Earnings call transcript Q4 2023

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Operator

Good day, and thank you for standing by. Welcome to the Credo Q4 Fiscal Year 2023 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to go ahead and turn the call over to Dan O'Neil. Please go ahead.

Dan O'Neil

you fourth joining earnings quarter thank our today call. and XXXX fiscal and afternoon, all us for for Good year ending

Executive Joining Brennan, our Credo from Financial Officer; Chief Chief me Fleming, and are Officer. Dan today our Bill

documents are in not comments can factors to factor These or operations, remind may management to call the results discussed company's cause the which the subject statements expected markets from certain forward-looking forward-looking business all filed or the strategies results, which to operate in any those actual in future this contained in I'd like our financial assess its with uncertainties extent that other and of and made forward-looking discussion. impact that to SEC. detail regarding possible everyone for any in may statements statements. to areas today the of company of risks combination include differ plans, factors risks we It's future are predict materially all on the or in

as obligation implied. this company uncertainties adversely to except this required risks, during publicly the the by events or from results statements these reason discussed materially and may anticipated statements could not the occur, actual expectations those or forward-looking these and actual no date and assumptions, any law. undertakes call results after update forward-looking for Given call of differ to conform in to to company's The changes

substitute in performance financial of financial or will of can Investor is issued U.S. financial with which of we today, provided financial we addition prepared company's we to website. reconciliations measures non-GAAP in consider between during be in are GAAP. refer non-GAAP the our as and discussion the Relations to certain not accessed our superior available which measures, non-GAAP measures These portion the accordance be this to a to Also call, release non-GAAP for and we financial GAAP performance. earnings use A measures and why using important measures

the Bill? With to now CEO. over that, turn our I'll call

Bill Brennan

Thanks, I'll fiscal for an then begin you Thank results. Dan, fiscal and highlight 'XX I our earnings providing call. 'XX. see forward 'XX remarks what overview will and good of QX CFO, of year Fleming, outlook our afternoon, QX going we year QX fiscal our into everyone. by 'XX with quarter. fiscal first follow share for financial Dan and and detailed my results will fiscal our discussion the a our joining

ecosystem to Credo range data our with connectivity and service delivering technology circuits, data efficiency significantly power hyperscale high-speed high-speed center with to design customer-focused a series optimized, cost. the IP deliver approach, is enabling company, along of integrated a core leverage our licenses secure better providers. Credo solutions and unique other solutions solutions All system-level and our and centers

connectivity delivered up X.X port optical and per second. of terabits from solutions leading performance to electrical speeds ranging Our XX gig

While exponentially. today, continue we with primarily connectivity speed into the standards-based for expand power-efficient more higher serve as the markets market other we increases need to Ethernet

solutions. have the to opportunity within continues growth high-speed connectivity Credo market significant accelerating expectations for

of more onset AI speed need higher solutions. already for energy-efficient applications accelerating generative and is the fact, this is In excels. Credo And where connectivity the

in 'XX, achieved fiscal over XXXX Today, revenue, and In Credo non-GAAP year reporting with from fiscal fiscal achieved results. on first over our a XX%. we of just I'll $XXX Credo 'XX, is comments gross fiscal XX% margin results start our up company. full public as million

grew solutions. primarily License from to revenue Product ramp XX% active to revenue million. the our increased electrical XX% year-over-year, $XX $XX cable million due year-over-year of

fiscal lines. Throughout several our across 'XX, highlights product we had

last Credo several during continue the lead we market, pioneered to For active electrical cables or years. AECs, the

centers to quickly innovate data and engagement been to successful we've and in Our expanding include our multiple with team continued solutions, service application-specific providers.

than our more lower remain XX power And imperative are to production while innovation shipped customer-focused ago, in it's wins. advantage a and in sole-sourced year, of their pushed different we our qualification customers led our AECs becoming significant to as increasingly the all carbon hyperscaler versions of years Our or was last for has nice footprint. couple have a to

optical continued passing to by optical For DSPs, and XXX-gig build qualification successfully XXX-gig multiple module multiple hyperscalers partners. momentum solutions at Credo for with

and optical DSPs, the market. introduced Credo optical addition, DSP coherent our In we and our entry TIAs XXX-gig laser into drivers announced

particular, our [ph] XX% In For over leader line position expand the continue market card we upon with as our for clients, to market Credo MAXes-X leadership. built share.

