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.
CRDO vs. AVGO: Which Data Center Connectivity Stock Is the Smart Buy?
Read MoreHide Full Article
Key Takeaways
CRDO and AVGO are both AI connectivity plays, but differ sharply on scale, agility and strategy.
CRDO's AEC business is gaining hyperscaler traction, with optical revenues projected above $600M.
AVGO's AI semiconductor revenues hit $10.8B, driven by demand for XPUs and networking.
The explosive AI infrastructure buildout has put the spotlight on semiconductor companies as the reshaping of the data center connectivity landscape is creating massive demand for high-speed interconnect and optical solutions.
Both Credo Technology Group Holding Ltd (CRDO - Free Report) and Broadcom (AVGO - Free Report) are beneficiaries of this cycle. While both companies operate in the same space, their positioning, scale and strategies differ significantly.
Broadcom is a diversified semiconductor and infrastructure software giant, while Credo specializes in high-speed connectivity solutions, including integrated circuits (ICs), retimers, optical DSPs, Active Electrical Cables (AECs), SerDes chiplets and SerDes IP licensing.
For investors, the choice between these two companies is not straightforward, as Broadcom offers scale and profitability while Credo brings agility and innovation. Let us break down the fundamentals, valuations, growth outlook and risks for each company to determine which stock stands out.
CRDO: Fast-Emerging Player
Credo is one of the major beneficiaries of the exploding demand for AI infrastructure. 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 has 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 AEC business sits at the core of its growth narrative, playing an increasingly critical role in AI-driven networking deployments. Credo’s hyperscaler traction is central to its AEC strength. Four hyperscalers each contributed more than 10% of total revenues in the fourth quarter of fiscal 2026, reflecting strong adoption of Credo’s high-reliability AEC solutions. Beyond the traditional hyperscalers, Credo is also seeing increasing demand from emerging Neocloud providers.
In addition to AEC, CRDO is now focusing on the IC portfolio (retimers and DSPs). The company expects mid-single-digit sequential growth in the first half of fiscal 2027, followed by a stronger second-half acceleration buoyed by its optical portfolio. Management projects more than $600 million in optical revenues, with ZeroFlap optics, silicon photonics PICs and optical DSPs each contributing more than $100 million. This is expected to support more than 80% year-over-year revenue growth for the full year. Fiscal 2026 revenues exceeded $1.3 billion and rose 206% year over year.
The acquisition of Dust Photonics strengthens Credo’s high-speed optical connectivity portfolio with silicon photonics PIC technology. The deal adds advanced technology, including 800G and 1.6T solutions, and would aid in developing upcoming 3.2T solutions.
Credo Technology Group Holding Ltd. Revenue (Quarterly)
Credo remains on track for PCIe Gen6 AEC solutions and is witnessing strengthening customer engagement and design activity. Retimer momentum is also improving across 100G and 200G per lane, alongside customer traction for PCIe Gen6 retimers. Blue Heron supports Ethernet, UALink and ESUN for emerging scale-out and scale-up networks. Management expects initial CPO and NPO revenues from DustPhotonics in fiscal 2028. It also expects production ramps for Active LED Cables and OmniConnect in fiscal 2028.
As revenue scales, Credo is beginning to show signs of operating leverage. Gross margins have been improving, and the company is moving closer to sustained profitability. For fiscal 2026, the company reported a non-GAAP gross margin of 68.1%, improving 310 basis points year over year, while operating margins expanded significantly to 47.8%. For fiscal 2027, gross margins are projected to stay in line with fiscal 2026 levels, while non-GAAP net margins are expected to remain around 50%, even as the company continues to invest in R&D.
Another positive is Credo’s balance sheet flexibility and disciplined capital strategy. The company emphasized that it has no immediate plans to raise additional capital or initiate share buybacks, instead focusing on maintaining flexibility for further M&A.
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 representing 34%, 27% and 16% of revenues. Credo continues to expect that three to four customers will account for more than 10% of revenues in the upcoming quarters.
Further, fourth-quarter fiscal 2026 non-GAAP operating expenses were $81.7 million, above the guided range, and first-quarter fiscal 2027 non-GAAP operating expenses are forecasted to be $86-$90 million. Increasing expenses could pressure margins if revenue growth falters.
AVGO: Established Giant
Broadcom is one of the giants in the semiconductor space, with deep integration across AI infrastructure. The company’s second-quarter fiscal 2026 revenues of $22.2 billion jumped 48% year over year, driven largely by AI semiconductors. AI semiconductor revenues reached $10.8 billion, surging 143% year over year, reflecting what management described as “insatiable” demand for XPUs and networking.
