Base Exchange Rate: 1 USD = 1,456 KRW (As of 2026-05-08) | Analysis Date: May 8, 2026 | Current Share Price: $188.29
Executive Summary
Credo Technology Group (NASDAQ: CRDO) is a semiconductor company specializing in high-speed connectivity solutions for AI data centers.
12-month baseline target price at current share price $188.29 $209Suggesting (approx. 304,304 won), investment opinion BuyMaintains.
The key investment points are as follows.
- Continued explosive quarterly sales growth driven by accelerated hyperscaler adoption of AEC (Active Electric Cable).
- Completion of an integrated electro-optic portfolio through entry into the silicon photonics business via the acquisition of DustPhotonics ($750M).
- FY2027 Optical Revenue: Over 1TP/4T500M Visibility and Consistency of Manager Guidance
Company Overview
Credo Technology is a semiconductor company established in 2008 that develops and supplies ultra-high-speed connectivity solutions for AI data centers.
The headquarters is located in the Cayman Islands, and R&D personnel are based in the United States, Taiwan, and Hong Kong.
The main product families consist of three axes: HiWire AEC (Active Electrical Cable) — 100G/400G/800G data center short-distance connectivity, optical PAM4 DSP and SerDes chiplets — optical communication interfaces and PCIe, SerDes IP licensing — semiconductor IP revenue.
With hyperscalers (Amazon, Microsoft, etc.), OEMs/ODMs, and optical module manufacturers as key clients, it is establishing itself as a “wiring supplier” for the entire AI data center infrastructure.
As for competitors Marvell Technology (MRVL), Companies such as Infinera and Applied Optoelectronics are included, and they are differentiating themselves with an integrated portfolio that encompasses both electrical and optical interconnects.
Financial Performance Analysis (Last 4 Quarters)
Quarterly Sales and Profit Trends
| branch | sales | Converted to Korean Won | Gross profit margin | Operating profit margin | EPS (Dilution) |
|---|---|---|---|---|---|
| Q4 FY2025 (2025.04) | $170.0M | Approximately 247.5 billion won | 67.2% | 20.4% | $0.20 |
| Q1 FY2026 (2025.07) | $223.1M | Approximately 324.8 billion won | 67.4% | 27.2% | $0.34 |
| Q2 FY2026 (2025.10) | $268.0M | Approximately 390.2 billion won | 67.5% | 29.4% | $0.44 |
| Q3 FY2026 (2026.01) | $407.0M | Approximately 592.6 billion won | 68.5% | 36.8% | $0.82 |
TTM Total Revenue: $1,068.1M (approx. 1.5551 trillion KRW), TTM Net Profit: $339.8M (approx. 494.8 billion KRW)
Operating leverage was maximized in Q3 FY2026, and the operating profit margin improved sharply from 20.41 TP3T in Q4 FY2025 to 36.81 TP3T.
Recent Earnings (Q3 FY2026, January 2026)
Revenue of $407.0M exceeded the upper end of the guidance and recorded explosive growth of +201.5% on a YoY basis.
Non-GAAP EPS was 1.07, achieving an earnings surprise of 37.21 compared to the consensus of 0.78.
Q4 FY2026 guidance is presented with revenue of $425–435M (approx. 618.9–633.4 billion KRW) and a Non-GAAP gross margin of 64–66%, signaling continued additional growth compared to the previous quarter.
Free Cash Flow (FCF) Trend
| branch | Operating cash flow | FCF |
|---|---|---|
| Q4 FY2025 (2025.04) | $57.8M | $54.2M |
| Q1 FY2026 (2025.07) | $54.2M | $51.3M |
| Q2 FY2026 (2025.10) | $61.7M | $38.5M |
| Q3 FY2026 (2026.01) | $166.2M | $139.7M |
| TTM sum | $339.9M | $283.7M (approx. 413.3 billion KRW) |
Financial soundness (as of January 2026)
Cash and short-term investments: 1 TP 4 T 1,301.5 M (approximately 1.8949 trillion won), maintaining a virtually debt-free status.
Total debt is 1 TP 4 T 16.3 M (lease liabilities only), with a D/E ratio of only 0.009, and liquidity is very abundant with a current ratio of 10.8 times and a quick ratio of 9.4 times.
The return on equity (ROE) is 27.51 TP3T, indicating high capital efficiency, and the return on assets (ROA) is 14.71 TP3T.
Valuation
| characteristic | CRDO | note |
|---|---|---|
| Trailing P/E | 103.5x | High absolute multiple |
| Forward P/E | 34.1x | Reasonable when reflecting growth |
| P/S (TTM) | 32.5x | High-growth premium |
| P/B | 18.8x | Reflection of intangible assets |
| EV/EBITDA | 95.5x | Growth expectations included |
| PEG ratio | 0.68x | Suggesting undervaluation relative to growth |
Looking only at the absolute multiple, it appears overvalued, but the PEG ratio of 0.68 (Forward P/E 34 ÷ YoY growth rate 50+) strongly suggests undervaluation relative to growth.
