Summary of CRDO Q2 2026 Earnings Call

1Key Financial Results and Metrics

Revenue: Record revenue of $268 million, a 20% sequential growth and a 272% year-over-year increase.

Non-GAAP Gross Margin: Strong at 67.7%, up 11 basis points sequentially.

Non-GAAP Net Income: Approximately $128 million, marking a 30% sequential increase.

Operating Expenses: Totaled $57.3 million, slightly above guidance, with a non-GAAP operating margin of 46.3%.

Cash Flow: Cash flow from operations was $61.7 million, with free cash flow at $38.5 million.

Cash Position: Ended the quarter with $813.6 million in cash and equivalents.

2Strategic Updates and Business Highlights

Product Growth: The Active Electrical Cable (AEC) segment remains the fastest-growing, with significant contributions from four hyperscalers, each exceeding 10% of total revenue.

New Growth Pillars: Introduced three new product lines:

Zero Flap Optics: Promises AEC-class reliability in optical connectivity.

Active LED Cables (ALCs): Expected to double the AEC total addressable market (TAM).

OmniConnect Gearboxes: Aimed at optimizing memory-to-compute connectivity.

Market Expansion: Credo's total addressable market is projected to exceed $10 billion, tripling from 18 months ago.

3Forward Guidance and Outlook

Q3 Revenue Guidance: Expected between $335 million and $345 million, representing a 27% sequential increase at the midpoint.

Fiscal Year 2026 Outlook: Anticipates over 170% year-over-year growth, with continued diversification in customer base and revenue streams.

Operating Expenses: Expected to rise by approximately 50% year-over-year in fiscal year 2026.

4Challenges and Points of Concern

Supply Chain Risks: Potential supply constraints may arise as demand for wafers increases, which could impact production capabilities.

Customer Ramp Timing: The ramp for new customers is not linear, creating uncertainty in revenue projections.

Competitive Landscape: Increased competition in the optical transceiver market could pressure margins, although Credo aims to differentiate through system-level solutions.

5Notable Q&A Insights

Customer Dynamics: The top four customers contributed significantly to revenue, with the largest at 42%. The ramp for the fifth customer is expected but not projected to reach 10% this fiscal year.

Market Transition: Discussions around co-packaged optics indicate that while there is interest, reliability concerns may delay widespread adoption.

ASP Dynamics: Transitioning from 100 to 200 gig per lane is expected to yield ASP increases, but the impact will vary based on connection specifics.

Execution Focus: The integration of Hyperlume for ALC development is seen as a critical execution play rather than a technology challenge. Overall, CRDO's Q2 2026 results reflect strong growth and strategic positioning within the connectivity market, although challenges related to supply chain and competition remain.