Credo Revenue Jumps 274% in Fiscal Q1

Key Points

• Revenue soared 274% year over year in Q1 FY2026, sharply exceeding management guidance.

• Adjusted EPS climbed to $0.52 for Q1 FY2026, marking 1,200% year-over-year growth.

• Adjusted operating margins and cash generation reached record highs in Q4 FY2025. However, gross margin is forecast to moderate in Q2 FY2026.

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Credo Technology Group (NASDAQ:CRDO), a provider of high-speed connectivity solutions for the data infrastructure market, delivered a standout fiscal 2026 first quarter on Sept. 3, 2025. Revenue hit $223.1 million, a sizable upside compared to the company’s revenue forecast of $185 million–$195 million for Q1 FY2026. Adjusted EPS reached $0.52.

The quarter showcased robust sales, strong margins, and a healthy balance sheet, while also flagging important risks in customer concentration and future margin pressure.

Source: Credo Technology. Note: Fiscal 2026's first quarter ended Aug. 2, 2025. Fiscal 2025's Q1 ended Aug. 3, 2024.

Business Overview and Key Success Factors

Credo Technology Group specializes in designing and delivering advanced hardware and intellectual property for data center networking. Its core products include SerDes chips (serializer-deserializer circuits that enable high-speed data transfer), data signal processors (DSPs), Active Electrical Cables (AECs), and retimer components. These technologies are crucial in moving large volumes of data quickly and efficiently across AI, cloud, and hyperscale data centers.

Recently, the company has focused on three core drivers: rapid innovation in next-gen connectivity, deepening relationships with major hyperscale customers, and expanding its product portfolio across Ethernet and PCIe standards. Key factors for success include sustaining its technology leadership and maintaining performance advantages in power efficiency. Its strategy hinges on continued research and development investment, an expanded intellectual property (IP) portfolio, and strong partnerships in the industry.

Quarter Highlights: Growth Surge and Strategic Progress

During Q1 FY2026, sales set new records, reflecting the fast-growing demand for high-speed, energy-efficient networking products. Product sales surged to $217.1 million (GAAP), up 279% from a year ago. The company’s connectivity solutions for AI and cloud networking, such as Active Electrical Cables and retimer chips, found broader adoption among hyperscalers—very large tech companies running massive data centers. IP licensing revenue, now less than 3% of the total in FY2025, has been overtaken by hardware sales, emphasizing a successful pivot toward physical products. This surge was enabled by rapid scaling and, as CEO Bill Brennan noted, “deep, strategic partnerships with hyperscalers and key customers.”

Gross margin—how much profit remains from sales after the direct cost of goods—is a key performance metric in semiconductors. Credo’s non-GAAP gross margin expanded 4.7 percentage points to reach 67.6%, compared to Q1 fiscal year 2025. This was above its earlier guidance and reflected favorable product mix, especially in high-value chips and cables. Operating income, a measure of profit after all operating costs (but before interest and tax), ballooned from $2.2 million in Q1 fiscal year 2025 to $96.2 million, thanks to operating leverage, where rising sales outpaced increases in expenses. Net income on a non-GAAP basis reached $98.3 million for Q1 FY2026, underlining robust profitability improvements.

The earnings release highlighted the breadth of the company’s solutions, spanning Active Electrical Cables, retimer chips that help restore signal quality in high-speed circuits, optical DSPs that process data transmitted via light, and SerDes IP. This range supports a large and growing set of applications in AI, cloud, and networking. New design wins and technology advances, such as 112G SerDes and 800G DSPs, provided momentum for future quarters.

However, the quarter also brought some points of caution. Inventory rose to $116.7 million from $90 million in the previous quarter. While expenses rose more slowly than revenue, both R&D and selling, general and administrative (SG&A) costs climbed rapidly. Customer concentration is another concern. Past filings indicate that one customer brought in 67% of revenue in FY2025, and no new quantitative data confirmed increased diversification this quarter. GAAP gross margin is expected to decrease to the 63.5%–65.5% range for Q2 FY2026, possibly due to product or customer mix. The company’s IP licensing, once a more material contributor, has become a minor revenue stream, representing 3% of total revenue in FY2025 and 15% in FY2024, confirming the pivot away from licensing toward hardware products.

Looking Ahead: Guidance and Areas to Watch

For Q2 FY2026, Credo forecasts GAAP revenue of $230 million–$240 million. This implies continued top-line growth of 3%–8% compared to the previous quarter, though a decline from recent levels. Non-GAAP operating expenses are projected to rise modestly to $56–58 million for Q2 FY2026.

No annual outlook or long-term projections were offered beyond Q2 FY2026. Credo does not currently pay a dividend. Looking ahead, investors should monitor customer concentration risk, trends in gross margin, and whether the recent pace of R&D spending yields continued leadership in next-generation connectivity. Any inventory buildup will also be important to track if demand were to slow, and the anticipated decrease in GAAP gross margin for Q2 FY2026 bears watching as market dynamics shift in the highly competitive semiconductor sector.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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