card and for gearboxes line per family We Xs also to XXX with with advantages extended efficiency of power per introduction second screening gig X.X bandwidth. up of performance the latent Eagle our retimers our and of terabits

to build to In optimized continue LR. from we from licensing, to from XX IP SerDes SerDes our several on highly ranging XSR process XX-nanometer offering in licensed the and reach nodes to IP of year, performance gig For gig we with ranging X-nanometer speeds XXX IP.

remains We optimized deliver We maintain needs. relationships solutions collaborate with continue innovate their and deliver to to to working that unparalleled. believe solutions close to are ability custom them hyperscalers, to our we'll very with

macroeconomic in higher why beyond. speed believe about data better need which strengths, grow. recent efficiency our the and remain headwinds in with Credo's prospects plays fiscal for power to we Despite to 'XX the is center we perfectly This will industry, continue optimistic

QX, non-GAAP we now and discuss trends for million In business specifically. of of margin delivered now more gross $XX.X the revenue quarter. will overview fourth an provide I key of XX%. the quarter I'll

to cables first development to higher programs, they this per including Market AEC. on benefits in cost. our cables, legacy and optical our acceleration First, XXX-gig an in we're to AECs both AI product encouraged growth largest of customer, several due continue by and program the expect category compared is progress new attached deploy higher where compared lane AECs. to With AEC the to significantly accretive significant power active forecasters regarding which direct intend copper

And ADC throughout for the to also their develop both to compute happy We're next-generation year. report XX [ph] applications. several lane first meaningfully AI lane AEC of initial been gig the other grow has to customer, ramp to advanced we hyperscale awarded their working that saw customer's Credo this which per actively We deployments. I'm a program. solutions second ramping solutions for tour XXX-gig per expect and Nick We're

customers remain We opportunities XXX-gig with providers. service across continue compute for with additional additional also in flight with meaningful well. continue expect and to to seen hyperscalers as building make We to momentum AI, quickly speeds and two switch in per as move progress we AEC benefit lane. solutions and to are engaged applications, We've

DSPs, of gig port through the TIAs and gain our to over share remain applications. cost. drivers confident XX XXX technology our Regarding leveraged we and optical time we've our deliver for We power solutions. on gig compelling progress SerDes performance, category, In products, optical to including combination disruptive can due laser

In have that the a hyperscaler the Credos DSP XXX-gig of addition for optical previously a production-qualified ramp optical as end to started production DSPs, U.S. hyperscalers we the customer.

received OEMs. with hyperscalers engaged speeds. Channel, XXX products [ph] on gig, coparent well as enter market. as OTM in gig March, our well feedback PON Fibre networking optical and across applications the service partners, opportunities positioned OFC also announcement in At and XXX XXX-gig applications, range a very on including to XG, providers ZR including our for we win We're gig positive DOVE-XXX our market solutions, and port DSP to We're XXX of

card Within category. by our line

our second X.X saw devices. the solutions, specifically During several OEMs we growing per winning terabit screening and We've successful from already in for interest quarter, design screening our leading Eagle ODMs Eagle for buys. commitments the networking fourth been and

efficiency integrity, our selected of due to power signal Credo combination and performance, was effectiveness. cost

MACsec-X [ph] We also [indiscernible] made extend next-generation development significant terabit our we per which for believe will with leadership into our future well applications customer-sponsored requiring progress X-nanometer the second X.X

businesses, to deals series ability QX led Regarding IP, competition by on our primarily and reach our optimize X-nanometer versus customers, significant application. were SerDes which power our IP X SerDes based licensing in of our XXX-gig to to an the according power advantage in offers IP chiplet

Our SerDes opportunity chiplet to continues [ph] progress.

leadership the fuel of enable the industry working systems. continue connectivity ensure chiplets and chiplet grows acceleration collaboration to with We across licensing we is retain will next-generation in on believe businesses. customers matures. e-consortium standard example UCI their sites design the market advanced Dojo the our as Our of solutions how AI chiplet Tesla and to can as AI such an with closely We're supercomputer

