Credo Technology Group ((CRDO Quick QuoteCRDO - Free Report) ) is a $27 billion provider of high-performance, high-bandwidth serial connectivity solutions for the hyperscale datacenter, 5G carrier, enterprise networking, artificial intelligence and HPC markets.

They are famously known in these industries for their purple Active Electric Cables (AEC) that use copper to provide low-latency connectivity for hundreds of different hardware applications.

Credo connectivity solutions are optimized for optical and electrical Ethernet applications, including the emerging 100G, 200G, 400G, 800G and the emerging 1.6T (or Terabits per second) port markets. Credo products are based on their proprietary Serializer/Deserializer (SerDes) and Digital Signal Processor (DSP) technologies.

The stock is up over 120% this year because demand for their products and solutions is so strong. One look at the recent quarter numbers illustrates their success.

Strong Beat-and-Raise Quarter Spikes Shares Above $200

On December 1, Credo reported Q2 fiscal 2026 (ended October) adjusted EPS of 67-cents, which surpassed the Zacks Consensus Estimate by 36.7% and dwarfed the year-ago quarter by 850%.

The company’s revenues surged 272.1% y-o-y year to $268 million. The top line also surpassed the Zacks Consensus Estimate by 14%. This result was due to product sales surging 278.3% to $261.3M, supported by growth in major hyperscale customers rapidly expanding the world’s largest AI training and inference clusters.

CRDO guided up to $345M in Q3 revenue and now expects roughly 170% fiscal 2026 growth. The Zacks topline consensus sits at $1.19 billion now. The company had earlier projected revenue growth of "only" 120%.

In response to this guidance and management commentary, analysts raised this fiscal year's Zacks EPS consensus by over 30% from $2.04 to $2.66, representing 280% annual growth. And they boosted fiscal 2027's (begins May) EPS projection 35% from $2.52 to $3.40.

Bill Brennan, Credo’s President and Chief Executive Officer, stated, "In the second quarter Credo delivered revenue of $268.0 million, an increase of 20% sequentially and an extraordinary 272% increase year-over-year. These are the strongest quarterly results in Credo’s history, and they reflect the continued build-out of the world’s largest AI training and inference clusters. 

"Looking forward, the combination of continued growth in our core AEC and IC franchises, plus the upcoming ramps of our recently announced ZeroFlap Optics, ALCs, and OmniConnect gearbox solutions, gives us an outlook with strong revenue growth and profitability through fiscal 2026 and beyond."

ALC stands for Active LED Cables.

The Optical Question

We know NVIDIA ((NVDA Quick QuoteNVDA - Free Report) ) is a big customer of Credo AECs because CEO Jensen Huang is a big fan of copper for connecting GPUs within rack-scale architectures and Credo has repeatedly showcased its AECs in live demonstrations at the NVIDIA GPU Tech Conference (GTC). These demos feature Credo's AECs connecting servers and switches directly to NVIDIA H100 GPUs to create disaggregated, rack-scale GPU clusters.

But at GTC in March, Jensen announced a collaboration with a purely optical player, Coherent ((COHR Quick QuoteCOHR - Free Report) ). Here's what I wrote in my Bull of the Day feature on Dec 10...

One big driver of investor enthusiasm that helped drive COHR shares from below $70 to over $190 this year was their collaboration with NVIDIA announced at GTC in March.

Coherent and NVIDIA will develop silicon photonics networking switches using co-packaged optics (CPO). This ecosystem will allow AI factories to connect millions of GPUs.

NVIDIA still uses copper wiring within Blackwell NVL72 rack-scale systems to connect GPUs to each other, but to "scale out" across the datacenter Jensen Huang recognized the power and speed of optical solutions to connect many racks together for the lowest latency.

Thus NVIDIA has several connectivity and networking systems that use optical and photonics solutions and they can be categorized into two main areas: Interconnect Products, including Infiniband and Ethernet protocols, and the upcoming Co-Packaged Optics, like Spectrum-X Photonics Switches.

Buying the Pullback to $140

I was closely watching the CRDO pullback from above $200, as the stock got caught up in the AI/datacenter worries over "circular financing" narratives and no visible ROI from all the massive capex. 

On Dec 12, I put my stake in the ground for my TAZR Trader group here at Zacks. Here was part of the trade alert...

