Credo Technology (CRDO) Stock: Record Revenue and Strong Q4 Guidance After Blowout Q3

TLDR

• Credo reported record Q3 revenue of $407 million, up 52% sequentially and over 200% year-over-year.
• Three hyperscale customers made up 88% of total revenue at 39%, 32%, and 17% respectively.
• Non-GAAP gross margin hit 68.6%, with operating cash flow reaching a record $166.2 million.
• Q4 guidance set at $425–$435 million, with fiscal 2027 expected to grow more than 50% year-over-year.
• Credo acquired Comera (CoMira Solutions) and pulled forward its ZeroFlap optics ramp to Q1 fiscal 2027.

Credo Technology Group posted its biggest quarter ever in Q3 fiscal 2026, reporting revenue of $407 million — up 52% from Q2 and more than 200% from the same period last year.

CEO William Brennan called it the “most accelerated growth phase” in Credo’s history. The company more than doubled revenue from fiscal 2024 to 2025, and now expects to triple it again in fiscal 2026.

The quarter closed at the high end of Credo’s revised guidance, according to CFO Daniel Fleming.

Credo Technology Group Holding Ltd, CRDO

Three customers drove the bulk of the quarter. The largest accounted for 39% of revenue, the second for 32%, and the third for 17%. Management said this concentration is expected to continue, with three to four customers each above the 10% threshold in coming quarters.

All three of Credo’s largest customers grew sequentially in Q3, which Fleming said drove the outperformance.

Margins and Cash Flow

Non-GAAP gross margin came in at 68.6%, above the top end of guidance and up 92 basis points from Q2. Non-GAAP operating margin reached 49.6%, while net margin hit 51.3%.

Non-GAAP operating expenses were $77.4 million, up 35% sequentially, largely due to R&D investment.

Operating cash flow hit a record $166.2 million. Free cash flow was $139.7 million after $26.5 million in capital expenditures, mostly for production mask sets.

Credo ended the quarter with $1.3 billion in cash, up $487.9 million from Q2, reflecting proceeds from an at-the-market stock offering completed between October and December, plus free cash flow.

Inventory ended at $208 million, up $57.8 million sequentially.

Product Roadmap Updates

Brennan updated timelines across Credo’s newer product lines.

ZeroFlap optics production has already begun with neocloud customer TensorWave. The broader ramp is now expected in fiscal Q1 2027 — pulled forward from the second half of fiscal 2027 — with more than four customers lined up.

Active LED Cables (ALCs), which use MicroLED technology from Credo’s HyperLUM acquisition, are designed to reach up to 30 meters. Sampling is planned for fiscal 2027 with production in fiscal 2028.

OmniConnect, a gearbox product for XPU connectivity, is also targeting a fiscal 2028 production ramp. Customer Positron plans to use it in an inference XPU design.

On Active Electrical Cables (AECs), Brennan said adoption is still in early stages but growing, with a fifth hyperscaler now among Credo’s customers. He said ZeroFlap AECs offer up to 1,000 times better reliability than commodity laser optics at roughly half the power consumption.

Credo completed its acquisition of Comera (also referred to as CoMira Solutions) during the quarter. Brennan described Comera as strong in protocol IP, error correction, and security IP, noting the companies had worked together since 2022.

For Q4 fiscal 2026, Credo guided revenue of $425 million to $435 million, with non-GAAP gross margin of 64% to 66%. Fleming noted the outlook is based on the “current tariff regime,” which he described as fluid.

For fiscal 2027, management guided for more than 50% year-over-year revenue growth, with sequential growth in the mid-single digits to start the year.

The stock was up 1.74% on the day, though it remains down 21.98% year-to-date, with a market cap of around $20.28 billion.

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