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Credo Technology Slips 32% in a Month: Hold the Stock or Cut Losses?
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Key Takeaways
CRDO stock fell 31.9% in a month, underperforming the broader semiconductor industry.
CRDO's growth is buoyed by AECs and retimers, with Q3 revenues guided to rise 27% sequentially at midpoint.
CRDO faces risks from customer concentration, rising expenses and premium valuation.
Credo Technology Group Holding Ltd (CRDO - Free Report) stock has declined sharply over the past month, falling 31.9%, igniting investor concern regarding volatility in AI-driven semiconductor plays. Overall, the Electronic-Semiconductors industry is down 7.6% over the same time frame.
Image Source: Zacks Investment Research
Last year, CRDO’s stock price benefited from the AI infrastructure cycle that is driving demand for high-speed, energy-efficient data center connectivity solutions.
However, this recent slide is bound to raise the obvious question: is this the beginning of a deeper problem, or simply a pause in an otherwise compelling long-term growth story?
Let’s dig deeper and assess what to do with the stock.
Why CRDO Deserves Patience
CRDO’s focus on high-performance, energy-efficient connectivity solutions gives it strategic relevance as hyperscalers and cloud service providers overhaul their network architectures. As AI clusters scale into the hundreds of thousands of GPUs and push toward million-GPU configurations, reliability, signal integrity, latency and power efficiency, total cost of ownership have become “mission-critical”. Credo’s architecture (purpose-built SerDes technology, sound IC design and a system-level development approach) is tailored to meet these demands.
CRDO’s Active Electrical Cables (AECs) business sits at the core of its growth narrative, playing an increasingly critical role in AI-driven networking deployments. According to Credo, adoption of zero-flap AECs is accelerating because they deliver up to 1,000x higher reliability while consuming roughly 50% less power compared with optical alternatives.
Beyond AECs, Credo is focusing on its IC portfolio, which includes retimers and optical DSPs. Credo’s PCIe retimer program remains on track for design wins in fiscal 2026 and revenue contributions in the next fiscal year.
Credo Technology Group Holding Ltd. Price, Consensus and EPS Surprise
With the recent launch of the Blue Heron 224G AI scale-up retimer, it is eyeing the lucrative scale-up networking market. The Blue Heron retimer is purpose-built to support multiple protocols, including UALink, ESUN and Ethernet and enables full recovery of a 40+dB 224G link. Blue Heron enables rack-scale cable backplanes and flexible placement of switch ICs and GPUs for AI scale-up applications.
Apart from the AECs and IC portfolio, CRDO introduced three additional pillars, each representing a multi-billion-dollar opportunity. These include Zero-Flap optics, active LED cables and OmniConnect gearboxes (Weaver). These five pillars collectively present a total market opportunity likely to surpass $10 billion, more than tripling Credo’s market reach just 18 months ago, as highlighted by management.
Profitability & Balance Sheet Strengthen CRDO’s Case
CRDO’s improving profitability is another thing investors need to watch for. In the last reported quarter, non-GAAP gross margin expanded 410 basis points (bps) to 67.7%, coming in above the high end of the company’s guidance. Non-GAAP operating income was $124.1 million compared with $8.3 million reported in the prior-year period.
Credo also has a clean balance sheet. As of Nov. 1, 2025, CRDO had $813.6 million of cash and cash equivalents and short-term investments compared with $479.6 million as of Aug. 2, 2025. This financial firepower provides ample flexibility to invest in innovation and inorganic expansion.
Given the momentum, Credo expects revenues between $335 million and $345 million, implying 27% sequential growth at the midpoint for the fiscal third quarter. The company anticipates more than 170% year-over-year growth in fiscal 2026 and net income to more than quadruple.
Why the Stock Is Not Without Risks
While hyperscaler demand is a growth driver, it also poses risks. With just three to four hyperscalers making up the bulk of revenues, a change in spending or in-house solution from one of these customers could materially affect revenue numbers. In the last reported quarter, four hyperscalers each contributed more than 10% of total revenues. Management added that the fourth hyperscaler is in full volume and noted the emergence of a fifth hyperscaler, which has begun contributing initial revenues.
The new connectivity pillars — ZF optics, ALCs and OmniConnect — are not expected to generate meaningful revenues until fiscal 2027-2028. Execution delays could shift these timelines further.
Non-GAAP operating expenses are expected to rise approximately 50% year over year in fiscal 2026. This could pressure margins if revenue growth falters.
