Credo Technology Group Holding Ltd

Ladies and gentlemen, thank you for standing by. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. And at that time, if you have a question, you will need to press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one a second time. I would now like to turn the conference over to Dan O'Neill. Please go ahead, sir.

Good afternoon. Thank you for joining our earnings call for the first quarter of fiscal 2026. Today, I am joined by Bill Brennan, Credo's Chief Executive Officer, and Dan Fleming, Credo's Chief Financial Officer. During this call, we will make certain forward-looking statements. These forward-looking statements are subject to risks and uncertainties discussed in detail in our documents filed with the SEC, which can be found in the investor relations section of the company's website. It is not possible for the company's management to predict all risks, nor can the company assess the impact of all factors on its business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statement. Given these risks, uncertainties, and assumptions, the forward-looking events discussed during this call may not occur and actual results could differ materially and adversely from those anticipated or implied. The company undertakes no obligation to publicly update forward-looking statements for any reason after the date of this call. to conform these statements to actual results or to changes in the company's expectations, except as required by law. Also, during this call, we will refer to certain non-GAAP financial measures, which we consider to be important measures of the company's performance. These non-GAAP financial measures are provided in addition to, and not as a substitute for or superior to, financial performance prepared in accordance with U.S. GAAP. The discussion of why we use non-GAAP financial measures and reconciliations between our GAAP and non-GAAP financial measures is available in the earnings release we issued today, which can be accessed using the investor relations portion of our website. I will now turn the call over to our CEO, Bill.

