TLDR

  • Credo delivered record Q3 revenue of $407 million, representing 52% sequential growth and over 200% annual expansion.
  • Three major hyperscale clients generated 88% of quarterly revenue, contributing 39%, 32%, and 17% individually.
  • Non-GAAP gross margin reached 68.6%, while operating cash flow achieved a record $166.2 million.
  • Q4 revenue target established at $425–$435 million, with fiscal 2027 projected to expand more than 50% annually.
  • Credo completed the Comera (CoMira Solutions) acquisition and accelerated ZeroFlap optics deployment to Q1 fiscal 2027.

Credo Technology Group delivered its strongest quarterly performance in Q3 fiscal 2026, achieving revenue of $407 million — a 52% increase from the previous quarter and more than 200% expansion compared to the prior year period.

CEO William Brennan characterized the period as representing the “most accelerated growth phase” in Credo’s corporate history. The company doubled revenue between fiscal 2024 and 2025, and currently anticipates tripling that figure again in fiscal 2026.

The quarter concluded at the upper boundary of Credo’s updated guidance range, CFO Daniel Fleming confirmed.


CRDO Stock Card
Credo Technology Group Holding Ltd, CRDO

Three major customers generated the majority of quarterly revenue. The top customer represented 39% of total revenue, the second contributed 32%, and the third accounted for 17%. Management indicated this customer concentration pattern will persist, with three to four clients anticipated to exceed the 10% threshold in upcoming quarters.

Each of Credo’s three largest customers expanded their spending sequentially during Q3, which Fleming identified as the primary driver behind the quarter’s outperformance.

Profitability and Cash Generation

Non-GAAP gross margin landed at 68.6%, exceeding the upper guidance range and advancing 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, climbing 35% sequentially, primarily driven by increased R&D investment.

Operating cash flow reached a record $166.2 million. Free cash flow measured $139.7 million after deducting $26.5 million in capital expenditures, predominantly allocated to production mask sets.

Credo concluded the quarter holding $1.3 billion in cash, representing a $487.9 million increase from Q2, reflecting proceeds from an at-the-market equity offering executed between October and December, combined with free cash flow generation.

Inventory balances ended at $208 million, advancing $57.8 million sequentially.

Product Development Timeline

Brennan provided updates on deployment schedules across Credo’s emerging product portfolio.

ZeroFlap optics manufacturing has commenced with neocloud customer TensorWave. The broader commercial deployment timeline has been accelerated to fiscal Q1 2027 — advanced from the previously anticipated second half of fiscal 2027 — with more than four customers prepared for launch.

Active LED Cables (ALCs), incorporating MicroLED technology from Credo’s HyperLUM acquisition, are engineered to span distances up to 30 meters. Customer sampling is scheduled for fiscal 2027 with volume production targeted for fiscal 2028.

OmniConnect, a gearbox solution for XPU connectivity, similarly targets a fiscal 2028 production deployment. Customer Positron intends to integrate it within an inference XPU architecture.

Regarding Active Electrical Cables (AECs), Brennan indicated adoption remains in initial phases while expanding, with a fifth hyperscaler joining Credo’s customer base. He emphasized that ZeroFlap AECs deliver up to 1,000 times enhanced reliability compared to commodity laser optics while consuming approximately half the power.

Credo finalized its acquisition of Comera (alternatively referenced as CoMira Solutions) during the quarter. Brennan highlighted Comera’s capabilities in protocol IP, error correction, and security IP, mentioning the companies had collaborated since 2022.

For Q4 fiscal 2026, Credo established revenue guidance of $425 million to $435 million, with non-GAAP gross margin projected at 64% to 66%. Fleming emphasized the forecast assumes the “current tariff regime,” which he characterized as dynamic.

For fiscal 2027, management projected more than 50% year-over-year revenue expansion, with sequential growth in the mid-single digits anticipated at the year’s beginning.

The stock advanced 1.74% on the trading day, though it remains down 21.98% year-to-date, with a market capitalization of approximately $20.28 billion.