16 out of 18 analysts issued a Buy rating, and the consensus target price is a median of $202.77, an average of $209.09, and a peak of $260.
Same sector Arista Networks (ANET)Compared to, Credo is showing a higher sales growth rate and a trajectory of rapid margin improvement.
Growth Outlook
Revenue in FY2026 recorded explosive growth exceeding 2001 TP3T on a YoY basis, and management guidance for FY2027 also projects YoY growth of over 501 TP3T.
With the acquisition of DustPhotonics ($750M, announced in April 2026), an integrated portfolio encompassing ZeroFlap optical transceivers + optical DSPs + silicon photonics PICs is completed.
Management has set a target of achieving over $500M in optical sales in FY2027, and the acquisition of DustPhotonics is expected to contribute immediately to FY2027 Non-GAAP EPS.
The major growth drivers are as follows.
- Transition from 800G to 1.6T Port Speeds: Simultaneous Increase in AEC Payload and Unit Price per Port
- Hyperscaler AI Cluster Expansion: Amazon and Microsoft’s Continuous Data Center Capital Expenditure
- SerDes IP License: Contributing to improved company-wide profitability as a stable, high-margin revenue source
Target Price (12-Month Scenario)
| scenario | Probability | Target price | Converted to Korean Won | reason |
|---|---|---|---|---|
| Basic scenario | 50% | $209 | Approximately 304,304 won | FY2027 EPS $5.52 x P/E 38x |
| Bullish scenario | 25% | $251 | Approximately 365,456 won | DustPhotonics Synergy Realization Early, Optics Sales $600M+ |
| Bearish scenario | 25% | $167 | Approximately 243,152 won | Hyperscaler spending slows, margins compressed |
Expected Rate of Return: ($209 x 50% + $251 x 25% + $167 x 25% – $188.29) / $188.29 = +10.3%
The upside potential from the current price of $188.29 to the baseline target price of $209 is approximately 11%.
Recent major issues
1. Acquisition of DustPhotonics (April 2026)
Credo announced that it will acquire DustPhotonics, a silicon photonics PIC technology holder, for 1 TP4T750M in cash + approximately 920,000 shares.
DustPhotonics has a portfolio of 400G/800G/1.6T optical transceiver SiPho PICs and a roadmap up to 3.2T, which strengthens its competitiveness as port speeds advance.
This acquisition is a strategic milestone that completes Credo's positioning as a fully integrated AI infrastructure provider encompassing SerDes, AEC, optical DSPs, and silicon photonics.
2. Q3 FY2026 Massive Earnings Surprise (February 2026)
Non-GAAP EPS of 1.07 outperformed the consensus of 0.78 by 37.21, and revenue of 407M exceeded the upper end of the guidance.
This shows that demand for 800G AEC from hyperscalers such as Amazon and Microsoft has increased faster than expected, raising expectations for future quarterly earnings.
3. IBD 50 Inclusion and Patent Dispute Resolution
The inclusion in the IBD 50 is accelerating the inflow of funds from momentum investors.
Patent disputes related to the technology portfolio have been resolved, and intellectual property uncertainties have been eliminated.
Similar stocks in the optical communication semiconductor sector Applied Optoelectronics (AAOI)The sector as a whole continues its strong performance as it also benefits from the surge in demand for AI data center transceivers.
Risk factors
- Valuation Risk: With high absolute multiples such as a trailing P/E of 103x and a P/S of 32x, there is a possibility of sharp multiple compression if growth is disappointing.
- Customer Concentration Risk: Since the majority of sales are concentrated among a small number of hyperscalers, changes in specific customers' spending priorities can cause a shock to sales.
- DustPhotonics Integration Risk: There is a possibility of operational disruptions and unexpected cost increases during the integration process following the completion of the $750M large-scale acquisition.
- Intensified competition: As major semiconductor companies such as Marvell and Broadcom intensify their entry into the high-speed connectivity market, changes in the long-term competitive landscape are expected.
- Macroeconomic Risks: Valuation pressure on high-multiplier growth stocks may intensify during an adjustment in the AI investment cycle or changes in the interest rate environment.
Investment Opinion
Buy | Confidence: Medium | Investment Period: 12 months
The current share price of 188.29 is at a Forward P/E level of 34x, which is reasonable compared to the YoY growth outlook of 5011.
A PEG ratio of 0.68 suggests undervaluation relative to growth, and 16 out of 18 analysts recommend a Buy.
With the acquisition of DustPhotonics, the electro+optical integrated portfolio has been completed, securing visibility for FY2027 optical revenue of $500M+.
However, since the absolute multiple is high and there is a possibility of increased volatility if performance falls short, it is advisable to manage the position size at a level of 3 to 51 TP3T of the total portfolio.
This analysis is for investment reference purposes only, and the investor is solely responsible for investment decisions. Base exchange rate: 1 USD = 1,456 KRW (as of May 8, 2026)
※ This article was written based on publicly available data with the assistance of AI research tools, and the content was reviewed by the author prior to publication. It is for informational purposes only and does not constitute an investment recommendation.