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. 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 again. I would now like to turn the conference over to Mr. Dan O'Neill. Please go ahead, sir.

Good afternoon, everyone. Thank you for joining our earnings call for the third quarter of fiscal 2026. Today, I am joined by Bill Brennan, CREO's Chief Executive Officer, and Dan Fleming, our 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 at the SEC, which can be found in the investor relations portion 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 adversely and materially from those anticipated, implied, or inferred. The company undertakes no obligation to publicly update forward-looking statements for any reason after the date of this call. 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. A 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 thank you all for joining our third quarter fiscal 26 earnings call. I'll start by walking through our Q3 results, give an update on our business, and share our view on our long-term opportunities. After my remarks, Dan Fleming, our Chief Financial Officer, will provide a detailed financial review of the third quarter and our guidance for the fourth quarter. We will then open the call for questions. In the third quarter, we delivered record revenue of $407 million, a sequential increase of 52%, and more than 200% from Q3 last year. We delivered non-GAAP gross margin of 68.6%, and generated approximately $209 million of non-GAAP net income. Over the past 18 to 24 months, maximizing network reliability and energy efficiency have been our core mandates as we've built our roadmap and brought new products to market. In AI infrastructure, performance without reliability stalls clusters, and scale without efficiency strains both economics and power envelopes. The strategy is clear. accelerate cluster bring-up, maximize XP utilization, and reduce total cost of ownership, all while providing our customers the highest reliability in the industry. Our recent performance reflects the most accelerated growth phase in Credo's history. From fiscal 24 to fiscal 25, we more than doubled revenue. And from fiscal 25 to current year, fiscal 26, we expect to triple revenue on top of that. That represents greater than six times growth in just two years. Few companies, particularly semiconductors, have scaled at that pace while maintaining consistent execution, healthy margins, and product leadership. Our purpose-built CERTIs and ICs, vertically integrated system model, and deep hyperscaler partnerships win at scale. We established leadership in high reliability copper connectivity and built strong position in optical DSPs and re-timers. Now, our strategy is to lead in reliability, power efficiency, and signal integrity across the full spectrum of AI and data center connectivity, from die-to-die links to chip-to-chip and board-level links to rack and row-scale copper to mid-reach optical and to resilient facility-wide optical solutions. By extending both inward toward the silicon and outward across the data center, We're positioning Credo to encompass the entire connectivity fabric of AI infrastructure. Each layer of connectivity is being fundamentally reshaped by demand for higher bandwidth and faster data rates. AI workloads continue to grow in parameter size, model complexity, and cluster scale, driving sustained transitions from 100 gig to 200 gig per lane and to 400 gig per lane in the upcoming years. At the same time, Architectures are becoming more complex, power envelopes are tightening, and reliability requirements are rising. We believe the industry's persistent push towards higher speed and larger clusters continues to expand our long-term opportunity and our ability to win. I'll now discuss our business in more detail. Our ADC product line once again delivered strong growth, driven by existing customers and new wins, including our fifth hyperscaler. Demand is accelerating across both hyperscalers and emerging neocloud providers. We continue to believe the industry is early in its AEC adoption. As AI clusters scale, reliability and power efficiency have become the primary design constraints. AECs are now the de facto standard for intra-rack and rack-to-rack connectivity up to seven meters, increasingly displacing laser-based optical modules. Their reliability and power advantages are driving broad adoption. Our zero-flap agencies deliver up to 1,000 times better reliability than commodity laser-based optics, while consuming roughly half the power. In XPU clusters, where downtime can cost millions, network reliability matters. We're supporting large-scale deployments at 100 gig per lane today and expect a long-tail deployment at those speeds. We're fully prepared to support strong industry momentum towards 200 gig per lane or 1.6 terabit ports. Our 1.6 terabit ADCs will support Ethernet, UA-Link, and E-Sun protocols. Additionally, our PCIe Gen 6 ADCs are sampling now and will be released to mass production in first half fiscal 27. Our vertically integrated system-level model remains a key competitive advantage. We take end-to-end ownership. from CERTI's leadership in silicon innovation to system design and qualification, deep telemetry, and supply chain execution, positioning us for sustained leadership. I'll now turn to our IT business, including our retimers and optical DSPs. Our IT portfolio spans both optical and copper connectivity across 50 gig, 100 gig, and 200 gig per lane speeds. We expect strong optical DSP growth in fiscal 26, driven by 100 gig per lane deployments, with increasing traction at 200 gig as customers prepare for 1.6T