Key Takeaways CRDO shares have jumped 144% in three months, nearing its 52-week high on strong AI-driven product demand. AECs, optical DSPs and retimers continue to witness traction, driving $436.8M in revenues in fiscal 2025. CRDO projects over $800M in fiscal 2026 revenues amid tariff and market risks.Credo Technology Group Holding Ltd (CRDO) has been on a tear, with the stock appreciating 144.2% over the past three months. Riding on momentum fueled by AI proliferation and increasing demand for faster a ...

Credo Technology Group Holding Ltd (CRDO) is emerging as a powerhouse as the world races to build the next generation of AI data centers. Credo has seen explosive growth, with fiscal 2025 revenues hitting $436.8 million, a 126% year-over-year increase driven by strong demand for its innovative and energy-efficient high- performance connectivity solutions. Demand continues to accelerate, particularly among hyperscaler customers supporting advanced AI services. In the fourth quarter of fiscal 2025, revenues s ...

Core Insights - Credo Technology Group Holding Ltd (CRDO) stock has increased by 50.2% over the past month, outperforming the Electronic-Semiconductors sector's growth of 18.8% and the broader Computer and Technology sector's growth of 10.3% [1][8] - The company's fiscal Q4 revenues surged 179.7% year over year to $170 million, driven by strong product sales and AI demand [3][8] - CRDO expects fiscal 2026 revenues to exceed $800 million, indicating an 85% year-over-year growth [11][8] Financial Performance - CRDO's fiscal 2025 revenues rose 126% year over year to $436.8 million, with significant contributions from product sales [3][8] - The company anticipates first-quarter fiscal 2026 revenues between $185 million and $195 million, representing a 12% increase at the midpoint [11] - Non-GAAP gross margin is projected to be between 64-66%, with operating expenses estimated at $54 million to $56 million [11] Product and Market Dynamics - The Active Electrical Cables (AEC) product line has shown double-digit sequential growth, particularly in the data center market, due to its reliability compared to traditional optical solutions [4] - CRDO's Optical Digital Signal Processors (DSPs) are gaining momentum, with expectations for increased customer diversity and revenue growth [5][8] - The demand for PCIe and Ethernet retimers is robust, particularly in AI server applications, indicating a strong market position for CRDO [9][10] Competitive Positioning - CRDO's stock performance has significantly outpaced competitors like Broadcom, Marvell, and Cirrus Logic, which have seen gains of 22.3%, 14.2%, and 3.4%, respectively [15] - The company is trading at a forward 12-month Price/Sales ratio of 18.03, higher than the sector average of 8.21, indicating a premium valuation [16] Analyst Sentiment - Analysts have revised earnings estimates upwards in the past 60 days, reflecting increased confidence in CRDO's growth trajectory [12] - The company maintains a Zacks Rank 1 (Strong Buy), supported by strong business momentum and positive guidance [18]

Financial Data and Key Metrics Changes - The company is nearing the end of a six-year capital expenditure (CapEx) cycle, which began in 2021, with significant investments aimed at expanding capacity in the U.S. [7][12] - The company reported a 13% growth in the first half of Q2, with expectations for continued acceleration in revenue growth [34][40] - The revenue opportunity supported by new investments could exceed $40 billion by 2030, depending on market demand [25][26] Business Line Data and Key Metrics Changes - The company has increased its exposure to high-growth markets, particularly industrial and automotive, from 40% in 2013 to around 70% in 2022 [10][11] - The company is focusing on embedded business, with new fabs designed to support high-speed analog and embedded products [15][23] Market Data and Key Metrics Changes - The industrial sector is showing broad recovery across all geographies and channels, with significant growth expected [40][41] - Automotive markets are recovering, particularly in China, driven by increased electric vehicle (EV) adoption [42][66] Company Strategy and Development Direction - The company is strategically investing in U.S. manufacturing to ensure geopolitical reliability and to better support customers [12][12] - The focus is on transitioning from older fabs to more efficient 300mm wafer fabs, which will significantly reduce costs and improve margins [102][104] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the recovery of the semiconductor market, particularly in industrial and automotive sectors, and emphasized the importance of being prepared for demand surges [34][39] - The company is well-positioned to navigate geopolitical tensions and potential decoupling from China, viewing it as an opportunity rather than a risk [72][74] Other Important Information - The company is actively working on requalifying parts for different manufacturing locations to mitigate potential tariff impacts [91][92] - Management highlighted the importance of maintaining a diverse manufacturing footprint to support customer needs and market demands [12][66] Q&A Session Summary Question: What is the current state of the semiconductor market recovery? - Management noted a broad recovery in the industrial sector and a positive outlook for automotive markets, particularly in China, where EV adoption is increasing [39][42] Question: How is the company managing inventory levels? - The company is deliberately holding higher inventory levels to prepare for demand fluctuations and to avoid capacity constraints experienced in previous cycles [46][52] Question: What are the implications of tariffs and geopolitical tensions? - Management indicated that current tariffs have not significantly impacted operations, and the company is prepared for potential changes in the geopolitical landscape [62][64]

