Key Takeaways Credo Technology's Q1 EPS hit 52 cents, up from 4 cents last year, beating estimates by 48.6%.Revenue climbed 273.6% to $223.1M, driven by a 278.6% jump in product business sales.Top three customers each contributed over 10% of revenue, with broader diversification expected.Credo Technology Group Holding Ltd (CRDO) reported first-quarter fiscal 2026 adjusted earnings per share (EPS) of 52 cents, which surpassed the Zacks Consensus Estimate by 48.6%. The bottom line compared favorably with 4 ce ...

Financial Data and Key Metrics Changes - The company reported revenue of $223 million, an increase of 31% sequentially and 274% year over year [5][19] - Non-GAAP gross margin was 67.6%, with non-GAAP net income reaching nearly $100 million [5][19] - Non-GAAP operating income was $96.2 million, up from $62.5 million in the previous quarter, reflecting strong operational leverage [21] - Non-GAAP net margin was 44.1%, indicating significant leverage in the business [21][22] - Cash flow from operations was $54.2 million, with a slight decrease due to increases in working capital [22][23] Business Line Data and Key Metrics Changes - The product business generated $217.1 million in revenue, up 31% sequentially and 279% year over year [19] - The AEC product line continued to grow, achieving record revenue levels [19][20] - The company expects continued diversification in its customer base, with three to four customers projected to exceed 10% of revenue in upcoming quarters [20][25] Market Data and Key Metrics Changes - The demand for high-speed connectivity solutions is driven by investments in AI infrastructure by hyperscalers and data center operators [6][17] - The company anticipates significant year-over-year growth based on customer forecasts, with a focus on expanding its market presence [9][10] - The optical market is expected to double revenue in fiscal 2026, with strong momentum in optical DSP solutions [12][13] Company Strategy and Development Direction - The company is focused on delivering innovative connectivity solutions that enhance reliability, energy efficiency, and performance [8][17] - A strategic emphasis is placed on diversifying product offerings and customer engagements, particularly in the AEC and optical markets [14][17] - The company aims to leverage its unique position in the industry to capitalize on growth opportunities in AI-driven infrastructure [17][18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth potential driven by evolving network architectures and the demand for innovative connectivity solutions [17][18] - The company is well-capitalized to invest in growth opportunities while maintaining a substantial cash buffer [23] - Management highlighted the importance of reliability and power efficiency as key drivers for customer adoption of AECs [11][70] Other Important Information - The company expects revenue for Q2 to be between $230 million and $240 million, with a non-GAAP gross margin range of 64% to 66% [24][25] - The company is actively pursuing additional system-level opportunities in both copper and optical connectivity solutions [14][17] Q&A Session Summary Question: Adoption of AECs by new hyperscalers - Management confirmed that recent ramps have been at 100 gig per lane, with multiple programs in flight across hyperscalers [29][30] Question: Competitive advantages of AECs - Management believes AECs offer significant advantages for both inter rack and rack to rack applications, particularly as the market transitions to higher speeds [32][34] Question: Market size and cannibalization of traditional solutions - Management indicated that the AEC market is still in early stages and is expanding, with potential to replace both copper and optical solutions [38][42] Question: Future growth opportunities - Management sees multiple growth pillars driven by AI and connectivity bottlenecks, with significant investments in R&D for optical projects [46][50] Question: Customer concentration and growth drivers - Management expects the largest customer to remain a significant growth driver, with diversification across additional hyperscalers [73][74] Question: Impact of optical supply constraints on AEC business - Management believes that supply constraints in optical will not affect the AEC business, as customers will choose AECs based on their reliability and performance [78][82] Question: Upcoming customer engagements - Management is optimistic about the potential for the fifth hyperscaler to become a 10% customer, with ongoing engagements with major GPU manufacturers [84][86]

Financial Data and Key Metrics Changes - The company reported Q1 revenue of $223 million, representing a 31% sequential increase and a 274% year-over-year increase [4][18] - Non-GAAP gross margin was 67.6%, with non-GAAP net income reaching nearly $100 million [4][20] - Non-GAAP operating income was $96.2 million, up from $62.5 million in the previous quarter, reflecting strong operational leverage [20] - Cash flow from operations was $54.2 million, with a slight decrease attributed to increases in working capital [21] Business Line Data and Key Metrics Changes - The product business generated $217.1 million in revenue, up 31% sequentially and 279% year-over-year [18] - The AEC product line achieved record revenue levels, continuing robust growth driven by a diverse customer base [18][19] - The optical business is on track to double revenue in fiscal 2026, with strong momentum in DSP solutions [11][12] Market Data and Key Metrics Changes - The company noted significant demand from hyperscalers and data center operators, particularly in AI-driven infrastructure [5][16] - The adoption of AECs is expanding, with increasing interest in both inter-rack and rack-to-rack solutions [10][71] - The market for AECs is expected to grow significantly, with the potential for copper to replace optical connections in certain applications [42][71] Company Strategy and Development Direction - The company is focused on innovation in high-speed connectivity solutions, leveraging strategic partnerships with hyperscalers [5][6] - A three-tiered innovation framework is being employed to enhance product offerings and customer engagement [5][11] - The company is prioritizing optical solutions as a key part of its product roadmap, anticipating a growing total addressable market (TAM) [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about continued growth opportunities driven by evolving network architectures and AI infrastructure demands [16][17] - The company expects to see diversification in customer base and revenue sources, with additional hyperscalers ramping up [19][23] - Future growth is anticipated to be supported by advancements in both AEC and optical technologies [46][49] Other Important Information - The company ended the quarter with cash and equivalents of $479.6 million, providing a strong capital position for future investments [21] - Inventory levels increased to $116.7 million, reflecting ongoing demand and production scaling [22] Q&A Session Summary Question: Adoption of AECs by new hyperscalers - Management confirmed that recent ramps have been at 100 gig per lane, with multiple programs in flight across customers [26][27] Question: Competitive advantages of AECs - Management believes AECs offer significant advantages for both inter-rack and rack-to-rack applications, particularly as the market shifts to higher speeds [29][30] Question: Market size and cannibalization of traditional solutions - Management indicated that the AEC market is still in early stages, with significant growth potential as it replaces passive copper cables [36][40] Question: Future opportunities beyond AECs - Management highlighted ongoing investments in optical projects and the potential for system-level opportunities in various protocols [46][49] Question: Customer concentration and growth drivers - Management noted that the largest customer will continue to be a significant growth driver, with expectations for diversification across the customer base [72][74] Question: Impact of optical supply constraints on AEC business - Management stated that supply constraints in optical will not affect the AEC business, as customers will choose AECs based on their reliability and performance [78][80] Question: Progress with the fourth hyperscaler - Management confirmed that the fourth hyperscaler is ramping quickly, with expectations for it to become a 10% customer by the end of the fiscal year [82][84]