Credo Technology Skyrockets 50% in a Month: Time to Buy the Stock?

Credo Technology Group Holding Ltd CRDO stock has skyrocketed 50.2% over the past month, significantly more than the Electronic-Semiconductors and the broader Computer and Technology sector’s growth of 18.8% and 10.3%, respectively. The S&P 500 Composite is up 5.7% over the same time frame. The stock has gained more than 16.5% since reporting results on June 2.

Despite the surge, CRDO stock is still trading 15.8% below its 52-week high of $86.69 and closed last trading session at $73. Investors are likely to contemplate what to do next, whether it is time to take profits or continue holding CRDO as the rally extends.

AI Demand to Drive CRDO Top Line

Credo’s fourth-quarter fiscal 2025 revenues surged 179.7% year over year to $170 million. The increase in sales was primarily driven by strong growth in its product sales. Fiscal 2025 revenues rose 126% year over year to $436.8 million. Amid exponential data growth and rapid AI proliferation, market demand for faster and energy-efficient connectivity solutions continues to increase. This bodes well for Credo.

One of Credo’s key strengths lies in its Active Electrical Cables (AEC) product line, which posted double-digit sequential growth in the fiscal fourth quarter. The growth is driven by its increasing adoption in the data center market. The demand for AECs is increasing as ZeroFlap AECs offer more than 100 times improved reliability than laser-based optical solutions. This made AECs an increasingly attractive option for data center applications, contributing to the new expansion of AEC usage and further solidifying Credo Technology’s position in the market. With demonstration of PCIe Gen6 AECs and increasing hyperscaler interest, this product line is expected to remain a growth engine going ahead.

CRDO’s Optical DSP Momentum 

Momentum in the optical business, particularly for Optical Digital Signal Processors (DSPs), bodes well. CRDO achieved revenue targets for this business in fiscal 2025 and expects expansion of customer diversity across lane rates, port speeds and applications to accelerate revenue growth going ahead. CRDO announced that it achieved a key 800 gig transceiver DSP design win and unveiled ultra-low power 100 gig per lane optical DSPs built on 5 nanometer technology.

CRDO expects its 3-nanometer 200-gig-per-lane optical DSP (port speeds up to 1.6 terabits per second) to boost the industry’s transition to 200 gig lane speeds. 
Growing Demand for Retimers

CRDO’s PCIe retimers and Ethernet retimers continue to witness customer interest, especially for scale-out networks in AI servers. CRDO highlighted that the retimer business delivered “robust” performance in both the fiscal fourth quarter and fiscal 2025, driven by 50 gig and 100 gig per lane Ethernet solutions.

This growing demand underscores the increasing importance of high-performance solutions in the rapidly expanding AI server market. Shift to 100 gig per lane solutions and higher demand for system-level expertise and software capabilities for dealing with AI-optimized architectures bode well for CRDO’s retimer business.

CRDO Provides Robust Q1 Outlook

For the first quarter of fiscal 2026, the company expects revenues between $185 million and $195 million, up 12% at the midpoint. The Zacks Consensus Estimate for fiscal first-quarter revenues is pegged at $190 million, suggesting growth of 218.2% from the year-ago quarter’s reported figure. Non-GAAP gross margin is projected at 64-66%, with operating expenses between $54 million and $56 million

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%. Strong AI-driven demand and solid execution supported its fiscal 2025 performance and continue to fuel momentum.

Analysts seem bullish as earnings estimates have been revised upwards in the past 60 days.

Nonetheless, management stated that though the guidance assumes the current tariff regime, it remains “fluid.” Any untoward change in tariff policy — especially on China-related supply chains — could directly impact margins.

This along with increasing market competition and macroeconomic uncertainties, may impact CRDO’s growth trajectory. Credo competes with semiconductor giants like Broadcom Inc. AVGO and Marvell Technology, Inc. MRVL.

CRDO Stock vs. Peers

CRDO’s 50.2% surge is also much higher than peers like Broadcom, Marvell and Cirrus Logic, Inc. CRUS.

Broadcom, Marvell and Cirrus Logic have gained 22.3%, 14.2% and 3.4%, respectively.

CRDO Trades at a Premium

In terms of the forward 12-month Price/Sales ratio, CRDO is trading at 18.03, higher than the Electronic-Semiconductors sector’s multiple of 8.21.

In comparison, Broadcom trades at a forward 12-month P/S multiple of 17.88, while Cirrus Logic and Marvell Technology are trading at a multiple of 2.82 and 6.46, respectively.

Buy CRDO for Now

Credo’s sharp stock surge reflects strong business momentum, driven by AI demand, product innovation and solid revenue growth. Though it trades at a premium, momentum in high-growth businesses like AEC and optical DSPs supports a bullish outlook. With upbeat guidance and rising investor confidence, CRDO remains well-positioned for continued upside

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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