Credo Technology Group Holding Ltd Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Toshiya Hari - Goldman Sachs - Analyst : Hi, good afternoon. Thanks so much for taking the question. Bill, maybe my first question is on the outlook for fiscal Q3. Obviously, you're guiding to, to a level that's well above what most of us had in our models. Curious if it's really the size of certain projects that's coming in above what you were expecting 90 days ago or a couple of quarters ago? Is that the timing of certain projects is of both what's driving the significant upside in the quarter? You talked about AES, but if you can expand on that, that would be really helpful.

Question: Toshiya Hari - Goldman Sachs - Analyst : That's really helpful. And then as my follow up one on the competitive landscape in AECs. I think since the time of the IPO, you've always said that, competition would be, kind of an endorsement of, of your vision and what you're going after. Many companies have spoken to the ac opportunity it doesn't feel like or seem like they've made significant traction. But curious what you're seeing in the marketplace today and any early feedback on the zero flap AEC product you announced that OCP would be super helpful as well. Thank you.

Question: Thomas O'Malley - Barclays - Analyst : Good afternoon, guys. Thanks for getting me on the call here. I thought of the stats that you kind of just mentioned, Bill, the 50% growth into the next fiscal year was the most impressive. And I think that if you look at the growth trajected for you guys into next year, could you maybe spend a little time on splitting out those growth drivers? Because obviously you're seeing a really large ramp in the AEC product already. But in the preamble, you mentioned that you have taped out that 200 gig per lane DSP solution as well. And you mentioned LRO there. Could you maybe comment on what those growth drivers are into the next fiscal year? And to the extent that you can, will that DSP opportunity start to become more impactful in the next fiscal year?

Question: Thomas O'Malley - Barclays - Analyst : Super helpful and then this is just a, a 30,000 of you question here. You're seeing The Ethernet market expand into certain different applications. You're also seeing the PCIE market expand, you talked about, moving into that market as well. Obviously, playing in both markets allows you to reap the benefits of growth across both. But could you maybe just give your commentary on where do you think the back end moves towards longer term? Is it more towards the Ethernet part of the world or more towards the PC IE part of the world? It's just a constant debate that we kind of run into daily and would love to hear your opinion it.

Question: Quinn Bolton - Needham and Company - Analyst : Hey, guys, congratulations on the nice results and outlook, I guess maybe to start Bill, the guidance is well, well above street expectations. If you look into the back half of the year for AEC, you guys, I think have 10% customers that are driving a lot of that growth. Can you give us some sense as to the number of AECs that ship sort of per [nick] card or per accelerator and how that ratio may be changing as you look from fiscal '25 into fiscal '26. I think in past conversations, you might have implied that that you could have one AEC that aggregates the bandwidth from two nick cards. But I'm wondering if that attach ratio of effectively, half an AEC to one GPU. If that, that may now be a number that ends up being too low, just trying to get some sense from you guys, what gives you the confidence that the business continues to grow into fiscal '26?

Question: Quinn Bolton - Needham and Company - Analyst : Maybe there is as a follow up if you look into the second half of the year. Do you see the business? Is it mostly driven by just you guys are seeing an acceleration in the number of GPUs or XPUs deployed? Is it driven by a higher attach rate of some of these new projects, go to market with more AECs per GPU or per rack or is it a mix shift towards higher ASP devices? You talked about 400 gig, in the market now, you've got the 800 gig zero flat AECs launching, is it or is it a combination of all three just any color would be, would be appreciated?

Question: Quinn Bolton - Needham and Company - Analyst : Thank you, Bill.

Question: Tore Svanberg - Stifel Financial Corp. - Analyst : Yes, thank you. And congratulations on the strong results. Bill, I have to ask this question just because of history, right? But, when we look at this type of growth, what gives you the visibility that, there's not some inventories build here, especially given the geopolitical climate and so on and so forth.

Question: Tore Svanberg - Stifel Financial Corp. - Analyst : Yeah, that's a great call. And as my follow up and you mentioned some of this, obviously, Credo is very unique with the decision, whether it's copper or optical PC IE or Ethernet. And I'm just wondering if you think about, the large GPU vendor, they obviously chose a very unique system architecture for their latest product. I'm just wondering if that has sort of really driven a lot of your customers to focus so much more on using copper. And is that perhaps why you're starting to see these opportunities being greater than originally thought?

Question: Tore Svanberg - Stifel Financial Corp. - Analyst : No, that's great color. Thanks, and congrats again.

Question: Vivek Arya - Bank of America Securities - Analyst : Thanks for taking my question. Bill, you said that the second half marks an inflection point, what is driving that inflection now? Because when I look at you know, Blackwell, that you know, product has been pushed out somewhat, is this just a lot more hoppers that are being deployed or is it more that there is perhaps more custom basic accelerator deployment? I'm just curious to see what is driving this inflection now.

