Credo Expects Revenues to Top $800M in FY26: Is the Growth Sustainable?
Credo Technology Group Holding Ltd CRDO has set an ambitious tone for fiscal 2026, guiding revenues of more than $800 million compared with $437 million reported in fiscal 2025. Fiscal 2025 revenues rose 126% year over year amid exponential data growth and rapid AI proliferation, which is driving demand for faster and energy-efficient connectivity solutions. This bodes well for Credo.
One of Credo's key strengths lies in its Active Electrical Cables ('AEC') product line, which posted double-digit sequential growth in the fiscal fourth quarter. The growth is driven by its increasing adoption in the data center market. The demand for AECs is increasing as ZeroFlap AECs offer more than 100 times improved reliability than laser-based optical solutions. Moreover, Credo's system-level approach is giving it a competitive edge.
It owns the entire stack of SerDes IP, Retimer ICs, system-level design, qualification and production. This integrated approach allows faster innovation cycles and strong cost efficiency. With demonstration of PCIe Gen6 AECs and increasing hyperscaler interest, this product line is expected to remain a growth engine going ahead.
Momentum in the optical business bodes well. CRDO achieved revenue targets for this business in fiscal 2025 and expects expansion of customer diversity across lane rates, port speeds and applications to accelerate revenue growth going ahead.
CRDO's PCIe retimers and Ethernet retimers continue to witness customer interest, especially for scale-out networks in AI servers. Credo highlighted that the retimer business delivered 'robust' performance in both the fiscal fourth quarter and fiscal 2025, driven by 50 gig and 100 gig per lane Ethernet solutions. This growing demand underscores the increasing importance of high-performance solutions in the rapidly expanding AI-server market. Shift to 100 gig per lane solutions and higher demand for system-level expertise and software capabilities for dealing with AI-optimized architectures bode well for CRDO's retimer business.
That said, increasing market competition and macroeconomic uncertainties may impact CRDO's growth trajectory. Credo competes with semiconductor giants like Broadcom Inc. AVGO and Marvell Technology, Inc. MRVL.
Taking a Look at AVGO & MRVL Revenue Guidance
Broadcom does not provide guidance for the full year but has provided third-quarter fiscal 2025 view. For third-quarter fiscal 2025, Broadcom expects revenues of $15.8 billion, up 21% year over year. Semiconductor revenues are anticipated to grow 25% year over year to $9.1 billion. AI semiconductor revenues are projected to grow 60% year over year to $5.1 billion, whereas non-AI semiconductor revenues are expected to reach $4 billion. AI revenues are benefiting from investments from hyperscale partners in AI XPUs and connectivity solutions for AI data centers. Infrastructure Software revenues are expected to grow 16% year over year to $6.7 billion.
Marvell Technology expects revenues to be $2 billion (+/- 5%) for the second quarter of fiscal 2026, indicating growth of 57% year over year. The growth is likely to be driven by demand for AI-driven custom silicon, which has become the biggest component of Marvell Technology's data-center revenues. It expects data-center revenues to increase in the mid-single-digit range sequentially and maintain strong year-over-year growth. MRVL delivered approximately $1.9 billion in revenues for the first quarter of fiscal 2026, up 63% year over year, while data center end-market revenues of $1.44 billion rose 76% year over year.
CRDO Price Performance, Valuation and Estimates
Shares of CRDO gained 6.5% year to date compared with the Electronics-Semiconductors industry's growth of 6.8%.
Image Source: Zacks Investment Research
In terms of the forward 12-month price/sales ratio, CRDO is trading at 15.16, higher than the Electronic-Semiconductors sector's multiple of 8.21.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for CRDO earnings for fiscal 2026 has seen a significant upward revision over the past 60 days.
CRDO currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
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