CRDO Up on Preliminary Q3 Revenue Beat: What it Signals for FY26 & FY27

Credo Technology Group Holding Ltd. CRDO delivered a powerful surprise to the market with its preliminary revenue results for the third quarter of fiscal 2026.  The company’s performance not only crushed prior expectations but also solidified its position as a key beneficiary of accelerating demand for high-speed, energy-efficient connectivity solutions in data center and AI-driven infrastructure.

CRDO’s Massive Q3 Revenue Upside

Per the preliminary report, Credo now expects to report third-quarter fiscal 2026 revenue between $404 million and $408 million, far exceeding its previously issued guidance of $335 million to $345 million. The upside indicates that demand picked up sharply late in the quarter and reflects strong, sustained customer demand, driven by hyperscale data centers, AI networking upgrades and wider use of Credo’s connectivity products.

The Zacks Consensus Estimate is currently pinned at $340 million, up 151.8% from the prior year’s reported figure.

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

It delivered a record fiscal second quarter with 272% year-over-year revenue growth, driven by soaring AI infrastructure demand and strong adoption of its active electrical cables (AECs), high-speed SerDes ICs and new optical and gearbox products. As hyperscalers race to expand AI capacity, Credo is witnessing explosive momentum, fueling triple-digit revenue gains and stronger profitability.

CRDO Updated Outlook: Sustained Growth Into FY27

Credo also provided prospective long-term growth targets. The company expects sequential revenue growth in the mid-single digits heading into fiscal 2027. Credo now anticipates more than 200% year-over-year revenue growth for fiscal 2026 (up from prior 170% view). This reduces concerns about demand volatility and strengthens the case for sustained expansion.

On its fiscal second quarter earnings call, management projected strong year-over-year growth from each of its top four customers in fiscal 2026, with the fourth customer contributing more than 10% of revenue, improving diversification. While non-GAAP operating expenses are set to rise about 50%, margins are still expected to remain robust at around 45%, driving net income to more than quadruple year over year.

Credo will discuss its detailed financial results for the fiscal third quarter ended Jan. 31, 2026, during its earnings call on March 2, 2026, after the release of results.

What CRDO’s Competitors Signal for Future Revenue?

Astera Labs, Inc. ALAB will report fourth-quarter numbers today, with revenues likely to have benefited from increasing demand for AI servers and data center infrastructure. Strong momentum across its three key product families, Aries, Taurus and Leo, is expected to have contributed well.  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 the fourth quarter, 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. However, gross margin in the fiscal first quarter is expected to contract sequentially.

CRDO Price Performance, Valuation and Estimates

With revenue dramatically surpassing expectations and management signaling continued momentum into fiscal 2027, CRDO’s shares gained 18% in the pre-market trading today. Shares have gained 60.1% in the past year compared with the Electronics-Semiconductors industry’s growth of 38.1%.

Regarding the forward 12-month Price/Sales ratio, CRDO is trading at 14.4, higher than the Electronic-Semiconductors sector’s multiple of 8.46.

The Zacks Consensus Estimate for CRDO earnings for fiscal 2026 remains 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.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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

Zacks Investment Research