A month has gone by since the last earnings report for Credo Technology Group Holding Ltd. (CRDO Quick QuoteCRDO - Free Report) . Shares have lost about 3.5% in that time frame, outperforming the S&P 500.

But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is Credo Technology Group due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the latest earnings report in order to get a better handle on the important drivers.

Key highlights

• Revenue: $407.0M, up 201.5% year over year and 51.9% sequentially
• GAAP diluted EPS: 82 cents.
• GAAP gross margin: 68.5% 
• GAAP operating income: $149.6 million (36.8% margin)
• Non-GAAP gross margin: 68.6%; management reported non-GAAP net income of $208.8 million

Primary drivers

AEC shipments to hyperscalers were the main revenue driver, with adoption widening to an additional hyperscaler in the quarter. 

IC portfolio (optical DSPs, retimers) scaled alongside AECs, with growing 200G-per-lane traction supporting switching and AI server demand.

Customer concentration

Three hyperscalers each contributed more than 10% of total revenues, reflecting strong adoption of Credo’s high-reliability AEC solutions. The top three customers accounted for 39%, 32%, and 17% of revenue in the third quarter of 2026.  

Credo has also secured a fifth hyperscaler customer, further strengthening its position within the global cloud ecosystem.

Profitability and operating leverage

Scale and favorable mix expanded margins: non-GAAP operating margin was 49.6%. Operating expenses increased for R&D and projects but rose more slowly than revenue, supporting strong incremental margins. Management maintains a long-term non-GAAP gross margin target of 63%-65% while noting quarter-to-quarter variability from mix.

Cash flow and balance sheet

Operating cash flow was $166.2 million while free cash flow was $139.7 million, suggesting a capex of $26.5 million

Cash and equivalents were approximately $1.3 billion. Inventory was $208 million to support customer ramps.

Guidance and management outlook

For the fourth quarter of 2026, revenues are projected to be between $425 million and $435 million. Non-GAAP gross margin is anticipated to be 64%-66%.

Non-GAAP operating expenses are expected to be between $76 million and $80 million in the fiscal fourth quarter. 

For fiscal 2027, management expects mid-single-digit sequential growth through the year, resulting in more than 50% year over year growth. 

Management expects a considerable production ramp of ZF optics beginning in the first quarter of fiscal 2027.

Credo’s PCIe retimer program remains on track for design wins in fiscal 2026 and revenue contributions in the next fiscal year.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

The consensus estimate has shifted 9.79% due to these changes.

VGM Scores

Currently, Credo Technology Group has a nice Growth Score of B, a score with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Credo Technology Group has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.