Image Source: Zacks Investment Research
Exposure to the AI investment cycle amid increasing market competition from the likes of Broadcom (AVGO - Free Report) , Marvell Technology (MRVL - Free Report) and relatively newer entrants like Astera Labs (ALAB - Free Report) , and macroeconomic uncertainties may impact CRDO’s growth trajectory.
Competitors are investing aggressively to capture market share amid the AI-driven boom. ALAB is witnessing strength in demand for signal conditioning (Aries, Taurus) and Switch Fabric (Scorpio), and Leo CXL memory expansion products. Strong business momentum for ALAB is underpinned by the expanding role in delivering comprehensive connectivity infrastructure at the rack scale, which it terms as AI Infrastructure 2.0. A key pillar of Astera Labs’ outlook is Scorpio, particularly the upcoming X-Series, which management views as an anchor socket in next-generation AI racks.
On the other hand, Broadcom is a giant in this space and is gaining from AI semiconductor revenue growth and VMware’s continued traction. AVGO sees massive opportunities in the AI space as its hyperscaler customers have started to develop their own XPUs.
Similarly, Marvel’s strategic pivot to prioritize the data center market is proving to be a successful growth catalyst. The data center end market emerged as the company's largest segment, with revenue contribution of 73% in the third quarter of fiscal 2026. MRVL’s Interconnect business remains impressive. The increasing demand for AECs and retimers, driven by the shift to high-speed PAM-based solutions, is likely to drive revenues from this segment moving forward.
CRDO’s Premium Valuation Concerning
In terms of the forward 12-month price/sales ratio, CRDO is trading at 11.48, higher than the Electronic-Semiconductors sector’s multiple of 7.68.
In comparison, Broadcom trades at a forward 12-month P/S multiple of 13.98, while Astera Labs and Marvell are trading at a multiple of 20.06 and 7.66, respectively.
Image Source: Zacks Investment Research
Why Is CRDO Still a Hold?
CRDO currently carries a Zacks Rank #3 (Hold).
The company remains well-positioned to benefit from AI-driven demand, supported by expanding profitability and a strong balance sheet. While risks around competition, customer concentration and valuation persist, the long-term growth story seems compelling.
Investors looking to invest are better off waiting for a favorable entry point, while those who already have a position can retain the stock given the strong fundamentals.
Image: Bigstock
Credo Technology Slips 32% in a Month: Hold the Stock or Cut Losses?
Key Takeaways
Credo Technology Group Holding Ltd (CRDO - Free Report) stock has declined sharply over the past month, falling 31.9%, igniting investor concern regarding volatility in AI-driven semiconductor plays. Overall, the Electronic-Semiconductors industry is down 7.6% over the same time frame.
Image Source: Zacks Investment Research
Last year, CRDO’s stock price benefited from the AI infrastructure cycle that is driving demand for high-speed, energy-efficient data center connectivity solutions.
However, this recent slide is bound to raise the obvious question: is this the beginning of a deeper problem, or simply a pause in an otherwise compelling long-term growth story?
Let’s dig deeper and assess what to do with the stock.
Why CRDO Deserves Patience
CRDO’s focus on high-performance, energy-efficient connectivity solutions gives it strategic relevance as hyperscalers and cloud service providers overhaul their network architectures. As AI clusters scale into the hundreds of thousands of GPUs and push toward million-GPU configurations, reliability, signal integrity, latency and power efficiency, total cost of ownership have become “mission-critical”. Credo’s architecture (purpose-built SerDes technology, sound IC design and a system-level development approach) is tailored to meet these demands.
CRDO’s Active Electrical Cables (AECs) business sits at the core of its growth narrative, playing an increasingly critical role in AI-driven networking deployments. According to Credo, adoption of zero-flap AECs is accelerating because they deliver up to 1,000x higher reliability while consuming roughly 50% less power compared with optical alternatives.
Beyond AECs, Credo is focusing on its IC portfolio, which includes retimers and optical DSPs. Credo’s PCIe retimer program remains on track for design wins in fiscal 2026 and revenue contributions in the next fiscal year.
Credo Technology Group Holding Ltd. Price, Consensus and EPS Surprise
Credo Technology Group Holding Ltd. price-consensus-eps-surprise-chart | Credo Technology Group Holding Ltd. Quote
With the recent launch of the Blue Heron 224G AI scale-up retimer, it is eyeing the lucrative scale-up networking market. The Blue Heron retimer is purpose-built to support multiple protocols, including UALink, ESUN and Ethernet and enables full recovery of a 40+dB 224G link. Blue Heron enables rack-scale cable backplanes and flexible placement of switch ICs and GPUs for AI scale-up applications.