Financial Data and Key Metrics Changes - Revenue for Q4 2024 increased by 21% to $29.2 million compared to $24.2 million in Q4 2023 [26] - Licensing and related revenue rose by 33% to $15.7 million, accounting for 54% of total revenues [26] - Royalty revenue increased by 9% to $13.5 million, representing 46% of total revenues [27] - GAAP operating income for Q4 was $100,000, marking the first positive quarter in 2024, up from a loss of $2.8 million in the same quarter last year [27] - Non-GAAP net income for Q4 increased by 1210% to $2.7 million, with diluted earnings per share rising to $0.11 [29] Business Line Data and Key Metrics Changes - The company achieved its strongest royalty quarter, with shipments of 623 million units, a 38% increase from Q4 2023 [29] - Wi-Fi shipments grew by 110% year over year, while Bluetooth shipments increased by 41% [30] - For the full year 2024, total unit shipments reached 2 billion, a 22% increase year over year [31] - Annual mobile modem shipments rose by 19% to 340 million units, reflecting strong demand [31] Market Data and Key Metrics Changes - Consumer IoT accounted for 53% of annual royalties, followed by mobile at 32% and industrial IoT at 16% [17] - The company powered a record 1.1 billion Bluetooth devices and 179 million Wi-Fi devices in 2024 [17] - Wi-Fi royalties increased by 175% year over year, driven by higher royalty rates for Wi-Fi 6 products [31] Company Strategy and Development Direction - The company aims to maintain leadership in connectivity and capitalize on the shift from AI inference processing in the cloud to the edge [23] - Strategic partnerships with key customers are expected to drive long-term growth and profitability [10] - The focus on delivering integrated high-value offerings through multi-connect protocols and AI accelerators is central to the company's strategy [24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the ongoing AI super cycle and its impact on demand for edge devices [8] - The company anticipates continued growth in Wi-Fi, Bluetooth, and cellular IoT shipments, with a strong second half of 2025 expected [34] - The shift towards lower power consumption and reduced latency in AI applications is seen as a pivotal growth driver [23] Other Important Information - The company signed 43 licensing agreements in 2024, with a diverse customer base across multiple industries [15] - The company achieved an all-time high in royalty shipments, marking a significant milestone in its operational performance [13] Q&A Session Summary Question: Opportunities for MPU integration in MCUs - Management confirmed that there is a growing trend for MCU players to integrate AI capabilities alongside wireless technology, indicating potential for future collaborations [40][42] Question: Details on U.S. Mobile OEM licensing agreement - Management stated that they are excited about the potential of the agreement but could not provide specific details on royalty revenues at this time [43] Question: Impact of AI developments on edge opportunities - Management noted that innovations in AI models, such as DeepSeq, are expected to enhance the company's edge capabilities and drive demand for their technologies [48] Question: Wi-Fi growth expectations - Management indicated that they expect significant growth in Wi-Fi as customers transition to Wi-Fi 6, with strong demand across various IoT markets [51][53] Question: Revenue growth expectations for cell phone modems vs. Wi-Fi - Management acknowledged the uncertainty in predicting which segment will grow faster but expressed optimism for growth across all product lines [62][67] Question: Customization in new licensing deals - Management clarified that the new licensing deals do not involve customization and are based on off-the-shelf technologies [74]