Credo Technology Group Holding Ltd Q3 2025 Earnings Call Transcript

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

Question: Vivek Arya - Bank of America Securities - Analyst : Thanks for taking my, question. For the first one, if you could give us a sense of how large was the largest customer. I think Dan mentioned the number I didn't catch it. But I guess I have two parts to the question. One is, where are you in the adoption of AEC at that customer? And if you exclude that customer, how are you looking at the growth of your business among other customers? Because depending on that customer concentration, rightly, we get a slightly different trend outside of that large customer.

Question: Vivek Arya - Bank of America Securities - Analyst : Got it. So my follow-up, Bill, if let's say, more of the market turns towards inference rather than training, right, whether more (technical difficulty), but (technical difficulty) of the compute build-out. What does that do to these air clusters? And what does that do to connectivity requirements and the AEC potential? Is that good, bad, neutral for AEC? Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 04, 2025 / 10:00PM, CRDO.OQ - Q3 2025 Credo Technology Group Holding Ltd Earnings Call

Question: Thomas O'Malley - Barclays - Analyst : Hey guys, thanks for taking my question. I appreciate it. So I think a lot of the tone of the call here has been about like a broadening of the portfolio. You're talking about PCIe retimers. You're talking about PCIe cables. To push you maybe 1 step further, if you're looking in the PCIe realm, an area of a lot of value is in the switching ecosystem as well. Do you guys have plans to move into the switching ecosystem? Is that like a natural progression from kind of the road traveling down already? And maybe talk about the challenges of doing retailers versus moving to switching and the time line that it would take to transition from product in the market today to maybe some new products on the switching side. Thank you.

Question: Thomas O'Malley - Barclays - Analyst : I appreciate you answering despite you just announcing the prior product before, so I appreciate it. But just in terms of the market outlook, so you're talking about the scale up networks and also the scale-out network you have PCIe cables, potentially more aligned with the scale up network. You've got some of the AEC product, particularly looking more at the scale-out network. Can you talk about the opportunity size? Because I think we're going to see in a couple of weeks here, like maybe a redefinition of what scale up and scale out is? Is it one rack, is it multiple racks, maybe your thoughts on scale up versus scale out, where does the opportunity set life for you? Are you indifferent? Just want to kind of to get your temperature on that transition. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 04, 2025 / 10:00PM, CRDO.OQ - Q3 2025 Credo Technology Group Holding Ltd Earnings Call

Question: Karl Ackerma - BNP Paribas - Analyst : Yes, thank you, gentlemen. Two questions, if I may. The first one, I guess, what's driving the uptick in gross margins in the April quarter? Is it IP licensing revenue related? Or is there some other thing that we should be thinking about?

Question: Karl Ackerma - BNP Paribas - Analyst : Got it. Just a follow-up on your prepared comments, you spoke about how you may have three or four customers that would be 10% plus in the coming quarters or in calendar '26. Obviously, the first three today are AEC related. Is the fourth one also AEC-related, or would that just perhaps broadening into other aspects in product portfolios of your business?

Question: Quinn Bolton - Needham & Company - Analyst : If I've got my numbers right, revenue outside of your largest customer went from about $48 million in October to about $19 million in January. You talked about kind of revenue diversifying again over the next few quarters and into fiscal '26 with 3 to 4 customers that could be over 10%. Can you just give us some sense. What do you expect your largest customer to do? Does it stay 80-plus percent of revenue? Are you anticipating that, that pulls back and that you see ramps at some of the other customers in the April quarter. Just any sense of revenue rediversifying would be helpful.

Question: Quinn Bolton - Needham & Company - Analyst : Got it. And then I guess just looking at that customer, obviously, it's a significant percentage of revenue in the January and April quarters. I think in the past, you've talked about having kind of 12-month rolling forecast from some of your larger hyperscale customers. Just generally speaking, can you give us any sense -- what gives you the confidence that the surge you've seen here in January and April may not just be somewhat related to an inventory build ahead of server deployments that at some point in fiscal '26, you go into kind of a depletion mode or just a deployment mode where you could see I guess, for a lack of a better term, an air pocket at that customer at some point next year? Just any help to hold hands would be appreciated. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 04, 2025 / 10:00PM, CRDO.OQ - Q3 2025 Credo Technology Group Holding Ltd Earnings Call

Question: Quinn Bolton - Needham & Company - Analyst : Understood. I'd rather see you guys have the Amazon revenue than not. So congratulations on the nice results.

Question: Tore Svanberg - Stifel - Analyst : Yes, thank you and congrats on the record results. Bill, in your prepared remarks, you talked about several layers or multitiered innovation. And the one thing that obviously is that you talk about is the system-level approach. That's obviously very obvious on the AEC part of your business. But as you venture into some of these new segments and especially on PCIe. Will you take more of a system business model approach there as well, or should we assume that's going to be primarily selling chips? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 04, 2025 / 10:00PM, CRDO.OQ - Q3 2025 Credo Technology Group Holding Ltd Earnings Call

Question: Tore Svanberg - Stifel - Analyst : That's very interesting. And then my follow-up, LRO, I haven't heard a whole lot about it since you obviously introduced it. So any update you can give us there? If you do have some stuff that you're going to talk about at OFC, I get it. But any update we can get on the row would be really helpful.

