Credo Reports Third Quarter of Fiscal Year 2025 Financial Results

Rhea-AI Summary

Credo Technology Group (Nasdaq: CRDO) reported strong financial results for Q3 FY2025, ended February 1, 2025. Revenue reached $135.0 million, showing remarkable growth of 87.4% quarter-over-quarter and 154.4% year-over-year. The company achieved GAAP gross margin of 63.6% and reported GAAP net income of $29.4 million ($0.16 per diluted share).

The record revenue was primarily driven by their AEC product line, marking a significant business inflection point. The company ended the quarter with a strong cash and short-term investment position of $379.2 million.

Looking ahead to Q4 FY2025, Credo projects revenue between $155.0-165.0 million, with expected GAAP gross margin of 62.7-64.7% and operating expenses between $73.0-75.0 million.

Positive

• Record quarterly revenue of $135.0M (+154.4% YoY)
• Strong gross margin of 63.6% GAAP
• Profitable with $29.4M GAAP net income
• Healthy cash position of $379.2M
• Higher revenue guidance for Q4 ($155-165M)

Negative

• Operating expenses increased to $59.7M GAAP
• Q4 guidance shows slight margin decline to 62.7-64.7%
• Projected increase in Q4 operating expenses to $73-75M

Insights

Financial Analyst

Credo Technology's Q3 FY2025 results demonstrate exceptional growth acceleration, with revenue reaching $135.0 million, representing a staggering 154.4% year-over-year increase and 87.4% sequential growth. This performance significantly outpaces typical semiconductor industry growth rates, suggesting market share gains in the connectivity solutions space.

The company's profitability metrics are equally impressive, with GAAP gross margin of 63.6% and non-GAAP gross margin of 63.8%, reflecting premium positioning and strong execution. Net income reached $29.4 million on a GAAP basis and $45.4 million non-GAAP, translating to diluted EPS of $0.16 and $0.25 respectively.

Particularly noteworthy is management's confirmation of an inflection point driven by their AEC (Active Electrical Cable) product line. This suggests successful commercial deployment of next-generation connectivity solutions, likely benefiting from AI infrastructure and data center expansion.

The forward guidance is equally strong, projecting Q4 revenue between $155-165 million, which represents sequential growth of approximately 15-22%. With a robust cash position of $379.2 million, Credo has ample resources to fund continued R&D and expansion while maintaining financial flexibility.

The company's focus on energy efficiency in high-speed connectivity positions it well in the current market environment where data infrastructure demands continue to grow while energy consumption concerns mount.

SAN JOSE, Calif.--(BUSINESS WIRE)-- Credo Technology Group Holding Ltd (Nasdaq: CRDO), an innovator in providing secure, high-speed connectivity solutions that deliver improved energy efficiency as data rates and corresponding bandwidth requirements increase through the data infrastructure market, today reported financial results for the third quarter of fiscal year 2025, ended February 1, 2025.

Third Quarter of Fiscal Year 2025 Financial Highlights

• Revenue of $135.0 million, grew by 87.4% quarter over quarter and 154.4% year over year
• GAAP gross margin of 63.6% and non-GAAP gross margin of 63.8%
• GAAP operating expenses of $59.7 million and non-GAAP operating expenses of $43.8 million
• GAAP net income of $29.4 million and non-GAAP net income of $45.4 million
• GAAP diluted net income per share of $0.16 and non-GAAP diluted net income per share of $0.25
• Ending cash and short-term investment balance of $379.2 million

Management Commentary

Bill Brennan, Credo’s President and Chief Executive Officer, stated, “During the third quarter ended February 1, 2025 Credo generated revenue of $135.0 million, up 87% sequentially and 154% year over year. We achieved record revenue in the third quarter, driven by our AEC product line, as we experienced the inflection point in our business that we had expected. Going forward, we expect continued growth across our product lines and customer base as market demand for innovative connectivity solutions continues to grow.”

Fourth Quarter of Fiscal 2025 Financial Outlook

• Revenue is expected to be between $155.0 million and $165.0 million
• GAAP gross margin is expected to be between 62.7% and 64.7%, and non-GAAP gross margin is expected to be between 63.0% and 65.0%
• GAAP operating expenses are expected to be between $73.0 million and $75.0 million, and non-GAAP operating expenses are expected to be between $50.0 million and $52.0 million

Conference Call

Credo will conduct a conference call on Tuesday, March 4, 2025, at 2:00 p.m. Pacific Time to discuss its financial results for the third quarter of fiscal year 2025, ended February 1, 2025. Interested parties may join the conference call by dialing 888-596-4144 (toll-free) or +1 646-968-2525 (international). The conference ID for the call is 5251802. It is recommended that participants register and dial in for the call at least 10 minutes before the start of the call. A live webcast of the conference call will be available on Credo’s Investor Relations website at http://investors.credosemi.com. A replay of the webcast will be available via the web at http://investors.credosemi.com.

