Investment Rating - The report maintains a "Buy" rating for the company, indicating an expected price increase of over 15% in the next 6-12 months [3]. Core Insights - The company reported a significant revenue increase of 154.4% year-over-year and 87.4% quarter-over-quarter for FY25Q3, achieving $135 million in revenue [1]. - The GAAP net profit for FY25Q3 was $29.36 million, reflecting a year-over-year increase of 6760% and a return to profitability [1]. - The company expects FY25Q4 revenue to be between $155 million and $165 million, with a year-over-year growth of 163% [1]. Summary by Sections Performance Review - For FY25Q3, the company achieved a GAAP gross margin of 63.6% and a Non-GAAP gross margin of 63.8% [1]. - Non-GAAP net profit for FY25Q3 was $45.38 million, showing a year-over-year increase of 618% [1]. Operational Analysis - Revenue growth in FY25Q3 was primarily driven by increased demand from major clients, with the largest client accounting for 86% of revenue [2]. - The company anticipates that 3-4 clients will contribute over 10% of revenue in FY25Q4 [2]. - The company is actively expanding its PCIe-related product offerings and plans to showcase PCIe AEC products at the upcoming GTC event [2]. Profit Forecast, Valuation, and Rating - The company is positioned as a leading player in the AEC industry, with expectations of benefiting from the growth in AI Ethernet networking and ASIC demand [3]. - Revenue projections for FY25, FY26, and FY27 are $423.46 million, $662.22 million, and $798.71 million, respectively, with year-over-year growth rates of 119.4%, 56.4%, and 20.6% [6]. - GAAP net profit forecasts for the same periods are $35.30 million, $95.45 million, and $174.25 million [6].

Core Viewpoint - Credo Technology Group (CRDO) has experienced significant stock underperformance in 2023, with a 30.9% decline year-to-date, compared to the broader Zacks Computer & Technology sector's decrease of 5.8% and the Zacks Electronics - Semiconductors industry's decline of 13.5% [1][2]. Financial Performance - In the third quarter of fiscal 2025, Credo Technology reported earnings of 25 cents per share, exceeding the Zacks Consensus Estimate by 38.89%, compared to earnings of 4 cents per share a year ago [3]. - The company achieved revenues of $135 million, representing an 87% sequential increase and a 154% year-over-year increase, surpassing the Zacks Consensus Estimate by 12.50% [6]. Product and Market Dynamics - The growth in revenues was primarily driven by a significant increase in production from its largest hyperscale customer, reflecting the rising demand for AI-powered connectivity solutions [6]. - Credo's Active Electrical Cables (AEC) product line experienced triple-digit sequential growth, driven by increased adoption in the data center market, as AECs are more reliable than traditional laser-based optical solutions [7][8]. - The optical business, particularly Optical DSPs, also saw strong growth, with increased market demand for 50G and 100G designs for Active Optical Cable and transceiver applications [9]. Competitive Positioning - The demand for Credo's PCIe retimers and Ethernet retimers is growing, especially in AI server scale-out networks, highlighting the importance of high-performance solutions in this rapidly expanding market [11]. - Credo's PCIe 5.0 specification-capable "Toucan" retimer has successfully passed compliance testing, reinforcing its market reputation and positioning for future revenue growth, with demand for PCIe retimers expected to exceed $1 billion by 2027 [12][13]. Future Guidance - For the fiscal fourth quarter of 2025, Credo expects revenues between $155 million and $165 million, indicating a potential growth of 122.52% year-over-year, while the consensus estimate for earnings is 22 cents per share, suggesting a 214.29% increase year-over-year [14][15]. Valuation Concerns - Credo Technology's stock is currently trading at a forward 12-month Price/Sales ratio of 16.46, significantly higher than the sector average of 5.97, indicating a stretched valuation [18].

