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Credo Technology Group Holding Ltd (CRDO)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 FY2025 delivered a decisive beat on revenue and non-GAAP EPS; revenue was $170.0M (+25.9% q/q, +179.7% y/y) and non-GAAP diluted EPS was $0.35; GAAP gross margin reached 67.2% and non-GAAP 67.4% .
  • Credo guided Q1 FY2026 revenue to $185–$195M and non-GAAP GM to 64–66%; management expects FY2026 revenue to exceed $800M (>85% y/y) with non-GAAP net margin approaching ~40%—a material step-up vs prior >50% y/y commentary .
  • Strategic momentum in AEC with three hyperscalers >10% of revenue and largest at 61%; optical DSP wins (including 800G) and PCIe Gen6 retimer traction (full PCI-SIG compliance) expand the pipeline across scale-out and scale-up architectures .
  • Key near-term stock catalysts: visibility to sequential growth via Q1 guide, diversified hyperscaler ramps (two more in 2H FY2026), optical LRO low-power innovation (~9W 800G) and Pilot telemetry platform engagement—positively impacting margin durability and narrative on AI infrastructure reliability .

What Went Well and What Went Wrong

What Went Well

  • AEC-led growth and customer diversification: three hyperscalers >10% in Q4 (61%, 12%, 11%) with continued diversification expected; AECs remain de facto intra-rack solution with expansion to rack-to-rack up to 7m .
  • Margin expansion and operating leverage: non-GAAP GM 67.4% (up 355 bps q/q); non-GAAP operating margin 36.8%; free cash flow $54.2M with ending cash+ST investments $431.3M .
  • Optical DSP momentum and low-power leadership: 800G module demonstrated ~9W using LRO; significant 800G DSP win with initial deployment at a U.S. hyperscaler expected in FY2026 .
    • “Our recently demonstrated PCIe Gen 6 AECs at GTC promise the same compelling benefits for AI scale-up networks as deployments transition to rack-scale architectures.”
    • “In collaboration with an optical module partner, Credo demonstrated an industry-first 800 Gig optical module with total power consumption of roughly 9 watts.”

What Went Wrong

  • Customer concentration remains a risk: while improved in Q4, Q3 saw largest customer at 86% of revenue; normalization is expected but near-term concentration can drive quarterly lumpiness .
  • Tariff/macro fluidity: management flagged the current tariff regime as fluid; while not driving Q1 GM guide-down, it adds uncertainty and may require geographic diversification .
  • Inventory build: inventory rose to ~$90M (+$36.8M q/q) to support ramp—execution risk if forecasts shift; management emphasized supply chain agility and rapid capacity add at cable partners .

Financial Results

MetricQ4 FY2024Q3 FY2025Q4 FY2025
Revenue ($USD Millions)60.782 135.002 170.025
GAAP Gross Margin %65.8% 63.6% 67.2%
Non-GAAP Gross Margin %66.1% 63.8% 67.4%
GAAP Operating Income ($USD Millions)(7.881) 26.194 33.788
Non-GAAP Operating Income ($USD Millions)7.462 42.384 62.523
GAAP Net Income ($USD Millions)(10.477) 29.360 36.588
Non-GAAP Net Income ($USD Millions)11.806 45.378 65.254
GAAP Diluted EPS ($)(0.06) 0.16 0.20
Non-GAAP Diluted EPS ($)0.07 0.25 0.35
Cash + Short-Term Investments ($USD Millions, end)410.0 379.2 431.3

Revenue mix

Revenue Category ($USD Millions)Q4 FY2024Q3 FY2025Q4 FY2025
Product Sales40.798 129.371 164.524
Product Engineering Services3.341 2.667 1.337
IP License16.643 2.964 4.164
Total Revenue60.782 135.002 170.025

KPIs

KPIQ3 FY2025Q4 FY2025
Operating Cash Flow ($USD Millions)4.2 57.8
CapEx ($USD Millions)4.6 3.7
Free Cash Flow ($USD Millions)(0.4) 54.2
Inventory ($USD Millions, end)53.2 90.0
Non-GAAP Product Gross Margin %63.0% 66.5%
Diluted Weighted Avg Shares (Millions)182.464 182.119

Actual vs Wall Street consensus (Q4 FY2025)

MetricActualConsensusSurprise
Revenue ($USD Millions)170.025 159.593*+10.432
Non-GAAP Diluted EPS ($)0.35 0.2737*+0.0763

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)Q4 FY2025$155–$165 Actual $170.0 Beat vs guidance
Non-GAAP Gross Margin (%)Q4 FY202563.0–65.0 Actual 67.4 Beat vs guidance
Non-GAAP OpEx ($USD Millions)Q4 FY2025$50–$52 Actual $52.0 At high end
Revenue ($USD Millions)Q1 FY2026N/A$185–$195 New
Non-GAAP Gross Margin (%)Q1 FY2026N/A64–66 New
Non-GAAP OpEx ($USD Millions)Q1 FY2026N/A$54–$56 New
Revenue growth (%)FY2026>50% y/y (prior) >85% y/y; revenue >$800M (implied) Raised
Non-GAAP Net Margin (%)FY2026Expand vs FY2025 (prior qualitative) Approach ~40% Raised