Discussion of Non-GAAP Financial Measures

This press release contains references to the non-GAAP financial measures of non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income (loss), non-GAAP operating income (loss) margin, non-GAAP net income (loss) and non-GAAP diluted net income (loss) per share. Reconciliation of these non-GAAP measures to their comparable GAAP measures is included below. This non-GAAP information should not be construed as an alternative to the reported results determined in accordance with GAAP. The non-GAAP financial measures that Credo presents may not be comparable to similarly titled measures of other companies and other companies may not calculate such measures in the same manner as we do.

Non-GAAP financial measures exclude the effect of share-based compensation expenses, asset impairment and related charges (if applicable), and the related tax effect adjustment to the provision for income taxes.

Credo uses a full-year non-GAAP tax rate to compute the non-GAAP tax provision. This full-year non-GAAP tax rate is based on Credo’s annual GAAP income, adjusted to exclude non-GAAP items, as well as the effects of significant non-recurring and period-specific tax items which vary in size and frequency. Credo’s non-GAAP tax rate is determined on an annual basis and may be adjusted during the year to take into account events that may materially affect the non-GAAP tax rate, such as tax law changes, significant changes in Credo’s geographic mix of revenue and expenses or changes to Credo’s corporate structure.

GAAP diluted net income (loss) per share is calculated using basic weighted average shares outstanding when there is a GAAP net loss, and calculated using diluted weighted average shares outstanding when there is a GAAP net income. Non-GAAP diluted net income (loss) per share is calculated using basic weighted average shares outstanding when there is a non-GAAP net loss, and calculated using non-GAAP diluted weighted average shares outstanding when there is a non-GAAP net income. Non-GAAP adjustment for the number of shares used in the diluted per share calculations excludes the impact of share-based compensation expenses expected to be incurred in future periods and not yet recognized in the financial statements, which would otherwise be assumed to be used to repurchase shares under the GAAP treasury stock method.

Credo believes that the presentation of non-GAAP financial measures provides important supplemental information to management and investors regarding financial and business trends relating to Credo’s financial condition and results of operations. While Credo uses non-GAAP financial measures as a tool to enhance its understanding of certain aspects of its financial performance, Credo does not consider these measures to be a substitute for, or superior to, financial measures calculated in accordance with GAAP. Consistent with this approach, Credo believes that disclosing non-GAAP financial measures to the readers of its financial statements provides such readers with useful supplemental data that, while not a substitute for GAAP financial measures, allows for greater transparency in the review of its financial and operational performance.

Externally, management believes that investors may find Credo’s non-GAAP financial measures useful in their assessment of Credo's operating performance and the valuation of Credo. Internally, Credo's non-GAAP financial measures are used in the following areas:

• Management’s evaluation of Credo’s ongoing operating performance;
• Management’s establishment of internal operating budgets; and
• Management’s performance comparisons with internal forecasts and targeted business models.

Non-GAAP financial measures have limitations in that they do not reflect all of the costs associated with the operations of Credo’s business as determined in accordance with GAAP. As a result, you should not consider these measures in isolation or as a substitute for analysis of Credo’s results as reported under GAAP. The exclusion of the above items from our GAAP financial metrics does not necessarily mean that these costs are unusual or infrequent.

Forward-Looking Statements under the Private Securities Litigation Reform Act of 1995

This press release contains forward-looking statements within the meaning of the federal securities laws. All statements other than statements of historical fact could be deemed forward-looking statements, including, but not limited to, any statements regarding: launches of new or expansion of existing products or services; technology developments and innovation; our plans, strategies or objectives with respect to future operations; financial outlook; future financial results; expectations regarding the markets and industries in which Credo conducts business; and assumptions underlying any of the foregoing. Words such as “anticipates,” “expects,” “intends,” “plans,” “projects,” “believes,” “seeks,” “estimates,” “can,” “may,” “will,” “would,” “outlook,” “forecast,” “targets” and similar expressions, or their negatives, may identify such forward-looking statements. These statements are not guarantees of results and should not be considered as an indication of future activity or future performance. Forward-looking statements are predictions, projections and other statements about future events that are based on current expectations and assumptions and, as a result, are subject to risks and uncertainties that may cause actual events or results to differ materially from those described in this press release. Readers are encouraged to review risk factors and all other disclosures appearing in Credo’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission (SEC) on June 24, 2024, as well as Credo’s other filings with the SEC, for further information on risks and uncertainties that could affect Credo’s business, financial condition and results of operation. Copies of these filings are available from the SEC, Credo’s website or Credo’s investor relations department. Forward-looking statements speak only as of the date they are made. Credo assumes no obligation to update or revise any forward-looking statements as a result of new information, future events or otherwise, except as required by law. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date herein.