Core Viewpoint - The rapid expansion of AI-enabled data centers is significantly increasing demand for Credo Technology's high-speed connectivity solutions, despite a recent decline in stock price following strong earnings results [1][2]. Financial Performance - Credo Technology reported a revenue of $135.0 million for Q3 2025, a 154% increase year-over-year from $53.1 million in Q3 2024 [4]. - GAAP operating income flipped to a positive $26.2 million from a loss of $5.9 million, while adjusted operating income surged 667% to $42.4 million [4]. - GAAP net income reached $29.4 million, a remarkable increase of 7,250% compared to $0.4 million in the previous year [4]. - Adjusted net income also saw a significant rise of 621% to $45.4 million [4]. - The company ended the quarter with $379.2 million in cash and short-term investments, with no long-term debt [6]. Segment Performance - Product sales accounted for $129.4 million, reflecting a 224% increase year-over-year, while product engineering services declined by 77% to $2.7 million [7]. - Revenue from intellectual property (IP) licenses increased by 137% to $3.0 million [7]. Market Guidance - For Q4 2025, management provided revenue guidance of $155 million to $165 million, indicating a year-over-year growth of 155% to 171%, surpassing Wall Street's estimate of $136.3 million [10]. - The expected adjusted gross margin for Q4 is projected to be between 63% and 65%, consistent with Q3's adjusted gross margin of 63.8% but lower than the previous year's 66.1% [11]. Customer Concentration - The company experienced a high concentration risk, with 86% of revenue generated from a single customer, identified as Microsoft [13]. - The CFO indicated that this concentration was an outlier and expected to decrease in the coming quarters, with a forecast of three to four customers contributing over 10% of revenue [14].

Financial Data and Key Metrics Changes - Credo reported revenue of $135 million for Q3 2025, representing an 87% sequential increase and a 154% year-over-year increase [8][32] - Non-GAAP gross margin was 63.8% for Q3, with product gross margin (excluding product engineering services) at 62.4%, up over 200 basis points sequentially and over 900 basis points year-over-year [32][66] Business Line Data and Key Metrics Changes - The AEC product line achieved strong triple-digit sequential growth, driven by the largest hyperscale customer [16][33] - The product business generated $132 million in revenue for Q3, up 91% sequentially and 155% year-over-year, with AECs becoming the de facto standard for intra-rack connections [32][36] - The optical DSP business is on track to meet growth objectives, with revenue driven by 50-gig and 100-gig designs for AOC and transceiver applications [20][22] Market Data and Key Metrics Changes - The total addressable market (TAM) for PCIe retimers is expected to exceed $1 billion by 2027, with Credo well-positioned to capture market share [28][28] - The demand for faster, more reliable, and energy-efficient connectivity solutions is rapidly expanding, particularly in AI workloads [10][29] Company Strategy and Development Direction - Credo's multi-tiered innovation strategy focuses on SerDes technology, integrated circuit design, and system-level solutions, which are critical for addressing bandwidth challenges [11][12][14] - The company plans to expand its solutions to the PCIe protocol, addressing a larger connectivity opportunity with AI scale-out and scale-up networks [15][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the expanding market opportunity for high-speed connectivity driven by AI investments [29][30] - The company anticipates continued revenue growth based on customer forecasts, new qualifications, and design engagements [19][28] Other Important Information - The largest customer accounted for 86% of revenue in Q3, with expectations of diversifying the customer base in the coming quarters [35][41] - Credo has achieved volume production with three hyperscalers and is in qualification with two additional hyperscalers [18][44] Q&A Session Summary Question: What is the size of the largest customer and the adoption of AEC? - The largest customer accounted for 86% of revenue, and AEC opportunities are expanding significantly [39][40] Question: How does the company view the shift towards inference in AI? - The inference market presents a larger opportunity for AEC due to increased deployments [45][46] Question: Are there plans to move into the switching ecosystem? - Moving into PCIe switching is a natural progression, but the focus remains on retimers and AECs for now [48][51] Question: What is driving the uptick in gross margins? - The increase in gross margins is primarily driven by scale and the roll-off of contra revenue associated with Amazon [64][66] Question: How does the company view competition in the AEC space? - Credo focuses on being the best partner to customers, emphasizing innovation and reliability [125][127] Question: What is the outlook for new customers and their ramp-up? - New customers are expected to ramp up in fiscal '26, with multiple projects anticipated [96][135]

