Q3 2025 Earnings Summary
- Credo is diversifying its customer base, reducing dependence on its largest customer. In Q3, the largest customer accounted for 86% of revenue. However, Credo is now in volume production with three hyperscalers and has two additional hyperscalers in qualification expected to ramp in fiscal '26, which should broaden revenue and reduce customer concentration ,.
- Credo is expanding into the PCIe market, having passed PCI-SIG compliance for Gen5, and is optimistic about competing in the Gen6 market. They are targeting the Gen6 PCIe market with production ramp expected in calendar '26, which could significantly expand their total addressable market ,.
- The scale-up network represents a significant growth opportunity for Credo, potentially larger than the scale-out network, as they see volumes being larger than the scale-out network opportunities. This expansion could lead to substantial revenue growth over the next 2-3 years.
- In Q3 2025, Credo had a significant customer concentration, with 86% of revenue coming from its largest customer, highlighting a dependency risk.
- Revenue outside the largest customer declined from $48 million to $19 million sequentially, indicating that growth is heavily reliant on a single customer and that other segments may be weakening. ,
- The diversification of revenue from additional hyperscaler customers may be delayed, as new customer ramps are expected in fiscal year 2026, possibly in the second half, potentially prolonging reliance on the largest customer.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +154% YoY (from $53.06M in Q3 2024 to $135.00M in Q3 2025) | Total Revenue surged driven by a dramatic increase in product sales and a notable rise in IP license revenue. The previous period's lower revenue underscores how the ramp-up in high-volume, high-margin product shipments and favorable contract timing contributed to the current period’s strong performance vs. |
Product Sales | +223% YoY (from $39.98M in Q3 2024 to $129.37M in Q3 2025) | Product Sales skyrocketed owing to a substantial increase in unit shipments of AEC and Optical products, which accounted for over 95% of the growth. New design wins and a diversified customer base helped overcome the lower shipment levels seen in Q3 2024 vs. |
Product Engineering Services | -77% YoY (from $11.83M in Q3 2024 to $2.67M in Q3 2025) | The decline in Product Engineering Services revenue reflects a reduction in non-recurring or one-time engineering engagements compared to Q3 2024, indicating a strategic shift toward focusing on core product offerings vs. |
IP License Revenue | +137% YoY (from $1.25M in Q3 2024 to $2.96M in Q3 2025) | IP License revenue increased as better contract execution and more favorable revenue recognition timing improved revenue relative to the previous period, thereby contributing positively to the overall mix despite historical revenue fluctuations vs. |
Geographic Revenue – Hong Kong | +229% YoY (from $28.39M in Q3 2024 to $93.34M in Q3 2025) | Hong Kong revenue soared due to a ramp-up in demand from a U.S. hyperscaler serviced via a local partner. This region’s performance significantly outpaced Q3 2024, highlighting targeted market success vs. |
Geographic Revenue – United States | -51% YoY (from $15.44M in Q3 2024 to $7.63M in Q3 2025) | US revenue declined markedly, which may indicate a strategic reallocation of sales focus towards faster-growing regions, resulting in lower engagement relative to Q3 2024 despite previous stronger performance vs. |
Geographic Revenue – Mainland China | +3000%+ YoY (from $0.80M in Q3 2024 to $25.26M in Q3 2025) | Mainland China revenue experienced an extraordinary surge, driven by significant increases in unit shipments of AEC and Optical products, bolstered by new design wins and AI-driven demand—turning a previously marginal region into a major revenue contributor vs. |
Geographic Revenue – Taiwan | -69% YoY (from $3.48M in Q3 2024 to $1.08M in Q3 2025) | Taiwan revenue fell sharply, suggesting reduced market engagement or intensified competitive pressures compared to Q3 2024, with no specific mitigating factors cited in the documents vs. |
Geographic Revenue – Rest of World | +56% YoY (from $4.95M in Q3 2024 to $7.70M in Q3 2025) | Rest of World revenue grew moderately, reflecting sporadic improvements in demand across various international markets that helped offset declines in other regions, underlining a mixed geographic performance relative to Q3 2024 vs. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue | Q4 2025 | no prior guidance | $155 million to $165 million | no prior guidance |
Non-GAAP Gross Margin | Q4 2025 | no prior guidance | 63% to 65% | no prior guidance |
Non-GAAP Operating Expenses | Q4 2025 | no prior guidance | $50 million to $52 million | no prior guidance |
