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Image source: The Motley Fool. Tuesday, Sept. 1, 2026 at 5:00 p.m. ET Treasurer and VP of Investor Relations - Daniel J. O'Neil Chief Executive Officer - William J. Brennan Chief Financial Officer - Daniel Fleming Operator: Ladies and gentlemen, thank you for standing by. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. Where we request that you please limit yourself to 1 question only. At that time, if you have a question, you will need to press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. I would now like to turn the conference over to Daniel O'Neil Treasurer and VP of Investor Relations. Please go ahead, sir. Daniel J. O'Neil: Good afternoon. Thank you all for joining our first quarter fiscal 27 earnings call. Today, I am joined by Bill Brennan, Credo's Chief Executive Officer and Daniel Fleming, Credo's Chief Financial Officer. During this call, we will make certain forward-looking statements. These forward-looking statements are subject to risks and uncertainties discussed in detail in our documents filed with the SEC. These documents can be found in the Investor Relations portion of the company's website. It is not possible for the company's management to predict all risks, nor can the company assess the impact of all factors on its business. Or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statement. Given these risks, uncertainties, and assumptions, the forward looking events discussed during this call may not occur. And actual results could differ materially and adversely from those anticipated, implied or inferred. The company undertakes no obligation to publicly update forward-looking statements for any reason after the date of this call. To conform these statements to changes in the company's expectations or to actual results. Except as required by law. Also, during this call, we will refer to certain non GAAP financial measures. Which we consider to be important measures of the company's performance. These non GAAP financial measures are provided in addition to and not as a substitute for or superior to financial performance prepared in accordance with US GAAP. A discussion of why we use non GAAP financial measures and reconciliations between our GAAP and non GAAP financial measures is available in the earnings release we issued today. Which can be accessed using the Investor Relations portion of the website. I will now turn the call over to our CEO, Bill. William J. Brennan: Thanks, Daniel, and thank you everyone for joining our first quarter fiscal 2027 earnings call. First quarter was another strong quarter for Credo. Revenue reached a record $479 million. Increasing 10% sequentially and more than doubling year over year. Non-GAAP gross margin was 68%. And non GAAP net income exceeded $236 million up 140% year over year. Credo has been growing at a pace that very few semiconductor companies have achieved. All while expanding. Profitability. At the heart of this growth is 7 consecutive quarters of triple digit year over year growth. We continue to see outsized growth in fiscal 27. With our optical business growing at the fastest pace. AI infrastructure investment continues to grow rapidly. Cluster sizes are increasing. James are moving higher. And connectivity requirements are becoming more challenging. As these systems scale, connectivity is about much more than bandwidth. Reliability, power efficiency, signal integrity, telemetry, and serviceability all matter. We also believe AI infrastructure will become increasingly heterogeneous. There will not be 1 architecture, 1 protocol, or 1 physical medium that is chosen for every connection. Future AI systems will combine optical and copper interconnects across different reaches, protocols, and topologies. With customers choosing the right technology to optimize their architecture. This is where Credo shines. While network reliability remains Credo's north star, our ability to innovate, execute, qualify, and deploy across the wide range of customers' needs is core to our differentiation. Our focus is on helping customers bring clusters up faster maximize processor utilization, and maintain reliable operation at scale. Our portfolio now spans connectivity from millimeters to kilometers, with solutions across optics and copper. Let me walk through each of these areas in more detail. Starting with AECs, AECs remain our largest business and continues to grow. We now have deep relationships with 5 hyperscalers, and our engagement with Neo Cloud customers continues to expand. Within our existing customers, we continue to see increased AEC penetration as deployment scale. Higher data rates provide another growth vector with the transition to 200-gig-per-lane, 1.6T ports are ahead. AECs have always been a system level product for Credo. We provide the complete solution and optimize the silicon firmware manufacturing test, and system qualification together. Our system level approach has been fundamental to our differentiation since we created the category. As AI clusters get larger, the value proposition remains straightforward. High reliability, and low power for short reach connectivity. Where both become increasingly important at scale. We continue to see a healthy growth trajectory for AECs. Driven by deeper penetration with existing and new customers, and with increasing bandwidth in next generation clusters. Now turning to optics. Our optical business is progressing very well and includes optical DSPs, silicon photonics PICs, and zero flap optical transceivers. Our optical DSP business delivered record revenue in Q1. Revenue included deployments across our 50-gig and 100-gig-per-lane solutions. We see a long tail for 800-gig ports, even as we begin the transition to 1.6T solutions. At 200-gig-per-lane, customer engagement with our 1.6T DSP is strong across both fully retimed and LRO solutions. Our first 1.6T DSP revenue remains on track for later this fiscal year. During the quarter, we also recognized our first silicon photonics PIC revenue following the Dust Photonics acquisition. Our initial wins are an 800-gig and 1.6T optical transceivers, and we expect these products to ramp throughout the year. More importantly, silicon photonics PICs add another important technology our optical platform. We now optimize the DSP and pick together and combine them with our firmware, telemetry, and pilot software. This level of integration creates opportunities to improve reliability, power, signal integrity, and diagnostics. It also positions us well as scale up architectures move toward near package optics. We are seeing increasing customer activity around NPO for scale up networks. With confirmed design wins expected to begin ramping in our fiscal 28. As part of the open CPX MSA consortium, we will help bring many of the advantages of today's pluggable ecosystem including telemetry, interoperability, and serviceability. Our opportunity here includes both optical components and complete system level solutions. This is an important evolution for Credo. We have historically been very successful solving connectivity problems at the semiconductor and the AEC system level. We are now applying that same approach to optics. Our zero-flap optics business continues to progress. Zero Flap Optics combines optimized optical hardware pilot software, and switch level SDK integration to continuously monitor link health and identify and mitigate issues when link instabilities become likely. The objective is to improve cluster bring up time and long term network availability both of which deliver significant financial advantages for end-customer outcomes. Production shipments are underway, and we expect additional customer ramps during fiscal 27 across both 800-gig and 1.6T, with both hyperscalers and neo clouds. With DSPs, PICs, and zero-flap optics, we now address much more of the optical link. That changes the opportunity for Credo. We sell components where that is preferred by customers. But more importantly, we also integrate those components with hardware, firmware, and software to deliver a complete transceiver with unprecedented system level reliability. Taken together, the momentum across DSPs, PICs, and zero-flap optics keeps us firmly on track to deliver more than $600 million of optical revenue in fiscal 27. Now turning to retimers. Our retimer business also delivered record revenue in Q1. Growth was primarily driven by scale up deployments using our Screaming Eagle Retimer at 100-gig-per-lane and with our Blue Heron Retimer beginning to contribute at 200-gig-per-lane. We continue to see opportunities for the Toucan Retimer as PCIe Gen6 adoption increases. And for screaming Eagle and Blue Heron across Ethernet and UALink. Scale up architectures are developing quickly. With customers making different choices around protocols, topology, and connectivity. Our ability to support multiple protocols allows us to successfully participate across these architectures. Now I will discuss 2 important emerging growth areas. We also continue to make progress with both Active LED Cables or ALCs and our Omni Connect gearbox solutions. Our ALC solutions use microemitters to combine many of the reliability and power advantages of copper with reach of up to 30 meters. Customer engagement continues to increase and we plan to demonstrate ALC solutions at OCP in October. We remain on target for initial revenue fiscal 28. We are also seeing strong engagement around our Omniconnect innovation. Our OmniConnect SERDES and Weaver gearboxes address the fan out issues that come with increasing memory bandwidth and capacity requirements of next generation AI architectures. This is especially relevant for inference. Where memory capacity bandwidth, packaging, and cost are becoming increasingly important architectural constraints. We believe OmniConnect solutions can represent