TAZR Traders

Portfolio is buying Credo Technology (CRDO Quick QuoteCRDO - Free Report) between $140 and $145.

We know Jensen still loves copper wiring to "scale up" in his NVL72 rack-scale systems. But he's expanding his use of silicon photonics to "scale out" in the datacenter and to "scale across" to connected sites because optical networking is obviously faster across larger distances.

So why Credo now?

While continuing to lead in copper-based Active Electrical Cables (AECs), Credo is diversifying its business significantly into optical interconnects.

Optical DSPs: Credo offers a complete suite of Optical Digital Signal Processors (DSPs) that support a wide range of speeds from 50G up to the emerging 1.6T (Terabits per second) PAM4 optical transceivers and Active Optical Cables (AOCs).

New Product Lines: The company has launched new optical products, such as its ZeroFlap optical transceivers and the Bluebird DSP for 1.6T optical transceivers, demonstrating a commitment to advanced optical solutions.

Strategic Acquisition: A clear sign of diversification is Credo's recent acquisition of Hyperlume, Inc., a developer of MicroLED-based optical interconnects for chip-to-chip communication. This move strategically enhances Credo's ability to offer next-generation optical connectivity solutions.

Financial Growth in Optics: Management has indicated strong momentum in the optical business, with projections for doubling optical revenues in the current fiscal year.

Dual Focus: While Credo pioneered the AEC market, they view the Total Addressable Market (TAM) as expanding for both copper (AECs) and optical connectivity solutions, and they are strategically prioritizing optical solutions as a cornerstone of their product roadmap, alongside their AEC leadership.

(end of Dec 12 TAZR alert excerpt)

I gathered a lot of this intel from a presentation (and subsequent blog) at the 2025 Open Compute Project (OCP) in October that featured Credo CEO Bill Brennan and Steve Manley, senior principal network engineer at Oracle ((ORCL Quick QuoteORCL - Free Report) ). The two had been collaborating on a problem known as optical link flaps.

This issue impacts the back-end network reliability of large AI clusters where a single unstable optical link can trigger disruptive link flaps that derail AI training runs resulting in loss of time, resources, and money.

It should be clear from Credo's close work with both NVIDIA and Oracle that they are aggressively preparing for the optical phase of their product line-up.

And the innovations should only grow as another key alliance implies. In October, Credo announced it joined the Arm® Total Design ecosystem. By joining Arm Total Design, Credo brings its industry-leading, high-speed SerDes and mixed-signal DSP IP portfolio including its SerDes chiplets to the ecosystem. 

The combination of Credo IP and chiplets with Arm's ((ARM Quick QuoteARM - Free Report) ) processor architecture allows customers to rapidly design innovative silicon solutions for next-generation AI, cloud computing and hyperscale data center applications.

Here's a good overview of Credo's growth opportunities: Can CRDO Tap a $10B+ Market With Record Q2 & New Growth Pillars?

Pocket Aces

Credo has some interesting members on its Board of Directors...

Credo recently appointed Brian Kelleher to its Board of Directors as an Independent Director. Kelleher is the former Senior Vice President of GPU Engineering at NVIDIA (from 2005-2024). This is a significant move that brings deep expertise in NVIDIA's GPU and AI systems to Credo's leadership, which is highly relevant for both electrical and optical interconnects.

Fariba Danesh is the Chief Operating Officer at PsiQuantum, bringing over 30 years of experience in novel semiconductor product development. Prior to this role, she served as CEO and Managing Director of Glo from 2010-2019. Glo is a venture-backed microLED display company using nanotechnology developed in Sweden to make the world’s first full RGB microLED small displays. 

Fariba has deep semi-conductor experience in a large spectrum of semiconducting materials including compound semiconductors and power semi. She has led teams at Avago Technology, Maxtor Technology, Finisar, Genoa, Sanmina and Seagate Technology. As COO of Finisar and EVP Global Ops at Maxtor she led a workforce of 14,000+, whilst at Avago she had full P&L responsibility for the $400M/yr photonics business. 

Finally, I covered Credo as my Top Stock Pick for the Week of Dec 15 in this video.

Disclosure: I own NVDA and CRDO shares for the Zacks TAZR Trader portfolio.