Credo Technology Group Holding Q3 FY26 earnings call CRDO

Credo's core mandate is maximizing network reliability and energy efficiency for AI infrastructure, which is crucial for accelerating cluster bring-up, maximizing XPU utilization, and reducing total cost of ownership. The company aims to lead in reliability, power efficiency, and signal integrity across the entire data center connectivity fabric, from die-to-die links to facility-wide optical solutions. This strategy addresses the growing demands for higher bandwidth and faster data rates driven by AI workloads, which are transitioning from 100 gig to 200 gig per lane and towards 400 gig per lane.

The AEC product line delivered strong growth in Q3 FY26, driven by existing customers and new wins, including a fifth hyperscaler. Demand is accelerating across both hyperscalers and emerging Neocloud providers, with AECs becoming the de facto standard for intra-rack and rack-to-rack connectivity up to 7 meters. AECs offer significant advantages, including up to 1,000x better reliability and roughly half the power consumption compared to commodity laser-based optics, which is critical for AI clusters where downtime is costly. The company is supporting large-scale 100 gig per lane deployments and is prepared for the industry's shift to 200 gig per lane or 1.6 terabit ports.

Credo's IC business, encompassing retimers and optical DSPs, supports copper and optical connectivity across 50 gig, 100 gig, and 200 gig per lane speeds. Strong optical DSP growth is expected in FY26, driven by 100 gig deployments and increasing traction at 200 gig. Ethernet retimers are seeing significant growth in traditional switching fabrics and the rapidly expanding AI server segment. PCIe Gen6 retimers are on track for FY26 design wins to convert to production revenue in FY27, offering industry-leading reach, latency, and power efficiency. The new Blue Heron 200 gig per lane retimer is purpose-built for AI scale, supporting UALink, Ethernet, and E.SUN protocols.

Progress with Zero Flat Optics is ahead of schedule, with production shipments initiated to a first Neocloud customer (Tensor Way) and qualification underway with three additional customers, including hyperscalers. This product addresses major data center challenges by providing real-time telemetry and autonomous detection/mitigation of potential link failures, significantly improving network reliability beyond what traditional laser-based optics can offer. This innovation expands Credo's total addressable market by addressing optical connectivity across various lengths within the data center, with a significant production ramp expected to begin in Q1 FY27.

Credo is extending its product portfolio with Active LED Cables (ALCs) and Omni Connect. ALCs apply the AEC system-level philosophy to mid-reach optical connectivity, combining Credo's architecture with micro LED expertise to deliver reliability and power efficiency up to 30 meters, bridging the gap between AECs and conventional optical modules. ALCs are expected to sample and qualify in FY27, with production ramp in FY28. Omni Connect expands Credo's reach inward towards silicon, combining BSR SerDes with gearboxes for XPU connectivity. The first product, Weaver, enables a 10x improvement in memory beachfront I/O density, supporting composable XPU architectures for training and inference workloads, with a production ramp expected in FY28.

The company highlighted its silicon operations and system product operations teams for their outstanding job in managing supply, scaling production, and executing flawlessly amidst significant upside demand. This operational excellence has become a distinct competitive advantage, enabling record performance and reinforcing customer trust. Management expressed confidence in its supply chain for wafers (across 12nm, 7nm, 5nm, and 3nm nodes) and packaging, noting that supply chain management is increasingly a differentiator in the current market. While memory (HBM) supply is tight, Omni Connect offers a solution by enabling DDR over HBM.