TLDR
- Credo Technology (CRDO) beat Q1 earnings expectations with $0.52 EPS vs $0.36 consensus and revenue of $223.1 million vs $190.6 million expected
- Revenue jumped 274% year-over-year, driven by strong demand for AI data center connectivity solutions
- Company raised guidance for current quarter to $235 million midpoint vs $201.9 million analyst consensus
- Multiple analysts raised price targets, with Mizuho lifting target to $155 and BofA to $165
- Credo holds 73% market share in Active Electrical Cables (AECs), which are crucial for AI server connections
Credo Technology delivered a strong first-quarter performance that sent shares higher in after-hours trading Wednesday. The AI data center connectivity company posted adjusted earnings of $0.52 per share, beating Wall Street’s $0.36 consensus by a wide margin.
Credo Technology Group, $CRDO, Q1-26. Results:
📊 Adj. EPS: $0.52 🟢
💰 Revenue: $223.1M 🟢
📈 Net Income: $63.4M
🔎 Growth driven by strategic hyperscaler partnerships and strong demand for energy-efficient connectivity solutions. pic.twitter.com/1FoivlpbR5— EarningsTime (@Earnings_Time) September 3, 2025
Revenue hit $223.1 million for the quarter, representing a massive 274% increase from the same period last year. This figure also topped analyst expectations of $190.6 million, showing the company’s growth trajectory remains robust.
The semiconductor company specializes in high-speed data connections for artificial intelligence data centers. Its product portfolio includes optical devices and data networking chips, but the star performer continues to be its Active Electrical Cables.
Credo invented AECs, which are copper-based cables that connect AI servers to networking switches. These cables offer better reliability and lower power consumption compared to optical alternatives while working over longer distances than traditional passive copper cables.
According to research firm 650 Group, Credo controls 73% of the AEC market as of the most recent quarter. This dominant position has proven valuable as data centers shift toward rack-based servers with higher GPU density.
Strong Forward Guidance
Management provided upbeat guidance for the current quarter, forecasting revenue of $235 million at the midpoint. This outlook exceeded the Street’s $201.9 million consensus estimate by a comfortable margin.
Looking ahead to fiscal year 2026, Credo expects revenue to grow approximately 120% year-over-year to around $964 million. This projection reflects continued strength in cloud service provider demand and customer ramp-ups.
CEO Bill Brennan highlighted the company’s strategic partnerships during the earnings call. “The Company’s growth has been driven by deep, strategic partnerships with hyperscalers and key customers,” he explained.
A fourth major hyperscaler is now ramping up and is expected to represent more than 10% of fiscal 2026 revenue. The company’s customer base includes tech giants Amazon, Microsoft, and Elon Musk’s xAI according to Needham research.
Analyst Reactions
Wall Street responded positively to the results, with several firms raising their price targets. Mizuho bumped its target from $135 to $155 while maintaining an Outperform rating.
BofA Securities increased its price target to $165 from $120, keeping a Buy rating. The firm positioned Credo as one of its top four AI-leveraged stocks alongside NVIDIA, Broadcom, and AMD.
Needham also raised its target significantly, moving from $85 to $150 with a Buy rating maintained. The firm cited strong performance and raised guidance as key factors in its decision.
Market Position and Margins
Gross margin reached 67.6% in the reported quarter, though management expects margins to normalize toward the long-term range of 63-65% due to product mix changes. The company has maintained consistently strong margins throughout its growth phase.
The Optical DSP business segment is positioned to double revenues in fiscal 2026 with an expanding customer base. This diversification effort supports the company’s broader growth strategy beyond AECs.
Mizuho projects AEC revenues of approximately $700 million for fiscal 2026. This represents a small portion of the estimated $2.7 billion total AEC market expected by fiscal 2028, assuming 12-15% penetration of the roughly $22 billion scale-out cable market.
Credo shares have gained about 86% year-to-date, significantly outperforming the Nasdaq Composite’s 11% advance. The company reported fiscal first-quarter results that exceeded expectations across all key metrics, with management providing optimistic guidance for both the current quarter and full fiscal year.
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