Key Highlights
- Q3 revenue reached a record $407 million, representing a 52% sequential increase and more than 200% year-over-year growth.
- 88% of total revenue came from three hyperscale clients, contributing 39%, 32%, and 17% individually.
- Non-GAAP gross margin climbed to 68.6%, while operating cash flow set a company record at $166.2 million.
- Management projects Q4 revenue between $425 million and $435 million, with fiscal 2027 growth exceeding 50% YoY.
- The company completed the Comera acquisition and accelerated ZeroFlap optics deployment to Q1 of fiscal 2027.
Credo Technology Group delivered its strongest quarterly performance to date in Q3 of fiscal 2026, achieving revenue of $407 million — a 52% jump from the previous quarter and exceeding 200% growth compared to the year-ago period.
Chief Executive William Brennan characterized the period as representing the “most accelerated growth phase” the company has experienced. After doubling revenue between fiscal 2024 and 2025, Credo is now on track to triple it once more in fiscal 2026.
The results landed at the upper boundary of the company’s revised forecast, CFO Daniel Fleming confirmed.
Credo Technology Group Holding Ltd, CRDO
Revenue concentration remained high during the quarter, with three major clients dominating sales figures. The top customer represented 39% of total revenue, followed by 32% from the second-largest, and 17% from the third. Leadership expects this pattern to persist, with three to four customers exceeding the 10% revenue threshold in upcoming quarters.
Each of Credo’s three principal customers showed sequential expansion in Q3, which Fleming identified as the primary driver behind the company’s outperformance.
Profitability and Cash Generation
The company’s non-GAAP gross margin expanded to 68.6%, surpassing guidance expectations and improving 92 basis points from the prior quarter. Non-GAAP operating margin achieved 49.6%, while net margin reached 51.3%.
Non-GAAP operating expenses totaled $77.4 million, marking a 35% sequential increase driven primarily by heightened R&D spending.
Operating cash flow established a new company record at $166.2 million. After accounting for $26.5 million in capital expenditures — predominantly for production mask sets — free cash flow came in at $139.7 million.
The company’s cash position strengthened to $1.3 billion by quarter-end, up $487.9 million from Q2. This increase reflects proceeds from an at-the-market equity offering executed between October and December, combined with strong free cash flow generation.
Inventory balances rose to $208 million, increasing $57.8 million from the previous quarter.
Product Development Timeline Updates
Brennan provided updates on several emerging product categories within Credo’s portfolio.
ZeroFlap optics manufacturing has commenced with neocloud partner TensorWave. The wider commercial rollout timeline has been advanced to fiscal Q1 2027 — earlier than the previously anticipated second half of fiscal 2027 — with more than four customers already committed.
Active LED Cables (ALCs), incorporating MicroLED technology from the HyperLUM acquisition, are engineered for distances up to 30 meters. Sample distribution is scheduled for fiscal 2027, with volume production targeted for fiscal 2028.
OmniConnect, a gearbox solution for XPU connectivity, is similarly aimed at a fiscal 2028 production launch. Customer Positron intends to integrate it into an inference XPU architecture.
Regarding Active Electrical Cables (AECs), Brennan noted that market adoption remains in preliminary phases but is expanding, with a fifth hyperscaler now included in Credo’s customer base. He highlighted that ZeroFlap AECs deliver up to 1,000 times superior reliability compared to standard laser optics while consuming approximately half the power.
Credo finalized its acquisition of Comera (alternatively known as CoMira Solutions) during the quarter. Brennan praised Comera’s capabilities in protocol IP, error correction, and security IP, mentioning the two companies had collaborated since 2022.
Forward Guidance and Stock Performance
For Q4 of fiscal 2026, Credo established revenue guidance ranging from $425 million to $435 million, with non-GAAP gross margin projected between 64% and 66%. Fleming emphasized that this outlook assumes the “current tariff regime,” which he characterized as dynamic.
Looking ahead to fiscal 2027, management forecasts revenue growth exceeding 50% year-over-year, with sequential increases in the mid-single-digit range anticipated at the fiscal year’s outset.
Shares closed up 1.74% on the trading day, though the stock remains down 21.98% year-to-date, with the company’s market capitalization standing at approximately $20.28 billion.
