Credo Technology (NASDAQ:CRDO)a provider of high-speed connectivity solutions for data centers, has made big gains since its initial public offering (IPO). It went public on January 26, 2022 at $10 per share, opened at $12.10 on the first day but is currently trading at around $177.
The stock has soared as bulls have been dazzled by its explosive growth and direct exposure to emerging artificial intelligence (artificial intelligence) Sunday. But it’s not often mentioned in the same breath as other top AI stocks. Nvidia And Palantir Technologies.
So, can Credo, which has already increased by more than 150% in the last 12 months, maintain its momentum in 2026 as the AI market expands? Let’s review the business model and near-term catalysts to find out.
Image source: Getty Images.
Credo sells active electrical cables (AECs) that connect switches, servers, and other hardware to data centers; serializer/deserializer (SerDes) chips, which convert serial and parallel data over high-bandwidth connections; and other types of integrated circuits and digital signal processor chips for optical and electrical connections.
High-speed connectivity products are essentially the “plumbing fixtures” of modern data centers, making them essential purchases for companies looking to upgrade their infrastructure to support their infrastructure. the last cloud and artificial intelligence applications. It also licenses its IP to other companies.
Credo says its products “alleviate system bandwidth bottlenecks” in data centers. Built on new 224G PAM4 SerDes chips Taiwan Semiconductor ManufacturingAdvanced N3 (3nm) node helps data centers achieve port link speeds of 1.6 Tbps; This is a crucial threshold for supporting next-generation AI clusters and high-scale data centers.
Credo generated 94% of its revenue from product sales in fiscal 2025 (which ended last May). The remaining 6% came from the engineering services and IP licensing segment. Its growth slowed in fiscal 2024 due to the launch of its faster products (including 224G PAM4) and lower IP licensing revenue.
But its growth accelerated again in fiscal 2025 and its adjusted margins reached record levels. This acceleration has been driven by the explosive growth of the AI market, which is driving hyperscale data center customers to increase their purchase of AECs, SerDes chips, and other chips to increase their bandwidth.
Metric
Fiscal Year 2022
Fiscal Year 2023
Fiscal Year 2024
Fiscal Year 2025
revenue growth
81%
73%
5%
126%
Adjusted gross margin
60.6%
58%
62.5%
65%
Adjusted operating margin
No*
3.5%
1.4%
26.4%
Data source: Credo Technology. *Not disclosed. FY=fiscal year.
In the first half of fiscal 2026, Credo’s revenue increased 273% year-over-year to $491 million, adjusted gross margin increased 430 basis points to 67.6%, and adjusted operating margin increased from 7.9% to 44.9%. Adjusted net income increased nearly ninefold to $226 million and remained profitable on a generally accepted accounting principles (GAAP) basis. In the third quarter, Credo expects its revenue to increase 148%-156% year-over-year, with adjusted gross margin rising from 63.8% to 64%-66%.
For fiscal 2026, analysts expect revenue and adjusted EPS to grow 173% and 301%, respectively. For fiscal 2027, analysts expect revenue and adjusted EPS to rise 37% and 30%, respectively, as the AI boom continues. It is also expected to sell more high-speed optical interconnect chips, retimers (which recover, refresh and retransmit signals), active LED cables and gearboxes to reduce its long-term dependence on its core AEC hardware business.
Credo has established an early mover advantage in the AI infrastructure space but may face tougher competition from a wider variety of chip makers. broadcom And Marvel Technology in the next few years. Customer concentration is another important issue. Four of its hyperscale customers each accounted for more than 10% of its revenue in the second quarter of fiscal 2026; so losing any of these customers could suddenly curtail growth.
Credo needs to continue growing, but investors shouldn’t expect it to maintain triple-digit growth. The stock certainly isn’t cheap at 93 times forward adjusted earnings, but it’s also not trading at meme stock levels yet. So if you think the AI market will continue to expand in 2026 and beyond, it might be a good idea to accumulate a few shares of Credo today. It will remain volatile, but its long-term headwinds are too strong to ignore.
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Leo Sun It has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia, Palantir Technologies and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and Marvell Technology. The Motley Fool has a feature disclosure policy.
