Key Highlights
- Q3 fiscal 2026 revenue reached a record $407 million, representing 52% sequential growth and more than 200% year-over-year expansion.
- Three hyperscale clients generated 88% of total quarterly revenue, contributing 39%, 32%, and 17% individually.
- Non-GAAP gross margin climbed to 68.6%, while operating cash flow set a new record at $166.2 million.
- Management issued Q4 revenue guidance between $425 million and $435 million, with fiscal 2027 expected to expand over 50% year-over-year.
- The company completed the Comera (CoMira Solutions) acquisition and accelerated its ZeroFlap optics launch to Q1 fiscal 2027.
Credo Technology Group delivered an exceptional fiscal Q3 2026 performance, achieving revenue of $407 million—a 52% increase from the prior quarter and exceeding 200% compared to the year-ago period.
Chief Executive William Brennan characterized this period as the company’s “most accelerated growth phase” to date. Credo successfully doubled its revenue between fiscal 2024 and 2025, and is now on track to triple that figure in fiscal 2026.
The quarter’s performance landed at the upper limit of Credo’s updated guidance range, as confirmed by Chief Financial Officer Daniel Fleming.
Credo Technology Group Holding Ltd, CRDO
Three major hyperscale clients dominated the revenue mix this quarter. The top customer represented 39% of total sales, followed by the second at 32%, and the third at 17%. Company leadership indicated this customer concentration pattern will persist, with three to four clients expected to exceed the 10% revenue threshold in upcoming quarters.
Each of Credo’s top three customers increased their spending sequentially during Q3, which Fleming identified as the primary driver behind the quarter’s outperformance.
Profitability and Cash Generation
Non-GAAP gross margin registered at 68.6%, surpassing the high end of company guidance and expanding 92 basis points from the previous quarter. Non-GAAP operating margin reached 49.6%, while net margin climbed to 51.3%.
Non-GAAP operating expenses totaled $77.4 million, reflecting a 35% sequential increase primarily attributed to expanded R&D spending.
Operating cash flow achieved a company record of $166.2 million. After deducting $26.5 million in capital expenditures—predominantly for production mask sets—free cash flow came in at $139.7 million.
The company closed the quarter with $1.3 billion in cash reserves, up $487.9 million from Q2. This increase reflects proceeds from an at-the-market equity offering executed between October and December, combined with strong free cash flow generation.
Inventory levels stood at $208 million, up $57.8 million from the prior quarter.
Product Pipeline Developments
Brennan provided updated timelines for Credo’s emerging product categories.
ZeroFlap optics manufacturing has already commenced with neocloud partner TensorWave. The broader commercial rollout is now anticipated in fiscal Q1 2027—accelerated from the previous second-half fiscal 2027 target—with over four customers preparing for deployment.
Active LED Cables (ALCs), incorporating MicroLED technology from the HyperLUM acquisition, are engineered to support distances up to 30 meters. Sampling is scheduled for fiscal 2027, with volume production targeted for fiscal 2028.
OmniConnect, a gearbox solution for XPU interconnectivity, is similarly targeting a fiscal 2028 production launch. Customer Positron intends to integrate it into an inference XPU platform.
Regarding Active Electrical Cables (AECs), Brennan noted that market adoption remains nascent but expanding, with a fifth hyperscaler joining Credo’s customer roster. He emphasized that ZeroFlap AECs deliver reliability improvements of up to 1,000 times over conventional laser optics while consuming approximately half the power.
Credo finalized its acquisition of Comera (alternatively known as CoMira Solutions) during the quarter. Brennan highlighted Comera’s expertise in protocol IP, error correction capabilities, and security IP, noting the two companies had collaborated since 2022.
Forward Guidance
For Q4 fiscal 2026, Credo projected revenue in the range of $425 million to $435 million, with non-GAAP gross margin between 64% and 66%. Fleming emphasized that the forecast assumes the “current tariff regime,” which he acknowledged remains subject to change.
Looking ahead to fiscal 2027, management projected year-over-year revenue growth exceeding 50%, with sequential expansion in the mid-single digits expected at the year’s outset.
The stock advanced 1.74% on the trading day following the announcement, though shares remain down 21.98% year-to-date, with the company carrying a market capitalization of approximately $20.28 billion.
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