Credo Technology Group Holding Ltd (NASDAQ:CRDO) Q3 2025 Earnings Conference Call March 4, 2025 5:00 PM ET Company Participants Dan O'Neil - VP, Corporate Development and IR Bill Brennan - CEO Dan Fleming - CFO Conference Call Participants Vivek Arya - Bank of America Securities Tom O'Malley - Barclays Karl Ackerman - BNP Paribas Quinn Bolton - Needham & Company Tore Svanberg - Stifel Vijay Rakesh - Mizuho Sean O'Loughlin - TD Cowen Christopher Rolland - Susquehanna Richard Shannon - Craig-Hallum Suji Desil ...

Group 1 - Credo Technology Group Holding Ltd. reported quarterly earnings of $0.25 per share, exceeding the Zacks Consensus Estimate of $0.18 per share, and showing a significant increase from $0.04 per share a year ago, representing an earnings surprise of 38.89% [1] - The company achieved revenues of $135 million for the quarter ended January 2025, surpassing the Zacks Consensus Estimate by 12.50%, and compared to year-ago revenues of $53.06 million [2] - Over the last four quarters, the company has surpassed consensus EPS estimates three times and topped consensus revenue estimates four times [2] Group 2 - The stock has underperformed, losing about 25% since the beginning of the year, while the S&P 500 has declined by only 0.5% [3] - The current consensus EPS estimate for the coming quarter is $0.22 on revenues of $135.25 million, and for the current fiscal year, it is $0.50 on revenues of $386.95 million [7] - The Electronics - Semiconductors industry, to which Credo Technology Group belongs, is currently in the top 36% of Zacks industries, indicating a favorable outlook compared to the bottom 50% [8]

Financial Performance - Credo reported revenue of $135.0 million for Q3 FY2025, representing an 87% increase sequentially and a 154% increase year over year[3]. - GAAP net income for the quarter was $29.4 million, with a GAAP diluted net income per share of $0.16[5]. - Credo's total revenue for the nine months ended February 1, 2025, was $266.8 million, compared to $132.2 million for the same period last year[17]. - GAAP net income for the three months ended February 1, 2025, was $29.360 million, a significant recovery from a net loss of $4.225 million in the previous quarter[22]. - Non-GAAP net income for the same period was $45.378 million, compared to $12.255 million in the previous quarter, showing an increase of 270.5%[22]. Revenue Projections - The company expects Q4 FY2025 revenue to be between $155.0 million and $165.0 million[6]. - The company anticipates continued growth across its product lines and customer base due to increasing market demand for connectivity solutions[3]. Margins and Profitability - GAAP gross margin was 63.6%, while non-GAAP gross margin was 63.8% for the same period[5]. - Projected GAAP gross margin for Q4 FY2025 is expected to range from 62.7% to 64.7%[6]. - GAAP gross profit for the three months ended February 1, 2025, was $85.926 million, up from $45.512 million in the previous quarter, indicating an increase of 88.8%[22]. - Non-GAAP gross profit for the same period was $86.152 million, compared to $45.843 million, reflecting a growth of 88.0%[22]. - GAAP operating income margin improved to 19.4% from a loss margin of 11.7% in the previous quarter[22]. Expenses - Research and development expenses for Q3 FY2025 were $36.3 million, contributing to total operating expenses of $59.7 million[17]. - Non-GAAP operating expenses for the three months ended February 1, 2025, were $43.768 million, compared to $37.587 million in the previous quarter, reflecting a rise of 16.0%[22]. Balance Sheet - Ending cash and short-term investment balance was $379.2 million as of February 1, 2025[5]. - Total assets increased to $719.916 million from $601.932 million, representing a growth of 19.6% year-over-year[20]. - Total current liabilities increased to $80.733 million from $44.620 million, a rise of 80.9% year-over-year[20]. - Total shareholders' equity rose to $618.226 million from $540.198 million, marking an increase of 14.4%[20]. Product Performance - Credo's product line, particularly the AEC products, was a significant driver of revenue growth during the quarter[3].

