Key Takeaways
- Credo Technology posted Q3 revenue of $407 million, representing a 52% quarter-over-quarter increase and over 200% year-over-year growth.
- Revenue concentration remains high, with three hyperscale clients contributing 88% of total sales at 39%, 32%, and 17% shares.
- Non-GAAP gross margin expanded to 68.6%, while operating cash flow surged to a company record of $166.2 million.
- Management issued Q4 revenue guidance between $425 million and $435 million, with fiscal 2027 projected to exceed 50% annual growth.
- The company completed the Comera acquisition and accelerated its ZeroFlap optics launch to Q1 of fiscal 2027.
Credo Technology Group delivered an outstanding fiscal Q3 2026 performance, achieving revenue of $407 million—a 52% sequential jump from the previous quarter and more than triple the year-ago figure.
Chief Executive William Brennan characterized the period as representing the “most accelerated growth phase” the company has experienced. After doubling revenue between fiscal 2024 and 2025, Credo now anticipates tripling its performance again in fiscal 2026.
The quarterly results landed at the upper boundary of Credo’s updated guidance range, as confirmed by Chief Financial Officer Daniel Fleming.
Credo Technology Group Holding Ltd, CRDO
Revenue composition showed significant concentration among top clients. The company’s largest customer represented 39% of quarterly revenue, followed by the second-largest at 32%, and the third at 17%. Leadership indicated this customer concentration pattern should persist, with three to four accounts expected to exceed the 10% revenue threshold in upcoming quarters.
Each of Credo’s three primary customers demonstrated sequential growth during Q3, which Fleming identified as the primary driver behind the quarter’s outperformance.
Profitability and Financial Position
Non-GAAP gross margin reached 68.6%, surpassing the high end of company guidance and expanding 92 basis points from the prior quarter. Non-GAAP operating margin climbed to 49.6%, while net margin touched 51.3%.
Non-GAAP operating expenses totaled $77.4 million, reflecting a 35% sequential increase primarily attributable to expanded research and development initiatives.
Operating cash flow achieved a company record of $166.2 million. After deducting $26.5 million in capital expenditures—predominantly for production mask sets—free cash flow reached $139.7 million.
Credo concluded the quarter holding $1.3 billion in cash, an increase of $487.9 million from Q2. The growth reflects proceeds from an at-the-market equity offering executed between October and December, combined with strong free cash flow generation.
Inventory balances ended at $208 million, up $57.8 million from the previous quarter.
Product Development Timeline Updates
Brennan provided updates across multiple product initiatives within Credo’s development pipeline.
ZeroFlap optics manufacturing has commenced with neocloud client TensorWave. The broader commercial rollout has been accelerated to fiscal Q1 2027—earlier than the previously anticipated second-half fiscal 2027 timeline—with over four customers already committed.
Active LED Cables (ALCs), leveraging MicroLED technology from the HyperLUM acquisition, are engineered for distances up to 30 meters. Customer sampling is scheduled for fiscal 2027, with volume production targeted for fiscal 2028.
OmniConnect, a gearbox solution for XPU connectivity applications, is also tracking toward a fiscal 2028 production ramp. Customer Positron intends to incorporate the technology into an inference XPU architecture.
Regarding Active Electrical Cables (AECs), Brennan noted adoption remains in nascent stages but is expanding, with a fifth hyperscaler now included in Credo’s customer base. He emphasized that ZeroFlap AECs deliver up to 1,000 times superior reliability compared to conventional laser optics while consuming approximately half the power.
Credo finalized its acquisition of Comera (alternatively known as CoMira Solutions) within the quarter. Brennan highlighted Comera’s strengths in protocol IP, error correction capabilities, and security IP, mentioning the companies have collaborated since 2022.
For Q4 fiscal 2026, Credo issued revenue guidance ranging from $425 million to $435 million, with non-GAAP gross margin projected between 64% and 66%. Fleming emphasized the forecast assumes the “current tariff regime,” acknowledging the situation remains dynamic.
Looking toward fiscal 2027, management projected year-over-year revenue growth exceeding 50%, with sequential expansion in the mid-single digits anticipated at the year’s outset.
Shares closed up 1.74% following the announcement, though the stock remains down 21.98% year-to-date, with the company carrying a market capitalization near $20.28 billion.
Get 3 Free Stock Ebooks
Discover top-performing stocks in AI, Crypto, and Technology with expert analysis.
- Top 10 AI Stocks - Leading AI companies
- Top 10 Crypto Stocks - Blockchain leaders
- Top 10 Tech Stocks - Tech giants
