Credo Technology Stock Keeps Beating the Stock Market. Time to Buy?

Key Points

• Credo makes high-speed connectivity hardware for data centers.

• As data traffic soars, its business is booming.

• Despite Credo’s eye-popping growth, its best days could be yet to come.

• 10 stocks we like better than Credo Technology Group ›

Since debuting as a publicly traded company on Jan. 27, 2022, Credo Technology Group Holding (NASDAQ: CRDO) has been quietly crushing the stock market. Shares of Credo have soared 1,300%, making the S&P 500's return of 59% during that same time frame seem paltry by comparison.

Credo, which makes high-speed connectivity hardware for data centers, doesn't have the mainstream name recognition of an Nvidia or Palantir Technologies. But if Credo's blistering revenue growth keeps up, that could change soon.

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CRDO Revenue (TTM) data by YCharts

With the stock up 1,300% since inception, investors might be wondering if it's too late to jump on the bandwagon. Here's why Credo's growth story still might be in the early innings.

Image source: Getty Images.

Big data, big catalysts

With the rise of artificial intelligence (AI) and cloud computing, the volume of digital data being generated and stored is increasing exponentially, to the point that it's now being measured in zettabytes. Credo provides the behind-the-scenes infrastructure that helps keep that data flowing smoothly. At the heart of Credo's portfolio is its proprietary circuitry that turns massive amounts of digital data into clean, high-speed signals and moves it reliably across chips, cables, and networks.

Credo is a leader in the active electrical cable (AEC) market., AECs are next-generation copper cables with built-in chips that help maintain signal integrity. Compared to fiber-optic cables, Credo's AECs are up to 1,000 times more reliable while consuming half the power, according to the company. One of Credo's key advantages is that it provides the complete cable and it controls system-level design, testing, and manufacturing, which gives customers a fully integrated, plug-and-play solution.

Credo saw strong adoption of AECs in its fiscal 2026 first quarter, which ended Aug. 2. Management expects "significant year-over-year growth" in sales of active electrical cables, noting that the total addressable market (TAM) for AECs could be expanding. Thanks to advances in liquid cooling and power delivery, data center operators are packing more graphics processing units (GPUs) into server racks, and they're cramming more racks together in clusters to build AI supercomputers. That means data centers need more high-speed connections between GPUs and racks, creating a bigger and more lucrative market for AEC providers like Credo.

Active electrical cables are only part of the company's growth story. Credo produces a variety of integrated circuits for data centers and telecom infrastructure, including retimers, digital signal processors, and serializer/deserializer chiplets. Essentially, it's a one-stop shop for high-speed connectivity.

Data centers use a mix of copper cables and fiber-optic cables, and Credo sees growth opportunities in both categories. Credo's optical (fiber-optic) business is booming, with its signal-processing chips finding their way into more fiber optic modules and data centers. Management says the company is on pace to double optical revenue again in fiscal 2026.

"For several years, the industry has debated the shift from copper to optical connectivity solutions," CEO Bill Brennan said during the Q1 conference call. "While consensus holds that copper will remain prevalent in the foreseeable future, Credo is strategically prioritizing optical solutions as a cornerstone of our product roadmap. We see an expanding TAM for both copper and optical connectivity solutions."

Does Credo belong in your portfolio?

Credo is growing at a torrid pace. Fiscal 2025 revenue surged 126% to $436.8 million. Fiscal 2026 Q1 revenue skyrocketed 274% to $223.1 million, blowing by management's top-end guidance of $195 million. Even if Q2 revenue comes in at the low end of management's guidance -- $230 million -- Credo will surpass its full-year fiscal 2025 revenue in just two quarters of the current fiscal year.

Fiscal 2025 was Credo's first full year as a profitable company since going public. The trend continued in Q1 2026, with Credo reporting generally accepted accounting principles (GAAP) net income of $63.4 million, up from $36.6 million in the previous quarter and a dramatic improvement over the $9.5 million loss in the year-ago quarter. Most bottom-line metrics are trending in the right direction.

With nearly $480 million in cash and short-term investments on hand at the end of Q1, Credo has ample liquidity to support continued growth. During the Q1 call, Brennan hinted at several new product announcements in the coming months.

If there's anything that might give some investors pause, it's Credo's lofty valuation. Credo shares at the time of this writing are trading at a price-to-earnings (P/E) ratio of 227 on a trailing-12-month basis. But if you look at the forward P/E ratio -- and compare it to growth juggernauts Nvidia and Palantir -- it doesn't look as excessive. Also, keep in mind that high-octane stocks often command eye-popping multiples, as investors are willing to pay up for supercharged revenue growth and earnings expansion.

CRDO PE Ratio (Forward) data by YCharts

While stocks with high growth potential can justify their lofty valuations over time, they also come with elevated risk. Investors need to consider whether the expected growth is realistically achievable and sustainable. In this case, I think it is. McKinsey & Company predicts that global demand for data center capacity could more than triple by 2030, which is why the firm expects companies to invest nearly $7 trillion in data center infrastructure during that same time frame. If those estimates pan out, Credo is well positioned to cash in on the data center boom.

Should you invest $1,000 in Credo Technology Group right now?

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Josh Cable has positions in Nvidia and Palantir Technologies. The Motley Fool has positions in and recommends Nvidia and Palantir Technologies. The Motley Fool has a disclosure policy.