Group 1 - The article discusses the initiation of coverage on Credo Technology Group Holding Ltd (NASDAQ: CRDO) with a bullish rating, suggesting that the stock's valuation, despite high multiples, is not as expensive as perceived [2] - The investment group Beyond the Wall Investing offers features such as a fundamentals-based portfolio, weekly analysis from institutional investors, and alerts for short-term trade ideas based on technical signals [2] - The analyst has a beneficial long position in CRDO shares, indicating confidence in the stock's potential [2]

Core Viewpoint - Credo Technology Group (CRDO) is expected to report strong fiscal third-quarter results driven by AI demand and customer adoption of high-speed connectivity solutions, with projected revenues between $115 million and $125 million, indicating a 67% sequential growth at the mid-point and a 126.16% year-over-year increase [2][4]. Revenue and Earnings Estimates - The Zacks Consensus Estimate for fiscal third-quarter revenues is $120 million, reflecting significant growth compared to the previous year [2]. - The consensus for fiscal third-quarter earnings is set at 18 cents per share, representing a 350% year-over-year increase [3]. Performance Drivers - CRDO's performance is anticipated to benefit from strong AI-driven demand and increased customer adoption of its high-speed connectivity solutions [4]. - The company has experienced substantial momentum in product shipments, particularly in Active Electrical Cables (AECs), optical Digital Signal Processors, and line card retimers, driven by AI demand for reliable and power-efficient connectivity [5][6]. Customer Base and Market Position - CRDO is diversifying its customer base, with seven end customers each contributing over 5% of revenues, indicating growing customer traction [7]. - Despite strong fundamentals, CRDO shares have underperformed, declining 21.7% year-to-date compared to the broader Zacks Computer & Technology sector's decrease of 4.2% [8][11]. Valuation Metrics - CRDO is trading at a forward Price/Sales ratio of 16.01, which is significantly higher than the sector average of 6.14, suggesting a stretched valuation [12]. Product Portfolio and Market Demand - The company's robust portfolio addresses the rising demand for high-density interconnectivity in AI and machine learning infrastructure, with Ethernet solutions supporting high speeds and low latency [15]. - CRDO's AECs and DSP solutions are in high demand, with products supporting speeds from 100 gigabits per second to 1.6 terabits per second, catering to AI back-end networks [16][18]. Challenges and Competitive Landscape - The rapid evolution of AI cluster architectures and the transition toward PCIe Gen 6 present competitive and developmental challenges for CRDO, potentially impacting growth [20][21]. - Despite innovative solutions, increasing market competition and macroeconomic uncertainties pose risks to the company's growth trajectory [22].

Core Insights - The article highlights Steven Cress's role as VP of Quantitative Strategy and Market Data at Seeking Alpha, emphasizing his contributions to the platform's quantitative stock rating system and analytical tools designed to assist investors [1][2] - Cress's focus is on removing emotional biases from investment decisions through a data-driven approach, utilizing sophisticated algorithms to streamline investment research [2][4] - His background includes founding CressCap Investment Research, which was acquired by Seeking Alpha in 2018, and establishing a quant hedge fund, showcasing his extensive experience in equity research and quantitative strategies [3][4] Company Overview - Seeking Alpha is positioned as a platform that offers a quantitative stock rating system aimed at providing insights and saving time for investors [1] - The platform's tools are designed to simplify complex investment research, making it accessible for users [2] Industry Context - The investment research industry is increasingly leaning towards data-driven methodologies, with a focus on minimizing emotional biases in decision-making [2][4] - The trend towards quantitative strategies in investment management is evident through the establishment of systematic stock recommendation tools like Alpha Picks [1][3]