Question: Vivek Arya - Bank of America Securities - Analyst : Just on the 10% customers, how big were these 3 10% customers? And as you go into Q3 is the demand growing across these three 10% customers or is it being driven more by one of them? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 02, 2024 / 10:00PM, CRDO.OQ - Q2 2025 Credo Technology Group Holding Ltd Earnings Call

Question: Vivek Arya - Bank of America Securities - Analyst : Thank you. Appreciate it.

Question: Suji Desilva - ROTH Capital Partners - Analyst : Hi, Bill. Hi, Dan. Congrats on the strong guidance. Maybe just to follow up on the last question about the hyper skilled customer, it's going to be important for the second half. Can you talk about the breadth of programs you're penetrating now, maybe versus six months a year ago? Is it one program that's growing or now? Are you not penetrating multiple programs, that kind of color would be helpful in terms of diversification?

Question: Suji Desilva - ROTH Capital Partners - Analyst : Okay. And then I know on the customer sophistication staying there two hyperscalers you're shipping to. Now, can you confirm that you're shipping to all four of the large hyperscalers or are they in the pipeline or just to understand how you've broadened out across the seven large customers? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 02, 2024 / 10:00PM, CRDO.OQ - Q2 2025 Credo Technology Group Holding Ltd Earnings Call

Question: Suji Desilva - ROTH Capital Partners - Analyst : Very helpful, bill. Thank you.

Question: Vijay Rakesh - Mizuho Securities USA - Analyst : Yeah. Hi Bill. And then congratulations. Just a quick question the AEC side. I was wondering what person range what's going to the AI side, AI servers? And if you would be looking to add new 10% customers in 2025 calendar, '25 sorry, and a follow up.

Question: Vijay Rakesh - Mizuho Securities USA - Analyst : That's right.

Question: Vijay Rakesh - Mizuho Securities USA - Analyst : And so the second part, in terms of new 10% customers in calendar '25 I guess?

Question: Vijay Rakesh - Mizuho Securities USA - Analyst : Got it. And on the optical DSP side, just wondering obviously it's nice ramp there. But how many customers do you have on the optical DSP side now? Thanks. That's it.

Question: Vijay Rakesh - Mizuho Securities USA - Analyst : Got it. Thank you.

Question: Joshua Buchalter - TD Cowen - Analyst : Hey, guys, congrats on the results and thank you for taking my question. I was hoping you could maybe spend a minute or two talking about your go to market and, and competitive position specifically on optical DSPs. I mean, you cited some pretty impressive power stats on your three nanometer optical DSP and also mentioned that that 50, 100 gig per lane was hit record numbers. I mean, should we be thinking about the 200-gig product serving a sort of a step function change and how you feel about your competitive position against some pretty big incumbents and 50, 100 are proving grounds to be curious to see, hear you talk about your the catalyst for further inflection in the DSP market? Thank you.

Question: Joshua Buchalter - TD Cowen - Analyst : Got it. Thank you. And to follow up, I saw a competitor made an announcement about AEC that one of your lead customers this morning. I know you guys have different architectures, but second sourcing and resilience has been increasingly important in the AI ecosystem. I'd be wondering, I wonder if you could maybe speak to how you think your customers think about second and third sourcing and in the AEC market specifically? And are you guys on generally, are you going up against -- are your customers using a CS from multiple vendors on the same projects or is it spread across different clusters? Just be curious to hear your thoughts there. Thank you.

Question: Joshua Buchalter - TD Cowen - Analyst : Thank you.

Question: Karl Ackerman - BNP Paribas Exane - Analyst : Thank you. I have two as well. First question I was is on your licensing business. I was hoping you could discuss the revenue contribution you anticipate in the January quarter, whether that's also below 10% of your implied outlook. And in regards to your revenue, how do we -- how do you think about the visibility you have in that line item given? I believe more of your licensing revenue appears the royalty based now rather than more of these one time and repayments. If you could just highlight that, that would be helpful and I have a follow up. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 02, 2024 / 10:00PM, CRDO.OQ - Q2 2025 Credo Technology Group Holding Ltd Earnings Call

Question: Karl Ackerman - BNP Paribas Exane - Analyst : Sure. No, I thank you for that of the four customers greater than 5% of revenue that you mentioned, are they primarily concentrated in AECs or is the customer breadth also occurring in your DSP offering as well as line card offering here to speak about the broad segmentation or buckets to where these other four customers are in? That would be helpful. Thank you.

Question: Karl Ackerman - BNP Paribas Exane - Analyst : Thank you.