thousands of dollars of Credo content per GPU. With revenue beginning in fiscal 28. In conclusion, Q1 was another strong quarter for Credo. And customer engagement across the business remains very strong. AECs continue to grow as we expand with existing customers add new customers, and move to higher data rates. Our retimer and optical DSP businesses also delivered record revenue. At the same time, the scope of our optical business is expanding. We believe that the system level approach will become increasingly important as AI networks move to 1.6T and 3.2T solutions. And as scale up architectures drive greater use of near package optics. AECs have helped take Credo to the scale we have achieved today, and we continue to see growth ahead for that business. what is different today is that we are adding optics as another major growth engine. From a much larger base and as an established player in the industry. Our optical opportunity now extends from DSPs and silicon-photonic PICs to complete zero-flap optics and NPO solutions. Our content opportunity expands significantly as we solve a broader set of challenges for our customers. AECs continue to grow, Optics is growing faster. And based on the customer engagements and ramps underway across the portfolio, we remain confident in the outsized growth we expect to deliver in fiscal 27. The common thread across all these products remains reliability. As AI infrastructure scales, our job is to provide connectivity that works reliably. Uses less power, provides visibility into the network, and keeps expensive processors operating at high utilization. that is what we are focused on and we are very excited about what lies ahead. With that, I will turn the call over to Daniel. Daniel Fleming: Thank you, Bill, and good afternoon. I will first review our Q1 results and then discuss our outlook for Q2 of fiscal year 27. In Q1, we reported revenue of $479 million up 10% sequentially and above the high end of our guidance range. Year over year, revenue grew 115%, Q1 marks another revenue record driven by substantial year over year growth across 4 domestic customers, and marks our seventh consecutive quarter of triple digit revenue growth year over year. Our top 4 end customers each came in At or greater than 10% of revenue in Q4. As a reminder, customer mix will vary from quarter to quarter, We continue to expect that 3 to 4 customers will be greater than 10% of revenue in the coming quarters and fiscal year, and we continue to make progress in diversifying our revenue base across hyperscalers, neo clouds and other customers. Our team delivered Q1 non GAAP gross margin of 68% at the midpoint of our guidance range. Total non GAAP operating expenses in the first quarter were $95.2 million above the high end of our guidance range due to our strong R&D investment and up 16% sequentially. Our non GAAP operating income was $230.6 million in Q1. Compared to non GAAP operating income of $216.7 million in Q4. Our non GAAP operating margin was 48.2% in the quarter. Our bottom line once again demonstrated the substantial leverage we are delivering in the business, even with our continued heavy investment. In R and D. Our non GAAP net income was $236.3 million in the quarter, a record high and a 4% sequential increase compared to non GAAP net income of $226.7 million in Q4. Our Q1 non GAAP net income more than doubled year over year clearly demonstrating the magnitude of our top line growth. Strong gross margins and disciplined approach to managing operating expenses. Our non GAAP net margin was 49.3% in the quarter, Cash flow from operations in the first quarter was $90.2 million, down $92 million sequentially. Due primarily to changes in working capital. CapEx was $7.3 million in the quarter, and free cash flow was $82.9 million We ended the quarter with cash and equivalents of $764.3 million a decrease of $679 million from the fourth quarter due primarily to the cash outlay for our acquisition of Dust Photonics. We remain well capitalized to continue investing in our growth opportunities while maintaining a substantial cash buffer. Our Q1 ending inventory was $313.1 million, up $62.2 million sequentially. Now turning to our guidance. We currently expect revenue in Q2 of fiscal 27. To be between $525 million and $535 million. We expect Q2 non GAAP gross margin to be within a range of 67% to 69%. We expect Q2 non GAAP operating expenses to be between $100 million and $105 million And we expect Q2 diluted weighted average share count to be approximately 200 million shares. These expectations are based on the current tariff regime, which remains fluid. As we move forward through fiscal year 27, we continue to expect an inflection in the second half driven by more than $600 million in optical revenue, with zero-flap optics, silicon-photonics PICs, and optical DSPs each contributing more than $100 million. Resulting in more than 85% year-over-year total revenue growth for the full year. We expect non GAAP gross margin in fiscal year 2027 to be broadly consistent with fiscal year 26 levels. We expect non GAAP operating expenses to increase approximately 55% year-over-year, well below our revenue growth rate as we continue to invest in R&D to support the new product development and address the significant growth opportunities As a result, expect our non GAAP net margin to be in the vicinity of 50%. And with that, I will open it up for questions. Operator: At this time, I would like to remind everyone in order to ask a question, please press star then the number 1 on your telephone keypad. As a reminder, we ask that you please limit yourself to 1 question only so we can get to as many people as possible. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Tore Svanberg with Stifel. Your line is now open. Please hold. Thank you. I am Please go ahead. Tore Svanberg: Thank you, Tore. Thank you, and congrats on the record quarter. Bill, I was hoping you could unpack a little bit the position in Optical right now. You did reiterate the $600 million-plus but now you also talked about NPO and maybe even doing some system level NPO. So, as we think about that $600 million both in fiscal 27 and fiscal 28, how should we expect the mix to look like between the all the various different components? William J. Brennan: Sure. I think we feel great about the broadening portfolio that we are bringing to market. As we have indicated you know, the optical DSP business for us is going quite well at a component level. The team that came in to Credo from Dust brought a lot of momentum. And in fact, after know, just a few months, the momentum has picked up and we are happy to be able to say that we have got design wins with 2 major players for next generation ramps that will occur in fiscal 28 and maybe starting in the late part of this fiscal year. At ZF Optics, we continue to make progress. We are engaged with multiple customers, both hyperscalers and neo clouds. And we feel good about the way that the year is shaping up. I think as I think about the overall optical opportunity, and you did mention CPX, and I think you may have all seen the press release earlier that we have joined the consortium. And we plan on pursuing solutions for the scale up market that is developing. Really across the board. CPX is, I think, an important development in the industry. that is 1 way of solving the challenge of going to 10x more density than what you are seeing in scale out And we will pursue this market the same way. We will pursue component sales where that makes sense with customers, and we will also pursue system level solutions. that we will talk about over time But you bring up an important point. Fiscal 2027, I think, is just a stepping stone for where we are going with our optical business. And if we think about the market forecasters, specifically the ones that are focused on the optical transceiver pluggable market, Just that piece alone is expected to grow from 60 million units in 2026 to 175 million units by 2030. This is amazing growth for this portion of the industry, and then add growth on top of that. For what happens in scale up. And so we think that with our broad portfolio of solutions, that we are going to experience continued outsized growth through the 2030 timeframe And it is gonna, you know, have contributions from not just our ops portfolio, but also AUCs as well as, as well as our other copper solutions. So I probably gave you a little more color than you asked in that question. So, hopefully, that gives you what you were looking for. Operator: Your next question comes from the line of Quinn Bolton with Needham. Your line is now open. Please go ahead. Quinn Bolton: Hey, Bill. I guess a question just on the follow-up to Tore's question. Just really wanted more color on the importance of Credo joining the OpenCPX consortium, what types of solutions you may be providing, is it more PIC based? Would you be supplying a full optical engines? I assume these are all laser based rather than micro LED based, but maybe just a little bit more detail on this new opportunity that is opening up for you in the NPO scale up segment? Thank you. William J. Brennan: Sure. So as, as we all think about this scale up opportunity, you know, we are thinking about a changing of form factors. When we look at front end and we look at scale out, there is no real catalyst to change from the pluggable form factor. But for scale up networks, there is a fundamental need to have more dense form factors. And we have talked--you know, there is been an ongoing industry conversation about things like XPO CPX, how that fits in with NPO, and then ultimately CPO. All of these solutions address the need for a 10x density improvement. And the way that we are approaching the market is somewhat agnostic. We will basically look at what our customers are asking us and what our customers are driving