Diluted Weighted Average Share Count | Q4 2025 | no prior guidance | Approximately 188 million shares | no prior guidance |
Revenue Growth | FY 2026 | no prior guidance |
| no prior guidance |
Non-GAAP Operating Expenses Growth | FY 2026 | no prior guidance | Half the rate of revenue growth | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Revenue | Q3 2025 | Between $115 million and $125 million | 135 million | Beat |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Customer Concentration | Previously discussed as a diversified mix with multiple 10%+ customers (Q2: Microsoft at 11%, an AEC hyperscaler at 33%, emerging hyperscaler at 14% ; Q1: two 10% customers including an emerging hyperscaler ; Q4: four 10% customers, including a lead chiplet customer ) | Q3 2025 shows a stark concentration with the largest customer accounting for 86% of revenue driven by a ramp for AI platforms. | Increased concentration risk is evident as reliance on one customer spikes, though the company’s stated plans to gradually diversify (targeting 3–4 customers >10% revenue) balance the risk. |
Diversification | Consistently highlighted in Q2 (seven customers >5% of revenue ), Q1 (broadening customer base with emerging hyperscalers ) and Q4 (achieving revenue diversification through AI deployments ) | Q3 2025 reiterates efforts to broaden the customer base with expectations of additional hyperscalers ramping up to contribute 10%+ revenue. | Continued focus on diversification remains, even with a current high concentration; the sentiment is steady with an eye toward a more balanced revenue mix over time. |
AEC Solutions | Mentioned across prior periods as a key revenue driver – Q4 emphasized maintaining market leadership , Q2 reached record AEC revenues with strong hyperscaler demand , Q1 underlined AECs as the de facto solution for in‐rack connectivity | Q3 2025 reports a surge in AEC revenue, highlighting its role as the de facto standard for intra‑rack connectivity and expanding into rack‑to‑rack solutions with superior reliability. | Sustained growth and leadership continue with AEC solutions, underscored by robust performance and technological advantages that further solidify market position. |
AI/Data Center Demand | Consistently bullish in Q4 (AI drove roughly 75% of revenue ), Q2 (strong demand driving market leadership ) and Q1 (accelerated adoption across hyperscalers and emerging segments ) | In Q3 2025, AI and data center demand is emphasized – from driving new design engagements like PCIe AEC demonstrations at NVIDIA’s GTC to expanding inference market opportunities. | Unwavering bullish sentiment: The company’s optimism remains high as demand for AI-driven connectivity continues to accelerate, reinforcing opportunities for future expansion. |
Optical DSP Business Expansion | Q4 reported significant fiscal 2024 wins and a 10% revenue target for fiscal 2025. Q1 noted design wins and momentum with over 2 million modules. Q2 saw record revenues driven by 50/100-gig solutions and early 200-gig developments. | Q3 2025 focuses on achieving growth objectives with global customer engagement and anticipates future opportunities such as 1.6T port deployments. | Consistent upward trajectory: The emphasis on optical DSP continues with steady innovation and expanding market adoption across global customers. |
Next-Generation DSP Solutions | Earlier calls (Q1, Q2, Q4) introduced next‑gen advances with 3‑nanometer tape-outs for 200‑gig DSPs and innovative LRO architectures for power reductions. | Q3 2025 reaffirms progress with advanced 3-nanometer tape‑out for 200‑gig per lane products, reinforcing a focus on performance, power efficiency, and reliability. | Ongoing innovation: Continued technical advancements underline the commitment to next‑gen solutions, promising significant improvements in energy efficiency and performance. |
PCIe Market Expansion | Q1 outlined plans for entering the PCIe Gen6 market with focus on latency and DSP advantages. Q2 introduced PCIe retimers at OCP with plans for sampling and ramping in 2026. Q4 provided no PCIe updates. | Q3 2025 reports that the Toucan PCIe retimer has achieved full PCIe compliance and is targeting both Gen6 and Gen7 markets, marking a significant expansion into this high‐value space. | Emerging and growing focus: Moving from planning to execution, the PCIe market is a new strategic area with a large TAM and promising future revenue potential. |
High-Speed Connectivity | Consistently affirmed in Q4 with a broad range of high-speed connectivity products ; Q1 emphasized Credo as a pure‑play in high‑speed connectivity ; Q2 highlighted the trend towards faster lanes in Ethernet and PCIe. | Q3 2025 underscores high-speed connectivity’s expanding opportunity driven by AI and advanced product innovation, along with strategic plans to extend solutions across multiple protocols. | Sustained bullish sentiment: High‑speed connectivity remains a core strength, with continued investments and technology leadership fueling future growth. |
