Credo Technology Q4 FY2026 Earnings Call Transcript

Opening Remarks & Financial Summary

Dan O'Neil, Investor Relations: "Good afternoon. Thank you all for joining our fourth quarter fiscal 2026 earnings call."

Record Q4 revenue of $437 million, up 7% sequentially and 157% year-over-year. Full fiscal year 2026 revenue reached $1.3 billion, representing 206% year-over-year growth.

Bill Brennan, CEO: "Fiscal 2026 marked another defining year for Credo. Revenue exceeded $1.3 billion, more than tripling year-over-year, while non-GAAP net income increased more than five times to $662 million."

Key Financial Metrics

Q4 FY2026: - Revenue: $437 million (vs. $431.79 million forecast) - EPS: $1.16 (vs. $1.02 forecast) — 13.73% beat - Non-GAAP gross margin: 68.3% - Non-GAAP net income: $227 million - Stock movement: +1.13% aftermarket

Full Year FY2026: - Revenue: $1.3 billion - EPS: $3.46 (up 392% YoY) - Gross margin: 68.1% (up 310 bps) - Operating margin improvement: 2,144 bps - Cash flow from operations: $182.2 million in Q4 (record) - Free cash flow: $177.5 million - Ending cash position: $1.4 billion

Business Segments & Products

Active Electrical Cables (AECs)

ZeroFlap AECs deliver reliability advantages for in-rack and multi-rack connectivity up to seven meters. Strong adoption across hyperscalers and neo cloud operators at 100G and emerging 200G per lane.

Bill Brennan: "AECs have become the preferred solution for in-rack connectivity and for many multi-rack deployments up to seven meters."

PCIe 6.0 AEC development on track with strengthening customer engagement.

Optical Portfolio

Dan Fleming, CFO: "In fiscal 2027, we expect our optical DSPs, SiPho PICs, and ZeroFlap Optics will each contribute more than $100 million of revenue. In total, more than $600 million."

1. Optical DSP Components — Robin (100G per lane optimized) and Cardinal (200G per lane leading-edge); strong customer feedback.
2. Silicon Photonics PICs — DustPhotonics acquisition (closed last week) brings 800G and 1.6T solutions, roadmap to 3.2T+. Reduces laser count, improving reliability and supply chain positioning.
3. ZeroFlap Optics Platform — DSP-to-PIC integration + PILOT software for autonomous link health monitoring. Largest revenue contribution expected due to three-digit ASPs vs. two-digit component pricing.

CPO and NPO design revenue expected to begin in fiscal 2028.

Retimers

Growth at 100G and 200G per lane. Blue Heron 200G per lane retimer for scale-out networks, supporting Ethernet, UALink, and Ethernet SAN protocols.

Emerging Products

• OmniConnect/Weaver — gearbox solution addressing memory bandwidth and density for inference designs. Production ramp fiscal 2028. Revenue per GPU potential: $2,000–$3,000.
• AECoptics — row-scale optical connectivity using microLED, AEC-class reliability with 30-meter optical reach. Fiscal 2028 ramp.

Customer Dynamics

Q4 customer concentration: - Four customers at 10%+ of revenue - Largest: 34%; second: 27%; third: 16%; fourth: 10% (new to threshold)

Dan Fleming: "We continue to expect that three to four customers will be greater than 10% of revenue in the coming quarters and fiscal year."

Increasing diversification expected in FY2027 across multiple hyperscalers and neo cloud operators.

Bill Brennan (neo cloud): "I definitely think it could be on the order of 20%" of future revenues.

Supply Chain & Process Nodes

Bill Brennan: "We feel very good about the commitments that we've got in place across the board from the supply chain that contributes to ZeroFlap Optics."

• 12nm: AEC workhorse for 100G per lane
• 7nm: Optical DSP transition for 100G
• 5nm: Program in flight for significant volume
• 3nm: All 200G per lane products across portfolio

FY2027 Guidance

Q1 FY2027: - Revenue: $465–$475 million - Non-GAAP gross margin: 67%–69% - Operating expenses: $86–$90 million - Diluted weighted average shares: ~199 million

Full Year FY2027: - Mid-single-digit sequential growth in first half; inflection beginning second half - Total revenue growth: 80%+ YoY - Optical portfolio: $600+ million (40%+ of total dollar growth) - Copper portfolio (AECs, retimers): remaining half of dollar growth - Non-GAAP gross margin: broadly consistent with FY2026 (~68%) - Operating expense growth: ~50% YoY (below revenue growth) - Non-GAAP net margin: ~50%

Dan Fleming (1.6T): "Fiscal 2027 will have relatively light revenue as it relates to 200G per lane... if we are going to make a shift and the industry is ready, we're ready right now."

Capital Allocation

DustPhotonics acquisition: closed last week. Net cash outlay ~$750 million in Q1 FY2027.

Dan Fleming: "We have no current plans to raise any additional capital at this point, nor do we plan to do a share buyback... we want to maximize our strategic flexibility... we've done three acquisitions."

Market Positioning

Bill Brennan: "As AI clusters scale from tens of thousands to hundreds of thousands of GPUs, connectivity is no longer just about bandwidth. Reliability, power efficiency, signal integrity, and telemetry have become critical architectural requirements."

Vertically integrated approach spanning SerDes to system solutions; telemetry-first software architecture; multi-generation connectivity with deep system integration. Addresses die-to-die/chip-to-chip through multi-rack copper and facility-wide optical interconnect.

Risk Factors

Supply chain disruptions; economic uncertainties; increased AI infrastructure competition; regulatory/tariff fluidity; customer concentration and lumpiness; 1.6T transition timing uncertainty.

Q&A Highlights

1. Optical revenue composition — all three optical categories (DSP, SiPho, ZeroFlap) in FY2027 guidance; each growing 80%+ YoY.
2. 200G per lane timing — light revenue in FY2027; industry transition timing uncertain; positioned for rapid ramp.
3. Copper vs. optical mix — long-term potential for 50/50; optical TAM could exceed copper in future.
4. Scale-up opportunity — some FY2027 revenue; fiscal 2028 more substantial depending on customer architectures.
5. Neo cloud penetration — could be ~20% of revenues long-term.
6. Supply chain execution — capacity commitments secured; confidence in H2 FY2027 ramp.
7. AEC market sustainability — long-term growth across hyperscalers and neo clouds; early innings.

Closing (Bill Brennan): "Thanks so much for the questions. I really appreciate the ongoing interest and support, and look forward to the next time we talk."