Credo Expects Revenues to Top $800M in FY26: Is the Growth Sustainable?

Core Insights - Credo Technology Group Holding Ltd (CRDO) has set a revenue guidance of over $800 million for fiscal 2026, a significant increase from $437 million in fiscal 2025, reflecting a 126% year-over-year growth driven by data growth and AI demand [1][10] Group 1: Product Performance - The Active Electrical Cables (AEC) product line has shown double-digit sequential growth in fiscal Q4, primarily due to its adoption in the data center market, with ZeroFlap AECs offering over 100 times improved reliability compared to laser-based optical solutions [2] - Credo's integrated approach, owning the entire stack of SerDes IP, Retimer ICs, and system-level design, allows for faster innovation cycles and cost efficiency, positioning AECs as a growth engine [3] - The optical business has met revenue targets for fiscal 2025, with expectations for increased customer diversity across various applications to further accelerate revenue growth [4] Group 2: Market Demand and Competition - The demand for PCIe retimers and Ethernet retimers is strong, particularly for AI server scale-out networks, with robust performance reported in fiscal Q4 and fiscal 2025, driven by 50 gig and 100 gig per lane Ethernet solutions [5] - However, increasing competition from semiconductor giants like Broadcom and Marvell Technology may pose challenges to CRDO's growth trajectory [6] Group 3: Industry Comparisons - Broadcom expects third-quarter fiscal 2025 revenues of $15.8 billion, a 21% year-over-year increase, with AI semiconductor revenues projected to grow 60% year-over-year to $5.1 billion [7] - Marvell Technology anticipates revenues of $2 billion for the second quarter of fiscal 2026, indicating a 57% year-over-year growth, driven by demand for AI-driven custom silicon [8] Group 4: Financial Metrics - CRDO shares have gained 6.5% year-to-date, slightly underperforming the Electronics-Semiconductors industry's growth of 6.8% [11] - The forward 12-month price/sales ratio for CRDO is 15.16, significantly higher than the sector's multiple of 8.21 [13] - The Zacks Consensus Estimate for CRDO earnings for fiscal 2026 has seen a notable upward revision over the past 60 days [14]