Key Takeaways
- Shares initially plunged 14% in after-hours trading before finishing Monday’s session down 4.2% at $226.10
- Fourth-quarter revenue soared 157% from the prior year to reach $437 million, surpassing analyst projections of $431.8 million
- Adjusted earnings per share of $1.16 exceeded Wall Street’s $1.02 forecast; annual revenue crossed $1.3 billion, representing 206% growth
- First-quarter fiscal 2027 outlook of $465M–$475M topped consensus estimates but failed to satisfy bullish expectations
- The company finalized its $750 million DustPhotonics takeover to bolster optical connectivity capabilities
Credo Technology shares experienced significant volatility on Monday, initially tumbling 14% in after-hours trading before stabilizing to finish the regular session down 4.2% at $226.10. The decline came despite the semiconductor company reporting impressive fiscal fourth-quarter results, with investor disappointment stemming from forward guidance that fell short of elevated expectations.
Credo Technology Group Holding Ltd, CRDO
Heading into Tuesday’s trading session, the stock remained approximately 2% lower. Even with the recent pullback, CRDO has delivered a remarkable 58% gain year-to-date and has skyrocketed 157% from its March 30 trough.
The company’s fourth-quarter performance showcased record-setting revenue of $437 million, representing a 157% year-over-year increase and exceeding the analyst consensus estimate of $431.8 million. On the bottom line, adjusted earnings per share reached $1.16, significantly outpacing the $1.02 forecast and marking a substantial improvement from the $0.35 reported in the same period last year.
Looking at the full fiscal year 2026 performance, revenue climbed to $1.3 billion — representing a staggering 206% year-over-year expansion. Non-GAAP net income multiplied more than five times to reach $662 million. The company generated $177.5 million in free cash flow during the quarter and maintained a robust cash position of $1.4 billion at period end.
Chief Executive Officer Bill Brennan characterized fiscal 2026 as “another defining year,” emphasizing that fourth-quarter revenue alone surpassed the company’s entire revenue for fiscal 2025.
Forward Outlook Falls Short of Optimistic Expectations
For the first quarter of fiscal 2027, Credo projected revenue in the range of $465 million to $475 million. While this guidance exceeded the Street consensus of $461.3 million, it apparently failed to match the more aggressive expectations already embedded in the stock price.
Management anticipates full-year fiscal 2027 revenue to expand by more than 80% compared to the prior year. The company indicated that approximately half of this growth will be driven by its optical product portfolio, with the remaining half coming from copper-based solutions including Active Electrical Cables and retimer products.
The company expects to maintain non-GAAP net margins around the 50% level throughout the fiscal year.
Credo’s customer base includes technology giants Microsoft, Amazon, and Meta. The company’s four largest clients each represented at least 10% of fourth-quarter revenue, with the top customer alone accounting for 34% of the total.
DustPhotonics Acquisition Finalized
In a strategic move completed last week, Credo closed its acquisition of DustPhotonics in a transaction valued at $750 million in cash plus 920,000 shares of CRDO stock. This acquisition enhances Credo’s capabilities in silicon photonics and photonic integrated circuit technologies.
According to management, DustPhotonics contributes existing 800G and 1.6T design wins along with a technology roadmap extending to 3.2 terabits per second. The acquired technology’s architecture requires fewer laser components, potentially reducing costs while enhancing system reliability.
The company anticipates its comprehensive optical portfolio — encompassing optical DSPs, silicon photonics PICs, and ZeroFlap Optics — will generate over $600 million in fiscal 2027 revenue. Each of these three product categories is projected to individually contribute more than $100 million.
ZeroFlap Optics is positioned to become the largest revenue contributor within the optical segment, driven by higher average selling prices in the three-digit range compared to two-digit ASPs for discrete components.
Brennan indicated the company expects mid-single-digit sequential growth during the first half of fiscal 2027, with acceleration anticipated in the second half fueled by the optical product portfolio.
Looking further ahead to fiscal 2028, Credo anticipates production ramps for its AEC and OmniConnect product families, alongside its Weaver gearbox product designed to address next-generation inference memory challenges.
CFO Dan Fleming stated the company has no current plans for additional capital raises or share buyback programs following the significant cash outlay for the DustPhotonics acquisition.
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