Loading...
01/10 19:04
Loading...
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Credo's earnings call highlighted strong financial performance with 126% revenue growth and a 65% gross margin. Product innovation and customer diversification, including new hyperscaler contributions, were emphasized. The Q&A session revealed optimism in addressing AI connectivity bottlenecks and expanding AEC adoption. Despite management's lack of specificity on some aspects, the overall guidance is optimistic, expecting revenue to exceed $800 million with expanding margins. The positive sentiment is bolstered by the resolution of patent lawsuits and anticipated growth in the optical DSP market, suggesting a likely stock price increase of 2% to 8%.
Revenue $223.1 million, up 31% sequentially and up 274% year-over-year. The increase was driven by strong demand for AI-driven infrastructure and connectivity solutions.
Product Revenue $217.1 million, up 31% sequentially and up 279% year-over-year. Growth was attributed to the AEC product line achieving record revenue levels and increasing scale.
Non-GAAP Gross Margin 67.6%, up 20 basis points sequentially and up 517 basis points year-over-year. The improvement was due to increasing scale.
Non-GAAP Operating Income $96.2 million, up from $62.5 million in Q4, reflecting a 31% sequential top-line growth and mid-single-digit growth in operating expenses.
Non-GAAP Operating Margin 43.1%, up from 36.8% in the prior quarter, a sequential increase of 635 basis points, driven by significant leverage in the business.
Non-GAAP Net Income $98.3 million, a record high, up 51% sequentially from $65.3 million in Q4. This reflects strong operational execution and revenue growth.
Cash Flow from Operations $54.2 million, down $3.7 million sequentially due to increases in working capital.
Free Cash Flow $51.3 million, down slightly from $54.2 million in the fourth quarter, primarily due to increased working capital.
Cash and Equivalents $479.6 million, an increase of $48.3 million from the fourth quarter, indicating strong cash generation.
Inventory $116.7 million, up $26.6 million sequentially, reflecting increased production and working capital needs.
Active Electrical Cable (AEC) Product Line: Continued robust growth driven by a diverse customer base, with three hyperscalers contributing over 10% of revenue. A fourth hyperscaler began contributing material revenue in Q1, expected to grow throughout the fiscal year. AEC adoption is expanding across the industry, with solutions supporting data rates up to 1.6 terabits per second.
Optical Market: Strong momentum sustained, with a goal to double optical revenue in fiscal '26. Delivering cutting-edge DSP solutions to optical module customers and hyperscale end users. Expanding TAM for both copper and optical connectivity solutions.
Ethernet Retimer Business: Achieved strong results in Q1, with recently launched PCIe retimer family gaining traction. Expected PCIe design wins in calendar '25 and production revenue in calendar '26. Broadens TAM with a focus on 200-gig per lane scale-up solutions.
Customer Diversification: Three hyperscalers each contributed over 10% of revenue, with a fourth hyperscaler starting to contribute. Customer base diversification is expected to strengthen further in fiscal '26.
AI Infrastructure Demand: Growth fueled by surging demand for AI-driven infrastructure, with customers scaling deployments and adopting advanced connectivity solutions.
Revenue Growth: Revenue of $223 million in Q1, up 31% sequentially and 274% year-over-year. Non-GAAP gross margin at 67.6%, with nearly $100 million in non-GAAP net income.
Operational Efficiency: Non-GAAP operating margin increased to 43.1% in Q1, driven by 31% sequential top-line growth and mid-single-digit OpEx growth.
System-Level Approach: Credo's system-level design approach integrates SerDes technology, IC design, and production, driving innovation and competitive edge. Focus on PCIe AECs and advanced products for future growth.
Optical Connectivity Focus: Strategic prioritization of optical solutions as a cornerstone of the product roadmap, while maintaining a presence in copper connectivity.
Forward-looking statements: The company acknowledges risks and uncertainties that could cause actual results to differ materially from forward-looking statements. These include factors that management cannot predict or assess fully.
Customer concentration: Three hyperscalers contributed over 10% of revenue, indicating a reliance on a few key customers. This concentration poses a risk if any of these customers reduce their orders or switch to competitors.
Nonlinear growth patterns: Shipment timing may lead to uneven growth patterns at the customer level, potentially impacting revenue predictability.
Market competition: The company operates in a highly competitive market, particularly in the AEC and optical connectivity sectors, which could pressure margins and market share.
Technological shifts: The industry debate over copper versus optical connectivity solutions presents a risk. While copper remains prevalent, the company is prioritizing optical solutions, which may not align with all customer needs.
Inventory levels: Ending inventory increased significantly to $116.7 million, which could lead to potential write-downs or cash flow issues if demand does not meet expectations.
Tariff regime: The current tariff regime is described as fluid, posing risks to cost structures and pricing strategies.
Revenue Expectations: Credo expects Q2 fiscal '26 revenue to be between $230 million and $240 million, representing a 5% sequential growth at the midpoint. For fiscal year '26, the company anticipates approximately 120% year-over-year revenue growth.
Gross Margin Projections: Non-GAAP gross margin for Q2 fiscal '26 is expected to range between 64% and 66%. The company also expects to maintain a non-GAAP net margin of approximately 40% for fiscal year '26.
Customer Diversification: Credo expects its top 3 customers from Q1 to grow significantly year-over-year in fiscal year '26. Additionally, a fourth customer is expected to surpass the 10% revenue threshold for the year, further diversifying the customer base.
Product Line Growth: The AEC product line is anticipated to experience significant year-over-year growth, driven by customer forecasts and scaling deployments by data center partners. The optical business is on track to double its revenue in fiscal '26, and the PCIe retimer family is expected to secure design wins in calendar '25 with production revenue in calendar '26.
Market Trends and Opportunities: Credo foresees multiple waves of growth opportunities in the medium and long term, driven by evolving scale-out and scale-up networks and next-generation training and inference architectures. The company is well-positioned to capitalize on the industry shift to 200-gig per lane scale-up solutions.
The selected topic was not discussed during the call.
The earnings call summary and Q&A session reflect strong financial performance, optimistic guidance, and strategic growth initiatives. Credo's expectation of 120% YoY revenue growth, expanding customer base, and product line growth are positive indicators. While management avoided specific details on ASP uplift and timeline for a new 10% customer, the overall sentiment remains positive with a focus on system-level solutions and strong market positioning. The lack of market cap information limits precise impact prediction, but the positive outlook suggests a stock price increase in the short term.
Credo's earnings call highlighted strong financial performance with 126% revenue growth and a 65% gross margin. Product innovation and customer diversification, including new hyperscaler contributions, were emphasized. The Q&A session revealed optimism in addressing AI connectivity bottlenecks and expanding AEC adoption. Despite management's lack of specificity on some aspects, the overall guidance is optimistic, expecting revenue to exceed $800 million with expanding margins. The positive sentiment is bolstered by the resolution of patent lawsuits and anticipated growth in the optical DSP market, suggesting a likely stock price increase of 2% to 8%.
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.
No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