Scale-Up Network Growth Opportunity | Q4 2024 discussed increased connection density in AI clusters and higher rack-level AEC counts ; Q1 highlighted emerging hyperscalers and new spending driving opportunity ; Q2 noted market discussions on faster lane speeds. | Q3 2025 highlights the transition from appliance‑level to rack‑/row‑scale networks with advanced modulation (Gen5 to Gen6, 224-gig solutions), pointing to a larger total addressable market. | Growing emphasis on new architectures: As AI drives higher connection densities and new network topologies, scale‑up opportunities are expanding steadily with a sizeable long‑term impact. |
Gross Margin Improvement | Q4 2024 saw record margins with non‑GAAP gross margin at 66.1% ; Q1 reported lower margins due to a dip in IP contributions, but product margins improved with scale ; Q2 indicated sequential improvements. | Q3 2025 reports a non‑GAAP gross margin of 63.8%, with product margins also improved significantly—all primarily attributed to increasing scale. | Continuous improvement: The consistent margin gains reflect better scale and operational efficiency, with sentiment shifting increasingly positive as margins strengthen. |
Operating Leverage | Q4 2024 delivered a record operating margin of 12.3%. Q1 had lower leverage with modest margins while Q2 recorded notable improvements (operating margin of 11.5%). | Q3 2025 shows significant operating leverage improvement, with non‑GAAP operating income jumping to $42.4 million and margins increasing to 31.4%—a nearly 20 percentage point gain sequentially. | Strong gains: Operating leverage is improving markedly as top‑line growth outpaces expense increases, signaling robust operational performance. |
IP Licensing Revenue Uncertainty | Q4 2024 showed high IP revenue (27% of total) but noted it would moderate toward 10–15%. Q1 described the revenue as “lumpy” with long‑term expectations of 10–15%, despite a low Q1 percentage (4%). Q2 characterized it as uncertain and lumpily recognized. | In Q3 2025, there is little emphasis on IP licensing uncertainty, with only modest revenue of $3 million noted and confirmation that the primary focus remains on product revenue. | Diminishing impact: While past periods highlighted uncertainty and variability in IP licensing revenue, its relative importance appears to be declining as the focus shifts to more predictable product revenues. |
Competitive Pressure in the AEC Market | Q4 2024 featured remarks on a competitive environment with new entrants like Marvell and Astera, but emphasized organizational advantages. Q1 stated minimal competition on high-speed AECs. Q2 focused on a customer‑centric, customizable approach. | Q3 2025 acknowledges the inherent competitive pressures given the de facto standard status of AECs, but reaffirms a system‑level, first-to-market strategy that provides a clear differentiator. | Steady yet confident: Although competitive pressures persist, the company consistently stresses its technological and operational advantages, maintaining a confident stance in its market leadership. |
LRO Product Revenue Uncertainty | Q4 2024 explicitly mentioned uncertainty in ramping LRO revenue for fiscal 2025. Q1 and Q2 discussed the LRO concept positively without flagging revenue concerns. | Q3 2025 does not bring up specific LRO revenue uncertainty, instead noting ongoing efforts in both full DSP and LRO solutions without signaling revenue concerns. | Easing uncertainty: While earlier Q4 commentary noted revenue uncertainties for LRO products, later periods reflect a smoother outlook with a stronger focus on technical advantages rather than revenue fluctuations. |
-
Revenue Diversification and Largest Customer Outlook
Q: Will your revenue remain concentrated with the largest customer?
A: Our largest hyperscaler was 86% of revenue in Q3, but we expect this concentration to decrease ( , ). As we guided 19% sequential growth into Q4, our largest customer may represent about two-thirds of revenue ( ). We anticipate 3 to 4 customers each contributing over 10% of revenue in coming quarters, based on customer forecasts ( , ). -
Gross Margin Uptick Drivers
Q: What's driving the increase in gross margins?
A: The uptick to nearly 64% gross margin is driven by scale ( ). Excluding product engineering services, gross margin was 62.4%, up over 200 basis points sequentially and 900 basis points year-over-year ( ). Additionally, the roll-off of Amazon's warrant contra revenue after fulfilling $200 million in shipments contributed to margin improvement and will continue to do so next quarter ( ). -
Ramp of New Hyperscale AEC Customers
Q: Do you see new hyperscalers ramping significantly?
