How strong was Credo's revenue growth in the quarter?

Revenue of $268.0 million grew 20.2% from the prior quarter's $223.1 million and 272.1% from $72.0 million a year earlier. Management described these as the strongest quarterly results in the company's history, attributing them to the build-out of large AI training and inference clusters.

What does the Q3 guidance imply for growth and margins?

Q3 revenue guidance of $335.0 million to $345.0 million implies sequential growth of roughly 25% to 29%. Non-GAAP gross margin is guided to 64.0% to 66.0%, down from 67.7% in Q2, and non-GAAP operating expenses are guided to $68.0 million to $72.0 million, up from $57.3 million. Together these point to lower margins as expenses rise, though profitability may still grow in absolute dollars.

Did Credo's profitability improve materially?

Yes. GAAP operating income swung to $78.8 million from a loss of $8.4 million a year earlier, and GAAP net income was $82.6 million versus a loss of $4.2 million. Non-GAAP operating margin reached 46.3%, compared with 11.5% a year earlier. Share-based compensation of $45.3 million is the main reconciling item between GAAP and non-GAAP results.

What do the balance sheet changes indicate?

Cash and short-term investments rose to $813.6 million, and shareholders' equity increased to $1.29 billion, largely from higher additional paid-in capital. Accounts receivable grew to $245.2 million and inventories to $150.2 million, which reflects a working-capital build that supports the higher revenue run rate. New goodwill of $68.9 million and intangibles of $17.1 million suggest a recent acquisition, though the excerpt does not identify it.

What are the key risks and new product drivers to watch?

Management pointed to upcoming ramps of ZeroFlap Optics, ALC and OmniConnect gearbox products as growth drivers. Key risks include the dependence on large AI infrastructure build-outs, the margin pressure implied by guidance, and the working-capital build in receivables and inventory. The filing refers investors to the risk factors in the 10-K filed July 2, 2025, and forward-looking statements are not guarantees of future results.

CRDO 8-K SEC Disclosure

01—Abstract

Summary

Summary of the 8-K filed December 1, 2025. Cited figures are marked; the original filing is the authoritative source.

Credo reported fiscal Q2 2026 (ended November 1, 2025) revenue of $268.0 million^a, up 20.2% sequentially and 272.1% year over year, and described it as the strongest quarter in the company's history.

Product sales were $261.3 million^b and IP license revenue $6.7 million. GAAP gross margin was 67.5% and non-GAAP gross margin 67.7%. GAAP operating income was $78.8 million (29.4% margin), and GAAP net income was $82.6 million, or $0.44 per diluted share.

Non-GAAP net income was $127.8 million^c, or $0.67 per diluted share. Cash and short-term investments rose to $813.6 million from roughly $431 million at fiscal year-end May 3, 2025. The Q3 FY2026 outlook calls for revenue of $335.0 million to $345.0 million, implying roughly 25% to 29% sequential growth at the midpoints.

Management guided GAAP gross margin to 63.8% to 65.8% and non-GAAP gross margin to 64.0% to 66.0%, a decline of about 2 to 3 points from Q2 at the midpoint. Non-GAAP operating expenses are guided to $68.0 million to $72.0 million^d, up from $57.3 million in Q2, and GAAP operating expenses to $116.0 million to $120.0 million. Investors should watch whether revenue growth continues to outpace the step-up in expenses and the margin compression.

The balance sheet shows a working-capital build alongside the growth. Accounts receivable rose to $245.2 million from $162.1 million and inventories to $150.2 million from $90.0 million, while shareholders' equity increased to $1.29 billion, largely from additional paid-in capital growing to $1.22 billion.

New goodwill ($68.9 million) and intangible assets ($17.1 million) appeared on the balance sheet, indicating an acquisition during the period, though the filing excerpt does not name it. The company also cited upcoming ramps of its ZeroFlap Optics, ALC and OmniConnect gearbox products as drivers of growth through fiscal 2026 and beyond.

02—Key points

Key Highlights

Q2 FY2026 revenue of $268.0 million rose 20.2% sequentially and 272.1% year over year, with product sales of $261.3 million and IP license revenue of $6.7 million.
GAAP operating income of $78.8 million (29.4% margin) and GAAP net income of $82.6 million ($0.44 diluted EPS); non-GAAP net income of $127.8 million ($0.67 diluted EPS).
Gross margin held near 67.5% GAAP and 67.7% non-GAAP, while GAAP operating expenses rose to $102.3 million, including $45.0 million of share-based compensation.
Q3 FY2026 revenue guidance of $335.0 million to $345.0 million implies about 25% to 29% sequential growth at the midpoints.
Q3 gross margin guidance of 64.0% to 66.0% non-GAAP is below Q2's 67.7%, signaling margin compression as new products ramp.
Non-GAAP operating expense guidance of $68.0 million to $72.0 million represents a significant step-up from $57.3 million in Q2.
Cash and short-term investments reached $813.6 million, up from about $431 million at May 3, 2025, while accounts receivable and inventory rose sharply.

03—Questions

Frequently Asked Questions

How strong was Credo's revenue growth in the quarter?
Revenue of $268.0 million grew 20.2% from the prior quarter's $223.1 million and 272.1% from $72.0 million a year earlier. Management described these as the strongest quarterly results in the company's history, attributing them to the build-out of large AI training and inference clusters.
What does the Q3 guidance imply for growth and margins?
Q3 revenue guidance of $335.0 million to $345.0 million implies sequential growth of roughly 25% to 29%. Non-GAAP gross margin is guided to 64.0% to 66.0%, down from 67.7% in Q2, and non-GAAP operating expenses are guided to $68.0 million to $72.0 million, up from $57.3 million. Together these point to lower margins as expenses rise, though profitability may still grow in absolute dollars.
Did Credo's profitability improve materially?
Yes. GAAP operating income swung to $78.8 million from a loss of $8.4 million a year earlier, and GAAP net income was $82.6 million versus a loss of $4.2 million. Non-GAAP operating margin reached 46.3%, compared with 11.5% a year earlier. Share-based compensation of $45.3 million is the main reconciling item between GAAP and non-GAAP results.
What do the balance sheet changes indicate?
Cash and short-term investments rose to $813.6 million, and shareholders' equity increased to $1.29 billion, largely from higher additional paid-in capital. Accounts receivable grew to $245.2 million and inventories to $150.2 million, which reflects a working-capital build that supports the higher revenue run rate. New goodwill of $68.9 million and intangibles of $17.1 million suggest a recent acquisition, though the excerpt does not identify it.
What are the key risks and new product drivers to watch?
Management pointed to upcoming ramps of ZeroFlap Optics, ALC and OmniConnect gearbox products as growth drivers. Key risks include the dependence on large AI infrastructure build-outs, the margin pressure implied by guidance, and the working-capital build in receivables and inventory. The filing refers investors to the risk factors in the 10-K filed July 2, 2025, and forward-looking statements are not guarantees of future results.

04—Continue

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