Apart from the AECs and IC portfolio, CRDO introduced three additional pillars, each representing a multi-billion-dollar opportunity. These include Zero-Flap optics, active LED cables and OmniConnect gearboxes (Weaver). These five pillars collectively present a total market opportunity likely to surpass $10 billion, more than tripling Credo’s market reach just 18 months ago, as highlighted by management.
Profitability & Balance Sheet Strengthen CRDO’s Case
CRDO’s improving profitability is another thing investors need to watch for. In the last reported quarter, non-GAAP gross margin expanded 410 basis points (bps) to 67.7%, coming in above the high end of the company’s guidance. Non-GAAP operating income was $124.1 million compared with $8.3 million reported in the prior-year period.
Credo also has a clean balance sheet. As of Nov. 1, 2025, CRDO had $813.6 million of cash and cash equivalents and short-term investments compared with $479.6 million as of Aug. 2, 2025. This financial firepower provides ample flexibility to invest in innovation and inorganic expansion.
Given the momentum, Credo expects revenues between $335 million and $345 million, implying 27% sequential growth at the midpoint for the fiscal third quarter. The company anticipates more than 170% year-over-year growth in fiscal 2026 and net income to more than quadruple.
Why the Stock Is Not Without Risks
While hyperscaler demand is a growth driver, it also poses risks. With just three to four hyperscalers making up the bulk of revenues, a change in spending or in-house solution from one of these customers could materially affect revenue numbers. In the last reported quarter, four hyperscalers each contributed more than 10% of total revenues. Management added that the fourth hyperscaler is in full volume and noted the emergence of a fifth hyperscaler, which has begun contributing initial revenues.
The new connectivity pillars — ZF optics, ALCs and OmniConnect — are not expected to generate meaningful revenues until fiscal 2027-2028. Execution delays could shift these timelines further.
Non-GAAP operating expenses are expected to rise approximately 50% year over year in fiscal 2026. This could pressure margins if revenue growth falters.
Image Source: Zacks Investment Research
Exposure to the AI investment cycle amid increasing market competition from the likes of Broadcom (AVGO - Free Report) , Marvell Technology (MRVL - Free Report) and relatively newer entrants like Astera Labs (ALAB - Free Report) , and macroeconomic uncertainties may impact CRDO’s growth trajectory.
Competitors are investing aggressively to capture market share amid the AI-driven boom. ALAB is witnessing strength in demand for signal conditioning (Aries, Taurus) and Switch Fabric (Scorpio), and Leo CXL memory expansion products. Strong business momentum for ALAB is underpinned by the expanding role in delivering comprehensive connectivity infrastructure at the rack scale, which it terms as AI Infrastructure 2.0. A key pillar of Astera Labs’ outlook is Scorpio, particularly the upcoming X-Series, which management views as an anchor socket in next-generation AI racks.
On the other hand, Broadcom is a giant in this space and is gaining from AI semiconductor revenue growth and VMware’s continued traction. AVGO sees massive opportunities in the AI space as its hyperscaler customers have started to develop their own XPUs.
Similarly, Marvel’s strategic pivot to prioritize the data center market is proving to be a successful growth catalyst. The data center end market emerged as the company's largest segment, with revenue contribution of 73% in the third quarter of fiscal 2026. MRVL’s Interconnect business remains impressive. The increasing demand for AECs and retimers, driven by the shift to high-speed PAM-based solutions, is likely to drive revenues from this segment moving forward.
CRDO’s Premium Valuation Concerning
In terms of the forward 12-month price/sales ratio, CRDO is trading at 11.48, higher than the Electronic-Semiconductors sector’s multiple of 7.68.
In comparison, Broadcom trades at a forward 12-month P/S multiple of 13.98, while Astera Labs and Marvell are trading at a multiple of 20.06 and 7.66, respectively.
Image Source: Zacks Investment Research
Why Is CRDO Still a Hold?
CRDO currently carries a Zacks Rank #3 (Hold).
The company remains well-positioned to benefit from AI-driven demand, supported by expanding profitability and a strong balance sheet. While risks around competition, customer concentration and valuation persist, the long-term growth story seems compelling.
Investors looking to invest are better off waiting for a favorable entry point, while those who already have a position can retain the stock given the strong fundamentals.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.