Credo Technology (CRDO) Shares Dip Despite Record-Breaking Quarterly Performance

Key Takeaways

• Shares initially plunged 14% in after-hours trading before settling with a 4.2% decline at $226.10 on Monday’s close
• Fourth-quarter revenue soared 157% annually to $437 million, surpassing the analyst consensus of $431.8 million
• Non-GAAP earnings of $1.16 per share exceeded Wall Street’s $1.02 forecast; annual revenue surpassed $1.3 billion, marking 206% growth
• First-quarter fiscal 2027 outlook of $465M–$475M topped estimates but failed to satisfy bullish market expectations
• The company finalized its $750 million DustPhotonics acquisition to broaden optical connectivity capabilities

Shares of Credo Technology tumbled 14% during extended trading hours Monday before moderating losses to finish 4.2% lower at $226.10, following the release of impressive fiscal fourth-quarter earnings coupled with forward guidance that underwhelmed the market.

Credo Technology Group Holding Ltd, CRDO

The shares remained approximately 2% lower in pre-market activity Tuesday. Nonetheless, CRDO has delivered a 58% gain year-to-date and has climbed 157% from its March 30 trough.

Fourth-quarter revenue reached an all-time high of $437 million, representing a 157% year-over-year increase and exceeding the $431.8 million analyst projection. Non-GAAP earnings per share registered $1.16, comfortably beating the $1.02 consensus and significantly higher than the $0.35 reported in the prior-year period.

For the complete fiscal 2026 year, revenue totaled $1.3 billion — a 206% annual expansion. Non-GAAP net income multiplied more than five times to $662 million. The quarter generated $177.5 million in free cash flow, with the company concluding the period with $1.4 billion in cash reserves.

Chief Executive Bill Brennan described fiscal 2026 as “another defining year,” highlighting that fourth-quarter revenue alone surpassed the company’s entire fiscal 2025 annual revenue.

Forward Outlook Falls Short of Elevated Expectations

For the first quarter of fiscal 2027, Credo projected revenue ranging from $465 million to $475 million. While this exceeds the Street consensus of $461.3 million, market participants had anticipated a more robust forecast.

Full-year fiscal 2027 revenue is anticipated to expand over 80% year-over-year. Company leadership indicated that approximately half of this expansion will stem from its optical product line, with the remainder driven by copper-based solutions including Active Electrical Cables and retimer products.

Non-GAAP net margin is forecast to remain around 50% throughout the fiscal year.

Major customers include Microsoft, Amazon, and Meta. The company’s four largest accounts each represented at least 10% of fourth-quarter revenue, with the top customer alone accounting for 34%.

DustPhotonics Acquisition Finalized

Credo completed its acquisition of DustPhotonics last week, paying $750 million in cash plus 920,000 shares of CRDO stock. This transaction enhances Credo’s portfolio with silicon photonics and photonic integrated circuit capabilities.

Company executives noted that DustPhotonics brings established 800G and 1.6T design wins alongside a development roadmap extending to 3.2 terabits per second. The technology’s architecture requires fewer lasers, potentially reducing expenses and enhancing reliability.

Credo anticipates its optical portfolio — encompassing optical DSPs, silicon photonics PICs, and ZeroFlap Optics — will produce more than $600 million in fiscal 2027 revenue. Each of the three product categories is projected to individually exceed $100 million in sales.

ZeroFlap Optics is forecast to be the primary optical revenue generator due to superior average selling prices — reaching triple digits compared to double digits for discrete components.

Brennan indicated that mid-single-digit sequential expansion is projected during the first half of fiscal 2027, with acceleration anticipated in the second half fueled by optical product adoption.

Looking toward fiscal 2028, Credo anticipates production scaling for its AEC and OmniConnect product lines, along with its Weaver gearbox solution designed to address emerging inference memory bottlenecks.

CFO Dan Fleming stated the company has no intentions to pursue additional capital raises or stock repurchase programs following the DustPhotonics cash transaction.

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