Can Credo's Solid Cash Position Give It an Edge Against Rivals?

Credo Technology Group Holding Ltd (CRDO) is in the midst of rapid expansion fueled mainly by the AI infrastructure cycle, which is driving explosive demand for high-speed connectivity solutions. Revenues surged a staggering 272% year over year to $268 million in the second quarter of fiscal 2026. Moreover, its fortified balance sheet, boasting a cash position of $813.6 million, remains a highlight. Management noted that it remains “well capitalized” to continue to fuel the next leg of growth, while maintaining a considerable cash buffer.

The company generated cash flow from operating activities of $61.7 million, up $7.5 million sequentially, while free cash flow totaled $38.5 million.

This cash strength is strategically valuable as Credo deepens its role in the hyperscale ecosystem. Increasing funds offer Credo meaningful internal funding capacity to invest in system-level platform expansion and new product initiatives.

Credo Technology Group Holding Ltd. Price, Consensus and EPS Surprise

Credo Technology Group Holding Ltd. price-consensus-eps-surprise-chart | Credo Technology Group Holding Ltd. Quote

On the last earnings call, management’s tone signaled continued investment intensity as it deploys resources toward new growth multi-billion-dollar pillars. These include Zero-Flap optics, active LED cables (ALCs) and OmniConnect gearboxes (Weaver), along with its established AECs and IC solutions (retimers and optical DSPs) businesses. Collectively, these present a total market opportunity which is likely to surpass $10 billion, more than tripling Credo’s market reach just 18 months ago.

The cash balance also boosts CRDO’s M&A efforts. Acquisitions accelerate access to the latest technologies and provide valuable tools and market access that accelerate and amplify organic growth. Last year, CRDO acquired Hyperlume, which is a developer of miniature light-emitting diode (microLED) technology-based optical interconnects for chip-to-chip communication.

For a company riding the AI infrastructure wave, this liquidity is a potential accelerator to seize revenue opportunities.

Credo expects revenues between $335 million and $345 million, implying 27% sequential growth at the midpoint for the fiscal third quarter. The company anticipates more than 170% year-over-year growth in fiscal 2026 and net income to more than quadruple. Meanwhile, non-GAAP operating expenses are expected to rise 50% year over year in fiscal 2026.

How Do Rivals Stack Up in Terms of Cash Position?

Astera Labs (ALAB) had about $1.13 billion as cash, cash equivalents and marketable securities at the end of the third quarter of 2025. Cash flow from operating activities came in at $78.2 million. The cash balance provides flexibility to keep investing in R&D and strategic initiatives, including acquisitions such as Xscale Photonics.

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. The company is witnessing strong traction across its Scorpio, Aries and Taurus product lines. It expects fourth quarter revenues to be between $245 million and $253 million, up 6% to 10% sequentially.

Broadcom (AVGO) is one of the giants in the semiconductor space. As of Nov. 2, 2025, cash and cash equivalents were $16.2 billion, giving enough flexibility to AVGO to execute M&A, boost R&D and expand manufacturing capacity amid the AI boom. AVGO sees massive opportunities in the AI space as its hyperscaler customers have started to develop their own custom accelerators or XPUs. Broadcom generated $7.7 billion in cash flow from operations, while free cash flow was $7.5 billion in the last reported quarter. Capex stood at $237 million for the quarter.

However, AVGO’s acquisition-driven growth strategy (mainly the VMware acquisition) had led to a hefty debt on its balance sheet. Long-term debt was nearly $62 billion at the end of the last reported quarter. Notably, ample free cash flow generation offers a cushion for servicing/reducing its debt.

CRDO Price Performance, Valuation and Estimates

Shares of CRDO have lost 25.8% in the past month compared with the Electronics-Semiconductors industry’s decline of 9.2%.

Regarding the forward 12-month Price/Sales ratio, CRDO is trading at 39.79, higher than the sector’s multiple of 33.96.

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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