towards. And so we have, I think, done a very good job of being agnostic as it relates to the solutions that we are bringing to market. We are going to continue to do that. And so, of course, with all of the NPO solutions, including CPX, we will lead with the silicon photonics PIC, but we will also look at doing the complete optical engine long term as we add more functionality to our portfolio. Operator: Your next question comes from the line of Tom O'Malley with Barclays. Your line is now open Please go ahead. Tom O'Malley: Hey, guys. Thanks for taking my question. So mine relates to the Zero-Flap Optics side as well. So like when you look at the forecast that you have kind of over the next year and then in the year after that as well, like, a lot of the volume in terms of revenue is driven by the ZF Optics forecast. And, like, it is unique. I imagine that you are going to use a contract manufacturer for this. And you are hearing about supply issues, raising prices in the foundry world. Like, can you talk about, like, challenges that you are facing in scaling today? And what gives you the confidence that you are able to kind of hit the metrics that you gave us some color on the last earnings call But, like, what gives you the confidence that you are able to hit those really big revenue numbers in the near term? And just maybe a little bit of a pulse check on conversations with customers today, particularly those who in the media potentially been spending a little bit more money and the forecast is raised on the ZF optic side. Thank you very much. William J. Brennan: Yeah. You point out something that is lots of fun. We are in a very dynamic market right now, and you are right. From the supply side, it has been important that we have spent so much time even going back 18 to 24 months ago when we knew that this was the direction that we are heading. And so you can, you can see from Daniel's update that working capital is increasing. We are leaning in from a supply chain standpoint. I feel great about our ability to supply to supply increasing volumes in our second half and then throughout the next couple of fiscal years. The other half of that is driving demand. And so I see that over the past year, we have been very successful in marketing. And really engaging with customers. And so all of this has got to come together again, I will point out that we are really playing the long game here. And of course, there should be, and there is a lot of emphasis on the very fast ramp that we have set expectations on. But I think more importantly, looking at the big picture, this involves an opportunity that takes us to a different scale as a company. And so this is very, very much, an important part of our growth strategy and our scale as a company. Operator: Your next question comes from the line of Sean O'Loughlin with TD Cohen. Your line is now open. Please go ahead. Sean O'Loughlin: Hey, guys. Congrats on the solid results and momentum. Thanks for letting me hop on. Maybe we could just you know, get some blocking and tackling on the Daniel, you mentioned the 3 to 4 customers. Will be greater than 10% and you are continuing to diversify. Wanted to ask specifically, you know, maybe if you could do the run down of what the stats were on those 3 to 4 in the quarter. But then also, when we think about customer concentration, there is also platform concentration. And, you know, are you diversifying your product portfolio across those customers as well? Thanks. Daniel Fleming: Yeah. Sure. Let me start with just the percentages of those, 10% plus customers. So our largest customer was a third of our revenue at 33%; second largest, 28%; and then followed by 13% and 10%. Those top 3 customers were similar to or the same 3 as in the prior quarter. A slightly different order. 1 thing to note, our fourth 10% customer, right at 10%, was different from our 10%, you know, fourth customer last quarter. They have been a 10% customer in the past. Though. Now in terms of diversification of, product line within those, for sure, there is a strengthening and broadening across the board. It is not just ADCs that, that these hyperscalers are consuming about. Operator: Your next question comes from the line of Blayne Curtis with Jefferies. Your line is now open. Please go ahead. Analyst: Hey, guys. Thanks for taking my question. On the AEC side, I just wanted to ask about the timing on 1.6T SerDes, but also just the design traction if you compare that versus the 800-gig. You have been talking about NeoCloud. I think some of your existing customers are moving too fast speeds. Can you just give us a perspective of how those designs are laid out and the timing? William J. Brennan: Sure. We expect that our AEC portfolio will ramp in a similar kind of time frame as the rest of the market. And for that matter, our ZF or our ZF Optics products. But I want to step back and give some perspective on the way we view the AEC market. there is been a lot of conversation about copper and optical, and just the trade off there. And the way that we view the AEC market, it is part of the pluggable transceiver market. So when we talk about forecasts for specifically optical transceivers going from 60 to 175 over the next 4 years. there is not really a breakout for the AEC market, but the AEC market really represents the 1-meter to 7-meter segment of that market. And so it just makes sense that segment is going to grow as well. And we see that really being long term. We see that you know, in a big way in the 800-gig category. What we saw was copper replacing optical. And it was replacing optical laser based optical transceivers because of the need for higher reliability. And secondarily, lower power as it relates to that first connection in the network from GPUs to that first switch. And so the bottom line is that we see the pluggable transceiver market for all of the pluggable transceivers from copper, to laser based optical. And, ultimately, we will talk about ALCs being another pluggable transceiver option, within the spectrum and that you know, going up to 30 meters And so as it relates to the what I think the setup looks like for 1.6T, we are quite bullish about the AEC opportunity. And as, you know, we showed going back 6 months ago at OFC, many of the next generation deployments that have been discussed in the industry, we showed very, elegant solutions all connected with AECs. And we will deliver up to 6.5 meters in that category. So we think it takes shape towards the end of, or towards--you know, there will be some contribution in our second half fiscal 27, and then fiscal 28, it comes in a much bigger way. Operator: Your next question comes from the line of Joseph Cardoso with JPMorgan. Your line is now open. Please go ahead. Joseph Cardoso: Hi. Thank you for taking my question. This is MP on behalf of Joseph Cardoso. So just wanted to ask on the overall opportunity. To date, most of the opportunity has been the focus has been on training. But we are seeing incremental development around inferencing as well. Now, I just wanted to check how is Credo positioned in terms of addressing the inferencing opportunity and which part of the portfolio particularly stands out? And how does the overall opportunity compare relative to training? Thank you. William J. Brennan: Appreciate that question. I would like to maybe talk a little bit about our OmniConnect solutions. that we are bringing to market now that we expect to contribute revenue in our fiscal 28. it is specifically related to inference. As these solutions continue to gain momentum, 1 universal issue is around memory fan out. The memory fan out issue is limiting bandwidth and also total memory deployment memory capacity, both of which are critical to achieving high performance inference. And so with our OmniConnect solutions, there is kind of a 2-piece story to the offering. First thing is we license a highly optimized high speed SerDes that is got a very small form factor, very low power, and that is got reach of 10 inches. And so effectively addressing the fan out issue that exists on the XPU beachfront as well as the distance that you can you know, get you--the distance you could achieve between the GPU and memory. So the second piece is gearboxes that we are developing The first gearbox that we are developing is a solution that we call Weaver. And it is a gearbox that interfaces between that embedded SERDES on the XPU So it is up to 10 inches of reach and interfaces with that same exact SerDes. And then it becomes an LPDDR interface. And it is important to note that our first product will be LPDDR 5. And there will be a second product we do for LPDDR 6. And so in a sense, this architecture is future enabled because when the memory market shifts from 5 to 6, is not gonna be a need for our XPU partners to do another tape out, another design. Just simply change the gearbox. And so our first customer, Positron, is doing really great things when we look at memory limitations and the opportunity that if you can increase memory capacity of up to 2 terabytes, which is their first announced product, just the performance with Frontier model or frontier models, basically, you can fit everything in memory. And your performance just goes off the charts. And so they are redefining what is competitive in that space. And if we if we look even from a bandwidth standpoint, we have got a road map that will achieve very comparable bandwidth to even HBM 5. And that is while expanding on memory size and eliminating the reliability issues of packaging XPUs and HBM in the same package. But related specifically to inference, we are really excited about how this is really going to change the game for many frontier model applications. Operator: Your next question comes from the line of Given Arya with Bank of America. Your line is now open. Please go ahead. Given Arya: Thanks