Will Credo's Strong Cash Position Aid in Capturing AI Opportunities?

Credo Technology Group Holding Ltd CRDO ended fiscal 2025 strongly with revenue growth of 126% and a fortified balance sheet with a cash position of $431.3 million and no debt. The company generated fourth-quarter fiscal 2025 cash flow from operating activities of $57.8 million, up $53.6 million from the third quarter, driven by strong cash collections from the product ramp. Management has signaled confidence that this financial flexibility will continue to fuel the next leg of growth, while maintaining a considerable cash buffer.

As AI reshapes the data center architectures, there is an accelerating demand for high-speed connectivity solutions. Credo lies at the intersection of AI and data center build-outs with its active electrical cables, optical Digital Signal Processors and PCIe retimers solutions that address the growing need for high-speed, low-power connectivity in the data center space.

Moreover, Credo's system-level approach provides it with a competitive edge. It owns the entire stack of SerDes IP, Retimer ICs, system-level design, qualification and production. This integrated approach allows faster innovation cycles and strong cost efficiency.

For fiscal 2026, Credo anticipates revenues to surpass $800 million, implying more than 85% year-over-year growth. Non-GAAP operating expenses are expected to grow at less than half the revenue growth rate, driving non-GAAP net margin to nearly 40%, highlighting operational discipline even as the company ramps. For a company riding the AI infrastructure wave, this liquidity is a potential accelerator to seize revenue opportunities.

However, challenges remain. Increasing market competition and macroeconomic uncertainties amid tariff troubles may impact CRDO’s growth trajectory. Credo competes with semiconductor giants like Broadcom AVGO and Marvell Technology MRVL. Customer concentration is high, with three hyperscalers each accounting for more than 10% of revenues and inventories rose sharply in the fiscal fourth quarter, underscoring the risks of demand shifts. Amid all, this depends on management’s execution to utilize its financial firepower judiciously to boost innovation and secure strategic wins while deftly managing risks and challenges. 

Taking a Look at Broadcom and Marvell’s Cash Position

Broadcom is one of the giants in the semiconductor space. As of May 4, 2025, cash and cash equivalents were $9.47 billion, giving enough flexibility to AVGO to execute M&A, boost R&D, and expand manufacturing capacity amid the AI boom. Broadcom generated $6.55 billion in cash flow from operations, while free cash flow was $6.41 billion in the last reported quarter.

However, AVGO’s acquisition-driven growth strategy (mainly VMware acquisition) had led to a hefty debt on its balance sheet. Total debt (including the current portion of $5.53 billion) was $67.28 billion at the end of last quarter. Notably, ample free cash flow generation offers a cushion for servicing/reducing its debt.

Marvell had about $885.9 million in cash and cash equivalents at the end of the last reported quarter. The company is using its cash pile to capture AI-driven opportunities in cloud and data center infrastructure through scaling of the R&D investment. Higher demand for AI-driven custom silicon and strong shipments of electro-optics products for AI and cloud applications are driving data-center revenues for Marvell.

The company expects data-center revenues to increase in the mid-single-digit range sequentially and maintain strong year-over-year growth. Like AVGO, Marvell too has a highly leveraged balance sheet with a long-term debt of $2.98 billion as of May 3, 2025.

CRDO Price Performance, Valuation and Estimates

Shares of CRDO gained 14.1% in the past month compared with the Electronics-Semiconductors industry’s growth of 0.2%.

In terms of the forward 12-month Price/Sales ratio, CRDO is trading at 21.01, higher than the Electronic-Semiconductors sector’s multiple of 8.54.

The Zacks Consensus Estimate for CRDO earnings for fiscal 2026 has remained unchanged over the past 60 days.

CRDO currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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