Credo Technology Group Holding Ltd Q2 2026 Earnings Call Transcript

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

Question: Thomas O'Malley - Barclays Services Corp - Analyst : So you're seeing an expansion of the AEC market pretty rapidly here with the fourth and then now soon to be the fifth 10% customer kind of rolling on. I found it interesting amidst but it was clearly like a really strong ramp in the AEC market, you're able to say that when you look at the ALC market, you could see that being double the AEC TAM. So talking big numbers, maybe you could spend a little time talking about whether that's unit-driven, whether that's ASP-driven, just surprised given the size -- given how well AECs have done?

Question: Thomas O'Malley - Barclays Services Corp - Analyst : And then just on the timing and the scale of the other customers ramping on, maybe you could give us what the percentages of the top four were this quarter? And then any commentary on how large those other customers rolling on will be just to give us a feel for how one is kind of handing off the next over the next couple of quarters would be super helpful.

Question: Tore Svanberg - Stifel, Nicolaus & Company Inc - Analyst : Yes. Congratulations on the solid results. Bill, I had a question on your sort of three new product lines here, obviously, all in the optical domain. First of all, could you maybe elaborate a little bit on how much you're focusing on the system-level products because obviously, in copper, yes, you have system order products, but the three areas in optical, how much of those should we assume or systems? And then I have a follow-up.

Question: Tore Svanberg - Stifel, Nicolaus & Company Inc - Analyst : That's very helpful. And as my follow-up, and I'm very interested in the 112 gig VSR SerDes technology. I think you mentioned initially, it's going to be copper, but eventually, you're going to have an optical solution as well. I'm just curious, would you have to develop some silicon photonics technology there? Or would that still sort of be a solution in the pure silicon domain?

Question: Vivek Arya - Bofa Merrill Lynch Asset Holdings Inc - Analyst : Bill, which applications are you four customers using AECs for today and which applications are they not yet using AECs for? And as we look into next year, there's a lot of talk of co-packaged optics coming into the mix. And I was hoping you could give us a sense for what impact that might have on the current or future AEC usage by your customers.

Question: Vivek Arya - Bofa Merrill Lynch Asset Holdings Inc - Analyst : And for my follow-up, I'm curious, how does your ASP lift from the 100 to 200 gig per lane compared to the lift that you have seen and are still seeing in the 50 to 100 gig transition? And does the competitive landscape change as you start moving to 200 gig, does that new application create a bigger opportunity for some of your competitors? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 01, 2025 / 10:00PM, CRDO.OQ - Q2 2026 Credo Technology Group Holding Ltd Earnings Call

Question: N. Quinn Bolton - Needham & Company LLC - Analyst : Congratulations on the nice results and outlook. I guess, Bill, I had a question just on the supply side things, I think looking at the 10-K, you guys put out, you list Vislink as sort of your sole provider of AEC cable manufacturing and obviously, the forecast here is getting pretty big pretty quickly. How are you feeling about AEC supply? Are there any constraints you're working through? Anything to call out on the supply front?

Question: N. Quinn Bolton - Needham & Company LLC - Analyst : And for my follow-up, Bill, just looking at your top two customers, I believe they are still at either 50 gig or 25 gig per lane, but just wondering if you could confirm that at least that still feels like the vast majority of your AEC business is at 50 gig per lane and it sounds like there's an opportunity that is those customers ultimately transition to 100-gig per lane. There's probably some ASP lift you would see with that transition. I won't ask you to comment on specifically when they may transition. But just I don't think it's happened yet. I was hoping you could confirm that the top two guys are still either 25 or 50 gig per lane.

Question: Suji Desilva - Roth Capital Partners LLC - Analyst : Congrats on the progress here. Maybe you could talk about your customers now when your first IPO, you had a handful of customers, now you're gaining with five customers here potentially. So the hyperscalers that don't kind of use you at a scaled level 10%-plus type levels. I know you're in all of it at some level. What is the difference between the customers you haven't penetrated yet and the ones you're getting to 10-plus percent in various quarters.

