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Credo Technology Group (CRDO) has had a volatile start and is trading lower after reporting its Q4 (Apr) results last night. The supplier of high-speed connectivity solutions for AI and data-center infrastructure beat EPS expectations, while revenue continued to grow at a triple-digit pace, increasing 157% yr/yr to $437 mln, above expectations. CRDO issued upside Q1 guidance, expecting revenue of $465-475 mln. Also, CRDO now expects FY27 revenue growth of more than 80%, up from its prior view for more than 50% growth.

• CRDO's results continue to be fueled by the surging scale of AI clusters, which is creating greater demand for reliable, power-efficient connectivity. Management said connectivity is no longer just about bandwidth, with reliability, signal integrity, and telemetry becoming critical requirements. 
• Its AEC business, or Active Electrical Cables, remains a core growth driver. CRDO continues to see strong adoption across hyperscaler and neo cloud customers, both at 100 gig per lane and emerging 200 gig per lane deployments. Importantly, it remains on track with its PCIe Gen6 AEC family, and said customer engagement and design activity continue to strengthen.
• CRDO also believes FY27 will mark an inflection point for its optical business. At the optical DSP component level, it sees momentum in both design wins and revenue contribution. Additionally, the recently closed DustPhotonics acquisition gives CRDO differentiated silicon photonics PIC technology, with design win momentum across 800G and 1.6T solutions and a roadmap to 3.2T and beyond.
• DustPhotonics also provides a path to CPO and NPO architectures, with initial revenue expected in FY28. CRDO expects optical DSPs, silicon photonics PICs, and ZeroFlap optics to each contribute more than $100 mln in FY27 revenue.
• Non-GAAP gross margin expanded 90 bps yr/yr to 68.3%, well above its prior guidance for 64-66%. CRDO expects Q1 non-GAAP gross margin of 67-69%, suggesting stability at the midpoint.
• On guidance, CRDO expects mid-single-digit sequential growth in the first half before an inflection in the second half, supported by the ramp in optical revenue. It also expects FY27 non-GAAP gross margin to remain broadly consistent with FY26 levels.

Briefing.com Analyst Insight

CRDO shares are trading lower, but the weakness appears to reflect its sharp run into the report and elevated expectations rather than any meaningful deterioration in fundamentals. This was a strong close to the year, and CRDO now expects an even stronger FY27, supported by the continued scaling of AI clusters and an expected inflection in its optical business. AEC adoption remains strong across hyperscaler and neo cloud customers at 100 gig per lane and emerging 200 gig per lane deployments, while customer engagement and design activity around its PCIe Gen6 AEC family continue to strengthen. The second-half acceleration is expected to be supported by the ramp in optical revenue, including contributions from optical DSPs, DustPhotonics' silicon photonics PICs, and ZeroFlap optics. Margins were also better than management expected in Q4, with the FY27 outlook suggesting relative stability despite continued investment. Overall, the stock's weakness does not appear to reflect a broken story, but rather some digestion after shares more than doubled from April and the first-half growth cadence did not imply a larger near-term acceleration.