Credo Technology (US:CRDO)2025-12-01 23:00Financial Data and Key Metrics Changes - The company reported record revenue of $268 million for Q2 2026, representing a 20% sequential growth and a 272% increase year over year [5][17]. - Non-GAAP gross margin was 67.7%, with non-GAAP net income reaching approximately $128 million, marking the strongest quarterly results in the company's history [5][19]. - Non-GAAP operating income was $124.1 million, reflecting a significant increase due to over 20% sequential top-line growth [19]. - Cash flow from operations was $61.7 million, with ending cash and equivalents of $813.6 million, an increase of $333.9 million from Q1 [20]. Business Line Data and Key Metrics Changes - The Active Electrical Cables (AEC) product line continued to be the fastest-growing segment, with revenue driven by increasing customer diversity, including four hyperscalers contributing over 10% of total revenue [6][17]. - The Integrated Circuit (IC) business, including retimers and optical DSPs, also showed strong performance, with significant growth expected in fiscal 2026 [9]. Market Data and Key Metrics Changes - The company noted that the AECs have become the de facto standard for inter-rack connectivity, displacing traditional optical connections [6][7]. - The total addressable market (TAM) for AECs and IC solutions is projected to exceed $10 billion, more than tripling from 18 months ago [15][16]. Company Strategy and Development Direction - The company is focused on expanding its product offerings with three new growth pillars: Zero-flap Optics, Active LED Cables (ALCs), and OmniConnect gearboxes, each representing multi-billion dollar market opportunities [11][12][13]. - The strategy emphasizes delivering high-reliability and power-efficient solutions tailored to the needs of AI training and inference clusters [5][6]. Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued revenue growth through fiscal 2026 and beyond, driven by the ramp-up of new product categories and existing AEC and IC businesses [16]. - The company anticipates significant year-over-year growth from its top customers and expects to strengthen revenue diversification [21][22]. Other Important Information - The company is well-capitalized to invest in growth opportunities, with a substantial cash buffer and plans for continued innovation in connectivity solutions [20]. - The management highlighted the importance of reliability and power efficiency in their product offerings, which are critical for the evolving demands of AI infrastructure [30][31]. Q&A Session Summary Question: Expansion of the AEC market and ALC market potential - Management indicated that the ALC market could be double the AEC TAM, driven by both quantity and average selling price (ASP) increases [24]. Question: Customer revenue contributions - The largest customer contributed 42% of revenue, followed by others at 24%, 16%, and 11%, with expectations for continued growth and diversification [26][27]. Question: Focus on system-level products - The company is committed to expanding its portfolio at the system level, with a focus on delivering non-commodity solutions that exceed industry standards [28][29]. Question: AEC supply constraints - Management does not foresee concerns regarding AEC production capacity, citing a strong partnership with manufacturing providers [41][42]. Question: Transition to higher-speed connections - The company confirmed that it is in production with 25, 50, and 100 gig per lane solutions, with expectations for future transitions to 200 gig per lane [45][46]. Question: Licensing of AEC IP - The decision to license AEC IP reflects the company's established competitive position and the need to protect its innovations in a growing market [60].