for taking my question. Bill, I wanted to go back on the AEC growth in the second half and then longer term. If I take your 85% growth outlook for the year, suggests about $500 million of incremental growth in the second half. But if optics is going to be the bulk of it, then that 600 million, that suggests kind of more conservative assumptions about AEC growth. I am sure that I am probably mistaken about how much optics was in the first half. Or so. So I was just hoping, if you could kind of give us some more details on, you know, the optics versus the AEC segmentation in the first half versus second half and what that implies for AEC growth in the second half. And then how should we model AEC growth longer term? William J. Brennan: Sure. I think that as we look at the entire year, we look at the growth across each 1 of the products that we are bringing to market, we see growth across the board. Now, of course, with our optical solutions, this is really the first year that we are ramping, and it makes a lot of sense based on what we are bringing to market that we will be able to achieve a really fast paced growth. I think AECs will continue to grow. You have got to consider where we have grown from. AECs have driven growth over the last 2 fiscal years. More than doubling from 2024 to 2025 and then more than tripling from 2025 to 2026. And so I think that you know, as we look at our opportunities in AEC, we continue to see to see expanding opportunities. But in a sense, I think we are you know, we are looking at clearly a slower growth overall compared to the fact that we are growing into such a large market with optics. And so it makes sense that optics will grow faster because we are growing from a smaller base. But long term, I think you will see AECs grow. And as we continue to scale as a company, I think you will see a balance a really nice balance between Copper Solutions and Optical. Operator: Your next question comes from the line of Sebastien Naji with William Blair. Your line is now open. Please go ahead. Analyst: Yeah. Thank you. Good afternoon. Just wanted to maybe ask a little bit about Pilot and some of the telemetry data. That your solutions are picking up. As your installed base grows, are you accumulating enough link level telemetry that the data itself has become a bit of a competitive advantage, for example, allowing you to identify failure modes or optimize future DSP designs. And is that extending your moat at all? Just any thoughts on that? William J. Brennan: Sure. The pilot software platform is a really important part of the total ZF Optics offering. And when we look at what we have done, we have we basically had to start with a custom DSP design, 1 that would enable telemetry to be lit up on every link between an XPU and a switch. And when I say every link, there is really 6 in total. There are 3 in 1 direction and 3 in the other. And this is completely different than the telemetry that has been discussed up to this point in the industry. And so what we are able to sense on a real time continuous basis is really rich telemetry data that looks at indicators of link stability, even going down the SerDes level because that, of course, is core to our platform on everything we do. But we are looking at a real time measurement of eye height and SNR post fec histograms, really rich telemetry data even down to that level. And so when we are sensing this continuously, we can sense when the link integrity is decreasing. And so you can think of it as right now in the industry, what exists is a green light when you have got a connection, you and a red light when there is a failure. What we are adding is like a check engine light, a yellow light that says, 'Okay, you have identified something. And then the mitigation piece of it is about acting. And so there is different approaches that are enabled by pilot You can make the decision on a transceiver by transceiver basis to take that transceiver that looks likely to have a link flap. And in an orderly way, take that GPU out of the cluster. We have got other customers that are looking at a network level more of a centralized approach. And, you know, the ultimate outcome is the same from a reliability standpoint. But in this case, you know, both opportunities allow you to collect tremendous amount of data because as you are taking a link down, you have got a snapshot of exactly what was happening within that within that transceiver and what is happening within the network. And so you are right that the dataset that you know, we are starting to gather and that we will gather over time will lead to better solutions. It will lead to you know, next generation solutions being optimized even more so the types of failures that we are detecting early. I will say we are doing other things that are really interesting. And that is, you know, related to conversations with We had a customer ask us, can you sense even the slightest ESD damage on a transceiver? Because that will become a latent defect. And so, you know, we have figured out a way to sense even the slightest ESD damage, not the type of damage that would cause a transceiver to fail. The type of damage that over time would result in a failure in that connection. And so now when we have got customers lighting up racks, they can determine immediately if a transceiver was mishandled and needs to be replaced. Other things that we are, sensing is dust on the fiber plant. This is really important because even the smallest speck of dust can have light bouncing back in the other direction causing a multipath interference situation. And so what we are doing is far beyond. Now pilot allows us to integrate within the network. At our customers, and that really just changes the game on giving our customers tools to be active in identifying and mitigating and look. The goal here is twofold. it is really to deliver the fastest time to revenue. So bringing a cluster up in 5 or 6 days versus 6 to 8 weeks I think we have seen the contracts that have been reported in the market. You can measure a month on the order of hundreds of millions or even a billion dollars of advantage when you have got that really expensive gear that could be generating revenue. But it is sitting idle because you are trying to bring a cluster up and, on the order of weeks versus days. The other big 1 is uptime. You know, after deployment. And driving to a 99% uptime or even higher is the objective here. And that just delivers a better fabric, better product for the end customers. And so it is a huge differentiator, I think, at a cluster level. But, yes, pilot is critical to enabling that. it is a combination of the custom hardware, but the interface within the network is, really the critical piece. Analyst: Great detail. Thank you so much. Operator: Your next question comes from the line of Karl Ackerman with BNP. Your line is now open. Please go ahead. Karl Ackerman: Great. DSPs and picks. Are not direct hyperscaler sales growing as a portion of your mix versus optical module suppliers? How does that improve your customer visibility and stickiness with your data center customer base? Thank you. William J. Brennan: Karl, I apologize. You the first part of your question, we did not hear. So I just wanna make sure I have got the right perspective. Karl Ackerman: Sure. Yeah. As we think about the opportunity for your discrete DSPs and PICs, of that $600 million and also growing over time. Is not the customer mix moving more toward direct hyperscaler sales who are making their own custom transceivers. And as they do that, how does that improve your customer visibility and stickiness? With that customer base? William J. Brennan: So, in looking at our optical components business, this is a really important part of our business. Short term and long term. And ultimately, it is the path where we are going to pursue that pluggable optical transceiver market that is based on mainstream standards. And the combination of having an optical DSP and a PIC and being able to offer that system level even within a component offering, you know, that will help our customers deliver what we see as the most competitive combination of system performance, power, and yield. Many times, our module customers are working directly with hyperscalers the hyperscalers are active in you know, basically pointing to the components that they want to be put together within the modules that our module customers offer. And so the hyperscalers play a big role in both the component sale part of our business to our module customers as well as our ZF Optics. Modules that we are we are building ourselves. Long term, I think that, that is going to be a balance that we see that will continue. to where we are going to see that, in fact, our component sales and our module sales will be complementary in the sense that the broad part of the market will be addressed by components, and a very specific part of the market that is really focused on reliability, will be kind of a new product that is offered in that transceiver space. Operator: Your next question comes from the line of Vijay Rakesh with Mizuho. Your line is now open. Please go ahead. Vijay Rakesh: Yeah. Hi, Bill and Daniel. Just a quick question. You know, you mentioned just taking a step back, you mentioned 2027 is a stepping stone. And you are already growing, like, 85% year-on-year. As you look at know, as you look out to fiscal 28, can you give us some perspective on how to look at it? Obviously, AEC is growing, you know, might be, like 50% this year. You have ZF optics ramping. And SiPo. The z ZF optics and SiPo is, like $600 million. For fiscal 27, which kind of analyzes, like, a billion-plus run rate. And the as you mentioned, Active LED Cables as well. As you have all these 4 segments ramping, can you give us some perspective on how to look at fiscal 28? Thanks. William