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    CRDO
    Earnings call· May 2025(Q4 FY25)

    Credo Technology Group Holding Q4 FY25 earnings call CRDO

    Jun 2, 2025 Source

    Executive summary

    Credo Technology Group Holding Ltd Q4 FY25 — Record Revenue and Profitability Driven by AI Demand

    Credo Technology reported record Q4 FY25 results, driven by surging demand for high-speed connectivity solutions in the rapidly expanding AI landscape. The company demonstrated strong operational execution, achieving significant revenue growth and profitability, while also diversifying its hyperscaler customer base. Management anticipates continued robust growth into FY26, fueled by ongoing innovation in AEC, optical, and retimer solutions.

    Highlights

    5

    • Q4 FY25 revenue reached $170 million, marking a 26% sequential increase and 180% year-over-year growth, well above guidance.

    • Fiscal Year 2025 revenue achieved a record $437 million, representing 126% year-over-year growth.

    • Non-GAAP gross margin in Q4 FY25 was 67.4%, exceeding the high end of guidance and up 355 basis points sequentially.

    • Non-GAAP operating margin in Q4 FY25 expanded to 36.8%, a 538 basis point sequential increase, driven by top-line leverage.

    • Free cash flow in Q4 FY25 was $54.2 million, a significant improvement of $54.6 million sequentially.

    Concerns

    1

    • Tariff regime fluidity

    Guidance & targets

    8
    CategoryTargetConfidence
    Q1 FY26 Revenue
    $185M-$195M
    high materiality
    High
    Q1 FY26 Non-GAAP Gross Margin
    64%-66%
    medium materiality
    High
    Q1 FY26 Non-GAAP Operating Expenses
    $54M-$56M
    medium materiality
    High
    Q1 FY26 Diluted Weighted Average Share Count
    ~188M shares
    low materiality
    High
    FY26 Revenue
    exceed $800M
    high materiality
    High
    FY26 Non-GAAP Operating Expenses Growth Rate
    less than half the rate of revenue growth
    medium materiality
    High
    FY26 Non-GAAP Net Margin
    approach 40%
    high materiality
    High
    Optical Revenue Growth
    double or even beyond double
    medium materiality
    Medium

    Segment performance

    1
    SegmentRevenueYoYQoQMargin
    Active Electrical Cable (AEC)
    AEC revenue maintained a steep growth trajectory in Q4 FY25, achieving new record revenue levels. Customer base diversified with 3 hyperscalers each contributing over 10% of revenue. AECs are gaining traction for rack-to-rack solutions up to 7 meters, offering superior reliability and energy efficiency.
    		——healthy double digits—

    Operational metrics

    8
    Product Revenue Growth
    157%YoY
    FY25

    Product revenue growth for the full fiscal year 2025.

    Operating Margin Improvement
    2,500YoY
    FY25

    Improvement in operating margin for the full fiscal year 2025.

    Product Non-GAAP Gross Margin
    66.5%up 354 bps sequentially, up 1,289 bps YoY
    Q4 FY25

    Non-GAAP gross margin specifically for the product business in Q4 FY25, showing significant sequential and year-over-year improvement due to increasing scale.

    Non-GAAP Operating Income
    $62.5Mup from $42.4M in Q3
    Q4 FY25

    Non-GAAP operating income for Q4 FY25, demonstrating considerable leverage from sequential top-line growth.

    Non-GAAP Net Income
    $65.3Mup from $45.4M in Q3
    Q4 FY25

    Record high non-GAAP net income for Q4 FY25.

    Non-GAAP Net Margin
    38.4%
    Q4 FY25

    Non-GAAP net margin for Q4 FY25, well above the long-term model of 28% to 33%.

    IP Business Revenue Contribution
    sub-5%
    Q4 FY25

    The IP business's contribution to total revenue, which has decreased due to accelerated product revenue growth.

    CapEx Growth
    doublevs FY25
    FY26

    Anticipated CapEx growth for fiscal year 2026, driven primarily by production mask set tape-outs for upcoming 3-nanometer products.

    Industry KPIs

    12
    MetricValueDetails
    EPS$0.70USD
    Gross margin67.4%%
    Free cash flow$54.2MUSD
    Operating margin36.8%%
    Operating expenses$52MUSD
    Operating cash flow$57.8MUSD
    Revenue growth rate$170MUSD
    Customer account count3customers
    Cash investments balance$431.3MUSD
    Inventory channel inventory$90MUSD
    Rpo backlog bookings orders—
    Segment end market revenue mix61%, 12%, 11%%

    Product announcements

    5
    ProductTypeDetails
    PCIe Gen6 AECsmilestone
    100 gig per lane optical DSPs (5nm)launch
    800-gig optical module with Lark LRO DSPmilestone
    200 gig per lane optical DSP (3nm)launch
    PCIe Gen6 retimer family (Toucan)milestone

    Deals & partnerships

    1
    U.S. hyperscalerSignificant DSP win for an 800-gig transceiver

    Secured a significant DSP win for an 800-gig transceiver with initial deployments expected at a U.S. hyperscaler in fiscal '26. This implementation is a full DSP implementation and is expected to be the largest opportunity to date from a revenue standpoint.

