We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
How is Rising AEC Adoption Transforming Credo's Growth Trajectory?
Read MoreHide Full Article
Key Takeaways
CRDO's AEC business is its fastest-growing segment, fueled by expanding hyperscale customers.
Zero-flap AECs offer up to 1,000x more reliability and half the power of optical modules.
CRDO targets a $10B TAM with AECs, ICs, Zero-Flap optics, ALCs and OmniConnect gearboxes.
In the rapidly evolving landscape of AI and cloud-based data infrastructure, connectivity solutions have become a critical enabler of performance and scalability. As demand for faster, more reliable and more power-efficient data center infrastructure explodes, Active Electrical Cables (AECs) have emerged as a growth driver for Credo Technology Group Holding Ltd (CRDO - Free Report) , positioning it for its next major phase of expansion.
The AEC lineup remains its fastest-growing business. AEC sales are rising sharply, led by a rapidly expanding and more diversified customer base. In the fiscal second quarter, four hyperscale customers each accounted for more than 10% of total revenue, with the fourth currently in full production ramp-up and the fifth beginning to contribute initial sales. AECs have become the preferred standard for inter-rack connectivity, increasingly replacing optical connections for distances of up to seven meters. As a result, customer demand and forecasts have strengthened broadly over the past few months.
At today’s 100G per lane and next-gen 200G per lane speeds, zero-flap AECs are up to 1,000 times more reliable than laser-based optical modules while using about half the power.This reliability advantage is critical at scale, as link failures can delay cluster stability, revenue generation and productivity in large GPU deployments. These step-change gains in reliability and energy efficiency are expanding the AEC total addressable market (TAM) across current and next-generation speeds, a trend expected to continue as racks densify and AI clusters scale further.
CRDO’s AEC and IC businesses (retimers and optical DSPs) already target multibillion-dollar markets with strong growth visibility. On the last earnings call, management stated that it added three new growth pillars (Zero-Flap optics, ALCs and OmniConnect gearboxes), opening additional multibillion-dollar opportunities and strengthening its connectivity foothold.Together, these opportunities are expected to expand Credo’s TAM to more than $10 billion in the coming years, more than thrice its size just 18 months ago. However, heightened competition from Astera Labs (ALAB - Free Report) and Marvell Technology (MRVL - Free Report) within the AI infrastructure and data center business amid broader macro uncertainties, such as tariff tensions, continues to worry.
How Does CRDO Compete Against Key Industry Players?
A rich portfolio backed by strong demand from hyperscalers is expected to drive Astera Lab’s top line over the long term. 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. It has emerged as a key player in next-generation data center connectivity, with a full-stack portfolio spanning PCIe 6.0, Ultra Accelerator (UA) Link and CXL 3.0. In December, it announced plans to launch custom connectivity solutions to meet the growing complexity of AI infrastructure, helping hyperscalers optimize performance, power efficiency and cost across diverse, heterogeneous compute architectures.
Marvell is benefiting from the strong demand environment across the data center end market. Its AEC design win momentum remains strong, with wins from two U.S. Tier 1 hyperscalers and several emerging hyperscale customers in the last reported quarter. Marvell anticipates that total AEC and retimer revenue will more than double year over year. In December, it launched its Golden Cable initiative to expand the AEC ecosystem, providing software, reference designs and support to help partners quickly deliver AEC solutions for hyperscaler AI deployments. Buoyed by strong demand for its data center and AI products, MRVL issued robust fourth-quarter revenue guidance of $2.20 billion (+/- 5%).
Image: Bigstock
How is Rising AEC Adoption Transforming Credo's Growth Trajectory?
Key Takeaways
In the rapidly evolving landscape of AI and cloud-based data infrastructure, connectivity solutions have become a critical enabler of performance and scalability. As demand for faster, more reliable and more power-efficient data center infrastructure explodes, Active Electrical Cables (AECs) have emerged as a growth driver for Credo Technology Group Holding Ltd (CRDO - Free Report) , positioning it for its next major phase of expansion.
The AEC lineup remains its fastest-growing business. AEC sales are rising sharply, led by a rapidly expanding and more diversified customer base. In the fiscal second quarter, four hyperscale customers each accounted for more than 10% of total revenue, with the fourth currently in full production ramp-up and the fifth beginning to contribute initial sales. AECs have become the preferred standard for inter-rack connectivity, increasingly replacing optical connections for distances of up to seven meters. As a result, customer demand and forecasts have strengthened broadly over the past few months.
At today’s 100G per lane and next-gen 200G per lane speeds, zero-flap AECs are up to 1,000 times more reliable than laser-based optical modules while using about half the power.This reliability advantage is critical at scale, as link failures can delay cluster stability, revenue generation and productivity in large GPU deployments. These step-change gains in reliability and energy efficiency are expanding the AEC total addressable market (TAM) across current and next-generation speeds, a trend expected to continue as racks densify and AI clusters scale further.
CRDO’s AEC and IC businesses (retimers and optical DSPs) already target multibillion-dollar markets with strong growth visibility. On the last earnings call, management stated that it added three new growth pillars (Zero-Flap optics, ALCs and OmniConnect gearboxes), opening additional multibillion-dollar opportunities and strengthening its connectivity foothold.Together, these opportunities are expected to expand Credo’s TAM to more than $10 billion in the coming years, more than thrice its size just 18 months ago. However, heightened competition from Astera Labs (ALAB - Free Report) and Marvell Technology (MRVL - Free Report) within the AI infrastructure and data center business amid broader macro uncertainties, such as tariff tensions, continues to worry.
How Does CRDO Compete Against Key Industry Players?
A rich portfolio backed by strong demand from hyperscalers is expected to drive Astera Lab’s top line over the long term. 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. It has emerged as a key player in next-generation data center connectivity, with a full-stack portfolio spanning PCIe 6.0, Ultra Accelerator (UA) Link and CXL 3.0. In December, it announced plans to launch custom connectivity solutions to meet the growing complexity of AI infrastructure, helping hyperscalers optimize performance, power efficiency and cost across diverse, heterogeneous compute architectures.
Marvell is benefiting from the strong demand environment across the data center end market. Its AEC design win momentum remains strong, with wins from two U.S. Tier 1 hyperscalers and several emerging hyperscale customers in the last reported quarter. Marvell anticipates that total AEC and retimer revenue will more than double year over year. In December, it launched its Golden Cable initiative to expand the AEC ecosystem, providing software, reference designs and support to help partners quickly deliver AEC solutions for hyperscaler AI deployments. Buoyed by strong demand for its data center and AI products, MRVL issued robust fourth-quarter revenue guidance of $2.20 billion (+/- 5%).
CRDO Price Performance, Valuation and Estimates
Shares of CRDO have gained 93.1% in the past year compared with the Electronics-Semiconductors industry’s growth of 40.3%.
Image Source: Zacks Investment Research
Regarding the forward 12-month Price/Sales ratio, CRDO is trading at 16.91, higher than the Electronic-Semiconductors sector’s multiple of 8.63.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for CRDO earnings for fiscal 2026 has been revised upward over the past 60 days.
Image Source: Zacks Investment Research
CRDO currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.