Question: Suji Desilva - Roth Capital Partners LLC - Analyst : Okay. I appreciate how you classify the products there for us. And then my other question is on manufacturing. I know with AECs, you're doing the cable manufacturing and house selling the entire cable solution. Is it the same strategy for ALC? Will it be models versus cables, outsourcing? Any color there be helpful.

Question: Vijay Rakesh - Mizuho Securities Co Ltd - Analyst : Congratulations here. Just a quick question on the scale up. Do you see those revenues start to ramp in second half calendar '26. And I think you mentioned active LED cable, ALC, in calendar '27. Is that the way to look at it?

Question: Vijay Rakesh - Mizuho Securities Co Ltd - Analyst : Got it. And then longer term, as you're obviously seeing a pretty strong AEC ramp. How should we look at the gross margin profile as optical decrees are trying to ramp as well? Just longer term, how to look at those margins?

Question: Sean O'Loughlin - Cowen and Company LLC - Analyst : And obviously, congrats on the great results. I had a question about the ALC technology and your relationship with Hyperlume, specifically, I think, Bill, you just alluded to having been working on this for the last 18 months or so. And I would assume that, that's kind of how the acquisition came together. And then, so maybe just talk about that. And then if you could address if we're sitting here in 2027, 2028 and ALCs haven't ramped, has it been -- is this because of a technology problem that you guys still need to figure out? Or is it because of a business problem that maybe the market didn't go the direction that you thought it would?

Question: Sean O'Loughlin - Cowen and Company LLC - Analyst : Yes. And then a quick follow-up on ZF Optics. Understanding that they're a system-level solution, is there a -- is there a line rate or a lane rate that the ZF optics platform is targeting to intersect with? Or is it relatively agnostic, can be leveraged at 50 gig, 100 gig, 200 gig per lane type of applications?

Question: Christopher Rolland - Susquehanna Financial Group LLLP - Analyst : Congrats on the pretty amazing results here. And yes, these are probably going to be for Dan. So you guys, in a very good way, kind of blew up my old model. So I think we've talked -- you guys talked about more than 170% year-over-year growth. Perhaps we can put some brackets or talk about next year obviously will have a deceleration. But do you think that we could grow at a at a rate similar to the Street where it was? Or do you think that needs to come down a little bit, just given the better results for this fiscal year? Just any sort of commentary as to the growth rate for next year would be phenomenal.

Question: Christopher Rolland - Susquehanna Financial Group LLLP - Analyst : Okay. Okay. I guess I don't know, does that were we at the higher end of middle -- mid-single digits? And do we move lower, just given the better results? And then, my second question, Dan, is around OpEx. So a pretty big guided bump for next quarter. maybe talk about that. Is that just a bunch of engineers coming on? Is that more onetime? And then do we take that bump and then just forecast it across every quarter moving forward? How should we think about that and/or like just what do you think OpEx might grow at a percentage of revenue, if that's easier to discuss, however you would frame it?

Question: Joseph Cardoso - JPMorgan Chase & Co - Analyst : Maybe for my first one, I just wanted to touch again on the entry into the optical transceiver market beyond just DSPs. This is obviously a very large and expanding TAM, but perhaps one where current industry margins are somewhat below your long-term targets. So maybe can you just take a second and just talk about how you're thinking about the margin opportunity here? And also curious whether you're focused on selling the full modules or if there's an opportunity to drive attach at the DSPs, pilot software, et cetera, and sell those building blocks of the ZeroFlap solution to potential customers? And then I have a follow-up.

Question: Joseph Cardoso - JPMorgan Chase & Co - Analyst : No. Got it. Very clear, Bill. And then maybe just a quick clarification on the fifth customer in the quarter. And maybe this is anecdotal, but it sounds at least like they're tracking ahead of expectations relative to last quarter with some initial revenue this quarter, but just wanted to clarify if that was the case, and as we think about that customer tracking into the back half of this year, is there any opportunity for this customer to be 10% at least on a quarterly basis now in the half? Or have the denominator just kind of outpaced that opportunity there?