    Capital programs

    1
    Production Mask Set Tape-outsunderway

    Benefit: Upcoming 3-nanometer tape-outs

    The largest driver of CapEx, expected to double in FY26 compared to FY25, primarily for upcoming 3-nanometer tape-outs.

    Risks & headwinds

    1
    Tariff regime fluidityOngoing

    Not expected to significantly impact Q1 gross margin percentage.

    Mitigation: Monitoring the situation closely, working with customers, and diversifying geographically. Ability to shift production out of one geographic location within months if needed.

    What to watch in Q1 FY26

    5

    New Hyperscaler Ramps

    2H FY26 (one potentially mid-FY26)
    Current3 hyperscalers >10% of revenue in Q4 FY25
    Target2 additional hyperscalers ramping, one potentially in mid-FY26

    Why it matters

    Indicates successful customer diversification and expansion into new AI infrastructure deployments, crucial for sustained growth.

    We continue to expect that 3 to 4 customers will be greater than 10% of revenue in the coming quarters⏳ and fiscal year as hyperscale customers continue to ramp more significant volumes and as we expect to begin to ramp 2 new hyperscale customers in the second half of fiscal year '26.

    Q&A highlights

    8

    Can you quantify the Q4 revenue contribution from the top 3 customers and elaborate on the expected shape of FY26 revenue, including the ramp of new hyperscalers?

    The largest customer was 61% of Q4 revenue, with two others at 12% and 11%. Credo expects continued diversification with 3-4 customers over 10% and two new hyperscalers ramping in 2H FY26. A linear projection for FY26 revenue is the current best estimate, with excitement for broader adoption.

    “The largest customer was 61% of revenue. No surprise who that was. And we also had a 12% and an 11% customer. And they were the same as -- the same customers that we saw in Q2 past that 10% threshold.”

    asked by Vivek Arya · answered by Daniel Fleming

    2 min read6 chapters

    Detailed Narrative

    01

    AI Landscape and Connectivity Solutions

    Credo's record fiscal year 2025 was driven by surging demand for high-performance connectivity solutions, capitalizing on the AI inflection point. The company's portfolio supports port speeds from 100 gigabits per second to 1.6 terabits per second, integrating advanced SerDes technology, cutting-edge IC design, and comprehensive system-level solutions with its PILOT software platform. This strategy enables superior functionality, reliability, and energy efficiency crucial for large-scale AI deployments.

    02

    Active Electrical Cable (AEC) Leadership and Diversification

    AEC revenue maintained a steep growth trajectory in Q4 FY25, with customer diversification evident as three hyperscalers each contributed over 10% of revenue. AECs are gaining traction for rack-to-rack applications up to 7 meters, offering over 100x greater reliability and improved energy efficiency compared to optical modules. Credo's system-level approach, owning the entire solution stack, provides significant competitive and time-to-market advantages, with sustained AEC revenue growth expected.

    03

    Optical Business Momentum and Innovation

    Fiscal 2025 was a standout year for Credo's optical business, achieving revenue growth targets and expanding customer diversity. A significant DSP win for an 800-gig transceiver is expected to deploy at a U.S. hyperscaler in FY26. The company unveiled ultra-low power 100 gig per lane optical DSPs on 5-nanometer technology and demonstrated an industry-first 800-gig optical module at ~9 watts. Credo also showcased a 3-nanometer 200 gig per lane optical DSP, positioning it for future industry transitions.

    04

    Retimer Business and PCIe Gen6 Traction

    The retimer business delivered robust results in Q4 and FY25, fueled by 50 gig and 100 gig per lane Ethernet solutions. Customer base now includes leading AI server vendors, reflecting adoption in AI-driven architectures. The recently launched PCIe Gen6 retimer family, led by Toucan, achieved full compliance and is gaining customer momentum, with design wins expected in calendar 2025 and production revenue in calendar 2026. Credo leverages its SerDes technology and PILOT software for differentiated performance.

    05

    Customer Diversification and Future Ramps

    Credo continues to diversify its customer base, expecting 3 to 4 customers to be greater than 10% of revenue in coming quarters. Two additional hyperscale customers are anticipated to ramp in the second half⚖️ of fiscal year 2026, with one potentially ramping sooner. While the largest customer accounted for 61% of Q4 revenue, the company is excited about broader adoption of its innovative solutions across the industry, particularly for AI deployments.

    06

    Operational Excellence and Supply Chain

    The company demonstrated strong ability to ramp production quickly, managing both silicon and system-level aspects of its AEC business. The longest lead times are on the silicon side (TSMC and assembly partners), while system-level production capacity can be expanded more rapidly. Each additional production line for AECs represents about 1 million units annually, with lower CapEx and shorter lead times compared to semiconductor fab expansion, ensuring readiness for continued growth.

    AI-generated summary of the company’s earnings call. Not investment advice.