Credo Q1 Fiscal 2025 Earnings Report

Credo has reported a solid start to fiscal 2025, with Q1 revenues reaching $59.7 million and a non-GAAP gross margin of 62.9%. The company has seen a significant year-over-year revenue increase of 70% and a sequential growth of 30% in product revenues, driven by expanding AI deployments. Credo is preparing to enter the 64 gig PAM4 PCIe Gen 6 market later this year, aiming to capitalize on the growing demand for higher bandwidth driven by AI applications.

Key Takeaways

• Q1 revenue reported at $59.7 million with a non-GAAP gross margin of 62.9%.
• Product revenues increased by 30% sequentially, largely due to AI deployments.
• Credo plans to enter the 64 gig PAM4 PCIe Gen 6 market.
• Expected Q2 revenues between $65 million and $68 million with non-GAAP gross margins of 62% to 64%.
• Non-GAAP operating expenses expected between $36 million and $38 million.
• AECs (Active Electrical Cables) are anticipated to double the TAM if customers deploy rack-to-rack solutions.
• Projected IP licensing revenue is 10% to 15% for the full year.

Company Outlook

• Sequential growth is expected to accelerate in the second half of the year.
• Plans to enter the PCIe retimer market at Gen 6 speed.
• Anticipates significant contributions from AECs, optical products, Line Card PHYs, and SerDes Chiplets for growth.

Bearish Highlights

• Q1 revenue was down 2% sequentially.
• Cash flow used in operations was $7.2 million, with negative free cash flow of $13.1 million.

Bullish Highlights

• Year-over-year revenue growth of 70%.
• Strong product bookings driven by a large AEC hyperscale customer.
• Expected revenue diversification throughout the fiscal year.

Misses

• Did not pursue the Gen 5 market but is optimistic about Gen 6.

Q&A Highlights

• 128 gig silicon has been tested with plans to accelerate to Gen 7.
• Engagements with emerging hyperscalers like Amazon and Microsoft noted as growth drivers.
• The operating margin projected to be in the 30% to 35% range in the next fiscal year.

Credo’s fiscal 2025 has kicked off with strong financial results and strategic moves to position itself in new markets. The company’s focus on AECs, Optical DSP, and Line Card PHY businesses, along with its plans to enter the PCIe Gen 6 market, highlight its commitment to growth and innovation in the face of evolving AI demands. With a robust outlook and a clear strategy, Credo is set to navigate the coming quarters with confidence and a vision for sustained expansion.

InvestingPro Insights

• Credo has a market capitalization of $5.19 billion, reflecting strong investor confidence.
• Quarterly revenue growth of 89.42% noted in Q4 2024.
• Gross profit margin stands at an impressive 61.89%.
• Analysts believe the company will be profitable this year.
• Strong stock returns align with positive performance and prospects.

Full Transcript – Credo Technology Group Holding Ltd (NASDAQ:CRDO) Q1 2025

Operator: Thank you for standing by. At this time, all participants are in a listen-only mode. A question-and-answer session will follow. I would now like to turn the conference over to Dan O’Neil. Please go ahead, sir.

Dan O’Neil: Thank you for joining our earnings call for the first quarter of fiscal 2025. Today, I’m joined by Bill Brennan, Credo’s CEO; and Dan Fleming, CFO. We will make certain forward-looking statements that are subject to risks and uncertainties as discussed in our SEC documents. The company’s financial measures include non-GAAP metrics which are important for performance evaluation. I will now turn the call over to Bill.

Bill Brennan: Welcome to our Q1 earnings call. I will review our performance and future outlook. In Q1, Credo reported $59.7 million revenue and a 62.9% non-GAAP gross margin. Product revenues were up 30% sequentially, driven by strong AI deployment. We aim to extend our reach into new markets and our current AEC products remain our main source of revenue. We expect strong growth from the Optical DSP business, Line Card PHYs, and Chiplet licensing…

Dan Fleming: Our product business generated $57.3 million in Q1, up 30% sequentially and up 77% year-over-year. We reported a gross operating income of $2.2 million and cash flow used in operations was $7.2 million. We expect Q2 revenue to be between $65 million and $68 million. Overall, we’re excited about our prospects and see strong potential for growth throughout the fiscal year.

Operator: Thank you. I will now open the call for questions…

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