After-hours surge of 15%! "Optical interconnection giant" Credo's Q3 revenue guidance crushes expectations, with full-year growth expected to exceed 200%

Thanks to the explosive demand for high-speed connectivity products driven by AI infrastructure, connectivity solutions provider Credo has significantly raised its performance guidance, with revenue expectations far exceeding Wall Street's most optimistic estimates, driving the stock price to soar in after-hours trading.

On Monday, February 9, Credo released preliminary financial results for the third quarter of fiscal year 2026 (ending January 31, 2026) after the U.S. stock market closed and updated its full-year outlook.

The announcement indicated that the company expects third-quarter revenue to be between $404 million and $408 million. This figure not only significantly exceeds the previous guidance range of $335 million to $345 million but also leaves Wall Street analysts' average expectation of $341.2 million far behind.

In addition to the impressive quarterly data, Credo expressed strong confidence in its future growth prospects. The company stated in its announcement:

“Looking ahead to the end of fiscal year 2026 and into fiscal year 2027, Credo expects fourth-quarter revenue to achieve mid-single-digit sequential growth, which will drive over 200% year-over-year growth for this fiscal year (fiscal year 2026).”

This guidance confirms that the company is in a period of rapid expansion. Data shows that analysts previously expected sales growth of 172% for fiscal year 2026, while the company's latest official guidance clearly not only meets but significantly exceeds expectations.

Stimulated by this news, Credo's stock price rose by 10.91% during regular trading hours on Monday, closing at a high. After the earnings forecast was released, the stock price continued to surge in after-hours trading, with an increase of over 15% at one point.

Not only exceeding guidance but also far surpassing consensus expectations

The core impact of Credo's earnings forecast revision lies in the "magnitude."

• Based on the midpoint of the range, third-quarter revenue is approximately $406 million; this is about 19% higher than the midpoint of the previous guidance ($340 million).
• Even compared to the previous guidance upper limit of $345 million, this forecast lower limit of $404 million is still about 17% higher; if compared to the previous guidance lower limit of $335 million, this forecast upper limit of $408 million is about 22% higher.
• Media data also shows that this range is significantly above the market consensus expectation (approximately $341.2 million).

For the market, proactively disclosing preliminary revenue "after the quarter ends and before the official earnings report" typically indicates that the company has a high degree of confidence in revenue recognition for the quarter and is also managing market expectations in advance: first revealing the "hardest numbers."

The announcement stated that the company will release its complete earnings report after the U.S. stock market closes on Monday, March 2, 2026, and will disclose more detailed financial data during the earnings conference call scheduled for 2:00 PM Pacific Time on the same day The current announcement only provides revenue and guidance direction, without details on the income statement and cash flow. For the market, the incremental information in the subsequent formal financial report and conference call will mainly focus on three aspects:

• Can profits keep up with scale expansion: After revenue significantly exceeds guidance, whether gross margin and expense ratio improve in tandem will determine the "quality of growth." The media data platform InvestingPro previously mentioned that the company's gross margin is close to 67%.
• Where does growth come from: The company's business covers AEC active cables, optical modules/optical interconnects, retimers, and DSPs among other high-speed interconnect products. Investors will question which product line contributed more to the unexpected performance this quarter, whether supply is constrained, and how prices and combinations are changing.
• Visibility into fiscal year 2027: The company has extended its statements to fiscal year 2027, and the market will hope to hear more specific descriptions of order/delivery rhythms, rather than just directional language like "mid-single-digit quarter-on-quarter."

Explosion of Connection Demand in the AI Wave

Credo's explosive growth is primarily driven by the urgent demand for high-speed, high-energy-efficiency connection products in AI data centers.

As an innovator focused on providing connection solutions with speeds of up to 1.6T, Credo's product portfolio includes AEC (active cables), optical transceivers, and DSP chips for Ethernet and PCIe.

Credo's success largely stems from its absolute leadership position in the AEC market. AEC is a copper-based connection technology invented by Credo, used to connect AI servers to network switches, and is a key component for high-speed data transmission within AI data centers. Compared to traditional optical cables, AEC is considered more reliable and has lower power consumption; compared to traditional passive copper cables, it supports longer distance transmission.

The company emphasized in its announcement: “Our high-speed copper and optical interconnect products can provide industry-leading power and performance of up to 1.6T to meet the expanding data infrastructure needs of AI.”

These products are key components for building large-scale AI clusters and meeting the exponential growth of data infrastructure.

Currently, Credo's market capitalization has exceeded $20 billion. Although analysis from Investing.com indicates that its stock price is currently trading above fair value, in the context of the ongoing AI hardware arms race, investors seem to place more importance on its positioning advantage in cutting-edge technology nodes like 1.6T and a growth rate of up to 200%.

Credo's solutions have garnered favor from many industry giants. According to Needham, Amazon, Microsoft, and Elon Musk's xAI are all major customers of Credo. The significant investments these tech giants are making in AI infrastructure directly translate into strong demand for Credo's products.

Wall Street Optimistic About AI Drivers

Market analysts point out that Credo's current gross margin remains at a high level of nearly 67%, with a return on assets exceeding 20%, demonstrating strong profitability.

Despite recent stock price volatility and high valuations (market capitalization over $20 billion), mainstream Wall Street investment banks still maintain a bullish outlook. Needham reiterated its "buy" rating and listed Credo as a "Top Pick" for 2026, with a target price raised to $220 Analysts believe that as the adoption rate of AEC increases and new products (such as the Blue Heron 224G retimer) are launched, the company's performance will continue to outperform the market.

Rosenblatt Securities, on the other hand, takes a relatively cautious stance, giving a "neutral" rating with a target price of $170, reminding investors to pay attention to valuation risks