About Credo

Our mission is to deliver high-speed solutions to break bandwidth barriers on every wired connection in the data infrastructure market. Credo is an innovator in providing secure, high-speed connectivity solutions that deliver improved power and cost efficiency as data rates and corresponding bandwidth requirements increase exponentially throughout the data infrastructure market. Our innovations ease system bandwidth bottlenecks while simultaneously improving on power, security and reliability. Our connectivity solutions are optimized for optical and electrical Ethernet applications, including the 100G (or Gigabits per second), 200G, 400G, 800G and emerging 1.6T (or Terabits per second) port markets. Our products are based on our proprietary Serializer/Deserializer (SerDes) and Digital Signal Processor (DSP) technologies. Our product families include integrated circuits (ICs), Active Electrical Cables (AECs) and SerDes Chiplets. Our intellectual property (IP) solutions consist primarily of SerDes IP licensing.

Credo Technology Group Holding Ltd Condensed Consolidated Statements of Operations (Unaudited) (In thousands, except per share amounts)
	Three Months Ended											Nine Months Ended
	February 1, 2025			November 2, 2024				January 27, 2024				February 1, 2025			January 27, 2024
Revenue:
Product sales	$	129,371		$	64,443			$	39,975			$	247,653		$	104,250
Product engineering services		2,667			4,632				11,830				10,785			16,557
IP license		2,964			2,959				1,253				8,312			11,381
Total revenue		135,002			72,034				53,058				266,750			132,188
Cost of revenue:
Cost of product sales revenue		48,835			25,883				18,912				96,602			50,126
Cost of product engineering services revenue		233			571				1,471				1,256			1,935
Cost of IP license revenue		8			68				117				171			662
Total cost of revenue		49,076			26,522				20,500				98,029			52,723
Gross profit		85,926			45,512				32,558				168,721			79,465
Operating expenses:
Research and development		36,261			31,742				24,236				98,412			68,610
Selling, general and administrative		23,471			22,177				14,233				66,973			40,032
Total operating expenses		59,732			53,919				38,469				165,385			108,642
Operating income (loss)		26,194			(8,407	)			(5,911	)			3,336			(29,177	)
Other income, net		3,918			4,474				4,291				13,925			9,150
Income (loss) before income taxes		30,112			(3,933	)			(1,620	)			17,261			(20,027	)
Provision (benefit) for income taxes		752			292				(2,048	)			1,666			(2,135	)
Net income (loss)	$	29,360		$	(4,225	)		$	428			$	15,595		$	(17,892	)
Net income (loss) per share:
Basic	$	0.17		$	(0.03	)		$	—			$	0.09		$	(0.12	)
Diluted	$	0.16		$	(0.03	)		$	—			$	0.09		$	(0.12	)
Weighted-average shares used in computing net income (loss) per share:
Basic		168,167			166,487				157,155				166,562			152,063
Diluted		182,464			166,487				167,160				180,495			152,063

Credo Technology Group Holding Ltd Condensed Consolidated Balance Sheets (Unaudited) (In thousands)
	February 1, 2025				April 27, 2024
Assets
Current assets:
Cash and cash equivalents	$	299,208			$	66,942
Short-term investments		80,000				343,061
Accounts receivable		157,133				59,662
Inventories		53,231				25,907
Contract assets		13,585				21,562
Prepaid expenses and other current assets		15,993				13,131
Total current assets		619,150				530,265
Property and equipment, net		67,805				43,665
Right of use assets		15,346				13,077
Other non-current assets		17,615				14,925
Total assets	$	719,916			$	601,932
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable	$	36,805			$	13,417
Accrued compensation and benefits		9,236				9,000
Accrued expenses and other current liabilities		33,301				18,301
Deferred revenue		1,391				3,902
Total current liabilities		80,733				44,620
Non-current operating lease liabilities		12,956				11,133
Other non-current liabilities		8,001				5,981
Total liabilities		101,690				61,734
Shareholders' equity:
Ordinary shares		8				8
Additional paid in capital		738,371				676,054
Accumulated other comprehensive loss		(403	)			(519	)
Accumulated deficit		(119,750	)			(135,345	)
Total shareholders' equity		618,226				540,198
Total liabilities and shareholders' equity	$	719,916			$	601,932