J. Brennan: Appreciate that. The conversation about fiscal 28 and 2029 and 2030 is something that is very active conversation within our leadership team at Credo. Let me first touch on ALC as a part of our portfolio. I think this is the ALC product we are bringing to market first is using MicroLED technology. And the promise of this technology is really to deliver the same reliability and the same power efficiencies at a core technology level as AECs. Key difference there is we will extend the length to 30 meters. And so it is going to--ALCs will represent our third differentiated pluggable transceiver solution. So, different things were we first kind of created the product category with AECs. Followed by ZF Optics, again, creating a new product category. ALCs will be the third leg of that stool. The bottom line is I looked at that pluggable transceiver market, and I think that is just step 1 for ALCs and the micro emitter technology. A next natural step forward on that is to apply that to what comes with the scale up opportunity. Because, again, in scale up, this is another technology alternative but the promise there is that at a core technology level, we would be addressing you know, some of the problems that have prohibited that market from taking off with you know, with solutions specifically related to reliability, availability, and serviceability. And so we view ALC as a big multibillion dollar opportunity. Followed by, you know, as big of an opportunity with, with scale up. And it is highly complementary to this to the suite of technologies that we brought to market. So the way that I think about the future, more specifically to answer your question is that we are trying to put ourselves in several multibillion dollar TAM opportunities. You can just analyze our portfolio across the pluggable space. And you can see that it is really tens of billions of dollars of opportunity that we are now gonna be addressing in our fiscal 28 timeline given the fact that ALCs will be part of the portfolio. And so we are trying to put ourselves in position to address a very large market. Our growth as a as a company will follow based on our success in executing with every customer. Think we are quite bullish on the opportunity, and that is without even talking about the massive opportunity that the entire industry has in front of us with scale up. Even think about Omniconnect. We have articulated in the past that is a multibillion dollar opportunity annually as well. So I think that as we think about fiscal 28, you are right. We think about outsized growth again for another year, but we think that will continue for the years that follow as well. Operator: Your next question comes from the line of Mark Lipacis with Evercore ISI. Your line is now open. Please go ahead. Analyst: Hi. Thanks for taking my question. Bill, I think for you, you know, optics is growing fast. it is in your market. Can you contrast how you are prosecuting the optics market? Compared to how you prosecuted the AEC market? I have to imagine there are some differences given you effectively created the AEC market. And maybe as part of that, what are the implications on the business model as optics becomes larger. And to the extent that you can talk about like, where you get leverage between these businesses on development and the supply chain and with your customers and where you need to build capabilities. Thank you. William J. Brennan: There is a pretty interesting contrast between the efforts that we pursued with AECs and some of the leverage and how it looks different this time with ZF Optics. With AECs, we imagined this product as being an extension to Copper, basically addressing the issues that our customers were facing as they were going to faster speeds. And they were having issues with DAX. We were surprised when we had customers pursuing us talking about really interesting innovations at a feature level--things like telemetry. Things like other system related rack level innovations, And we really opened that door to the customer base on feature set innovation. Our first customer, Microsoft, the reason that they converted to AECs was really the functionality that we offered We developed a solution that was smart enough to sense when the Tore port was failing or about to fail and then switching the data to a redundant Tore in a hitless manner. A really, really smart solution. in a cable format. Over time, the momentum built and this is over years. Momentum built because as speeds increased, it was clear that DAX were not going to cut it from a from a signal integrity but also from a from a form factor standpoint with the copper wires needing to become much, much thicker. So from a form factor standpoint and a signal integrity standpoint, many other customers started looking. And then again, I mean, if we look at our solutions today, many of them have really innovative feature set solutions. And so the growth happened over a product category creation. Happened over several years. As part of developing our solution and having it be a complete solution, and taking ownership of it, we developed a really differentiated way of coming to market from a qualification standpoint. The rigor that we put our solutions through is sometimes far beyond what our customer calls look like, and that includes having our customer switches, our customers' NICs running at speed as we are hammering the link, the entire link, not just our not just our AEC, but the entire link from NIC to switch. And the objective is to harden the solution, finding link weaknesses, and then hardening that through firmware modifications. So that was definitely something that we are leveraging now. As we bring ZF Optics to market. But the difference with ZF Optics was that AI happened. And AI networks were fundamentally different than say, front end networks, where there was a built-in redundancy within the 2 different tiers of, the network. And so we have had link flaps for a long time, but they just have not surfaced as a major concern. Because there was not any massive hit to the network. But now that we have got AI clusters, you got tens of thousands if not hundreds of thousands of links that are all interdependent, that if you start getting flaps on some of those links, it can affect the entire cluster to the point where you know, customers have talked about you know, losing GPU utilization on the on the order of greater than 10% or even approaching 20%. So there is a you know, with this with this new application, it was a perfect fit for following the playbook on AECs and doing interesting things very innovative things in an area where innovation had not happened. For many years. Working closely with customers and basically charting the path to at a system level be able to improve reliability of the network. That was really the difference. And it took some time to develop the hardware and the software solution. But we are seeing that the market is taking off a lot faster than AECs because we are addressing a pain point that exists. Clearly exists already. So this is you know, this is welcomed every time we have a conversation with the technical networking teams within the customer base. Operator: Your next question comes from the line of Suji Desilva with Roth Capital. Your line is now open. Please go ahead. Suji Desilva: Hi, Bill, Daniel, Dan, congrats on the progress, and the margins. You have given us a lot of color on the optical and kinda dug into how you are approaching it. It might be a good timely to revisit the competitive landscape and how you think competitors are approaching the markets you are approaching, whether, you are approaching it differently, or they are gonna be able to approach the feature driven approach the way you are or any other elements that are--kind of how you are doing it that really allow you to separate from the group? Because a lot of people talking about the same opportunities. William J. Brennan: Sure. I think there is a case to be made here about our go to market strategy. And the fact that we are owning the entire stack And I think when we look at the opportunity just at a transceiver level, starting with the SerDes, and then looking at it from a DSP and now a pick perspective, being vertically integrated gives huge advantage on your ability to deliver the best possible system solution, but it also gives you an advantage on COGS. Then you think about going to market with solution that is differentiated And the challenge is what are those features worth? And so I think we expect an advantage at a COGS level, but we also expect an advantage on an ASP level as we compare our solution to more standards based solutions in the market. I do think that long term, we are now the pacesetter on innovation in the optical space. The market needs it. And we are being pretty open with working with the standards groups on standardizing around some of the things that we are doing. And the challenge there is know, how can we innovate faster than the rest of the competition? Rest of the market. And I think we feel comfortable given the fact that we own the entire stack that is gonna lead to the same kind of success that we have had with AECs. Operator: Your next question and final question comes from the line of Christopher Rolland with Susquehanna. Your line is now open. Please go ahead. Christopher Rolland: Hi, guys. Thanks for the question, squeezing me in. And Bill, I will bite on your DSP plus pick integration that you have mentioned. quite a few times. I guess, first of all, if you could talk maybe a little bit more about your 2 dust wins. Do they include DSP integration? And if you could remind us kind of the economics for this part, for this market, and what it means to you guys, that would be great. William J. Brennan: Appreciate the question. The world we live in at a component level is quite competitive. And so just by just by proper protocol, we are not able to talk too specifically about exactly which of the major players that we are engaged with. I will say that these first 2 major design wins that we are talking about do not include the DSP. So there is upside potential with that. As we look at really co marketing the DSP and the picks long term. Right now, it is--the Dust team was really doing a great job with engaging deeply with major players in the industry. Amazing that a small team like that had such great traction. And I think it is evidence of the fact that the technical solution is absolutely leading edge in the market. Long term, I think there is gonna be a great opportunity for us to look at these 2 components and really bring a lot of benefits to the customer base. So I look at this as a great development in our overall portfolio, and going to be really promising long term for us. So I guess with that, we will we will wrap up the call. So I really appreciate you all attending. And thanks for the thoughtful questions. We look forward to the follow-up. Thanks so much. Operator: This concludes today's call. Thank you for attending. You may now disconnect. Before you buy stock in Credo Technology Group, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Credo Technology Group wasn’t one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $421,997!