Thanks, Dan, and thanks, everyone, for joining our earnings call for the first quarter of fiscal 26. I'll begin with an overview of our first quarter results and then discuss our forward outlook. After my comments, our Chief Financial Officer, Dan Fleming, will provide financial details for Q1 and our guidance for the second quarter. In the first quarter, we delivered revenue of $223 million, an increase of 31% sequentially, and an increase of 274% year over year. Our non-GAAP gross margin was 67.6%. and we achieved nearly $100 million of non-GAAP net income. Demand for Credo's reliable and power efficient high-speed connectivity solutions continues to ramp as hyperscalers and data center operators accelerate investments in AI-driven infrastructure. We provide state-of-the-art solutions for the most demanding connectivity needs, supporting data rates up to 1.6 terabits per second across a range of industry protocols. Beto's growth has been fueled by strategic partnerships with hyperscalers and key customers built on our ability to tackle their most complex connectivity challenges. We achieved this by delivering optimized solutions that span the design, development, qualification, and production across our entire product line. Our three-tiered innovation framework, comprising of purpose-built SERDES technology, advanced integrated circuit design, and system-level development approach integrates seamlessly with our pilot software and firmware platform, empowering customers to streamline system development and achieve peak performance, yield, and reliability. Our innovative system-level approach has driven our leadership in pioneering the active electrical cable, or AEC market, And looking ahead, we are applying this proven strategy to pursue additional system-level opportunities driven by the demand for better reliability, energy efficiency, and performance. We expect our approach will lead to continued diversification in terms of customers, protocols, and applications. We look forward to announcements over the next several months, including at upcoming trade shows. I'll now discuss our business in more detail. First, regarding ADCs, our ADC product line continued its robust growth, driven by an increasingly diverse customer base. Three hyperscalers each contributed over 10% of our revenue, and we expect our customer diversification to continue to broaden over the upcoming quarters. Based on customer forecasts, we anticipate significant year-over-year growth. While shipment timing may lead to nonlinear growth patterns at a customer level, we see every data center partner scaling their deployments. We're making strong progress with new customers as well, highlighted by the first material revenue contribution from a fourth hyperscaler in Q1. We anticipate this revenue to grow throughout the fiscal year, further strengthening our market position. The adoption of AECs continues to gain traction across the industry. AECs offer an unequaled combination of reliability, signal integrity, power efficiency, and system cost, all critical to building and scaling leading-edge AI clusters. We've seen AEC adoption at data rates of 50 gig and 100 gig per lane, and we see this continuing for 200 gig per lane, 1.6 terabit per second solutions as next-generation architectures ramp. We also see the trend towards GPU and cluster densification to continue to be a catalyst for an expanding AEC TAM. Over the past year, we've seen customer interest for AECs expand from intra-rack solutions to rack-to-rack solutions. Advances in liquid cooling and power sourcing have driven a quadrupling of GPU density with one customer, which enabled them to architect their entire scale-up network with AECs up to seven meters in length. Reliability and power efficiency led to choosing AECs over optical solutions, as they are up to 1,000 times more reliable and consume half the power. AECs virtually eliminate link flaps, which are intermittent losses of connection, boosting cluster reliability and productivity while reducing power consumption. Our system-level approach drives innovation, accelerates time to market, and delivers a distinct competitive edge. By owning and delivering the entire solution stack, including series IP, retimer ICs, system level design, qualification, and production, Credo has forged strong customer relationships and solidified its position as the leader in the AEC market. Moving forward, we'll continue driving innovation. with PCIE AECs and other advanced products coming to market in the near future. Let me now turn to the optical market. During the first quarter, we sustained strong momentum in our optical business, positioning us as on track to achieve our goal of again doubling optical revenue in fiscal 26. We're delivering cutting edge DSP solutions to an expanding roster of optical module customers and their hyperscale end users. With our expertise in optical DSPs, we're meeting the rigorous connectivity demands next generation applications. Our collaborative approach with customers helps ensure solutions that enhance performance, scalability, and power efficiency, further building on our position in the market. We provide customers with a leading edge portfolio of innovative, full DSP, and linear receive optical or LRO solutions, supporting port speeds up to 1.6 terabits per second. For several years, the industry has debated the shift from copper to optical connectivity solutions. While consensus holds that copper will remain prevalent in the foreseeable future, Credo is strategically prioritizing optical solutions as a cornerstone of our product roadmap. Credo sees an expanding TAM for both copper and optical connectivity solutions, and we're excited by the opportunity to bring our system-level expertise to bear in the optical market, further diversifying our position. We look forward to discussing these innovations in the coming months. And now regarding our retimer business. In Q1 fiscal 26, our Ethernet retimer business achieved strong results. Our retimers are recognized for their exceptional performance and energy efficiency, featuring advanced MACSEC encryption and gearbox functionality. The Ethernet retimer market encompasses traditional switching applications and the emerging category of AI appliances. Our recently launched PCIe retimer family is gaining significant traction, driven by robust customer engagements. Leveraging the expertise of our world-class series design team, our PCI solutions deliver an unparalleled combination of maximum reach and minimal latency, a rare achievement as these attributes are typically a trade-off. Our engineering team's innovative design approach has resulted in a truly differentiated solution. Our top-tier devices, coupled with our award-winning pilot debug and telemetry tools, to power customers to integrate our solutions with faster time to market and better reliability. We are on track to secure PCI design wins in calendar 25 with production revenue expected in calendar 26. Our expansion into PCIe based solutions for AI scale of networks significantly broadens our TAM and we are well positioned to capitalize on the industry shift to 200 gig per lane scale of solutions in the future. ensuring sustained growth and competitiveness. To summarize, during the first quarter of fiscal 26, Credo reported its highest quarterly revenue and profitability to date, reflecting exceptional operational execution to meet customer demand. Over the past several quarters, Credo has achieved extraordinary growth fueled by the surging demand for AI infrastructure. Credo is poised for continued success with a clear path for growth through fiscal 26 and beyond. Over the medium and long term, we anticipate multiple waves of growth opportunities fueled by the evolving scale-out and scale-up networks and next-generation training and inference architectures. We expect that each of these waves will drive growing demand for innovative connectivity solutions, spanning diverse fiscal mediums, distances, and protocols. Credo occupies a unique position in the industry as one of the few companies worldwide capable of delivering cutting-edge SERDES technology at the advanced speeds we're currently qualifying. By combining this core SERDES differentiation, central to our competitive edge, with our integrated circuit expertise and system-level design approach, we deliver solutions optimized to meet each customer's needs. Cato has become a high-value partner in the unprecedented build-out of hyperscale infrastructure. I believe our strong results today demonstrate our potential, and I'm increasingly optimistic about the opportunities that lie ahead. Our Chief Financial Officer, Dan Fleming, will now provide additional details on our financial results.