Question: What are the growth drivers for fiscal '26? - Management expects AECs to be the main driver, with optical DSP and line card retimers also contributing to growth [58] Question: How does the company view inventory levels amid growth? - Management stated that there is a high consumption rate among customers, with no significant inventory build observed [80] Question: What percentage of AEC revenues is related to AI applications? - Management confirmed that the large majority of AEC shipments are based on AI applications [112] Question: How many customers are engaged in the Optical DSP side? - Management indicated that there is broader design activity at the optical module level, with increased activity from end customers for qualifications [118]