Earnings Call Themes & Trends

TopicQ2 FY2025 (Dec 2024)Q3 FY2025 (Mar 2025)Q4 FY2025 (Jun 2025)Trend
AI-driven AEC adoptionInflection point; ZeroFlap AECs; multi-source expected Largest customer drove ramp; AEC de facto intra-rack; expansion to rack-to-rack Three hyperscalers >10%; largest 61%; continued diversification Broadening and deepening
Optical DSP (800G/200G)3nm 200G tape-out; low-power focus Engaged with >10 transceiver vendors; OFC demos planned 800G LRO at ~9W; new 800G DSP win for FY2026 deployment Accelerating wins; power leadership
PCIe scale-up/retimersIntroduced Gen6/Gen7; demos at OCP Toucan Gen5 retimer full PCI-SIG compliance; ODM commitment; revenue in CY2026 Scale-up discussion across UA-Link/NVLink Fusion; multi-standard support Building to 2026 revenue
Customer concentration/diversificationMSFT 11%, second 33%, third 14%; seven customers ≥5% Largest 86%; plan for 3–4 ≥10% going forward Three ≥10% in Q4; two additional hyperscalers in 2H FY2026 Diversifying from Q3 peak
Tariffs/supply chain—Execution/supply chain tight control Tariff regime fluid; minimal GM impact; geographic flexibility Watchful but manageable
Telemetry/software——Pilot platform highlighted; system-level debug + telemetry New software layer engagement

Management Commentary

  • “Quarterly revenue nearly tripled from Q1 to Q4, validating our foresight and our ability to capitalize on a predicted inflection point… As a pure-play high-speed connectivity leader, Credo delivers a growing portfolio of differentiated solutions” — Bill Brennan, CEO .
  • “Our product non-GAAP gross margin was 66.5% in the quarter… Our non-GAAP net margin was 38.4%, well above the high end of our long-term model” — Dan Fleming, CFO .
  • “We unveiled our ultra-low power 100G per lane Optical DSPs… demonstrated an industry-first 800G optical module with total power consumption of roughly 9 watts” .
  • “We expect revenue to exceed $800 million for year-over-year growth in excess of 85%… non-GAAP net margin to approach 40%” — CFO outlook .

Q&A Highlights

  • Customer mix and concentration: largest customer was 61% of Q4 revenue with two others at 12% and 11%; expectation for two additional hyperscalers to ramp in 2H FY2026; ongoing diversification trajectory .
  • Gross margin trajectory: scale benefits drove Q4 step-up; Q1 guided to ~65% mid-point; mix variability noted; EBIT margin expected to follow net margin expansion; CapEx likely doubles for 3nm tape-outs .
  • Tariff risk: current regime fluid but not a material driver of Q1 GM guide; flexibility to shift geographies within months if needed .
  • Scale-up architectures and standards: Credo aims to support 224G per lane across Ethernet, CXL, UA-Link, and NVLink Fusion; PCIe Gen6 AEC and retimers align with rack-scale evolution .
  • Optical DSP pipeline: plan to double optical revenue in FY2026; strong traction at 100G/lane and future 200G/lane; LRO vs full DSP chosen based on power envelope .

Estimates Context

  • Q4 FY2025 beat vs S&P Global consensus: revenue $170.0M vs $159.6M*, non-GAAP diluted EPS $0.35 vs $0.274* .
  • Forward S&P Global consensus (FY2026 quarters): sequential estimate trajectory suggests sustained growth in revenue and EPS (see table). Values retrieved from S&P Global.*

Forward consensus (S&P Global)

MetricQ1 FY2026Q2 FY2026Q3 FY2026Q4 FY2026
Revenue Consensus Mean ($USD)190,626,930*234,992,020*247,183,810*260,088,640*
Primary EPS Consensus Mean ($)0.36055*0.49534*0.51018*0.53304*

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Q4 marked a strong fundamental beat with non-GAAP GM and net margin well above long-term targets—evidence of scale advantages in AEC and improving mix; supports multiple expansion arguments .
  • Near-term setup attractive: Q1 FY2026 guide implies ~12% q/q revenue growth at the midpoint with margins at or above long-term model—momentum sustained into FY2026 .
  • Medium-term thesis: AEC TAM expansion (intra-rack and rack-to-rack), optical DSP low-power leadership (800G LRO ~9W) and PCIe Gen6 retimers position Credo across scale-out/scale-up AI networks .
  • Watch concentration and inventory: diversification is progressing (two more hyperscalers in 2H FY2026), but quarterly lumpiness remains a risk; inventory build requires continued demand follow-through .
  • Margin durability: GM expansion from scale and product contribution suggests durable 64–66% non-GAAP GM; FY2026 non-GAAP net margin target ~40% underscores substantial operating leverage .
  • Software differentiation: Pilot telemetry and diagnostics bolster system reliability narrative (ZeroFlap), increasing stickiness and potential software-enabled feature monetization over time .
  • Trading lens: beats plus raised FY2026 outlook and Q1 guide are positive near-term catalysts; monitor tariff/macro headlines and competitive second-source developments for volatility .

Appendix: Additional Relevant Press Releases (Q4 FY2025 timeframe)

  • Pilot diagnostic and analytics platform introduced—mission mode telemetry, predictive diagnostics, and secure architecture to minimize link flaps and improve uptime .
  • Lark optical DSP family unveiled—ultra-low power 800G variants including LRO (sub-10W) and full DSP, targeting AI data center power/cooling constraints .