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Did Credo Technology beat or miss consensus estimates last quarter?

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What were the key takeaways from Credo Technology’s earnings call?

- **Revenue Record**: Q2 $268M (272% YoY), driven by AECs and new products like Zero Flap optics and ALCs.
- **Customer Expansion**: 4 hyperscalers >10% of revenue, fifth entering ramp. ALC TAM expected to double AECs.
- **Innovation Lead**: 112G VSR SerDes enables 10x I/O density, with first gearbox addressing 2TB memory for XPUs.
- **Financial Strength**: 67.7% gross margin, $128M net income. FY26 net income to quadruple YoY.
- **Growth Path**: FY26 revenue >$1B, with mid-single-digit QoQ growth in FY27 and TAM >$10B.

**【CEO Summary Section】**
- **Record Revenue Growth**: Q2 revenue of $268 million, up 272% YoY and 20% QoQ, driven by AEC (Active Electrical Cables) and new product line expansions.
- **AEC Dominance**: 4 hyperscalers each contributed >10% of revenue, with a fifth customer entering initial ramp. AECs now displacing optical rack-to-rack connections up to 7 meters.
- **New Growth Pillars**: Introduced Zero Flap optics (ZF), Active LED Cables (ALCs), and OmniConnect gearboxes, targeting multibillion-dollar TAMs. ALCs expected to be double the AEC TAM long-term.
- **Strategic Innovations**: 112G VSR SerDes enables 10x I/O density, with first gearbox (Weaver) addressing memory-to-compute connectivity for XPUs. Initial customer plans for 2TB memory capacity in inference workloads.
- **TAM Expansion**: Total addressable market exceeds $10 billion, up from $3 billion 18 months ago, driven by 5 product lines (AECs, ICs, ZF, ALCs, OmniConnect).

**【CFO Financial Commentary】**
- **Profitability**: Non-GAAP gross margin 67.7%, up 110bps QoQ. Non-GAAP net income $128 million, 30% QoQ growth. Operating margin 46.3%, up 319bps QoQ.
- **Q3 Guidance**: Revenue $335-345 million (27% QoQ growth). Gross margin 64-66%, OpEx $68-72 million. FY26 non-GAAP net margin ~45%, with >4x YoY net income growth.
- **Cash Position**: $813.6 million in cash, up $333.9 million QoQ from ATM offering. Free cash flow $38.5 million, despite $23.2 million CapEx for production MACsec.

**【Q&A Highlights】**
- **Customer Diversification**: 4 hyperscalers >10% of revenue, with fifth customer entering initial ramp. Expect 3-4 >10% customers in FY26.
- **ALC Ramp**: First ALC samples to customers in FY27, with revenue ramp in FY28. ZF optics trials with lead hyperscaler, sampling second US hyperscaler in FY26.
- **Supply Chain**: No AEC supply constraints; focus on wafer capacity for ICs. Credo's older-node strategy (e.g., 12nm) mitigates foundry bottlenecks.
- **Competitive Strategy**: System-level solutions (e.g., ZF optics with switch-level SDK) differentiate from commodity transceivers. Gross margin target 63-65% long-term.
- **PCIe Growth**: PCIe Gen6 retimers on track for FY27 production, with Gen7 128Gbps solutions in development. PCIe revenue to complement AEC growth in scale-up networks.

Credo Technology Group Holding Ltd (CRDO) Q2 2026 Earnings Call Transcript

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CRDO

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