A: Yes, we have two additional hyperscalers in qualification, expected to ramp in fiscal '26, possibly in the second half ( , ). Design engagements are identified and committed, and our confidence is quite high with these new customers ( ). -
Confidence in Sustained Demand from Largest Customer
Q: How confident are you in ongoing demand from your largest customer?
A: We receive 12-month forecasts from customers, providing good visibility ( ). We expect our largest customer to return to historic levels, over $100 million run rate in fiscal '26 ( ). New customers are also ramping, contributing to a decreasing but still significant revenue concentration ( ). -
Plans to Enter PCIe Switching
Q: Are you planning to move into PCIe switching?
A: Yes, it's a natural progression from retimers to PCIe switches ( ). While there are challenges, it's not a huge step, and we see it as a possible growth area over time ( ). Currently, we're focused on retimers and AECs ( ). -
Competition and Dual Sourcing in AEC Market
Q: Are customers seeking dual sourcing in AECs?
A: While there's a desire for multiple sources, we focus on being the best partner by delivering innovations first and being accountable for the entire system solution ( ). We don't see significant changes on the competitive front ( ). -
Scale-Up vs Scale-Out Opportunities
Q: Where do you see more opportunity: scale-up or scale-out?
A: The scale-up network presents a larger opportunity over the next 2-3 years ( ). With the move to PCIe Gen6 and beyond, we're well-positioned to bring our advantages to this dynamic space ( ). The scale-out network continues to grow with moves to 100G and 200G per lane solutions ( ). -
AI Inference Shift Impact on AEC
Q: How does a shift to AI inference affect AEC potential?
A: As the inference market takes off, we expect a larger opportunity for AECs due to the increased number of deployments related to inference ( ). There's an uptick in customer activity focused on inference ( ). -
Update on LRO Technology
Q: What's the update on LRO technology?
A: We continue to offer both full DSP and LRO solutions, depending on customer needs ( ). LRO is becoming the default when power is critical, offering sub-10 watts power consumption for an 800G port, and superior signal integrity compared to LPO ( ). -
Clarification on Emerging Hyperscaler Customer
Q: Is the emerging hyperscaler now a major customer?
A: Yes, due to their increased spend, we now classify the emerging hyperscaler as a full hyperscaler, not drawing a line between them and the others ( ). -
Project Diversification among Key Customers
Q: Are you engaged in multiple projects with customers?
A: Yes, with each of our customers, including the first three we are ramping, there are multiple projects and SKUs ( ). We expect the same with new customers, starting with initial projects and expanding from there ( ). -
Front-End Networking Opportunities
Q: What's the outlook for front-end networking?
A: Front-end networking applies to both general compute and AI clusters ( ). General compute is moving from 25G to 50G and 100G per lane ( ). Our largest customer uses our AEC solutions for both back-end and front-end connections ( ). -
Impact of Analog Copper Cable Solutions on TAM
Q: Does analog copper missing the B300 cycle boost your TAM?
A: The TAM for analog copper cables exists mainly within the NVIDIA ecosystem, where we haven't been competing directly ( ). While we are ready to add value in that space, it's not included in our forecasts ( ). -
PCIe Ramp and Customer Qualification Process
Q: How is the PCIe ramp progressing?
A: The PCIe ramp will take time; we're targeting the Gen6 market with a design cycle in 2025 and production ramp in 2026 ( ). We're open to Gen5 opportunities and offer solutions that can easily upgrade to Gen6 ( ). -
System-Level Approach to PCIe Business
Q: Will you adopt a system-level approach in PCIe?
A: Yes, we're pursuing the same system-level strategy with PCIe AECs as we have with Ethernet ( ). We're demonstrating a full rack with multiple AECs, showcasing our capabilities ( ). -
Adoption of AECs by Other Hyperscalers
Q: Are other hyperscalers adopting AECs in back-end networks?
A: Yes, new customers are starting with initial projects and expanding ( ). One customer began with a 50G per lane project and quickly moved to 100G per lane for AI clusters ( ). -
Back-End Scale-Up Opportunities with ASICs and GPUs
Q: Is the scale-up opportunity only with in-house ASICs?
A: No, the back-end scale-up opportunity exists across the board, including with merchant GPUs like NVIDIA's ( ). PCIe is an opportunity in deployments using open protocols, regardless of the hardware source ( ). -
Sustainability of Revenue Ramps with Large Customers
Q: Should we expect lumpy revenue due to project-based ramps?
A: While projects are planned over time, we don't foresee an "air pocket" after completion ( ). There's a transition from 50G to 100G per lane technologies, and we're ready to ramp as customers need, ensuring sustainable demand ( ).