Credo Technology Group Holding Ltd Reconciliations from GAAP to Non-GAAP (Unaudited) (In thousands, except percentages and per share amounts)
	Three Months Ended												Nine Months Ended
	February 1, 2025				November 2, 2024				January 27, 2024				February 1, 2025				January 27, 2024
GAAP gross profit	$	85,926			$	45,512			$	32,558			$	168,721			$	79,465
Reconciling item:
Share-based compensation		226				331				458				838				897
Total reconciling item:		226				331				458				838				897
Non-GAAP gross profit (A)	$	86,152			$	45,843			$	33,016			$	169,559			$	80,362
GAAP gross margin		63.6	%			63.2	%			61.4	%			63.3	%			60.1	%
Non-GAAP gross margin		63.8	%			63.6	%			62.2	%			63.6	%			60.8	%
Total GAAP operating expenses	$	59,732			$	53,919			$	38,469			$	165,385			$	108,642
Reconciling item:
Share-based compensation		(15,964	)			(16,332	)			(7,874	)			(48,655	)			(23,547	)
Total reconciling item:		(15,964	)			(16,332	)			(7,874	)			(48,655	)			(23,547	)
Total Non-GAAP operating expenses (B)	$	43,768			$	37,587			$	30,595			$	116,730			$	85,095
GAAP operating income (loss)	$	26,194			$	(8,407	)		$	(5,911	)		$	3,336			$	(29,177	)
Non-GAAP operating income (loss) (A-B)	$	42,384			$	8,256			$	2,421			$	52,829			$	(4,733	)
GAAP operating income (loss) margin		19.4	%			(11.7	)%			(11.1	)%			1.3	%			(22.1	)%
Non-GAAP operating income (loss) margin		31.4	%			11.5	%			4.6	%			19.8	%			(3.6	)%
GAAP net income (loss)	$	29,360			$	(4,225	)		$	428			$	15,595			$	(17,892	)
Reconciling items:
Share-based compensation		16,190				16,663				8,332				49,493				24,444
Pre-tax total reconciling item		16,190				16,663				8,332				49,493				24,444
Other income tax effects and adjustments		(172	)			(183	)			(2,438	)			(416	)			(3,788	)
Non-GAAP net income (loss)	$	45,378			$	12,255			$	6,322			$	64,672			$	2,764
GAAP weighted-average shares - basic		168,167				166,487				157,155				166,562				152,063
GAAP weighted-average shares - diluted		182,464				166,487				167,160				180,495				152,063
Non-GAAP adjustment		2,028				15,769				4,218				3,335				14,567
Non-GAAP weighted-average shares - diluted		184,492				182,256				171,378				183,830				166,630
GAAP basic net income (loss) per share	$	0.17			$	(0.03	)		$	—			$	0.09			$	(0.12	)
GAAP diluted net income (loss) per share	$	0.16			$	(0.03	)		$	—			$	0.09			$	(0.12	)
Non-GAAP diluted net income (loss) per share	$	0.25			$	0.07			$	0.04			$	0.35			$	0.02

Credo Technology Group Holding Ltd Reconciliation of GAAP Forward-Looking Estimates to Non-GAAP Forward-Looking Estimates (In millions, except percentages)
	Outlook for Three Months Ending May 3, 2025
	Low				High
GAAP gross margin		62.7	%			64.7	%
Reconciling item:
Share-based compensation		0.3	%			0.3	%
Total reconciling item:		0.3	%			0.3	%
Non-GAAP gross margin		63.0	%			65.0	%
Total GAAP operating expenses	$	73.0			$	75.0
Reconciling item:
Share-based compensation		23.0				23.0
Total reconciling item:		23.0				23.0
Total Non-GAAP operating expenses	$	50.0			$	52.0

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20250304150521/en/

Investor Relations Contact:

Dan O’Neil

IR@credosemi.com

Source: Credo

FAQ

What was Credo's (CRDO) revenue growth in Q3 2025?

Credo's revenue grew 87.4% quarter-over-quarter and 154.4% year-over-year to $135.0 million in Q3 FY2025.

What is Credo's (CRDO) revenue guidance for Q4 2025?

Credo expects Q4 FY2025 revenue between $155.0 million and $165.0 million.

What was Credo's (CRDO) earnings per share in Q3 2025?

Credo reported GAAP diluted net income of $0.16 per share and non-GAAP diluted net income of $0.25 per share.

What drove Credo's (CRDO) record revenue in Q3 2025?

The record revenue was driven by Credo's AEC product line, marking a business inflection point.

What is Credo's (CRDO) current cash position as of Q3 2025?

Credo ended Q3 FY2025 with $379.2 million in cash and short-term investments.