Contents
Key Highlights
- Credo Technology delivered an all-time high Q3 revenue of $407 million, representing a 52% sequential increase and over 200% growth year-over-year.
- Revenue concentration remained high, with three hyperscale clients contributing 88% of total sales at 39%, 32%, and 17% each.
- The company achieved a non-GAAP gross margin of 68.6%, while operating cash flow surged to a record $166.2 million.
- Fourth quarter revenue guidance stands at $425–$435 million, with fiscal year 2027 projected to increase by over 50% year-over-year.
- The company completed the Comera acquisition and accelerated the ZeroFlap optics production timeline to Q1 of fiscal 2027.
Credo Technology Group delivered an outstanding third quarter performance for fiscal 2026, announcing revenue of $407 million—a 52% jump from the previous quarter and a staggering 200% increase compared to the year-ago period.
CEO William Brennan characterized this period as the company’s “most accelerated growth phase” to date. Credo has already more than doubled its revenue between fiscal years 2024 and 2025, and management now anticipates tripling that performance in fiscal 2026.
The results came in at the upper range of Credo’s updated projections, as confirmed by CFO Daniel Fleming.
Credo Technology Group Holding Ltd, CRDO
A concentrated customer base powered the quarter’s performance. The top customer represented 39% of total revenue, followed by 32% from the second-largest client, and 17% from the third. Management indicated this pattern will persist, with three to four major customers expected to exceed the 10% revenue threshold in upcoming quarters.
Sequential growth occurred across all three of Credo’s primary customers in Q3, which Fleming identified as the key driver behind the company’s outperformance.
Profitability and Financial Position
The non-GAAP gross margin reached 68.6%, exceeding the high end of guidance and marking a 92 basis point improvement from the prior quarter. Non-GAAP operating margin stood at 49.6%, while net margin climbed to 51.3%.
Non-GAAP operating expenses totaled $77.4 million, representing a 35% sequential rise driven primarily by increased R&D spending.
Operating cash flow reached an all-time high of $166.2 million. After accounting for $26.5 million in capital expenditures—predominantly for production mask sets—free cash flow came to $139.7 million.
Credo concluded the quarter with $1.3 billion in cash on hand, an increase of $487.9 million from Q2, reflecting proceeds from an at-the-market equity offering conducted between October and December, combined with strong free cash flow generation.
Inventory balances rose to $208 million, up $57.8 million sequentially.
Product Development and Strategic Initiatives
Brennan provided updates on several product initiatives across Credo’s expanding portfolio.
Production of ZeroFlap optics has already commenced with neocloud partner TensorWave. The broader commercial rollout has been accelerated to fiscal Q1 2027—earlier than the previously projected second half of fiscal 2027—with more than four customers already secured.
Active LED Cables (ALCs), which incorporate MicroLED technology from Credo’s HyperLUM acquisition, are engineered to support distances up to 30 meters. Sampling is scheduled for fiscal 2027 with full production targeted for fiscal 2028.
OmniConnect, a gearbox solution designed for XPU connectivity, is likewise targeting a fiscal 2028 production launch. Customer Positron has committed to integrating the technology into an inference XPU architecture.
Regarding Active Electrical Cables (AECs), Brennan noted that market adoption remains in nascent stages but is expanding, with a fifth hyperscale customer now added to Credo’s client roster. He emphasized that ZeroFlap AECs deliver up to 1,000 times superior reliability compared to conventional laser optics while consuming approximately half the power.
Credo finalized its acquisition of Comera (alternatively known as CoMira Solutions) during the quarter. Brennan highlighted Comera’s expertise in protocol IP, error correction, and security IP, noting that the two companies have collaborated since 2022.
Forward Guidance
For the fourth quarter of fiscal 2026, Credo projected revenue between $425 million and $435 million, with non-GAAP gross margin expected in the 64% to 66% range. Fleming emphasized that the guidance assumes the “current tariff regime,” which he acknowledged remains uncertain.
Looking ahead to fiscal 2027, management projected year-over-year revenue growth exceeding 50%, with sequential growth in the mid-single digit range anticipated at the start of the fiscal year.
Shares closed up 1.74% on the day of the announcement, though the stock remains down 21.98% year-to-date, with a market capitalization of approximately $20.28 billion.
