What's Driving Credo's Explosive Revenue Growth in FY26?

Credo Technology Group Holding Ltd.’s CRDO explosive revenue growth in fiscal 2026 is being driven by record execution across its core businesses and the rapid expansion of its connectivity solutions. In the second quarter of fiscal 2026, the company delivered record revenue of $268 million, representing 20% sequential growth and a whopping 272% year over year increase. This surge reflects the rapid build out of massive AI training and inference clusters, where reliability, power efficiency, latency, reach and total cost of ownership have become mission-critical requirements. Credo’s solutions are increasingly central to these deployments as AI clusters scale from tens of thousands to hundreds of thousands of GPUs.

The largest contributor to this growth continues to be Credo’s active electrical cable (AEC) business, which remains the fastest growing segment. AEC revenue again grew strongly in the second quarter, supported by broadening customer adoption and deeper penetration across hyperscale data centers. Four hyperscalers each contributed more than 10% of total revenue during the quarter, with a fourth customer now in full volume production and a fifth beginning to contribute initial revenue. AECs have become the preferred standard for inter-rack connectivity, increasingly replacing optical connections for distances of up to seven meters. As a result, customer demand and forecasts have strengthened broadly over the past few months.

Credo’s integrated circuit business, including retimers and optical DSPs, also delivered strong performance and is expected to be a significant growth driver throughout fiscal 2026. Optical DSP demand is increasing with deployments at 50 gig and 100 gig per lane, while interest in 200 gig per lane solutions is building following successful demonstrations. Ethernet and PCIe retimers continue to gain traction across AI servers and switching fabrics, benefiting from Credo’s purpose built SerDes architecture that delivers a rare combination of reach, latency and power efficiency. The company continues to expect PCIe design wins in fiscal 2026, with meaningful production revenue anticipated in fiscal 2027.

Going forward, continued momentum in the company’s core AEC and IC businesses, along with upcoming ramps of ZeroFlap optics, ALCs, and OmniConnect gearboxes, positions it well for sustained revenue growth through fiscal 2026 and beyond. Management expects continued momentum through fiscal 2026, with third-quarter revenue guided at $335–$345 million, implying 27% sequential growth at the midpoint. For fiscal 2026, Credo anticipates more than 170% year over year revenue growth.

Taking a Look at Competitors’ Revenue Outlook

Astera Labs, Inc. ALAB benefits from an innovative portfolio, strong demand for Aries and Taurus product families and an expanding partner base. ALAB expects accelerated shipments of Scorpio P-Series switches and Aries 6 retimers on a customized rack-scale AI platform based on market-leading GPUs to boost top-line growth. Scorpio revenues are expected to account for more than 10% of total revenues in 2025, while becoming the largest product line for Astera Labs over the next several years. For fourth-quarter 2025, Astera Labs expects revenues between $245 million and $253 million.

Broadcom Inc. AVGO is experiencing strong momentum fueled by growth in AI semiconductors and continued success with its VMware integration. Strong demand for its networking products and custom AI accelerators (XPUs) has been noteworthy. Its AI segment benefits from custom accelerators and advanced networking technology that supports large-scale AI deployments with improved performance and efficiency. For the first quarter of fiscal 2026, Broadcom expects revenues of $19.1 billion. AI revenues are expected to double year over year to $8.2 billion, driven by strong demand for custom AI accelerators and Ethernet AI switches.

CRDO Price Performance, Valuation and Estimates

Shares of CRDO have surged 85.1% in the past year compared with the Electronics-Semiconductors industry’s growth of 37.5%.

Regarding the forward 12-month Price/Sales ratio, CRDO is trading at 17.92, higher than the Electronic-Semiconductors sector’s multiple of 8.53.

The Zacks Consensus Estimate for CRDO earnings for fiscal 2026 has been revised upward 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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