Credo Technology Group Holding Ltd Q1 FY2026 earnings call

Key Points

• First quarter revenue was $223 million, up 31% sequentially and 274% year over year. Non-GAAP gross margin was 67.6% and non-GAAP net income nearly $100 million.
• Demand for Credo's high-speed connectivity solutions continues to ramp, driven by hyperscalers and data center operators' investments in AI-driven infrastructure.
• AEC product line growth is robust with diverse customer base, expanding from inter-rack to rack-to-rack solutions, offering reliability, power efficiency, and cost advantages.
• Optical business is on track to double revenue in 2026, providing cutting-edge DSP solutions. Retimer business, including Ethernet and PCIe retimers, is gaining traction with expanding TAM.

In the first quarter, Credo's revenue was $223 million. The AEC product line continued robust growth with top three end customers each contributing over 10% of revenue. The optical business sustained strong momentum, on track to double optical revenue in 2026. The Ethernet retimer business achieved stronger results in Q1, with the PCIe retimer family gaining significant traction.

Guidance

• Expect 2026 revenue between $230 million and $240 million, up 5% sequentially at midpoint.
• Q2 non-GAAP gross margin expected to be within 64% to 66%.
• Q2 non-GAAP operating expenses expected between $56 million and $58 million.
• Q2 diluted weighted average share count approximately 190 million shares.
• Sequential revenue growth mid-single digits in 2026, non-GAAP net margin ~40% in coming quarters and FY2026.

Risks

• Uncertainties in tariff regime affecting guidance.
• Supply constraints in optical components could impact, but AEC business expected to stand alone due to its own advantages in reliability, power efficiency, and cost.

Q: It sounds like you are seeing at least one of the two new hyperscalers adopting the AEC this year. Pull in orders relative to your previous outlook. Could you discuss whether all of these new developments are adopting across hyperscalers are adopting 100 gig per lane AECs and whether you have several programs across each of these hyperscalers that demonstrate not only the breadth but also the depth of your engagements?

A: And I have a Yeah. Thanks, Karl. I'll confirm that the most recent ramps that we've seen have been at a 100 gig per lane. And depending on the customer, you know, we've got multiple programs in flight. Naturally, as we begin a relationship with a new customer, it always starts with a single platform and then, typically, what we've seen is it expands from there. But I would say that everything we've seen over the last three months has been encouraging in a sense that we did see a pull-in from the schedule that we talked about and, we really effectively delivered to the volumes that they wanted.

Q: When you think about scale-up interconnect opportunities, several of your customers are taking different approaches with some using PCIe-based solutions and some using Scalopy to net solutions. Having said that, do you believe AECs offer greater competitive advantages to scale-up Ethernet or PCIe-based applications such as UA Link, and therefore, the market opportunity of one could be larger than the other?

A: Yes. I would say that the near-term opportunity for us to scale up is really with the PCIe protocol. As we see the market moving from PCIe Gen five to Gen six. We do see that AECs will represent a really nice opportunity both for inter-rack as well as rack-to-rack as scale-up goes row scale. The longer-term discussion is around the you know, the debate in the industry about the 200 gig per lane protocol. And, you know, of course, we've heard from Broadcom, we'll scale up Ethernet. UAL is really being driven by AMD and others. Of course, NVIDIA has come forward with EntityLink Fusion. And PCIe is talking about know, going you know, going to PCIe gen seven and beyond. For us, we really think the opportunity is one that we're agnostic towards because the products that we're delivering can support any one of the 200 gig per lane protocols. Each one of them uses the, the same identical IEEE 200 gig SerDes. And so I think we're gonna be in good shape. So it's again, it's it's layer one, from the standpoint of an AEC. So I think that you know, for us, we just like to see the market go faster sooner. Because the scale-up opportunity represents a significant increase in TAM. Really, over the next, over the next two to five years.