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,413,876!* That performance is why people listen. With a track record of beating the S&P 500 by nearly 5x, Stock Advisor offers a distinct advantage. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built for the long haul. See the 10 stocks » *Stock Advisor returns as of September 8, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Credo (CRDO) Q1 2027 Earnings Call Transcript was originally published by The Motley Fool

Credo Technology Group Holding Ltd CRDO reported stellar performance for the first quarter of fiscal 2027 yesterday, but investors seem wary. Shares are down 10% in pre-market trading today, despite quarterly revenues surpassing management’s guidance and the company maintaining an aggressive growth outlook for the year.Credo continues to benefit from the rapid buildout of artificial intelligence (AI) infrastructure, driving demand for its active electrical cables (“AEC”), optical solutions and retimers.However, the expectations now seem demanding as the next leg of growth hinges on a sharp ramp in the optical business. For investors evaluating CRDO today, the investment debate goes beyond the headline numbers and centers on whether its expanding opportunity set is sufficient to offset the associated execution risks. Credo reported fiscal first-quarter revenues of $479 million, up 10% sequentially and 115% year over year. It also beat the Zacks Consensus Estimate by 0.7%. The company has posted triple-digit year-over-year growth for seven consecutive quarters. Non-GAAP gross margin came in at 68%, compared with 67.6% in the prior-year quarter. Non-GAAP operating expenses increased to $95.2 million from $54.5 million in the prior-year quarter. The increase reflected continued investment in research and developmentNon-GAAP operating income rose to $230.6 million from $96.2 million, producing a non-GAAP operating margin of 48.2%. Non-GAAP net income margin reached 49.3% in the fiscal first quarter, compared with 44.1% in the year-ago quarter, underscoring the company’s ability to convert top-line growth into bottom-line profitability. Non-GAAP earnings per share came in at $1.20, up 130.8% and beat the consensus estimate by 2.6%. Image Source: Zacks Investment Research Cash flow from operations was $90.2 million, down from $92 million sequentially, primarily due to working-capital changes. Capital expenditures were $7.3 million, resulting in free cash flow of $82.9 millionCash and cash equivalents and short-term investments stood at $764.3 million, a decrease of $679 million from the previous quarter due to the cash outlay for the DustPhotonics acquisition.For the fiscal second quarter, management expects revenues between $525 million and $535 million. Non-GAAP gross margin is expected to be between 67% and 69%, and non-GAAP operating expenses are expected to be $100-$105 million. Credo continues to forecast more than 85% year-over-year revenue growth for fiscal 2027, aided by an expected second-half inflection CRDO’s focus on high-performance, energy-efficient connectivity solutions gives it strategic relevance as hyperscalers and cloud service providers overhaul their network architectures.As AI clusters grow to hundreds of thousands of GPUs, connectivity is emerging as a critical constraint. Management highlighted that the challenge is no longer just bandwidth, but also reliability, power efficiency, signal integrity, telemetry and serviceability.Credo believes its system-level approach, which combines silicon, firmware, manufacturing tests and qualification, remains a key differentiator. AEC is a system-level product for CRDO and its core growth engine. The company now has deep relationships with five hyperscalers, alongside expanding engagement with Neocloud customers. Credo continues to see higher AEC penetration within existing customers as deployments scale, while the shift toward 200-gig-per-lane 1.6T ports provides another growth opportunity. The most significant shift in Credo’s business mix is unfolding in its optical segment. Management continues to project more than $600 million in optical revenues, with ZeroFlap optics, silicon photonics PICs and optical DSPs each contributing more than $100 million. Credo added that its optical DSP business generated “record revenues” in the fiscal first quarter. The company also recognized its first silicon-photonics PIC revenues following the DustPhotonics acquisition, with initial wins involving 800-gig and 1.6T optical transceivers.ZeroFlap Optics represents another important opportunity. Management noted that production shipments are underway, and it expects additional fiscal 2027 customer ramps across both 800-gig and 1.6T products involving hyperscalers and Neocloud operators.Beyond AEC and optics, the retimer business is another lucrative opportunity. Management noted that the retimer business also delivered record quarterly revenues, supported by scale-up deployments of Screaming Eagle at 100-gig-per-lane and initial contributions from its 200-gig-per-lane Blue Heron retimer.Longer-term opportunities include Active LED Cables and OmniConnect. Credo continues to expect initial ALC revenues in fiscal 2028. Further, management added that OmniConnect could represent “thousands of dollars of Credo content per GPU”, with revenues also expected to begin in fiscal 2028. CRDO's growth does not come without meaningful risks. In the fiscal first quarter, four customers generated roughly 84% of quarterly revenues. Customer concentration is a major concern as it exposes the company to shifts in customer spending decisions and could materially affect results.Execution risk is another risk factor. Much of the expected growth in fiscal 2027 is dependent on a successful ramp in the optical business. Any delay in deployment or broader industry transitions could affect this ramp.Macroeconomic uncertainties and exposure to the AI investment cycle amid increasing market competition from the likes of Broadcom AVGO, Marvell Technology MRVL and Astera Labs ALAB may also impact CRDO’s growth trajectory. CRDO is trading at a forward 12-month price/earnings ratio of 30.09X, higher than the Electronic-Semiconductors sector’s multiple of 13.31X. Image Source: Zacks Investment Research The market is pricing in the explosive revenue momentum, strong profitability and expanding hyperscaler relationships. However, this leaves very little room for error. Any execution missteps or demand-supply chain troubles could lead to heavy volatility in the stock.In comparison, Broadcom trades at a forward 12-month P/E multiple of 20.64X, while Astera Labs and Marvell are trading at a multiple of 50.99X and 36.69X, respectively.Over the past year, CRDO has gained 65.6%. In comparison, the Electronic-Semiconductors industry, the broader Computer and Technology sector and the S&P 500 are up 46.1%, 27.2% and 19.7%, respectively. Image Source: Zacks Investment Research Investor enthusiasm around AI buildout has benefited other semiconductor stocks as well. Marvell Technology, Broadcom and Astera Labs have gained 237.7%, 22.3% and 58.5%, respectively. Credo's fiscal first-quarter performance reinforces the strength of its fundamental growth story. The company is aligned with one of the most powerful and durable trends in technology, the rise of AI-driven infrastructure. The expanding portfolio is particularly encouraging. Optical DSPs, silicon-photonics PICs, ZeroFlap Optics, retimers, ALCs and OmniConnect could steadily broaden Credo's addressable market and reduce its dependence on a single product category over time.However, customer concentration, increasing expenses and the need to execute a substantial second-half optical ramp leave little room for disappointment.The long-term growth opportunity remains compelling, but the near-term risk-reward warrants some caution. Existing investors may stay put, but new investors would be better off waiting for a favorable entry point. At present, CRDO carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Credo Technology Group Holding Ltd. (CRDO) : Free Stock Analysis Report Marvell Technology, Inc. (MRVL) : Free Stock Analysis Report Broadcom Inc. (AVGO) : Free Stock Analysis Report Astera Labs, Inc. (ALAB) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Credo Technology Group Holding Ltd. (CRDO) came out with quarterly earnings of $1.2 per share, beating the Zacks Consensus Estimate of $1.17 per share. This compares to earnings of $0.52 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +2.56%. A quarter ago, it was expected that this company would post earnings of $1.03 per share when it actually produced earnings of $1.16, delivering a surprise of +12.62%. Over the last four quarters, the company has surpassed consensus EPS estimates four times. Credo Technology Group, which belongs to the Zacks Electronics - Semiconductors industry, posted revenues of $479 million for the quarter ended July 2026, surpassing the Zacks Consensus Estimate by 0.69%. This compares to year-ago revenues of $223.07 million. The company has topped consensus revenue estimates four times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Credo Technology Group shares have added about 57.2% since the beginning of the year versus the S&P 500's gain of 12.3%. While Credo Technology Group has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Credo Technology Group was favorable. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #2 (Buy) for the stock. So, the shares are expected to outperform the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $1.25 on $502.69 million in revenues for the coming quarter and $6.02 on $2.35 billion in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Electronics - Semiconductors is currently in the top 17% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Ambarella (AMBA), another stock in the same industry, has yet to report results for the quarter ended July 2026. The results are expected to be released on September 3. This video-compression chipmaker is expected to post quarterly earnings of $0.16 per share in its upcoming report, which represents a year-over-year change of +6.7%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. Ambarella's revenues are expected to be $108.03 million, up 13.1% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Credo Technology Group Holding Ltd. (CRDO) : Free Stock Analysis Report Ambarella, Inc. (AMBA) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Interested in Credo Technology Group Holding Ltd.? Here are five stocks we like better. Record growth continued: Credo reported fiscal Q1 2027 revenue of $479 million, up 115% year over year, with non-GAAP net income more than doubling to $236.3 million. Management expects Q2 revenue of $525 million to $535 million and more than 85% full-year revenue growth. Optics is becoming a major growth engine: Credo reiterated its forecast for more than $600 million in optical revenue during fiscal 2027, supported by optical DSPs, silicon photonics products acquired through DustPhotonics, and ZeroFlap Optics. Investment and concentration remain key considerations: Operating expenses are expected to rise about 55% this year as Credo funds product development, while four customers accounted for 84% of first-quarter revenue despite ongoing efforts to diversify its customer base. AMD’s Helios Launch Could Create Winners Beyond AMD Stock Credo Technology Group (NASDAQ:CRDO) reported record fiscal first-quarter 2027 revenue of $479 million, up 10% sequentially and 115% from a year earlier, as demand for AI infrastructure connectivity products continued to expand. Chief Executive Officer Bill Brennan said the company’s growth has been supported by rising AI cluster sizes, faster data rates and increasing requirements for reliable, power-efficient connectivity. Credo recorded its seventh consecutive quarter of triple-digit year-over-year revenue growth, according to management. → OneMain’s Yield Comes With a Catch 5 AI Stocks Are Pulling Back—Which Growth Catalysts Still Look Strongest? “AECs continue to grow. Optics is growing faster,” Brennan said, referring to active electrical cables and the company’s expanding optical portfolio. Chief Financial Officer Dan Fleming said non-GAAP gross margin was 68% in the first quarter, while non-GAAP operating income totaled $230.6 million and non-GAAP operating margin was 48.2%. → Apple’s Foldable iPhone Could Be a Catalyst, But Not a Cure-All 3 Quiet AI Revenue Accelerators With Sales Growth Outpacing Peers Non-GAAP net income reached a record $236.3 million, up 4% sequentially and more than doubling from the prior-year period. Non-GAAP net margin was 49.3%. Cash flow from operations was $90.2 million, while capital expenditures were $7.3 million, resulting in free cash flow of $82.9 million. The company ended the quarter with $764.3 million in cash and equivalents, down $679 million from the prior quarter primarily because of the cash outlay for its DustPhotonics acquisition. Ending inventory rose $62.2 million sequentially to $313.1 million. → Strike a Balance Between Growth and Stability With These 3 Names Ready to Rally For the fiscal second quarter, Credo forecast: Revenue of $525 million to $535 million. Non-GAAP gross margin of 67% to 69%. Non-GAAP operating expenses of $100 million to $105 million. Diluted weighted-average share count of about 200 million shares. Fleming said the outlook is based on the current tariff regime, which he described as fluid. For fiscal 2027, the company continues to expect more than 85% year-over-year total revenue growth, non-GAAP gross margin broadly in line with fiscal 2026 levels, and non-GAAP net margin near 50%. Management reiterated its expectation for more than $600 million in optical revenue during fiscal 2027. The company expects its optical digital signal processors, silicon photonics PICs and ZeroFlap Optics offerings to each contribute more than $100 million during the year. Credo’s optical DSP business generated record first-quarter revenue, including deployments of 50G- and 100G-per-lane products. Brennan said the company expects initial 1.6T DSP revenue later in fiscal 2027 and sees a continuing market for 800G ports during the transition to higher speeds. The company also recognized its first silicon photonics PIC revenue following the DustPhotonics acquisition. Initial wins are in 800G and 1.6T optical transceivers, with products expected to ramp through the year. Brennan said the first two major DustPhotonics-related design wins do not include Credo DSPs, leaving potential for combined DSP and PIC sales over time. Credo is also pursuing near-package optics, or NPO, for scale-up networks, where management expects denser form factors will be needed. The company joined an Open Compute Project MSA consortium and expects confirmed NPO design wins to begin ramping in fiscal 2028. Brennan said Credo plans to lead with silicon photonics PICs in NPO-related opportunities while also considering complete optical-engine offerings over the longer term. Production shipments of ZeroFlap Optics are underway, with additional customer ramps expected in fiscal 2027 across 800G and 1.6T products for hyperscalers and neo clouds. The offering combines optical hardware, Credo’s PILOT software platform and switch-level software development kit integration to monitor link health and identify potential instability. Brennan said the system is designed to identify deteriorating link conditions before a failure occurs, allowing customers to mitigate issues. He said telemetry can track measures including eye height, signal-to-noise ratio and post-forward-error-correction histograms, and can also help identify potential electrostatic-discharge damage or dust-related fiber issues. Active electrical cables remained Credo’s largest business and continued to grow, supported by relationships with five hyperscalers and expanding neo cloud engagement. The company expects higher data rates, including a move toward 200G per lane and 1.6T ports, to provide another growth driver. Brennan said AEC contributions at 1.6T should begin in the second half of fiscal 2027 and become more significant in fiscal 2028. Retimer revenue also reached a record in the first quarter, driven primarily by scale-up deployments of the Screaming Eagle product at 100G per lane and initial contributions from Blue Heron at 200G per lane. Looking further ahead, Credo plans to demonstrate Active LED Cable solutions at OFC in October and remains on track for initial revenue in fiscal 2028. The company also expects OmniConnect SerDes and Weaver Gearbox solutions, aimed at memory bandwidth and capacity constraints in AI inference systems, to begin contributing revenue in fiscal 2028. Credo’s four largest customers represented 33%, 28%, 13% and 10% of first-quarter revenue, respectively, Fleming said. Management expects three to four customers to account for more than 10% of revenue in coming quarters while continuing to diversify across hyperscalers, neo clouds and other customers. First-quarter non-GAAP operating expenses rose 16% sequentially to $95.2 million, exceeding the company’s guidance range because of research-and-development investment. For the full fiscal year, Credo expects operating expenses to rise about 55% year over year, below its anticipated revenue growth rate, as it funds new product development and broader market opportunities. Credo Technology Group, Inc (NASDAQ: CRDO) is a fabless semiconductor company that develops high‑speed connectivity solutions for cloud, enterprise and telecommunications infrastructure. The company focuses on semiconductors and related IP that enable reliable, low‑latency movement of large volumes of data between servers, switches and optical modules in data centers and network equipment. Credo's product portfolio centers on high‑speed analog and mixed‑signal devices designed to preserve signal integrity and extend reach over copper and optical links. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Credo Technology Group Q1 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for September 2026.

