Credo Technology Group (CRDO) Q1 2026 Earnings Report

- Revenue: $223.1M in Q1 2026, up 31% QoQ and 274% YoY; product revenue $217.1M, up 31% QoQ and 279% YoY
- Non-GAAP gross margin: 67.6%; product non-GAAP gross margin: 66.7% (up 12 bps QoQ; up 517 bps YoY)
- Non-GAAP operating income: $96.2M; non-GAAP operating margin: 43.1% (vs 36.8% prior quarter, +635 bps)
- Non-GAAP net income: $98.3M; non-GAAP net margin: 44.1%
- Earnings per share (non-GAAP): $0.37 (GAAP EPS: $0.37; diluted: $0.34)
- Operating cash flow: $54.2M; free cash flow: $51.3M; capex: $2.8M
- Cash balance: $479.6M; cash/debt position: net cash positive by approximately $204M (net debt = -$204.0M)
- Ending inventory: $116.7M; working capital dynamics contributed to modest in-quarter cash flow headwinds
- Balance sheet: Total assets $905.2M; total liabilities $123.8M; total stockholders’ equity $781.4M
- Guidance (2026): Revenue $230–$240M; Q2 non-GAAP gross margin 64–66%; Q2 non-GAAP OpEx $56–$58M; diluted weighted shares ~190M; anticipated mid-single-digit sequential revenue growth in 2H26; expect >1 additional 10%+ customer and continued top-tier customer diversification
- Key qualitative themes: three hyperscalers >10% of revenue in Q1; first material contribution from a fourth hyperscaler; ongoing expansion in AEC adoption (50–100G per lane currently, with 200G/1.6Tbps on the roadmap); PCIe retimers gaining meaningful traction; optical DSP/LRO momentum with 1.6Tbps throughput; strong emphasis on system-level integration and end-to-end ownership of SerDes IP, retimers, system design, qualification, and production.

- Strategy and market positioning: Bill Brennan highlighted Credo’s three-tiered innovation framework (Certeus technology, advanced IC design, system-level approach) and the pursuit of system-level opportunities driven by reliability, energy efficiency, and performance in AI-scale infrastructure.
- Growth drivers and TAM expansion: The management emphasized the AI data-center cycle, hyperscaler demand, and diversification across protocols (copper and optical) and applications (inter-rack, rack-to-rack, scale-out and scale-up). Bill noted that AECs are expanding beyond inter-rack to rack-to-rack deployments, with reliability and power efficiency as primary differentiators.
- Customer concentration and diversification: CFO Dan Fleming stated that three customers were each >10% of revenue in Q1, with a fourth hyperscaler contributing material revenue, and that diversification is expected to continue with two additional hyperscalers ramping in fiscal 2026.
- Product roadmap and profitability: The company stressed PCIe retimers and PCI solutions delivering reach with low latency and high reliability, with expectations for PCI design wins in 2025 and production revenue in 2026. Optical DSP/LRO momentum remains strong with port speeds up to 1.6 Tbps and a move toward three-nanometer platforms for power efficiency.
- Guidance and profitability: The team reiterated a healthy margin profile and strong leverage from top-line growth, guiding 2026 revenue in a $230–$240M range and Q2 gross margin in the mid-60s, signaling sustained profitability and free cash flow generation.

Credo presents a compelling investment thesis anchored in elevated growth trajectories across AECs, PCIe retimers, and optical DSP/LRO, underpinned by a robust balance sheet and strong cash generation. The Q1 2026 results demonstrate record revenue, amiable gross margins, and meaningful operating leverage as hyperscaler deployments accelerate AI infrastructure. The company’s multi-pronged strategy—owning the end-to-end solution stack, expanding the AEC TAM across inter-rack and rack-to-rack architectures, and advancing PCIe retimer and optical platforms—positions Credo to benefit from the secular shift toward higher-speed, more reliable, and power-efficient data-center connectivity. Key points for investors: - Growth drivers are intact with a diversified hyperscaler base and a fourth hyperscaler contributing material revenue in Q1, plus expectations for two additional hyperscalers ramping in fiscal 2026. This supports more balanced revenue mix and reduces single-customer dependence over time. - Margin profile remains strong, with non-GAAP gross margin of 67.6% and non-GAAP net margin around 40–44% implied by the guidance and Q1 outcomes, signaling sustained profitability as volumes scale. The company also demonstrated substantial operating leverage (non-GAAP op margin 43.1%). - The pipeline across AEC, PCIe retimers, and optical DSP/LRO indicates a broad set of growth vectors beyond the current AEC cycle, including 200G/Gen6+ and 1.6 Tbps transitions, three-nanometer optical platforms, and system-level offerings that differentiate Credo from peers. - Risks center on external factors such as tariff sensitivity, optical supply constraints, and the IP/licensing landscape, along with execution risk of integrating additional hyperscalers and expanding new product lines. A continued emphasis on R&D and efficient OpEx management will be critical to sustain growth while maintaining profitability. - Relative to industry benchmarks, Credo’s near-term performance demonstrates higher gross margins and stronger operating leverage than many semis peers, supported by a cash-rich balance sheet and demonstrable demand for high-end SerDes solutions in AI-infrastructure contexts. Overall, the stock appears to offer an attractive risk-adjusted opportunity for investors seeking exposure to AI-driven data-center connectivity, provided the company sustains its hyperscaler diversification, executes on PCIe retimer and optical programs, and navigates macro and supply-chain uncertainties. Monitoring upcoming quarterly program wins, ramp timing of the fourth/fifth hyperscalers, and the pace of 1.6 Tbps optical adoption will be critical to updating the investment thesis.