transitions. For Ethernet retimers, we're seeing significant growth with our 100 gig per lane solutions in both traditional switching fabrics and the rapidly expanding AI server segment. Our PCIe Gen 6 retimers remain on track with fiscal 26 design rooms expected to convert to production revenue in fiscal 27. Customer feedback has been consistently stellar. We're delivering an unequaled combination of industry-leading reach, latency, and power efficiency. We're also excited about Blue Heron, our 200 gig per lane retimer that is purpose-built for scale of AI. It leverages our expertise to deliver long reach energy efficiency, and advanced telemetry, with support for UA-Link, Ethernet, and E-Sun protocols. These IC solutions address a large and growing market opportunity. As the industry transitions to 200 gig per lane, we see substantial growth potential across multiple protocols. I'll now discuss our three most recent product families, where we've made meaningful progress since their announcements last year. At a high level, these products significantly expand our total addressable market by extending Credo's reach across the full spectrum of connectivity lengths inside the data center. I'm pleased to report that our progress with ZeroFlap Optics is ahead of schedule. As noted in our recent press release, we began production shipments with our first NeoCloud customer, TensorFlow. In addition, we're in qualification with three additional customers, including hyperscalers and NeoCloud operators. At a high level, data centers today face major challenges with extended cluster bring-up times and uptime degradation created by the inherent link flap instability of commodity laser-based transceivers. Our zero-flap optics were designed to address these challenges directly. Through tightly integrated hardware, optics, firmware, and our pilot software with switch-level SDK integration, Duraflap optics deliver continuous link health telemetry and autonomous detection and mitigation of potential link flap events before they impact the cluster. This enables a step function improvement in network reliability. From a TAM perspective, Duraflap optics allows us to address optical connectivity spanning any length within the data center. Based on strong customer traction, we now expect to see a significant production ramp. beginning in first quarter fiscal 27 and continuing throughout the year. Next, I'll discuss active LED cables, or ALCs. ALCs extend our system-level ADC philosophy into mid-reach optical by combining Credo's connectivity architecture with the micro-LED expertise gained in our HyperLum acquisition. we're creating a new system-level product category that delivers the reliability and power profile of an AEC with a thinner gauge optical cable capable of reaching up to 30 meters. This makes ALCs ideal for row-scale AI networks where copper reach becomes limited and traditional pluggable optics introduce reliability, power, and cost disadvantages. ALCs expand our TAM outward from short-reach copper into mid-reach optical, bridging the gap between ADCs and conventional optical modules. We expect to sample and qualify our first ALC products in fiscal 27 and production ramp in fiscal 28. Finally, our OmniConnect line of products drives our reach inward toward the silicon to further expand our TAM. OmniConnect combines our purpose-built BSR surges with a family of gearboxes for XPU connectivity. Our first product, Weaver, enables up to a 10X improvement in memory beachfront IO density with reach up to 10 inches. By converting DSR to DDR, Weaver overcomes the physical fan-out constraints of traditional memory-to-compute interconnects. Our first OmniConnect customer, Positron, plans to leverage this architecture to deliver an inference XPU with two terabytes of memory capacity. enabling substantial bandwidth gains in memory-intensive workloads, such as real-time AI video generation. We expect the production ramp for the first OmniConnect gearbox to be in fiscal 28. We expect to introduce additional gearboxes over time to enable a composable architecture where the same XPU design can be optimized for inference or training workloads and be future-enabled as speeds or protocols change. We'll also develop and OmniConnect gearbox targeting near-package optics with micro-LED that will address the reliability, serviceability, and availability pitfalls of current CPO solutions, while at the same time reducing power significantly. To wrap up on the business update, we're proud of our record performance and even more energized by the opportunity ahead. With continued growth in ADCs and ICs, and three new multibillion-dollar TAM expansions through zero-flap optics, ALCs, and OmniConnect, we've meaningfully broadened our near- to long-term opportunity. We remain confident in our ability to innovate, scale, and grow in the expanding AI infrastructure landscape through our focus on delivering solutions with best-in-class network reliability and energy efficiency. I want to take a moment to express strong appreciation for our silicon operations and system product operations teams. They have done an outstanding job managing supply, scaling production, and executing flawlessly in the face of significant upside demand from our customers. Their ability to respond quickly and reliably has not only enabled our record performance, but has also become a distinct competitive advantage and truly a reason customers choose Credo. In an environment where execution matters as much as innovation, Operational excellence is a differentiator. And with that, I'll turn it over to Dan Fleming for detailed financial review of our Q3 and our Q4 guidance.