SAN JOSE, Calif., September 01, 2026--(BUSINESS WIRE)--Credo Technology Group Holding Ltd (Credo) (Nasdaq: CRDO), an innovator in providing connectivity at scale through fast, reliable, and energy-efficient system solutions, today announced financial results for the first quarter of fiscal year 2027, ended August 1, 2026. First Quarter of Fiscal Year 2027 Financial Highlights Revenue of $479.0 million, grew by 9.6% quarter over quarter and 114.7% year over year GAAP gross margin of 64.5% and non-GAAP gross margin of 68.0% GAAP operating expenses of $188.4 million and non-GAAP operating expenses of $95.2 million GAAP net income of $129.4 million and non-GAAP net income of $236.3 million GAAP diluted net income per share of $0.67 and non-GAAP diluted net income per share of $1.20 Ending cash and short-term investment balance of $764.3 million Management Commentary Bill Brennan, Credo’s President and Chief Executive Officer, stated, "During the first quarter of fiscal 2027, Credo delivered revenue of $479.0 million and non-GAAP net income of $236.3 million, representing 115% and 140% year-over-year growth respectively. Our portfolio now spans connectivity from millimeters to kilometers, with solutions across optics and copper. As AI infrastructure scales, we will continue to provide an innovative suite of reliable and energy-efficient connectivity solutions for the data center." Second Quarter of Fiscal 2027 Financial Outlook Revenue is expected to be between $525 million and $535 million GAAP gross margin is expected to be between 62.9% and 64.9%, and non-GAAP gross margin is expected to be between 67.0% and 69.0% GAAP operating expenses are expected to be between $199 million and $204 million, and non-GAAP operating expenses are expected to be between $100 million and $105 million Conference Call Credo will conduct a conference call on Tuesday, September 1, 2026, at 2:00 p.m. Pacific Time to discuss its financial results for the first quarter of fiscal year 2027, ended August 1, 2026. Interested parties may join the conference call by dialing 833-461-5787 (toll-free) or +1 585-542-9983 (international). The conference ID for the call is 702097177. It is recommended that participants dial in to the call at least 10 minutes before the start of the call. A live webcast of the conference call will be available on Credo’s Investor Relations website at http://investors.credosemi.com. A replay of the webcast will be available via the web at http://investors.credosemi.com. Discussion of Non-GAAP Financial Measures This press release contains references to the non-GAAP financial measures of non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income (loss), non-GAAP operating income (loss) margin, non-GAAP net income (loss) and non-GAAP diluted net income (loss) per share. Reconciliation of these non-GAAP measures to their comparable GAAP measures is included below. This non-GAAP information should not be construed as an alternative to the reported results determined in accordance with GAAP. The non-GAAP financial measures that Credo presents may not be comparable to similarly titled measures of other companies and other companies may not calculate such measures in the same manner as we do. Non-GAAP financial measures exclude the effect of share-based compensation expenses, acquisition and integration related costs, amortization of acquired intangible assets, asset impairment and related charges (if applicable), and the related tax effect adjustment to the provision for income taxes. Credo uses a full-year non-GAAP tax rate to compute the non-GAAP tax provision. This full-year non-GAAP tax rate is based on Credo’s annual GAAP income, adjusted to exclude non-GAAP items, as well as the effects of significant non-recurring and period-specific tax items which vary in size and frequency. Credo’s non-GAAP tax rate is determined on an annual basis and may be adjusted during the year to take into account events that may materially affect the non-GAAP tax rate, such as tax law changes, significant changes in Credo’s geographic mix of revenue and expenses or changes to Credo’s corporate structure. GAAP diluted net income (loss) per share is calculated using basic weighted average shares outstanding when there is a GAAP net loss, and calculated using diluted weighted average shares outstanding when there is a GAAP net income. Non-GAAP diluted net income (loss) per share is calculated using basic weighted average shares outstanding when there is a non-GAAP net loss, and calculated using non-GAAP diluted weighted average shares outstanding when there is a non-GAAP net income. Non-GAAP adjustment for the number of shares used in the diluted per share calculations excludes the impact of share-based compensation expenses expected to be incurred in future periods and not yet recognized in the financial statements, which would otherwise be assumed to be used to repurchase shares under the GAAP treasury stock method. Credo believes that the presentation of non-GAAP financial measures provides important supplemental information to management and investors regarding financial and business trends relating to Credo’s financial condition and results of operations. While Credo uses non-GAAP financial measures as a tool to enhance its understanding of certain aspects of its financial performance, Credo does not consider these measures to be a substitute for, or superior to, financial measures calculated in accordance with GAAP. Consistent with this approach, Credo believes that disclosing non-GAAP financial measures to the readers of its financial statements provides such readers with useful supplemental data that, while not a substitute for GAAP financial measures, allows for greater transparency in the review of its financial and operational performance. Externally, management believes that investors may find Credo’s non-GAAP financial measures useful in their assessment of Credo's operating performance and the valuation of Credo. Internally, Credo's non-GAAP financial measures are used in the following areas: Management’s evaluation of Credo’s operating performance; Management’s establishment of internal operating budgets; and Management’s performance comparisons with internal forecasts and targeted business models. Non-GAAP financial measures have limitations in that they do not reflect all of the costs associated with the operations of Credo’s business as determined in accordance with GAAP. As a result, you should not consider these measures in isolation or as a substitute for analysis of Credo’s results as reported under GAAP. The exclusion of the above items from our GAAP financial metrics does not necessarily mean that these costs are unusual or infrequent. Forward-Looking Statements under the Private Securities Litigation Reform Act of 1995 This press release contains forward-looking statements within the meaning of the federal securities laws. All statements other than statements of historical fact could be deemed forward-looking statements, including, but not limited to, any statements regarding: launches of new or expansion of existing products or services; technology developments and innovation; our plans, strategies or objectives with respect to future operations; financial outlook; future financial results; expectations regarding the markets and industries in which Credo conducts business; and assumptions underlying any of the foregoing. Words such as "anticipates," "expects," "intends," "plans," "projects," "believes," "seeks," "estimates," "can," "may," "will," "would," "outlook," "forecast," "targets" and similar expressions, or their negatives, may identify such forward-looking statements. These statements are not guarantees of results and should not be considered as an indication of future activity or future performance. Forward-looking statements are predictions, projections and other statements about future events that are based on current expectations and assumptions and, as a result, are subject to risks and uncertainties that may cause actual events or results to differ materially from those described in this press release. Readers are encouraged to review risk factors and all other disclosures appearing in Credo’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission (SEC) on June 15, 2026, as well as Credo’s other filings with the SEC, for further information on risks and uncertainties that could affect Credo’s business, financial condition and results of operations. Copies of these filings are available from the SEC, Credo’s website or Credo’s investor relations department. Forward-looking statements speak only as of the date they are made. Credo assumes no obligation to update or revise any forward-looking statements as a result of new information, future events or otherwise, except as required by law. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date herein. About Credo Credo’s mission is to transform connectivity at scale through fast, reliable and energy-efficient system solutions. Our high-speed copper and optical interconnect products deliver industry-leading power and performance from chip to cluster to meet the ever-expanding data infrastructure demands of AI. Our vertically integrated connectivity portfolio is comprised of our flagship purple ZeroFlap (ZF) Active Electrical Cables (AECs) and ZF optical transceivers; optical components including silicon photonics-based photonic integrated circuits (SiPho PICs) and DSPs; OmniConnect AI memory and chip-to-chip interconnect; and retimers for Ethernet and PCIe—supported by our PILOT diagnostic and analytics software platform. Credo innovations enable our customers to connect the systems that connect the world. For more information, please visit https://www.credosemi.com. Credo, the Credo logo and the color purple when associated with AECs are registered trademarks of Credo Technology Group Limited in the United States and other jurisdictions. All other trademarks referenced herein are the property of their respective owners. View source version on businesswire.com: https://www.businesswire.com/news/home/20260901825270/en/ Contacts Investor Contact: Dan O’[email protected]