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CRDO Surges 289% in Six Months: Is it Still a Buying Opportunity?
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Key Takeaways
Credo shares jumped 289% in six months, outpacing peers and the semiconductor sector's growth.
CRDO's revenues surged 273.6% year over year on strong AEC, optical and PCIe product demand.
The Hyperlume buyout expands CRDO's optical tech portfolio, strengthening its AI infrastructure play.
Credo Technology Group Holding Ltd (CRDO - Free Report) has been one of the top gainers in the semiconductor space. The stock has surged 289.3% in the past six months, outperforming the Electronic-Semiconductors and the broader Computer and Technology sector’s growth of 77.6% and 47.2%, respectively.
Image Source: Zacks Investment Research
The gains are also higher than some of its competitors, including Broadcom (AVGO - Free Report) , Marvell Technology (MRVL - Free Report) and Astera Labs (ALAB - Free Report) . AVGO and MRVL have gained 100.6% and 75% respectively, over the same time frame, while ALAB has skyrocketed 272.7%. ALAB develops advanced interconnect products such as PCIe, CXL and Ethernet semiconductor-based connectivity solutions, which are widely used by hyperscalers and the data center ecosystem.
The rally has been fueled by the company’s strong financial performance amid accelerating demand for AI-driven networking and connectivity solutions.
Investors now have a crucial question: Will this momentum continue, or is it wise to lock in profits after the steep run-up?
Let’s dive into the drivers behind CRDO’s surge and assess whether it still presents a buying opportunity.
CRDO’s Multiple Tailwinds Offer Runway for Growth
CRDO’s latest quarterly results underscore accelerating business momentum as hyperscalers and data center operators aggressively invest in AI infrastructure. Credo’s revenues surged 31% sequentially and a staggering 273.6% year over year to $223.1 million and exceeded management’s revenue guidance of $185 million and $195 million. Non-GAAP gross margin expanded 470 basis points to 67.6% while non-GAAP operating income was $96.2 million compared with $2.2 million reported in the prior year period.
The primary driver behind CRDO’s business momentum is its extensive footprint in the Active Electrical Cables (AECs) space. In the last reported quarter, the AEC product line increased by healthy double digits sequentially. The demand for AECs is increasing as these offer up to 1,000 times more reliability with 50% lower power consumption than optical solutions, added CRDO. The extensive elimination of link fabs or intermittent losses of connection results in increased cluster reliability while lowering power consumption. Management highlighted that one customer is enabling an entire scale-out network to be built with AECs up to seven meters long amid quadrupling of GPU density.
Image Source: Zacks Investment Research
The adoption from intra-rack to rack-to-rack deployments is expected to boost further revenues from this product line. Moreover, the system-level approach provides it with a strong competitive moat. It owns the entire stack of SerDes IP, Retimer ICs, system-level design, qualification and production. This integrated approach allows faster innovation cycles and strong cost efficiency.
Strength in the optical business is another key catalyst. It is investing heavily in both copper and optical solutions to diversify its market position. Its optical DSP segment maintained strong momentum, positioning the company to achieve a doubling of optical revenues again in the current fiscal year. Last month, the company introduced its Bluebird DSP, a high-performance, low-power solution for 1.6Tbps optical transceivers that delivers 224Gbps per lane PAM4 data transmission. Bluebird enables transceivers to operate under 20 watts, making them ideal for dense AI and hyperscale data centers.
Supplementing these two businesses is Credo’s PCIe and Ethernet retimer business. CRDO added that recently launched PCIe retimer solutions were gaining “significant traction” and expects PCIe design wins in 2025 with production revenue in 2026. The PCIe-based solutions for AI scale-up networks expand CRDO’s addressable market. It aims to capture the opportunity presented by the industry’s shift to 200-gig per lane scale-up solutions.
Credo’s recent quarterly performance has validated its positioning as one of the most critical enablers of hyperscaler AI infrastructure buildouts. In the fiscal first quarter, three hyperscalers each contributed over 10% of revenues, and there was a material revenue contribution from a fourth hyperscaler. It expects revenues from the additional hyperscaler to increase throughout fiscal 2026.
