Credo Technology Group

CRDO

Market cap $17.6B

Shares of Credo Technology (Nasdaq: CRDO), Lumentum (Nasdaq: LITE), and Applied Optoelectronics (Nasdaq: AAOI) were hammered Tuesday, with CRDO down 15%, LITE off 11%, and AAOI sliding 7% as investors rushed for the exits after a massive sector-wide surge yesterday.

Credo Technology Group Holding Ltd delivered Q3 revenue of $407M, up 200% YoY, beating both management's revised guidance and the Street's expectations. Who cares, right? Even as Q4 FY26 guidance was above the consensus, the stock is down double digits at the time of writing this piece. In my view, the biggest fundamental risk is the industry's shift from copper AECs toward optical interconnects, which the Street models as growth falling to the high teens by Q3 FY27.

Credo Technology Group Holding Ltd's Q3 revenue surged to $407 million, up over 200% year over year, yet guidance implies mid-single-digit sequential growth ahead. CRDO's gross margin guidance of 64% to 66% suggests normalization from the recent 68.6% peak, challenging hypergrowth assumptions. Customer concentration remains elevated, with the top client representing 42% of revenue and hyperscaler pacing driving volatility.

I reiterate a Strong Buy rating on Credo Technology Group Holding Ltd after record Q3 revenue of $407M, robust margins, and self-funding hypergrowth. CRDO's product roadmap accelerates, with ZeroFlap Optics ramping in Q1 2027 and ALCs OmniConnect targeted for 2028, broadening long-term opportunity. Growth-adjusted valuation remains attractive: FWD PEG of 0.47x, a 65% discount to sector median, despite premium multiples.

Credo Technology Group Holding Ltd reported a Q3 FY26 beat on the top and bottom lines, and in reaction, CRDO shares plunged 18% post-earnings amid concerns about deceleration in growth. The Q4 outlook signals sequential revenue growth but lower gross margins, heightening fears of a slower pace of AEC growth in FY27. The market overreacted to the print and, by extension, priced in fears over slower AEC growth early. The stock is now down over 35% YTD.

Credo Technology Group Holding Ltd delivered a strong earnings beat, with revenue up 201.5% Y/Y and guidance above consensus, but shares sold off on risk-off sentiment and priced-in optimism. CRDO's ZeroFlap Optics launch is accelerating, now expected to ramp in 1Q27, signaling robust customer demand and expanding total addressable market in data center optical connectivity. Customer concentration remains a key risk, with 88% of Q3 revenue from three hyperscalers, while gross margin guidance is conservatively lower due to product mix.

CRDO partners with TensorWave to power production-grade AI clouds as AEC demand surges and revenue guidance crushes prior expectations.

Credo Technology Group Holding Ltd. (NASDAQ: CRDO) on Monday posted upbeat earnings for the third quarter.

Credo Technology ( NASDAQ:CRDO ) just posted the kind of quarter that makes investors stop and pay attention.

Credo Technology Group Holding Ltd. (NASDAQ: CRDO) shares are down during Tuesday's premarket session following the company's recent third-quarter earnings report.