Can CRDO Beat Bigger Rivals in the Race to Power AI-Driven Networks?

Credo Technology Group Holding Ltd CRDO is emerging as a powerhouse as the world races to build the next generation of AI data centers. Credo has seen explosive growth, with fiscal 2025 revenues hitting $436.8 million, a 126% year-over-year increase driven by strong demand for its innovative and energy-efficient high-performance connectivity solutions. Demand continues to accelerate, particularly among hyperscaler customers supporting advanced AI services. In the fourth quarter of fiscal 2025, revenues surged 179.7% year over year to $170 million.

Credo’s strength lies in its focus on the backbone of AI infrastructure—low-power, high-bandwidth interconnects. Its portfolio includes HiWire Active Electrical Cables (AECs), Optical Digital Signal Processors (DSPs), Line Card PHYs, SerDes Chiplets and SerDes IP. With demonstration of PCIe Gen6 AECs and increasing hyperscaler interest, this product line is expected to remain a growth driver.

CRDO’s PCIe retimers and Ethernet retimers continue to witness customer interest, especially for scale-out networks in AI servers. The growing demand underscores the increasing importance of high-performance solutions in the rapidly expanding AI-server market.

For fiscal 2026, the company expects robust growth fueled by the ongoing transition to 100 gig per lane solutions and rising demand for system-level expertise and software capabilities to meet hyperscalers' complex AI-optimized architectures.

Momentum in the optical business, particularly for Optical DSPs, also 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.

For the first quarter of fiscal 2026, the company projects revenues in the range of $185 million to $195 million, suggesting a 12% increase at the midpoint. For fiscal 2026, Credo expects revenues to exceed $800 million, indicating year-over-year growth of more than 85%.

However, increasing market competition and macroeconomic uncertainties remain a concern. Credo competes with semiconductor giants like Marvell Technology, Inc. MRVL and Broadcom Inc. AVGO.

Taking a Look at MRVL & AVGO’s Push Into AI Infrastructure

Marvell has swiftly adapted to the growing demands of AI data centers, leveraging its extensive portfolio of AI accelerators, custom silicon and networking solutions. In fiscal 2025, its data center revenues jumped 76% year over year, driven by solid momentum in electro-optics products, custom AI silicon and next-gen switch divisions. The company expects this trend to continue into the fiscal second quarter with mid-single-digit sequential growth and a strong year-over-year increase. AI now represents the majority of the data center business, and that proportion is expected to rise further. The transition from copper to optical connectivity in AI infrastructure represents a tremendous growth opportunity for its Co-Packaged Optics technology. Marvell’s 400G-per-lane PAM optical interconnect solutions are expected to help it gain further market share. Marvell expects revenues to be $2 billion (+/- 5%) for the second quarter.

Broadcom is benefiting from strong demand for its networking products and custom AI accelerators (XPUs). AI revenues in second-quarter fiscal 2025 benefited from continued investments from hyperscale partners in AI XPUs and connectivity solutions for AI data centers. For third-quarter fiscal 2025, Broadcom expects revenues of $15.8 billion, up 21% year over year. Semiconductor revenues are anticipated to grow 25% year over year to $9.1 billion. AI semiconductor revenues are projected to grow 60% to $5.1 billion, whereas non-AI semiconductor revenues are expected to reach $4 billion. AI revenues are benefiting from investments from hyperscale partners in AI XPUs and connectivity solutions for AI data centers.

CRDO Price Performance, Valuation and Estimates

Shares of CRDO have surged 209.4% in the past year compared with the Electronics-Semiconductors industry’s growth of 20.8%.

In terms of the price/book ratio, CRDO is trading at 25.25, higher than the Electronic-Semiconductors sector’s multiple of 9.62.

The Zacks Consensus Estimate for CRDO earnings for fiscal 2026 has seen a significant upward revision 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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