Management expects these three to four hyperscalers to surpass 10% of revenues in the upcoming quarters and fiscal year. Two additional hyperscalers are also expected to commence ramping in fiscal 2026. Customer diversification reduces concentration risk.
Focus on Inorganic Expansion Strategy
Recently, Credo acquired Hyperlume, Inc., a privately held developer of miniature light-emitting diode (microLED) technology-based optical interconnects for chip-to-chip communication. With this buyout, CRDO expects to boost its next-generation connectivity solutions as AI, cloud and hyperscale data centers place unprecedented demands on data infrastructure deployments.
Acquisitions like this are valuable for companies as they accelerate access to the latest technologies. These types of buyouts provide valuable tools, technologies and market access that accelerate and amplify organic growth. With Hyperlume, CRDO now has access to this innovative optical technology, which broadens the portfolio, positioning it to serve customers seeking to expand AI networks cost-effectively to handle escalating workloads from large datasets and parallel processing.
Given the strong tailwinds, analysts have significantly revised their earnings estimates for the current year.
Image Source: Zacks Investment Research
Nonetheless, increasing market competition from Broadcom and Marvell Technology and macroeconomic uncertainties and tariff troubles may impact CRDO’s growth trajectory.
Lofty Valuation: A Concern?
In terms of the forward 12-month Price/Sales ratio, CRDO is trading at 23.7, higher than the Electronic-Semiconductors sector’s multiple of 9.3. Though the valuation may seem lofty, CRDO’s hypergrowth trajectory, high margin expectations and competitive edge in the AEC space justify the premium.
Image Source: Zacks Investment Research
For fiscal 2026, the company anticipates mid-single-digit sequential revenue growth, resulting in roughly 120% year-over-year growth. Non-GAAP net margin is projected to be around 40% both in the upcoming quarters and for fiscal 2026.
Bottom Line: CRDO is a Buy
Credo’s fundamentals remain strong, supported by surging AEC demand, rapid hyperscaler adoption, and expanding optical and PCIe product lines. The Hyperlume acquisition further strengthens its technology stack, thereby giving it a competitive edge.
Given its increasing footprint in next-gen data interconnects’ space and explosive growth trajectory, CRDO remains a compelling investment opportunity.
Image: Bigstock
CRDO Surges 289% in Six Months: Is it Still a Buying Opportunity?
Key Takeaways
Credo Technology Group Holding Ltd (CRDO - Free Report) has been one of the top gainers in the semiconductor space. The stock has surged 289.3% in the past six months, outperforming the Electronic-Semiconductors and the broader Computer and Technology sector’s growth of 77.6% and 47.2%, respectively.
Image Source: Zacks Investment Research
The gains are also higher than some of its competitors, including Broadcom (AVGO - Free Report) , Marvell Technology (MRVL - Free Report) and Astera Labs (ALAB - Free Report) . AVGO and MRVL have gained 100.6% and 75% respectively, over the same time frame, while ALAB has skyrocketed 272.7%. ALAB develops advanced interconnect products such as PCIe, CXL and Ethernet semiconductor-based connectivity solutions, which are widely used by hyperscalers and the data center ecosystem.
The rally has been fueled by the company’s strong financial performance amid accelerating demand for AI-driven networking and connectivity solutions.
Investors now have a crucial question: Will this momentum continue, or is it wise to lock in profits after the steep run-up?
Let’s dive into the drivers behind CRDO’s surge and assess whether it still presents a buying opportunity.
CRDO’s Multiple Tailwinds Offer Runway for Growth
CRDO’s latest quarterly results underscore accelerating business momentum as hyperscalers and data center operators aggressively invest in AI infrastructure. Credo’s revenues surged 31% sequentially and a staggering 273.6% year over year to $223.1 million and exceeded management’s revenue guidance of $185 million and $195 million. Non-GAAP gross margin expanded 470 basis points to 67.6% while non-GAAP operating income was $96.2 million compared with $2.2 million reported in the prior year period.