Broadcom expects AI semiconductor revenues to reach $56 billion in fiscal 2026 and exceed $100 billion in 2027. Long-term partnerships with major AI players, including Google, Meta, OpenAI and Anthropic bode well.
For OpenAI, AVGO has a contractual commitment to deploy 1.3 gigawatts in 2027 as part of the wider 10-gigawatt agreement by 2029. AVGO announced an agreement with Meta in April under which it would deliver multiple generations of MTIA XPUs and deploy 3 gigawatts by 2028.
Further, networking remains a key pillar of Broadcom’s AI strategy. The company noted that networking accounted for nearly 40% of the AI revenues in the fiscal second quarter.
Broadcom expects revenues of approximately $29.4 billion, indicating 84% year-over-year growth for the current quarter. The company is well-placed to gain from the demand for high-speed Ethernet switching and co-packaged optics solutions. AVGO is deeply embedded in both scale-up and scale-out architectures.
Image Source: Zacks Investment Research
Beyond revenues, profitability is a key differentiator. Broadcom delivered operating margins of approximately 67% and adjusted EBITDA margins near 69%, supported by operating leverage. The company also generated $10.3 billion in free cash flow in the quarter, representing 46% of revenues, enabling significant shareholder returns through cash dividends ($3.1 billion paid in the fiscal second quarter).
However, management continues to expect that consolidated gross margins will continue to be influenced by the revenue mix between infrastructure software and semiconductors. Gross margin for the current quarter is expected to be down to roughly 74% compared with 77.1% reported in the previous quarter.
Increasing expenses, heavy leverage and hyperscaler dependence are additional concerns. As of May 3, 2026, cash and cash equivalents were $19.6 billion, against long term debt of $62.7 billion.
Price Performances & Valuations of CRDO & AVGO
Year to date, CRDO is up 80.3%, while AVGO has surged 13.8%.
Image Source: Zacks Investment Research
In terms of the forward 12-month price/sales multiple, Credo is trading at 19.21X, higher than AVGO’s 13.09X.
Image Source: Zacks Investment Research
How Do the Consensus Estimates Compare for CRDO & AVGO?
Analysts have significantly revised their earnings estimates upwards for CRDO for the current fiscal year in the past 60 days.
Image Source: Zacks Investment Research
Estimates have been revised 2.5% upwards for AVGO’s bottom line.
Image Source: Zacks Investment Research
CRDO or AVGO: Which Is a Better Pick
CRDO currently flaunts a Zacks Rank #1 (Strong Buy) and AVGO 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. AVGO: Which Data Center Connectivity Stock Is the Smart Buy?
Key Takeaways
The explosive AI infrastructure buildout has put the spotlight on semiconductor companies as the reshaping of the data center connectivity landscape is creating massive demand for high-speed interconnect and optical solutions.
Both Credo Technology Group Holding Ltd (CRDO - Free Report) and Broadcom (AVGO - Free Report) are beneficiaries of this cycle. While both companies operate in the same space, their positioning, scale and strategies differ significantly.
Broadcom is a diversified semiconductor and infrastructure software giant, while Credo specializes in high-speed connectivity solutions, including integrated circuits (ICs), retimers, optical DSPs, Active Electrical Cables (AECs), SerDes chiplets and SerDes IP licensing.
For investors, the choice between these two companies is not straightforward, as Broadcom offers scale and profitability while Credo brings agility and innovation.
Let us break down the fundamentals, valuations, growth outlook and risks for each company to determine which stock stands out.
CRDO: Fast-Emerging Player
Credo is one of the major beneficiaries of the exploding demand for AI infrastructure. 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 has 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 AEC business sits at the core of its growth narrative, playing an increasingly critical role in AI-driven networking deployments. Credo’s hyperscaler traction is central to its AEC strength. Four hyperscalers each contributed more than 10% of total revenues in the fourth quarter of fiscal 2026, reflecting strong adoption of Credo’s high-reliability AEC solutions. Beyond the traditional hyperscalers, Credo is also seeing increasing demand from emerging Neocloud providers.
In addition to AEC, CRDO is now focusing on the IC portfolio (retimers and DSPs). The company expects mid-single-digit sequential growth in the first half of fiscal 2027, followed by a stronger second-half acceleration buoyed by its optical portfolio. Management projects more than $600 million in optical revenues, with ZeroFlap optics, silicon photonics PICs and optical DSPs each contributing more than $100 million. This is expected to support more than 80% year-over-year revenue growth for the full year. Fiscal 2026 revenues exceeded $1.3 billion and rose 206% year over year.
The acquisition of Dust Photonics strengthens Credo’s high-speed optical connectivity portfolio with silicon photonics PIC technology. The deal adds advanced technology, including 800G and 1.6T solutions, and would aid in developing upcoming 3.2T solutions.
