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CRDO vs. COHR: Which AI Connectivity Stock Is the Better Buy?
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Key Takeaways
CRDO and COHR are both riding the AI data-center buildout, but from different angles.
CRDO says Q3 FY26 revenues jumped 200% YoY and it is buying DustPhotonics for $750M.
COHR cites orders extending to 2028 and a NVIDIA deal with $2B equity plus supply through decade-end.
Both Credo Technology Group Holding Ltd (CRDO - Free Report) and Coherent Corp (COHR - Free Report) are beneficiaries of the AI data center buildout, but approach the opportunity from different angles.
Credo specializes in high-speed connectivity solutions, including integrated circuits (ICs), retimers, optical DSPs, Active Electrical Cables (AECs), SerDes chiplets and SerDes IP licensing.
Coherent is a manufacturer of lasers, transceivers, optoelectronic devices and modules, and engineered materials for verticals spanning industrial, instrumentation, communications and electronics markets.
For investors, the choice between CRDO and COHR is not straightforward. Let us break down the fundamentals, valuations, growth outlook and risks for each company to determine which stock stands out.
The Case for CRDO
Credo is one of the major beneficiaries of the exploding demand for AI infrastructure. Revenues surged 200% year over year in the third quarter of fiscal 2026, with management expecting revenues to triple in the full year from fiscal 2025. The company reports fourth-quarter fiscal 2026 results on June 1.
Credo’s leadership in AECs, optical DSPs and retimers places it at the heart of AI cluster connectivity. 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. Management added that the industry was still in the early stages of AEC adoption, implying a long runway for growth as AI infrastructure deployments accelerate.
Credo’s hyperscaler traction sits at the center of its AEC strength. The company reported “substantial year-over-year growth” across four domestic hyperscalers. Credo has also secured a fifth hyperscaler customer, further strengthening its position within the global cloud ecosystem. Beyond traditional hyperscalers, Credo is also seeing increasing demand from Neocloud providers.
Credo is aggressively expanding its total addressable market through the introduction of new product families like ZeroFlap Optics, Active LED Cables and OmniConnect.
Apart from organic growth, CRDO is now ramping up its M&A efforts to gain an edge against rivals. Last month, CRDO inked a deal to acquire DustPhotonics for $750 million (cash plus stock and performance-based incentives). The company will bring Silicon Photonics Photonic Integrated Circuit (SiPho PIC) capabilities or optical transceivers in-house.
Credo Technology Group Holding Ltd. Price, Consensus and EPS Surprise
The deal accelerates the optical roadmap, reduces supply dependence, lowers costs at scale and broadens its footprint within the optical industry. This addition, coupled with ZF Optical Transceivers and optical DSPs, Credo expects optical revenues to exceed $500 million in fiscal 2027. The deal is projected to close by the second quarter of calendar 2026 and be accretive to non-GAAP EPS by fiscal 2027.
However, the path ahead is not without challenges. Macroeconomic uncertainties and exposure to the AI investment cycle amid increasing market competition are concerning. Customer concentration is high, with the top three customers each contributing more than 10% of revenues and one alone accounting for 39%.
Further, non-GAAP operating expenses are expected to be between $76 million and $80 million in the fiscal fourth quarter. This could pressure margins if revenue growth falters.
The Case for COHR
Explosive growth in AI data center infrastructure is driving unprecedented demand for optical networking solutions, positioning Coherent for long-term growth. On the most recent earnings call, management noted that the demand remains “exceptionally strong with no signs of attenuation.” Importantly, the company noted orders now extend into calendar 2028, with customer long-term agreements reaching the end of the decade. This provides strong revenue visibility.
Revenues for the third quarter of fiscal 2026 increased 27% year over year (on a pro forma basis) to $1.81 billion. The Datacenter & Communications segment accounted for 75% of overall revenues. Revenues for this segment improved 40% year over year, reflecting strong demand across the AI data center space. Within this segment, the data center business delivered 37% year-over-year growth.
Management expects continued traction in the data center business, supported by strong demand trends, capacity expansion and supply improvements. It expects “accelerated growth” in the fiscal fourth quarter as transceivers (both 800 gig and 1.6T) and optical circuit switching (“OCS”) systems witness increased demand.
