Credo Technology Group Holding Ltd Q3 FY2026 earnings call

• Bill started by walking through Q3 results, updated on business, and shared view on long-term opportunities. • Revenue in Q3 was a record $407 million, up 52% sequentially and more than 200% year over year. • ADC product line growth driven by existing and new customers, AECs are de facto standard for intra-rack and rack-to-rack connectivity. • Zero-flap optics have ahead-of-schedule progress, expect production ramp in first quarter fiscal 27. • ALCs combine connectivity architecture with micro-LED expertise, expect sampling and qualification in fiscal 27 and production ramp in fiscal 28. • OmniConnect line drives reach inward toward silicon, first product Weaver enables 10X improvement in memory bandwidth IO density. • Appreciated silicon and system product operations teams for managing supply and scaling production.

In the third quarter, revenue was $407 million, non-GAAP gross margin was 68.6%, non-GAAP net income was approximately $209 million. ADC product line delivered strong growth, driven by existing customers and new wins. Zero-flap optics offer up to 1,000 times better reliability than commodity laser-based optics and consume half the power. IT portfolio spans optical and copper connectivity. Three new product families - zero-flap optics, active LED cables (ALCs), and OmniConnect line - are expanding the total addressable market.

• Q4 fiscal 26 revenue expected between $425 million and $435 million. • Q4 non-GAAP gross margin expected within 64% to 66% range. • Q4 non-GAAP operating expenses expected between $76 million and $80 million. • Q4 diluted weighted average share count expected approximately 197 million shares. • Fiscal 27 expected sequential revenue growth in mid single digits leading to more than 50% year-over-year growth.

• Forward-looking statements subject to risks and uncertainties discussed in SEC filings. • Non-GAAP financial measures used, which are not a substitute for GAAP. • Supply chain risks, but management feels great about supply chain for Credo including wafers and packaging, though memory and laser supply chain issues could be concerns.

Q: Will you compare ZF Optics customer engagement versus AEC customer engagement and talk about customer set variation for ZF Optics?

A: ZF optics have been in development for two years, delivering solution to customers for qualification that's fully vetted, similar in sense of delivering vetted solution. We're early in promoting ZF optics and expect growth across hyperscalers and neoclouds.

Q: Congratulations on record results, Bill, level set on AEC use cases and how they relate to CPO?

A: AECs are compelling for network reliability and power efficiency in intra-rack and rack-to-rack connections up to seven meters, not an either-or with CPO, industry evolving to heterogeneous mix.

Q: Update on composition of growth in fiscal 27 and beyond?

A: Fiscal 27 will see different composition between copper and optical with ZF Optics ramping, fiscal 28 will layer in ALCs and first OmniConnect gearbox.

Q: Clarification on what drove Q3 upside and views on AECs versus optical being complementary or competitive?

A: Growth driven by strength across hyperscale customers. AECs vs optical: reliability, power efficiency, total cost of ownership drive choice, they are complementary in different reach and power envelope scenarios.

Q: Discuss Blue Heron DSP for scale up AEC connections and timing of ALC CPO solution?

A: Bulk of AI revenue from scale out now, Blue Heron product supports 200 gig per lane retimer and will build AECs. ALC CPO solution timing not specified exactly but has a straightforward path.

Q: Clarification on fourth hyperscale customer and OpEx guide?

A: Fourth hyperscaler still in line with expectations, OpEx dynamics include higher R&D spend due to project related and hiring.

Q: Question on 1.60 RAM and CPO assumption?

A: 200 gig lane per market addressed by AECs, ALCs, and laser-based modules, CPO sometime in future, expect strong business in mentioned categories.

Q: Question on Comira acquisition?

A: Comira acquisition strengthens ability to deliver complete system-level connectivity solutions, accelerates end-to-end connectivity roadmap.

Q: Supply chain risks and gating factors?

A: Management feels great about supply chain for Credo, aligned with supply chain partners, no major gating factors seen.

Q: Sense of modeling strength of optical products and contribution?

A: Optical products will be material component of fiscal 27, but specific percentage not specified yet.

Q: Number of customers ramping ZF Optics across fiscal 27 and elaboration on Omniconnect gearbox opportunity?

A: Expect to ramp more than four customers across fiscal 27, Omniconnect gearbox enables composable architecture for different workloads and protocols.

Q: AEC applications in front end, scale out, etc.?

A: Strongest in scale-out, also in front end and switch tracks/disaggregated chassis.

Q: Follow-up on AEC TAM and gross margin guidance?

A: Market opportunity for AECs includes scale-up, scale-out, etc., gross margin guidance is conservative based on product mix and long-term expectation.

Q: Pull-in of ZF optics business reason?

A: Driven by customer pull due to reliability and productivity improvement benefits.