Credo Technology Group Holding Ltd. Revenue (Quarterly)
Credo Technology Group Holding Ltd. revenue-quarterly | Credo Technology Group Holding Ltd. Quote
Credo remains on track for PCIe Gen6 AEC solutions and is witnessing strengthening customer engagement and design activity. Retimer momentum is also improving across 100G and 200G per lane, alongside customer traction for PCIe Gen6 retimers. Blue Heron supports Ethernet, UALink and ESUN for emerging scale-out and scale-up networks. Management expects initial CPO and NPO revenues from DustPhotonics in fiscal 2028. It also expects production ramps for Active LED Cables and OmniConnect in fiscal 2028.
As revenue scales, Credo is beginning to show signs of operating leverage. Gross margins have been improving, and the company is moving closer to sustained profitability. For fiscal 2026, the company reported a non-GAAP gross margin of 68.1%, improving 310 basis points year over year, while operating margins expanded significantly to 47.8%. For fiscal 2027, gross margins are projected to stay in line with fiscal 2026 levels, while non-GAAP net margins are expected to remain around 50%, even as the company continues to invest in R&D.
Another positive is Credo’s balance sheet flexibility and disciplined capital strategy. The company emphasized that it has no immediate plans to raise additional capital or initiate share buybacks, instead focusing on maintaining flexibility for further M&A.
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 representing 34%, 27% and 16% of revenues. Credo continues to expect that three to four customers will account for more than 10% of revenues in the upcoming quarters.
Further, fourth-quarter fiscal 2026 non-GAAP operating expenses were $81.7 million, above the guided range, and first-quarter fiscal 2027 non-GAAP operating expenses are forecasted to be $86-$90 million. Increasing expenses could pressure margins if revenue growth falters.
AVGO: Established Giant
Broadcom is one of the giants in the semiconductor space, with deep integration across AI infrastructure. The company’s second-quarter fiscal 2026 revenues of $22.2 billion jumped 48% year over year, driven largely by AI semiconductors. AI semiconductor revenues reached $10.8 billion, surging 143% year over year, reflecting what management described as “insatiable” demand for XPUs and networking.
Broadcom expects AI semiconductor revenues to reach $56 billion in fiscal 2026 and exceed $100 billion in 2027. Long-term partnerships with major AI players, including Google, Meta, OpenAI and Anthropic bode well.
For OpenAI, AVGO has a contractual commitment to deploy 1.3 gigawatts in 2027 as part of the wider 10-gigawatt agreement by 2029. AVGO announced an agreement with Meta in April under which it would deliver multiple generations of MTIA XPUs and deploy 3 gigawatts by 2028.
Further, networking remains a key pillar of Broadcom’s AI strategy. The company noted that networking accounted for nearly 40% of the AI revenues in the fiscal second quarter.
Broadcom expects revenues of approximately $29.4 billion, indicating 84% year-over-year growth for the current quarter. The company is well-placed to gain from the demand for high-speed Ethernet switching and co-packaged optics solutions. AVGO is deeply embedded in both scale-up and scale-out architectures.
Image Source: Zacks Investment Research
Beyond revenues, profitability is a key differentiator. Broadcom delivered operating margins of approximately 67% and adjusted EBITDA margins near 69%, supported by operating leverage. The company also generated $10.3 billion in free cash flow in the quarter, representing 46% of revenues, enabling significant shareholder returns through cash dividends ($3.1 billion paid in the fiscal second quarter).
However, management continues to expect that consolidated gross margins will continue to be influenced by the revenue mix between infrastructure software and semiconductors. Gross margin for the current quarter is expected to be down to roughly 74% compared with 77.1% reported in the previous quarter.
Increasing expenses, heavy leverage and hyperscaler dependence are additional concerns. As of May 3, 2026, cash and cash equivalents were $19.6 billion, against long term debt of $62.7 billion.
Price Performances & Valuations of CRDO & AVGO
Year to date, CRDO is up 80.3%, while AVGO has surged 13.8%.
Image Source: Zacks Investment Research
In terms of the forward 12-month price/sales multiple, Credo is trading at 19.21X, higher than AVGO’s 13.09X.
Image Source: Zacks Investment Research
How Do the Consensus Estimates Compare for CRDO & AVGO?
Analysts have significantly revised their earnings estimates upwards for CRDO for the current fiscal year in the past 60 days.
Image Source: Zacks Investment Research
Estimates have been revised 2.5% upwards for AVGO’s bottom line.
Image Source: Zacks Investment Research
CRDO or AVGO: Which Is a Better Pick
CRDO currently flaunts a Zacks Rank #1 (Strong Buy) and AVGO 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.