Credo Technology (US:CRDO) The Motley Foolยท2025-03-05 12:45Core 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].