- Credo Technology reported fiscal Q1 results, beating estimates with record revenue of $479 million and an adjusted earnings of $1.20 per share.
- Despite the strong results, Credo stock fell in extended trading due to worries about profit margins.
- Management has guided for Q2 revenue between $525 million and $535 million with a gross margin of 67% to 69%.
- Credo Technology Group Holding Ltd is currently viewed as a Buy below $200, driven by robust demand for AI infrastructure.
- Key risks for Credo include customer concentration, competitive pressure, and execution challenges related to advanced optical products.
- Some analysts express concerns that margins may be peaking, but the current valuation suggests this is already priced in.
Credo Technology achieved a remarkable $479 million in revenue for its fiscal Q1, marking a 114.7% year-over-year increase. The company reported an adjusted earnings of $1.20 per share and a robust 68% adjusted gross margin alongside a 49.3% non-GAAP net margin.123
Despite these impressive figures, Credo's stock experienced a decline in after-hours trading due to ongoing concerns regarding its profit margins. Analysts are particularly focused on the potential peaking of margins, which has led to questions about the sustainability of its growth.
Looking ahead, management has provided guidance for Q2 revenue between $525 million and $535 million, with expected gross margins of 67% to 69%. This outlook reflects a strong medium-term growth trajectory, driven by robust demand in the AI infrastructure sector.5
However, the company faces key risks, including customer concentration, competitive pressure, and the successful execution of its advanced optical products and the DustPhotonics merger. Some analysts suggest that the current valuation reset may already account for these risks, indicating a potential buying opportunity for investors.7
“The company earned an adjusted $1.20 per share on sales of $479 million, up 114.7% year over year, with a 68% adjusted gross margin. Management's Q2 guidance implies continued growth, though risks include customer concentration and the DustPhotonics merger.”
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