The primary driver behind CRDO’s business momentum is its extensive footprint in the Active Electrical Cables (AECs) space. In the last reported quarter, the AEC product line increased by healthy double digits sequentially. The demand for AECs is increasing as these offer up to 1,000 times more reliability with 50% lower power consumption than optical solutions, added CRDO. The extensive elimination of link fabs or intermittent losses of connection results in increased cluster reliability while lowering power consumption. Management highlighted that one customer is enabling an entire scale-out network to be built with AECs up to seven meters long amid quadrupling of GPU density.
Image Source: Zacks Investment Research
The adoption from intra-rack to rack-to-rack deployments is expected to boost further revenues from this product line. Moreover, the system-level approach provides it with a strong competitive moat. It owns the entire stack of SerDes IP, Retimer ICs, system-level design, qualification and production. This integrated approach allows faster innovation cycles and strong cost efficiency.
Strength in the optical business is another key catalyst. It is investing heavily in both copper and optical solutions to diversify its market position. Its optical DSP segment maintained strong momentum, positioning the company to achieve a doubling of optical revenues again in the current fiscal year. Last month, the company introduced its Bluebird DSP, a high-performance, low-power solution for 1.6Tbps optical transceivers that delivers 224Gbps per lane PAM4 data transmission. Bluebird enables transceivers to operate under 20 watts, making them ideal for dense AI and hyperscale data centers.
Supplementing these two businesses is Credo’s PCIe and Ethernet retimer business. CRDO added that recently launched PCIe retimer solutions were gaining “significant traction” and expects PCIe design wins in 2025 with production revenue in 2026. The PCIe-based solutions for AI scale-up networks expand CRDO’s addressable market. It aims to capture the opportunity presented by the industry’s shift to 200-gig per lane scale-up solutions.
Credo’s recent quarterly performance has validated its positioning as one of the most critical enablers of hyperscaler AI infrastructure buildouts. In the fiscal first quarter, three hyperscalers each contributed over 10% of revenues, and there was a material revenue contribution from a fourth hyperscaler. It expects revenues from the additional hyperscaler to increase throughout fiscal 2026.
Management expects these three to four hyperscalers to surpass 10% of revenues in the upcoming quarters and fiscal year. Two additional hyperscalers are also expected to commence ramping in fiscal 2026. Customer diversification reduces concentration risk.
Focus on Inorganic Expansion Strategy
Recently, Credo acquired Hyperlume, Inc., a privately held developer of miniature light-emitting diode (microLED) technology-based optical interconnects for chip-to-chip communication. With this buyout, CRDO expects to boost its next-generation connectivity solutions as AI, cloud and hyperscale data centers place unprecedented demands on data infrastructure deployments.
Acquisitions like this are valuable for companies as they accelerate access to the latest technologies. These types of buyouts provide valuable tools, technologies and market access that accelerate and amplify organic growth. With Hyperlume, CRDO now has access to this innovative optical technology, which broadens the portfolio, positioning it to serve customers seeking to expand AI networks cost-effectively to handle escalating workloads from large datasets and parallel processing.
Given the strong tailwinds, analysts have significantly revised their earnings estimates for the current year.
Image Source: Zacks Investment Research
Nonetheless, increasing market competition from Broadcom and Marvell Technology and macroeconomic uncertainties and tariff troubles may impact CRDO’s growth trajectory.
Lofty Valuation: A Concern?
In terms of the forward 12-month Price/Sales ratio, CRDO is trading at 23.7, higher than the Electronic-Semiconductors sector’s multiple of 9.3. Though the valuation may seem lofty, CRDO’s hypergrowth trajectory, high margin expectations and competitive edge in the AEC space justify the premium.
Image Source: Zacks Investment Research
For fiscal 2026, the company anticipates mid-single-digit sequential revenue growth, resulting in roughly 120% year-over-year growth. Non-GAAP net margin is projected to be around 40% both in the upcoming quarters and for fiscal 2026.
Bottom Line: CRDO is a Buy
Credo’s fundamentals remain strong, supported by surging AEC demand, rapid hyperscaler adoption, and expanding optical and PCIe product lines. The Hyperlume acquisition further strengthens its technology stack, thereby giving it a competitive edge.
Given its increasing footprint in next-gen data interconnects’ space and explosive growth trajectory, CRDO remains a compelling investment opportunity.
CRDO flaunts a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.