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1. Company Snapshot

1.a. Company Description

Credo Technology Group Holding Ltd provides various high-speed connectivity solutions for optical and electrical Ethernet applications in the United States, Mexico, Mainland China, Hong Kong, and internationally.Its products include integrated circuits, active electrical cables, and SerDes chiplets that are based on its serializer/deserializer and digital signal processor technologies.The company also offers intellectual property solutions consist of SerDes IP licensing.


The company was founded in 2008 and is headquartered in San Jose, California.

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1.b. Last Insights on CRDO

Breaking News: Credo Technology Group Holding Ltd has seen significant growth with revenue up over 200% YoY for three quarters and EPS up 328% last quarter. This has driven aggressive margin expansion and operating leverage. The company has been upgraded to 'buy' due to AI-driven demand for connectivity solutions and structural bottlenecks. The forward P/E of 21.5 for FY2027 appears modest given robust growth and a $1.3B net cash balance. The upgrade is given by an analyst who previously had a wrong rating.

1.c. Company Highlights

2. Credo's Q3 Earnings: A Strong Beat with Record Revenue

Credo delivered a record revenue of $407 million in Q3, representing a 52% sequential increase and over 200% growth from Q3 last year. Non-GAAP gross margin was 68.6%, and non-GAAP net income was $209 million, resulting in an EPS of $1.07, beating estimates of $0.96. The company's financial performance was driven by strong growth in its AEC product line, with demand accelerating across hyperscalers and Neocloud providers.

Publication Date: Mar -04

📋 Highlights
  • Record Revenue Growth:: Credo achieved $407 million in Q3 revenue, a 52% sequential rise and over 200% YoY growth, driven by AEC demand from hyperscalers and Neocloud providers.
  • Strong Profitability:: Non-GAAP gross margin hit 68.6%, with $209 million in non-GAAP net income, reflecting efficient product margins and cost management.
  • ZeroFlap AECs Lead Innovation:: ZeroFlap AECs offer 1,000x better reliability than commodity optics, use 50% less power, and are scaling with three new customers in qualification, targeting $1.3 billion cash reserves for growth.
  • Future Product Leadership:: Credo projects 15-20% revenue from optical products by fiscal 2027 exit, with ZeroFlap Optics, Active LED Cables, and PCIe Gen6 retimers driving revenue to $2 billion by 2025.
  • Strategic TAM Expansion:: The $5 billion AEC market is dominated by scale-out networks, with 800G-1.6T ASP uplifts and 50% YoY growth expected in fiscal 2027, supported by the Chimera acquisition for system-level IP integration.

Business Update

Credo's strategy is to lead in reliability, power efficiency, and signal integrity across AI and data center connectivity. The company's AEC product line, which delivers up to 1,000x better reliability than commodity laser-based optics, drove strong growth. The IC business, including retimers and optical DSPs, spans optical and copper connectivity across 50 gig, 100 gig, and 200 gig per lane speeds.

Guidance and Outlook

Credo's financial guidance for Q4 includes revenue between $425 million and $435 million, non-GAAP gross margin between 64% and 66%, and non-GAAP operating expenses between $76 million and $80 million. The company expects sequential revenue growth in the mid-single digits in fiscal '27, leading to over 50% year-over-year growth. Analysts estimate next year's revenue growth at 46.2%.

Valuation

With a P/E Ratio of 50.54 and P/S Ratio of 16.45, the market is pricing in high expectations for Credo's future growth. The company's ROE of 29.56% and ROIC of 16.99% indicate strong profitability. The EV/EBITDA ratio of 46.8 suggests that the company's valuation is high relative to its earnings before interest, taxes, depreciation, and amortization.

Product Developments

Credo has made significant progress with its new product families, including ZeroFlap Optics, Active LED Cables (ALCs), and OmniConnect. The company expects strong optical DSP growth in fiscal '26, driven by 100 gig per lane deployments. The PCIe Gen6 retimers are on track, with fiscal '26 design wins expected to convert to production revenue in fiscal '27.

Growth Opportunities

The company's focus on delivering solutions with best-in-class network reliability and energy efficiency positions Credo for sustained leadership in the expanding AI infrastructure landscape. The narrative around AECs is driven by network reliability and power efficiency, with growth opportunities in 100-gig and 200-gig per lane deployments. Credo expects growth in AECs, ICs, and ZeroFlap optics in fiscal '27, with new products like active LED cables and gearbox in fiscal '28.

3. NewsRoom

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CRDO vs. MRVL: Which AI Connectivity Stock Is the Better Buy?

