Credo Stock Falls 4.2% After Q4 Earnings Beat, June 02

Credo Technology reported fourth-quarter and full-year 2026 earnings on June 1 that exceeded analyst expectations, but shares fell 4.2% to $226.10 the next day. The semiconductor company posted record Q4 revenue of $437 million and full-year revenue of $1.3 billion, up 206% year-over-year. Despite strong results, investors worried about slowing margin growth and heavy reliance on four major customers.

Record Revenue Masks Margin Concerns

Credo’s Q4 revenue hit $437 million, up 7.4% sequentially and 157% year-over-year, surpassing the entire prior fiscal year’s revenue. Full-year revenue reached $1.3 billion with gross margin of 68.1%, up 310 basis points. However, Q1 2027 guidance signals margin compression ahead. Management expects Q1 gross margin of 67% to 69%, down from Q4’s 68.3%, as newer ZeroFlap optics and AI connectivity products ramp production.

Earnings Beat Offset by Guidance Caution

Non-GAAP net income surged to $662 million for the full year, up more than 5x from prior year, with Q4 net income at $226.7 million, a 9% sequential increase. Full-year earnings per share reached $3.46, up 392%. The company beat consensus estimates on both earnings and revenue, but guided Q1 revenue to $465M-$475M, implying slower growth than the 206% full-year pace. Full-year 2027 revenue is projected to grow more than 80%, below the prior year’s growth rate.

Customer Concentration Risk Persists

Four customers accounted for at least 10% of Q4 revenue, with the largest customer representing 34% of sales. The next three customers contributed 27%, 16%, and 10% respectively. This heavy concentration limits pricing power and exposes Credo to demand swings from hyperscalers and cloud operators. Management noted that optical revenue is expected to exceed $600 million in fiscal 2027, but customer diversification remains a structural challenge.

What This Means for the Stock

Meyka rates CRDO a B with a 12-month price target of $200.03, implying 11.5% downside from current levels. The stock trades at a PE of 124.23 and a price-to-sales ratio of 39.96, both well above sector averages. With 22 analysts rating the stock a Buy and none rating it a Sell, consensus remains constructive. However, the post-earnings decline suggests the market is pricing in execution risk on margin maintenance and the company’s ability to grow without customer concentration becoming a liability.

Final Thoughts

Credo beat earnings but fell 4.2% as investors fretted over margin compression and customer concentration. With Meyka’s B rating and $200 price target, the stock faces headwinds despite strong growth guidance.

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