Popular semiconductor and infrastructure software solutions provider Broadcom ( AVGO ) recently reported first-quarter results for fiscal 2026, and investors are rewarding the little-known stock based on revelations in the earnings year. In particular, Broadcom has weighed in on the benefits of co-packaged optics over copper-based communications.
Broadcom CEO Hock Tan said that if companies are building large language models (LLMs) and designing their own AI data centers, they need massively larger domains or clusters to connect XPUs directly if possible. Tan added that direct copper supplementation is the best way to achieve this.
Shares of active electrical cable (AEC) maker Credo Technologies ( CRDO ) jumped on the news, gaining nearly 12% on the day on March 5. CRDO stock has shrugged off fears that the business will move to optical connectivity, as Broadcom has shown confidence in copper.
With that said, let’s look a little deeper at Credo.
Credo Technologies focuses on designing the high-speed connectivity solutions required for modern data infrastructures. It creates AECs using copper, digital signal processors, serializer/deserializer intellectual property, timers, and gearboxes. These products enable efficient data transfer across AI networks, cloud computing, hyperscale environments, and enterprise systems.
The company serves hyperscalers, original equipment manufacturers (OEMs), and optical module manufacturers through worldwide semiconductor operations and IP licensing. Credo is headquartered in Grand Cayman, Cayman Islands and has a market capitalization of $20.2 billion.
Explosive demand for high-speed copper cables and optical connectivity solutions has driven revenue growth and strong earnings momentum, leading to a sharp rise in CRDO stock. Over the past 52 weeks, CRDO stock has grown 150%. However, the stock is down 24% year-to-date (YTD). Shares hit an all-time high of $213.80 in December 2025, but are now 49% below that level. Therefore, the stock’s gains have actually declined this year.
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On a previously adjusted basis, Credo’s price-to-earnings (P/E) ratio of 52.1 times is higher than the industry average of 21.8 times.
Credo reported results for the third quarter of fiscal 2026 on March 2 (ended January 31, 2026). Revenue increased 201.5% year-over-year (YOY) to $407 million, as demand for AECs and ICs continued.
Credo also saw its margins expand as the title skyrocketed. The company’s non-GAAP gross margin increased from 63.8% to 68.6%, while non-GAAP operating income margin increased from 31.4% to 49.6%. GAAP non-net income increased from $0.25 per diluted share to $1.07 per diluted share.
The company’s total target market has expanded by billions of dollars as Credo has added new offerings, such as ZeroFlip Optics and OmniConnect. Credo also acquired CoMira Solutions, an IP innovator in high-speed connectivity. CoMira’s link layer, error correction (ECC), and security IPs are compatible with Credo’s existing scale products, helping businesses optimize them.
For fiscal 4 2026, revenue is expected to be between $425 million and $435 million. Credo’s non-GAAP gross margin is expected to be in the range of 64% to 66%, indicating some sequential contraction. This, along with some profit-taking by investors, led to an internal decline of approximately 15% on March 3.
Wall Street analysts are strongly optimistic about Credo’s future earnings. They expect EPS to rise 255% YOY to $0.71 for Q4 2026. For fiscal 2026, EPS will increase 659% annually to $2.20, and in fiscal 2027, growth will reach 41% to $3.10.
After the company’s Q3 earnings release, CRDO stock received a few positive endorsements from Wall Street analysts. Susquehanna maintained a “positive” rating on Credo but lowered its price target to $170 from $230. Mizuho analyst Vijay Rakesh echoed that sentiment, maintaining an “outperform” rating on the stock but lowering his price target to $200 from $225.
Rosenblatt analysts take a more middle-of-the-road approach, maintaining a “neutral” rating and a $125 price target after the Q3 results. Despite CRDO’s stock contracting after earnings, analysts at Needham reiterated their “buy” rating and maintained a $220 price target, indicating that the bottom line may remain. Needham analysts also raised their fiscal 2027 revenue estimate to $2 billion from $1.92 billion, suggesting optimism that the momentum in AEC hiring will continue if current adoption trends continue.
Wall Street analysts have a strong view of Credo Technologies stock, awarding it an overall “Strong Buy” rating. Out of 16 analysts rating the stock, a majority of 14 analysts rate it “Strong Buy”, one has “Moderate Buy” and one has “Hold”. The consensus price target of $200 represents a potential upside of 82% from current levels, while the high street price target of $260 indicates a potential upside of 136%.
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As of the date of publication, Anushka Dutta had no position (either directly or indirectly) in any of the secrets mentioned in this article. All information and data in this article are for informational purposes only. This article was originally published on Barchart.com
