Credo Technology Group Holding Ltd - 10-K Summary
Business Context and Reporting Period
Company: Credo Technology Group Holding Ltd (CRDO)
Filing Type: Form 10-K (Annual Report)
Reporting Period: Fiscal Year ended May 2, 2026 (52-week year)
Business Overview: Credo designs and sells high-speed copper and optical interconnect products, including Active Electrical Cables (AECs), optical transceivers, retimers, and DSPs, primarily for AI and data center infrastructure. The company operates as a fabless semiconductor entity, outsourcing manufacturing to third parties, primarily TSMC.
Key Financial Metrics
| Metric (in millions) | Fiscal 2026 | Fiscal 2025 |
|---|---|---|
| Revenue | $1,335.1 | $436.8 |
| Gross Profit | $908.3 | $282.9 |
| Gross Margin | 68.0% | 64.8% |
| Operating Income | $445.0 | $37.1 |
| Net Income | $472.3 | $52.2 |
| Diluted EPS | $2.51 | $0.29 |
| Cash and Cash Equivalents | $1,165.0 | $236.3 |
| Working Capital | $1,804.0 | $605.8 |
| Operating Cash Flow | $464.3 | $65.1 |
Material Changes vs. Prior Period
- Revenue Surge: Revenue increased 205.7% year-over-year, driven primarily by a significant ramp-up in volume unit shipments of Active Electrical Cables (AECs) to hyperscale data center customers. AEC products contributed over 99% of the revenue increase.
- Profitability Expansion: Net income increased 804% to $472.3 million. Operating margin expanded from 8.5% to 33.3% due to improved economies of scale and higher gross margins.
- Expense Growth: Research and Development (R&D) expenses rose 90.2% to $279.4 million, and Selling, General, and Administrative (SG&A) expenses rose 86.0% to $184.0 million. Increases were largely driven by share-based compensation and personnel costs to support growth and new product development.
- Liquidity Position: Cash and cash equivalents grew from $236.3 million to $1.165 billion, bolstered by $736.3 million in net proceeds from an At-The-Market (ATM) equity offering completed during the fiscal year.
- Acquisitions: The company acquired Hyperlume, Inc. (microLED technology) and CoMira Solutions, Inc. (connectivity IP) for a combined cash consideration of approximately $127.1 million.
Guidance, Outlook, and Risks
- Outlook: Management expects continued growth driven by AI/ML infrastructure demands, specifically the need for high-bandwidth, low-power connectivity in hyperscale data centers. The company is expanding its portfolio with new products like the Bluebird 200G/lane DSP and OmniConnect memory solutions.
- Customer Concentration: The company faces high customer concentration risk. In Fiscal 2026, the top 10 customers accounted for approximately 90% of total revenue. Two specific customers (Customer A and Customer B) accounted for 49% and 32% of revenue, respectively.
- Supply Chain Risks: Credo relies exclusively on TSMC for wafer fabrication and a limited number of third-party contractors for assembly and testing. Disruptions in these supply chains, particularly in the Pacific Rim, could materially impact operations.
- Geopolitical and Regulatory Risks: Operations are exposed to U.S.-China trade tensions, export controls, and new U.S. regulations restricting outbound investments in China. Additionally, political instability in Taiwan and Hong Kong poses risks to manufacturing and revenue streams (28% of revenue was generated in Hong Kong).
- Subsequent Event: In May 2026, the company announced the acquisition of DustPhotonics Ltd. for approximately $770 million in cash and equity, subject to contingent consideration.
Investor Verification Checklist
- Customer Concentration: Verify the stability of relationships with the top two customers, which collectively represent over 80% of revenue.
- Inventory Levels: Review the $250.8 million inventory balance (up from $90.0 million) to assess potential obsolescence risks given the rapid pace of technology changes.
- Share-Based Compensation: Analyze the $182.6 million in share-based compensation expense and the $367.9 million in unamortized RSU expense to understand future dilution and cash flow impacts.
- Manufacturing Capacity: Confirm the status of the $71.0 million in refundable deposits paid to suppliers for reserved manufacturing capacity and the associated purchase commitments.
- Acquisition Integration: Monitor the integration progress and financial impact of the Hyperlume, CoMira, and DustPhotonics acquisitions.