CRDO Guides 120% Growth in Fiscal 2026: Will the Momentum Sustain?

Credo Technology Group Holding Ltd CRDO is witnessing strong demand from hyperscalers and data center operators as AI infrastructure investment accelerates. In the first quarter of fiscal 2026, CRDO’s revenues surged 31% sequentially and a staggering 274% year over year to $223.1 million. The number far exceeded management’s revenue guidance of $185 million to $195 million.

For fiscal 2026, the company anticipates mid-single-digit sequential revenue growth, resulting in roughly 120% year-over-year growth. The company had earlier expected revenues to surpass $800 million, implying more than 85% year-over-year growth. With multiple growth drivers, the momentum seems to be sustainable.

Credo lies at the intersection of AI and data center build-outs with its active electrical cables (“AEC”), optical Digital Signal Processors (“DSP”) and PCIe retimer solutions that address the growing need for high-speed, low-power connectivity in the data center space.

AEC product line is the company’s key growth driver. In the last reported quarter, the AEC product line increased by healthy double digits sequentially. The adoption of rack-to-rack deployments is expected to boost further revenues from this product line. The demand for AECs is increasing as these offer up to 1,000 times more reliability with 50% lower power consumption than optical solutions, added CRDO.

Strength in the optical and retimer businesses is another key catalyst. Its optical DSP segment maintained strong momentum, positioning the company to achieve a doubling of optical revenues again in the current fiscal year. CRDO added that recently launched PCIe retimer solutions were gaining “significant traction” and expects PCIe design wins in 2025 with production revenues in 2026. It is looking to capture the opportunity presented by the industry’s shift to 200-gig per lane scale-up solutions. It is investing heavily in both copper and optical solutions to diversify its market position.

Moreover, the system-level approach provides it with a strong competitive moat. 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.

However, challenges persist. Given the lucrative market, the competition in this space is intensifying rapidly. Credo competes with semiconductor bigwigs like Broadcom AVGO, Marvell Technology and new players like Astera Labs ALAB. The fierce competition, coupled with global macro uncertainty, could impact CRDO’s growth trajectory.

Taking a Look at the Competitive Positioning for AVGO and ALAB

Strength in custom accelerators (XPUs), VMware and networking revenues continues to drive Broadcom’s top line. It recently reported the third-quarter fiscal 2025 results, wherein revenues jumped 22% year over year to $16 billion. AI semiconductor revenues surged 63% year over year to $5.2 billion and XPUs accounted for 65% of AI revenues in the reported quarter.

AVGO sees massive opportunities in the AI space as its three hyperscaler customers have started to develop their own XPUs. Management highlighted that the company has secured more than $10 billion of orders for AI racks based on its XPUs. As a result, it now expects AI semiconductor revenues to increase 66% year over year to $6.2 billion for the fourth quarter of fiscal 2025.

Astera Labs develops advanced interconnect products such as PCIe, CXL and Ethernet semiconductor-based connectivity solutions, which are widely used by hyperscalers and the data center ecosystem. In the last reported quarter, ALAB’s revenues increased 150% year over year, driven by strong demand for both signal conditioning and switch fabric product lines. ALAB is experiencing high demand for its PCIe solutions, with significant traction for both Scorpio P-Series and X-Series PCIe Fabric Switches.

Consequently, the Scorpio product line accounted for more than 10% of total revenues in the last reported quarter. Management emphasized that the Scorpio product line remains on track to surpass 10% of total revenues in 2025 and is expected to become the “largest product line” in the coming years. Additionally, ALAB views the expansion of UALink as a growth driver.

CRDO Price Performance, Valuation and Estimates

Shares of CRDO gained 38.5% in the past month compared with the Electronics-Semiconductors industry’s growth of 14.9%.

Regarding the forward 12-month Price/Sales ratio, CRDO is trading at 27.4, higher than the Electronic-Semiconductors sector’s multiple of 9.62.

The Zacks Consensus Estimate for CRDO earnings for fiscal 2026 has been revised upwards significantly over the past 60 days.

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

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

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