Key Takeaways Credo posts Q2 gross margin of 67.7% and revenues up 20% sequentially and 272.1% year over year.Strong AEC and IC demand plus disciplined expenses fueled sharp operating and net-margin gains.Fiscal 2026 guidance points to mid-single-digit sequential growth and roughly 170% annual revenue growth.Credo Technology Group Holding Ltd (CRDO) delivered another record-setting quarter in the second quarter of fiscal 2026, showcasing not only powerful top-line momentum but also notable margin expansion. ...

Core Insights - Credo Technology Group Holding Ltd (CRDO) reported a strong second quarter for fiscal 2026, leading to a 10.6% stock price increase post-earnings, reaching a new 52-week high of $213.80 [1][2] Financial Performance - CRDO's revenues surged 20% sequentially and 272% year-over-year to $268 million, significantly exceeding management's guidance of $230 million to $240 million [6][8] - Non-GAAP gross profit reached $181.4 million, up from $45.8 million year-over-year, with a gross margin expansion of 410 basis points to 67.7% [7] - Non-GAAP operating income was $124.1 million compared to $8.3 million in the prior-year period, while operating expenses increased 52.4% year-over-year to $57.3 million [7] - Cash flow from operating activities was $61.7 million, with free cash flow totaling $38.5 million, and cash and cash equivalents increased to $813.6 million from $479.6 million [9] Market Position and Growth Drivers - The company has expanded its hyperscaler base, with five hyperscalers contributing to revenue, enhancing its long-term total addressable market to over $10 billion [2][8][12] - Credo's leadership in the Active Electrical Cables (AEC) segment is a key growth catalyst, with AECs becoming the standard for inter-rack connectivity [11] - The introduction of three new multi-billion-dollar product pillars—Zero-Flap optics, Active LED cables, and OmniConnect gearboxes—broadens market opportunities [18][20] Future Outlook - CRDO anticipates revenues between $335 million and $345 million for the fiscal third quarter, implying a 27% sequential growth at the midpoint and over 170% year-over-year growth for fiscal 2026 [16] - The company expects significant growth in its IC portfolio, particularly in optical DSP deployments, with long-term upside tied to 200-gig per lane architectures [14][15] Competitive Landscape - CRDO's current valuation, with a forward Price/Sales ratio of 28.97, is higher than the Electronic-Semiconductors sector average of 7.92, indicating that much of the anticipated growth is already priced in [24][26] - The competitive environment includes established players like Broadcom and Marvell Technology, which may impact CRDO's growth trajectory [23]

Core Insights - Credo Technology Group Holding Ltd (CRDO) is positioned as a strong player in high-speed connectivity, driven by the increasing demand for data infrastructure and AI workloads [1] Financial Performance - For Q4 fiscal 2025, CRDO reported a non-GAAP operating margin of 36.8%, an increase of 538 basis points from the previous quarter [2][9] - The non-GAAP net margin reached 38.4%, exceeding the long-term target range of 28% to 33% [2] - Fiscal 2025 saw an operating margin expansion of 2,500 basis points, attributed to robust revenue growth and effective cost control [2] Revenue Growth - Revenues nearly tripled from Q1 to Q4 of fiscal 2025, driven by a shift towards efficient connectivity solutions [3] - Significant growth was noted in Active Electrical Cables (AECs), optical products, and retimers, with a notable win in the optical segment for an 800G transceiver [3] Future Outlook - For fiscal 2026, CRDO anticipates revenues to exceed $800 million, indicating over 85% year-over-year growth [4] - Non-GAAP operating expenses are expected to rise at less than half the rate of revenues, potentially driving the non-GAAP net margin to nearly 40% [4] Q1 Fiscal 2026 Projections - For Q1 fiscal 2026, CRDO expects revenues between $185 million and $195 million, suggesting a 12% sequential increase [5] - Non-GAAP gross margin is projected to be between 64% and 66%, with operating expenses forecasted between $54 million and $56 million [5] Competitive Landscape - CRDO faces competition from semiconductor giants like Broadcom Inc. and Marvell Technology, which may impact its growth trajectory [6] Market Performance - CRDO shares have increased by 197.8% over the past year, significantly outperforming the Electronics-Semiconductors industry's growth of 18.5% [11] - The company is currently trading at a price/book ratio of 24.54, higher than the sector's average of 9.91 [12] Earnings Estimates - The Zacks Consensus Estimate for CRDO's earnings for fiscal 2026 has been revised upward in the past 60 days [13]