Credo's Revenue Growth Decelerates as Optical Deal Signals Next Phase
The connectivity-chip maker posted $437 million in fourth-quarter revenue, up 157% year over year but marking a sharp slowdown in sequential growth.
Credo Technology Group Holding (CRDO), the high-speed connectivity semiconductor maker, reported fourth-quarter fiscal 2026 revenue of $437.0 million, a 157% jump from the year-earlier period but a sequential growth rate of just 7.4%, down sharply from the 51.9% quarter-over-quarter expansion logged in the third quarter.
The slowdown caps a fiscal year in which revenue more than tripled to $1.335 billion from $436.8 million in fiscal 2025, representing roughly 206% annual growth. Yet the trajectory tells a different story: sequential gains decelerated from 31% in the first quarter to roughly 20% in the second, spiked to nearly 52% in the third on a massive guidance beat, and then settled back to 7.4% in the fourth. The fourth-quarter figure still topped the company's own guidance range of $425 million to $435 million.
Profitability held broadly steady. Non-GAAP diluted earnings came to $1.16 a share, up from $1.07 in the third quarter, while GAAP diluted earnings were $0.88, compared with $0.82. Non-GAAP gross margin landed at 68.3%, down marginally from 68.6% in the prior quarter but well above the 64.0%-to-66.0% range the company had guided for three months earlier, suggesting a more favorable product mix or pricing environment. For the full year, non-GAAP net income increased more than five times to $662 million.
Operating expenses, however, grew faster than revenue in the quarter. GAAP operating costs rose 10% sequentially to $142.2 million, and non-GAAP opex climbed 5.6% to $81.7 million. That dynamic compressed GAAP operating income growth to just 4.2% quarter over quarter, reaching $155.8 million. Management guided non-GAAP opex to $86 million to $90 million for the first quarter of fiscal 2027, implying a further increase of roughly 7.7% at the midpoint.
Looking ahead, Credo set first-quarter fiscal 2027 revenue guidance at $465 million to $475 million, a midpoint of $470 million that implies roughly 7.8% sequential growth, a slight acceleration from the fourth quarter's pace. Non-GAAP gross margin is expected at 67.0% to 69.0%, roughly in line with the quarter just reported.
The company also announced a deal to acquire DustPhotonics for $750 million in cash plus approximately 920,000 shares, targeting the target's silicon photonics photonic integrated circuit technology. Credo said it expects the combined optical business to generate more than $500 million in revenue in fiscal 2027.
On the balance sheet, cash and short-term investments grew to $1.443 billion from $1.301 billion at the end of the third quarter, a $142 million increase. Inventories, however, surged 20.6% sequentially to $250.8 million and more than doubled from $90.0 million a year earlier, signaling an aggressive build ahead of anticipated fiscal 2027 demand. Accounts receivable fell to $233.4 million from $243.2 million despite the revenue increase, pointing to improved collections.