Question: Tore Svanberg - Stifel - Analyst : Understood.

Question: Vijay Rakesh - Mizuho - Analyst : Yes, hey, Bill and Dan, great quarter, congratulations. Just on the AEC side, I know you mentioned 2 new customers to new hyperscalers that you'll be working with. On the visibility, do you see them happening to -- as you look out 12 to 18 months, you see that ramping pretty nicely to significant volumes. How do you see that ramp. And I have a follow-up.

Question: Vijay Rakesh - Mizuho - Analyst : Got it. And then on the PCIe scale up side, really great to see you guys ramp so fast since you so quickly after (inaudible). You mentioned 1 server ODM. How does that pipeline look? And do you have to qualify the server ODM or the or the GPU [guide], just [just trying to understand]. Thanks.

Question: Vijay Rakesh - Mizuho - Analyst : Got it thank you.

Question: Sean O'Loughlin - TD Cowen - Analyst : Hey guys, thanks a lot for taking the question and congrats on a nice set of results and guide. I'd like to trend a little bit and ask about front-end networking. The original -- obviously, the original AEC deployment was on a front-end solution. And I wonder whether or how you and your customers are thinking about that front-end opportunity that still potentially exists? Is it just that in end networking is not where the innovation is happening in the space, and so customers are focused on the back end? Or is it a matter of time or some hybrid of the both? And then to squeeze an extra question on top of that, is there really a difference in the product

Question: Sean O'Loughlin - TD Cowen - Analyst : Great. Super helpful. And then just as a quick follow-up, you mentioned the three hyperscalers that are achieving volume shipments today. I think last quarter, you talked about the two hyperscale, obviously, that we all know about. And then in the third emerging hyperscale, I just want to clarify that, that is not the third hyperscaler that you talked about today, but is, in fact, a different customer.

Question: Christopher Rolland - Susquehanna - Analyst : I guess -- yes, as it concerns your largest customer here and maybe any of these large ramps going forward, I think a lot of these things are project-based. We have very large deployments, sometimes 200,000 GPUs in just a couple of months. So as we think about these kind of large, lumpy deployments, should we be expecting these customers, for example, in this case, a pretty strong hand off in the next few quarters to other customers? Like Bill, maybe if you could talk to how project-based these revenue ramps are, that would be great.

Question: Christopher Rolland - Susquehanna - Analyst : Great. And maybe as a second question, analog, copper cable solutions seem to have missed perhaps the B-300 cycle. Is that an opportunity for you guys? Do you think you're gaining share and design wins just as that technology did not ramp, does that increase your TAM and your ramp expectation?

Question: Christopher Rolland - Susquehanna - Analyst : Thanks so much, Bill.

Question: Richard Shannon - Craig-Hallum - Analyst : Well, hi, thanks, Bill and Dan, maybe I'll just ask a simple question here that I think you get most quarters here, Bill, but I just want to get your latest thoughts on competition in the AEC space. Obviously, you've got a very high share, you're doing exceptionally well here. It certainly makes sense for some of your large customers to attempt to do dual sourcing. Have you seen any evidence of that, either attempts or see that coming here anytime soon just kind of your latest thoughts on that, please?

Question: Richard Shannon - Craig-Hallum - Analyst : Okay, great, thanks for that update, Bill. My second question, really just looking at the large AEC opportunities here and clearly the largest customer is really drive a lot of content here, both as you said, both in the back end and the front end. I think maybe just thinking about from a back-end perspective, are you seeing any other hyperscalers getting close to adopting and even qualifying your AECs in the back end and kind of thought process on timing here? I'm assuming it's somewhere in fiscal '26 with that after, but maybe just kind of your latest thoughts there as well. Thank you.

Question: Suji Desilva - ROTH Capital - Analyst : Hi Bill. Hi Dan. Congrats on the progress here. I just want to understand from the lead customer and the future 10% customers. Just to clarify whether the ramp is today a single program and expected to be a single program across those 10% customers or whether you get into the point where you have multiple projects across these customers in the pipeline that might diversify you for each customer?

Question: Suji Desilva - ROTH Capital - Analyst : Okay, that's helpful, Bill. And then the opportunity and specifically in back end scale up, I just want to be clear here, is that an opportunity only on in-house ASICs, or is that opportunity as well on merchant GPUs in the marketplace? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 04, 2025 / 10:00PM, CRDO.OQ - Q3 2025 Credo Technology Group Holding Ltd Earnings Call

Question: Suji Desilva - ROTH Capital - Analyst : That is very helpful, Bill. Thanks.