01—Abstract
Summary
Summary of the 10-Q filed March 3, 2026. Cited figures are marked; the original filing is the authoritative source.
Credo Technology Group Holding Ltd (CRDO) reported a highly successful third quarter for fiscal year 2026, demonstrating exceptional top-line growth and a significant improvement in profitability.
Revenue surged by over 200%a year-over-year, driven by a substantial ramp-up in Active Electrical Cable (AEC) product shipments, particularly to hyperscale data center customers. This robust revenue growth, coupled with improved economies of scale, led to a significant expansion in gross margin, which increased by approximately 4.9 percentage points. The company also achieved substantial profitability growth, with net income increasing dramatically compared to the prior year's period.
While operating expenses, particularly in Research & Development and Selling, General & Administrative, have increased in absolute terms to support growth and acquisitions, they have decreased as a percentage of revenue, indicating strong operational leverage. The company ended the quarter with a strong cash position and positive operating cash flow, reflecting its robust financial health and ability to fund future growth initiatives, including a recent acquisition to bolster its optical interconnect solutions.
02—Key points
Key Highlights
- Exceptional Revenue Growth: Revenue increased by 201.5% year-over-year to $407.0 million for the three months ended January 31, 2026, primarily driven by strong demand for AEC products from hyperscale customers.
- Significant Profitability Improvement: Net income surged to $157.1 million, a substantial increase from $29.4 million in the prior year's comparable period, showcasing strong operational leverage.
- Expanding Gross Margins: Gross margin improved to 68.5% from 63.6% in the prior year's period, driven by economies of scale resulting from increased product shipments.
- Strategic Acquisition: The company completed the acquisition of Hyperlume, Inc., a microLED optical interconnect technology developer, for $92.0 million to enhance its end-to-end connectivity solutions for AI-driven data infrastructure.
- Strong Balance Sheet: Cash and cash equivalents grew significantly to $1.22 billion, with total assets reaching over $2.0 billion, indicating a healthy financial position.
- Positive Operating Cash Flow: The company generated $282.1 million in net cash from operating activities for the nine months ended January 31, 2026, demonstrating effective cash generation from its core business.
- Successful At-The-Market Offering: The company raised $736.3 million in net proceeds from its At-The-Market (ATM) offering, further strengthening its liquidity.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2026, Credo Technology Group Holding kept $0.39.
- Revenue$407.0M100.0%
- Cost of revenue−$128.1M31.5%
- Gross profit$278.9M68.5%
- Operating costs−$129.2M31.8%
- Operating income$149.6M36.8%
- Interest, other & tax$7.5M1.8%
- Net income$157.1M38.6%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2026filed March 3, 2026Financial Statements
Q3 FY2026 against Q3 FY2025
| Line item | Q3 FY2026Q3 FY2025 | Change |
|---|---|---|
| Revenue | $407.01M$72.03M | +465.0% |
| Cost of Revenue | $128.14M$26.52M | +383.2% |
| Gross Profit | $278.87M$45.51M | +512.7% |
| R&D Expenses | $78.48M$31.74M | +147.3% |
| SG&A Expenses | $50.76M$22.18M | +128.9% |
| Operating Expenses | $129.25M$53.92M | +139.7% |
| Operating Income | $149.62M-$8.41M | +1879.7% |
| Net Income | $157.14M-$4.22M | +3819.3% |
| EPS (Basic) | $0.86$-0.03 | +2966.7% |
| EPS (Diluted) | $0.82$-0.03 | +2833.3% |
| Shares Outstanding (Basic) | 182.22M166.49M | +9.5% |
| Shares Outstanding (Diluted) | 192.02M166.49M | +15.3% |
05—Questions
Frequently Asked Questions
What drove the significant increase in Credo's revenue?
Credo's revenue experienced substantial growth, increasing by over 200% year-over-year, primarily driven by a significant increase in the volume of Active Electrical Cable (AEC) product shipments. This growth was largely fueled by the ramp-up of AEC solutions at their hyperscale data center customers.
How has the company's profitability changed?
Profitability has seen a dramatic improvement. Net income for the three months ended January 31, 2026, reached $157.1 million, a significant increase from $29.4 million in the same period last year. This surge is attributed to strong revenue growth, improved gross margins due to economies of scale, and operating expenses growing at a slower pace than revenue, indicating effective operational leverage.
What is the significance of the Hyperlume acquisition?
The acquisition of Hyperlume, Inc., for $92.0 million, is a strategic move to expand Credo's portfolio of end-to-end system-level connectivity solutions. Hyperlume's microLED optical interconnect technology is expected to address the future demands of artificial intelligence-driven data infrastructure deployments, enhancing Credo's offerings in a rapidly growing market.
What is the company's cash position and outlook?
Credo reported a strong cash position, with cash and cash equivalents totaling $1.22 billion as of January 31, 2026. The company generated robust operating cash flow of $282.1 million for the nine months ended January 31, 2026. Management believes its current cash and working capital are sufficient to meet its needs for at least the next 12 months and longer term, supported by its strong financial performance and successful ATM offering.
06—Continue