Earnings Call Highlights: Credo (CRDO) | FY26 Q1

Summary | Credo delivered a stellar FY26 Q1 — revenue up 274% YoY and gross margin as high as 67.6%. Infrastructure upgrades in AI data centers are driving explosive demand for AEC (active electrical cables), with four hyperscalers ramping at the same time. The company is also accelerating its optical DSP and LRO product lines, jumping straight to 3nm to meet the 1.6T generation. PCIe retimers will see design-in in 2025 and volume production in 2026, expanding its footprint in AI scale-up. Credo emphasized its protocol-agnostic strategy and system-level integration advantage, targeting long-term growth in AI network architecture.

💰 Financials (Non-GAAP)

• Revenue: $223.1M (QoQ +31%; YoY +274%), a record high

• Gross margin: 67.6% (+20 bps QoQ)

• Operating expenses (Opex): $54.5M (QoQ +5%)

• Operating income: $96.2M (operating margin 43.1%, QoQ +635 bps)

• Net income: $98.3M (net margin 44.1%, QoQ +51%)

• Free cash flow: $51.3M (operating cash flow $54.2M, CapEx $2.8M)

• Cash and equivalents: $479.6M (QoQ +$48.3M)

• Inventory: $116.7M (QoQ +$26.6M)

Outlook (Q2 / FY26)

• Q2 revenue: $230–240M (midpoint QoQ +5%)

• Q2 gross margin: 64–66%; Opex: $56–58M

• Full-year FY26: revenue +120% YoY, net margin around 40%

⚙️ Product Updates

1. AEC (Active Electrical Cable)

• Multiple hyperscalers ramping at once; the 4th customer is already contributing revenue

• Widely deployed at 50G/100G per lane, and will move forward with the 200G/lane (1.6T) architecture

• Applications extend to rack-to-rack (up to 7m), benefiting from liquid cooling and rising GPU density

• Versus optical modules: half the power, up to 1000× the reliability, and virtually no link flaps

• In-house SerDes + retimer + system design validation end to end → a firmly entrenched lead

• Near term, the focus is PCIe Gen6 AEC; long term, 200G/lane SerDes is the core, staying protocol-agnostic (Ethernet / UALink / NVLink / PCIe)

2. Optical (Optical DSP / LRO)

• FY26 optical revenue expected to double again

• The product line covers DSP and LRO (Linear Receive Optics), up to 1.6T

• Jumping straight to 3nm (power is the key)

• 800G LRO has been demonstrated; 1.6T is seen as the main catalyst

• Management believes 1.6T market adoption will be slower than expected, but this will not affect optical business growth

3. Retimers (Ethernet / PCIe)

• Ethernet retimer: integrates MACsec / gearbox, balancing performance and energy efficiency

• PCIe retimer: positioned on "longest reach + lowest latency"

  • Design-in in 2025, volume production in 2026

  • Will be used in AI scale-up networks, significantly expanding the TAM

🔭 Outlook

• Multiple waves of growth: AI scale-out / scale-up networks are driving a surge in connectivity demand

• Protocol-agnostic + system-level integration: built around 200G/lane SerDes, spanning a multi-protocol ecosystem

• Customer and application diversification: the 5th hyperscaler is expected to reach volume production by year-end

• New markets: neoclouds, sovereign clouds and mega data centers (GW-scale) are all potential upside

💬 Q&A Highlights

• Scale-up protocol direction: PCIe in the near term; 200G/lane as the common foundation long term

• AEC vs. optical modules: for the first time, copper is replacing fiber in some scenarios, mainly due to reliability and energy efficiency

• Slow 1.6T optical module adoption: but it does not affect Credo's optical growth

• Legal matters: settled with Amphenol and Volex; stressed respect for IP and that the market is big enough to coexist

• New customer momentum: the 5th hyperscaler ramps by year-end, and collaboration with a major GPU vendor is already underway

• PCIe retimer: beyond the two existing major customers, other hyperscalers are also starting to adopt

⚠️ Risks and Watch Items

• Customer concentration remains high (top three about 88%)

• Rising inventory — watch how it is worked down

• Tariff and geopolitical risks persist

• The 1.6T market may ramp slower than expected

🧭 Bottom Line

Credo is showing strong growth momentum in the AI data center wave, advancing on two fronts — AEC and optics — and reinforcing its moat through SerDes + system-level integration.

Near term it focuses on PCIe scale-up; long term it benefits from the full arrival of the 200G/lane era.

Despite customer concentration and timing risks, Credo remains one of the few key players that command both the copper and optical technology stacks.