Overall revenues are also expected to deliver sequential growth in the current quarter. COHR expects the fiscal 2027 revenue growth rate to be higher than the fiscal 2026 rate. The company has now revised its estimate of the OCS market to more than $4 billion, driven by increasing usage across data center interconnect, scale-up and scale-out networks.
Co-packaged optics (“CPO”) is emerging as a major tailwind for Coherent. The partnership with NVIDIA, focused on multiple CPO-related offerings, represents a major strategic milestone. The agreement includes a $2 billion equity investment from NVIDIA and a multi-year supply agreement that extends through the end of the decade.
Aggressive capacity expansion strategy bodes well. The company expects to double its internal indium phosphide capacity by the end of calendar 2026, achieving this target one quarter earlier than anticipated. Additionally, management expects to more than double capacity again by the end of calendar 2027. COHR started shipping its first transceivers comprising components manufactured on the new 6-inch lines in the last reported quarter. The company noted that these shipments added not only to sequential revenue growth but gross margin improvement as well.
Heavy reliance on the Datacenter and Communications segment increases volatility linked to AI spending cycles amid increasing competition and macroeconomic troubles. Weakness in the Industrial segment, owing to softness in broader industrial markets, is concerning.
The company is witnessing rising operating and capital expenses as it focuses on capacity expansion. While these investments are necessary for long-term growth, they may pressure margins and free cash flow if revenues do not materialize as expected. Capacity expansion also brings execution risk. Any misstep here could affect financial performance.
Price Performances & Valuations of CRDO & COHR
Year to date, CRDO is up 27.1%, while COHR has surged 94.2%.
Image Source: Zacks Investment Research
In terms of the forward 12-month price/sales ratio, Credo is trading at 16.69X, higher than COHR’s 7.61X.
Image Source: Zacks Investment Research
How Do the Consensus Estimates Compare for CRDO & COHR?
Analysts have kept their earnings estimates unchanged for CRDO for the current fiscal year in the past 60 days.
Image Source: Zacks Investment Research
Estimates have been revised 1.7% upwards for COHR’s bottom line.
Image Source: Zacks Investment Research
CRDO or COHR: Which Is a Better Pick?
CRDO currently flaunts a Zacks Rank #1 (Strong Buy) and COHR carries a Zacks Rank #3 (Hold).
In terms of the Zacks Rank, CRDO appears to be a better pick at the moment.
View the Zacks #1 Rank List
Image: Bigstock
CRDO vs. COHR: Which AI Connectivity Stock Is the Better Buy?
Key Takeaways
Both Credo Technology Group Holding Ltd (CRDO - Free Report) and Coherent Corp (COHR - Free Report) are beneficiaries of the AI data center buildout, but approach the opportunity from different angles.
Credo specializes in high-speed connectivity solutions, including integrated circuits (ICs), retimers, optical DSPs, Active Electrical Cables (AECs), SerDes chiplets and SerDes IP licensing.
Coherent is a manufacturer of lasers, transceivers, optoelectronic devices and modules, and engineered materials for verticals spanning industrial, instrumentation, communications and electronics markets.
For investors, the choice between CRDO and COHR is not straightforward. Let us break down the fundamentals, valuations, growth outlook and risks for each company to determine which stock stands out.
The Case for CRDO
Credo is one of the major beneficiaries of the exploding demand for AI infrastructure. Revenues surged 200% year over year in the third quarter of fiscal 2026, with management expecting revenues to triple in the full year from fiscal 2025. The company reports fourth-quarter fiscal 2026 results on June 1.
Credo’s leadership in AECs, optical DSPs and retimers places it at the heart of AI cluster connectivity. 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. Management added that the industry was still in the early stages of AEC adoption, implying a long runway for growth as AI infrastructure deployments accelerate.
Credo’s hyperscaler traction sits at the center of its AEC strength. The company reported “substantial year-over-year growth” across four domestic hyperscalers. Credo has also secured a fifth hyperscaler customer, further strengthening its position within the global cloud ecosystem. Beyond traditional hyperscalers, Credo is also seeing increasing demand from Neocloud providers.
Credo is aggressively expanding its total addressable market through the introduction of new product families like ZeroFlap Optics, Active LED Cables and OmniConnect.
Apart from organic growth, CRDO is now ramping up its M&A efforts to gain an edge against rivals. Last month, CRDO inked a deal to acquire DustPhotonics for $750 million (cash plus stock and performance-based incentives). The company will bring Silicon Photonics Photonic Integrated Circuit (SiPho PIC) capabilities or optical transceivers in-house.