Mar -23

Source: zacks.com

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Credo Technology: The AI Connectivity Giant The Market Is Massively Undervaluing

Mar -23

Source: seekingalpha.com

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Got $1,000? This Under-the-Radar AI Stock Could Be a Future 10-Bagger

Mar -21

Source: fool.com

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Credo: The Market Got It Wrong

Mar -21

Source: seekingalpha.com

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Buy The Dip: Best Stocks With Forward EPS Growth Above 40%

Mar -19

Source: seekingalpha.com

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Credo: Time To Admit I Was Dead Wrong (Rating Upgrade)

Mar -19

Source: seekingalpha.com

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Semiconductor Stock Signal Has Never Been Wrong

Mar -18

Source: schaeffersresearch.com

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Credo Technology Expands AI Footprint With New Product Launches

Mar -18

Source: zacks.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (10.73%)

6. Segments

Serializer/Deserializer and Digital Signal Processor Technologies

Expected Growth: 10.95%

Credo Technology Group Holding Ltd's Serializer/Deserializer and Digital Signal Processor Technologies are driven by growing demand for high-speed data transmission, increasing adoption of cloud computing, and rising need for efficient data processing. The 10.95% growth is also fueled by advancements in 5G, artificial intelligence, and the Internet of Things (IoT), which rely on high-performance serializer/deserializer and digital signal processing capabilities.

Intellectual Property License

Expected Growth: 9.9%

Credo Technology Group Holding Ltd's 9.9% growth in Intellectual Property License is driven by increasing demand for high-speed data transmission, growing adoption of 5G and IoT technologies, and strategic partnerships to expand its patent portfolio. Additionally, the company's focus on innovation and R&D investments has led to the development of new and valuable IP, further fueling growth.

Serializer/Deserializer and Digital Signal Processor Technologies Engineering Services

Expected Growth: 10.32%

Credo Technology Group Holding Ltd's Serializer/Deserializer and Digital Signal Processor Technologies Engineering Services growth is driven by increasing demand for high-speed data transmission, proliferation of 5G and IoT devices, and rising need for low-power, high-performance computing solutions. Additionally, advancements in artificial intelligence, machine learning, and cloud computing are fueling growth in this segment.

Intellectual Property License Engineering Services

Expected Growth: 9.9%

Credo Technology Group Holding Ltd's 9.9% growth in Intellectual Property License Engineering Services is driven by increasing demand for customized IP solutions, expansion into new markets, and strategic partnerships. Additionally, the company's focus on innovation, R&D investments, and a strong sales pipeline have contributed to this growth.

7. Detailed Products

Optical Interconnects

Credo's optical interconnects provide high-speed connectivity solutions for data centers, high-performance computing, and artificial intelligence applications.

Active Electrical Cables

Credo's active electrical cables offer high-speed, low-power, and low-latency connectivity solutions for data centers, high-performance computing, and artificial intelligence applications.

SerDes IP Cores

Credo's SerDes IP cores provide high-speed, low-power, and low-latency serial link solutions for system-on-chip (SoC) designs.

High-Speed IP Cores

Credo's high-speed IP cores provide high-speed, low-power, and low-latency connectivity solutions for data centers, high-performance computing, and artificial intelligence applications.

Silicon Photonics

Credo's silicon photonics solutions provide high-speed, low-power, and low-latency optical connectivity solutions for data centers, high-performance computing, and artificial intelligence applications.

8. Credo Technology Group Holding Ltd's Porter Forces

Forces Ranking

Threat Of Substitutes

Credo Technology Group Holding Ltd has a moderate threat of substitutes due to the availability of alternative technologies and products in the market.

Bargaining Power Of Customers

Credo Technology Group Holding Ltd has a low bargaining power of customers due to its strong brand reputation and limited customer concentration.

Bargaining Power Of Suppliers

Credo Technology Group Holding Ltd has a moderate bargaining power of suppliers due to the presence of multiple suppliers in the market.

Threat Of New Entrants

Credo Technology Group Holding Ltd has a high threat of new entrants due to the low barriers to entry in the technology industry.

Intensity Of Rivalry

Credo Technology Group Holding Ltd operates in a highly competitive industry, leading to a high intensity of rivalry among existing competitors.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 4.27%
Debt Cost 3.95%
Equity Weight 95.73%
Equity Cost 14.11%
WACC 13.68%
Leverage 4.46%

11. Quality Control: Credo Technology Group Holding Ltd passed 3 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Credo Technology Group Holding

A-Score: 4.9/10

Value: 0.0

Growth: 9.4

Quality: 8.5

Yield: 0.0

Momentum: 10.0

Volatility: 1.3

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Ubiquiti

A-Score: 4.9/10

Value: 0.3

Growth: 8.1

Quality: 8.4

Yield: 1.0

Momentum: 9.0

Volatility: 2.3

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Belden

A-Score: 4.3/10

Value: 3.8

Growth: 5.9

Quality: 5.5

Yield: 0.0

Momentum: 4.5

Volatility: 6.3

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EchoStar

A-Score: 4.0/10

Value: 7.4

Growth: 4.2

Quality: 1.6

Yield: 0.0

Momentum: 10.0

Volatility: 1.0

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Zebra Technologies

A-Score: 3.7/10

Value: 3.4

Growth: 5.2

Quality: 6.6

Yield: 0.0

Momentum: 2.0

Volatility: 5.0

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Lumentum

A-Score: 3.5/10

Value: 2.0

Growth: 4.0

Quality: 3.0

Yield: 0.0

Momentum: 10.0

Volatility: 2.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

105.1$

Current Price

105.1$

Potential

-0.00%

Expected Cash-Flows