Core Viewpoint - Credo Technology Group Holding Ltd (CRDO) is expected to report strong fiscal Q3 results, with a projected earnings per share (EPS) increase of 284% year-over-year and revenues between $404 million and $408 million, significantly above previous guidance [1][2][8] Financial Performance - The Zacks Consensus Estimate for the upcoming quarter's EPS is 96 cents, reflecting an 284% year-over-year increase, with total revenue estimates at $389.4 million, indicating a 188.5% rise [1] - CRDO has consistently beaten earnings estimates in the past four quarters, with an average surprise of 38.46% [2][3] Revenue Drivers - The strong performance is attributed to high demand for active electrical cables (AEC) and optical products, along with increased engagement with hyperscalers [6][8] - Four hyperscalers contributed over 10% of total revenues, with a fifth hyperscaler beginning to generate initial revenues, indicating a significant expansion in customer base [6][7] Product Growth - AECs are the fastest-growing product line for CRDO, transitioning to higher capacity standards, which enhances their market position [8][9] - The company’s integrated circuit (IC) business, including retimers and optical DSPs, is gaining traction, with new products like the Bluebird optical DSP receiving positive feedback [10][11] Profitability and Margins - Non-GAAP gross margin expanded by 410 basis points to 67.7%, exceeding guidance, with expectations for Q3 margins between 64% and 66% [11][12] - Operating income for the last reported quarter was $124.1 million, a significant increase from $8.3 million in the prior year [11] Competitive Landscape - CRDO faces competition from major semiconductor companies like Broadcom and Marvell Technology, as well as newer entrants like Astera Labs [12] - The company’s reliance on a few key customers poses concentration risks, which could impact revenue stability [13] Stock Performance and Valuation - CRDO's shares have declined by 13.7% over the past six months, underperforming the broader market and its industry peers [14] - The company is trading at a forward P/E ratio of 27.81, which is lower than the industry average of 32.86, suggesting a potential valuation discount [17][18] Investment Outlook - The preliminary revenue update indicates strong demand momentum driven by hyperscalers, positioning CRDO favorably for future growth [19] - The combination of margin expansion, operating leverage, and attractive valuation presents a compelling investment opportunity ahead of the earnings report [19]