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
The deal accelerates the optical roadmap, reduces supply dependence, lowers costs at scale and broadens its footprint within the optical industry. This addition, coupled with ZF Optical Transceivers and optical DSPs, Credo expects optical revenues to exceed $500 million in fiscal 2027. The deal is projected to close by the second quarter of calendar 2026 and be accretive to non-GAAP EPS by fiscal 2027.
However, the path ahead is not without challenges. Macroeconomic uncertainties and exposure to the AI investment cycle amid increasing market competition are concerning. Customer concentration is high, with the top three customers each contributing more than 10% of revenues and one alone accounting for 39%.
Further, non-GAAP operating expenses are expected to be between $76 million and $80 million in the fiscal fourth quarter. This could pressure margins if revenue growth falters.
The Case for COHR
Explosive growth in AI data center infrastructure is driving unprecedented demand for optical networking solutions, positioning Coherent for long-term growth. On the most recent earnings call, management noted that the demand remains “exceptionally strong with no signs of attenuation.” Importantly, the company noted orders now extend into calendar 2028, with customer long-term agreements reaching the end of the decade. This provides strong revenue visibility.
Revenues for the third quarter of fiscal 2026 increased 27% year over year (on a pro forma basis) to $1.81 billion. The Datacenter & Communications segment accounted for 75% of overall revenues. Revenues for this segment improved 40% year over year, reflecting strong demand across the AI data center space. Within this segment, the data center business delivered 37% year-over-year growth.
Management expects continued traction in the data center business, supported by strong demand trends, capacity expansion and supply improvements. It expects “accelerated growth” in the fiscal fourth quarter as transceivers (both 800 gig and 1.6T) and optical circuit switching (“OCS”) systems witness increased demand.
Overall revenues are also expected to deliver sequential growth in the current quarter. COHR expects the fiscal 2027 revenue growth rate to be higher than the fiscal 2026 rate. The company has now revised its estimate of the OCS market to more than $4 billion, driven by increasing usage across data center interconnect, scale-up and scale-out networks.
Coherent Corp. Price, Consensus and EPS Surprise
Coherent Corp. price-consensus-eps-surprise-chart | Coherent Corp. Quote
Co-packaged optics (“CPO”) is emerging as a major tailwind for Coherent. The partnership with NVIDIA, focused on multiple CPO-related offerings, represents a major strategic milestone. The agreement includes a $2 billion equity investment from NVIDIA and a multi-year supply agreement that extends through the end of the decade.
Aggressive capacity expansion strategy bodes well. The company expects to double its internal indium phosphide capacity by the end of calendar 2026, achieving this target one quarter earlier than anticipated. Additionally, management expects to more than double capacity again by the end of calendar 2027. COHR started shipping its first transceivers comprising components manufactured on the new 6-inch lines in the last reported quarter. The company noted that these shipments added not only to sequential revenue growth but gross margin improvement as well.
Heavy reliance on the Datacenter and Communications segment increases volatility linked to AI spending cycles amid increasing competition and macroeconomic troubles. Weakness in the Industrial segment, owing to softness in broader industrial markets, is concerning.
The company is witnessing rising operating and capital expenses as it focuses on capacity expansion. While these investments are necessary for long-term growth, they may pressure margins and free cash flow if revenues do not materialize as expected. Capacity expansion also brings execution risk. Any misstep here could affect financial performance.
Price Performances & Valuations of CRDO & COHR
Year to date, CRDO is up 27.1%, while COHR has surged 94.2%.
Image Source: Zacks Investment Research
In terms of the forward 12-month price/sales ratio, Credo is trading at 16.69X, higher than COHR’s 7.61X.
Image Source: Zacks Investment Research
How Do the Consensus Estimates Compare for CRDO & COHR?
Analysts have kept their earnings estimates unchanged for CRDO for the current fiscal year in the past 60 days.
Image Source: Zacks Investment Research
Estimates have been revised 1.7% upwards for COHR’s bottom line.
Image Source: Zacks Investment Research
CRDO or COHR: Which Is a Better Pick?
CRDO currently flaunts a Zacks Rank #1 (Strong Buy) and COHR carries a Zacks Rank #3 (Hold).
In terms of the Zacks Rank, CRDO appears to be a better pick at the moment.
You can see the complete list of today’s Zacks #1 Rank stocks here.