To swiftly in up, shifted dramatically generative is which XXXX. horizon, the new a hyperscale and landscape AI. has facing Compute sum is now

slim this shift From solutions speeds. the energy-efficient expect connectivity our viewpoint, of for naturally increases participants. field the We accelerate market acceleration the the to at difficulty demand will that and highest technology degree of this perform

We remain confident our as growth and these fuel opportunities will our market technology innovation materialize. leadership that

of connectivity as will a We quarterly our We revenue which expect in by result believe we will multiple sequential range exit across revenue then and continue sequentially fiscal base grow throughout more 'XX. fiscal growth customers 'XX. diversified growth QX be led to our in solutions, with

Fleming, CFO, now I'll additional turn Dan details. Thank who our you. call will the over to provide

Dan Fleming

Thank will then Bill, QX for afternoon. of fiscal and results year a our you, financial good 'XX, summary our review outlook provide fiscal finally, first and and our discuss I QX 'XX.

be the non-GAAP a otherwise on a reminder, As will following discussed noted.\ unless financials basis,

product fiscal for grew Gross million, Revenue driven XX.X%. by revenue $XXX.X margin the at XX%. 'XX year up for that was was XX% year year-over-year, a by record

over share the the we illustrates earnings revenue margin percentage business. that of we as the improved This XX product by leverage operating prior year. our an reported in $X.XX mix. produce $X.XX, even Our per improvement points grew can We

Moving and the XX% In we down on reported down to year-over-year. sequentially fourth QX, revenue million, of quarter. XX% $XX.X

million down as IP preexisting may specific Our but of quarter-to-quarter, strategic revenue driven by to XX% IP largely down from QX, deliverables a and reminder, our generated remains XX% contracts. our sequentially business IP year-over-year. results part business, of vary a $X.X in

time, for any mix While revenue. XX% long-term to in which IP, vary will and IP mix XX% IP, our product quarter above of the revenue our expectation given revenue over was is QX in XX% of

to for percentage 'XX. our in expect continue as expectations revenue a above IP fiscal long-term We to of come

XX% Our product of down revenue flat million generated in QX, sequentially $XX.X business and year-over-year.

team contribution. margin to guidance end Our XX.X%, gross points QX our and IP due XX high basis sequentially the above down of range of delivered lower

in generally and XX.X% was hovers IP Our gross margin XXX% QX. near

Our XX.X% up points quarter, margin was XXX basis up principally points the due sequentially year-over-year, XXX basis product product in gross to mix. and

Total up XX% and in within were guidance quarter operating X% sequentially million fourth and expenses year-over-year. $XX.X the

in the a OpEx innovative year-over-year to R&D Our increase increase resources deliver to in solutions. continue invest of as result a we was XX%

XX% company up was SG&A public year-over-year infrastructure. we built as Our out

year-over-year. Our $XX.X was QX, in decline operating $X.X a loss of million million

points was XX.X% percentage quarter, top Our in a reduced negative of decline the operating XX.X year-over-year due to margin leverage. line

reported net below capital. our to largely $X.X decrease net operations year. QX, of loss in used of in working million million, in $XX.X and year-over-year fourth quarter loss the by Cash due last a a was $X.X million million We flow $XX.X changes

quarter. free and year-over-year. spending net CapEx million, flow $XX.X the decrease was equipment of and business. cash $X.X million a by the equivalents was quarter cash in from $X.X of quarter $XX.X driven the decrease We million a grow and the of was loss investments in ended cash $XXX.X negative third required This R&D the of a million, to result decrease our with million

to while buffer substantial We remain our well capitalized uncertain conditions. continue in maintaining for a opportunities cash macroeconomic investing growth

increased XX.X% XX to balance accounts Our increased $XX.X from to days sequentially up XXX to QX lower while receivable revenue. million, outstanding by due in days days, sales

ending $X.X million QX down inventory was Our sequentially. million, $XX.X

Now of fiscal $XX sequentially X% between revenue million, currently be QX and turning million We midpoint. to to $XX guidance. in the our at up expect 'XX

be gross XX% a XX%. QX within expect margin We range to of to

and expenses $XX operating to between be QX million $XX expect million. We

expect QX count million average be shares. We to XXX weighted approximately basic share

summary, we bottom we sequential 'XX, to year uncertain cautious to in fiscal operating about In move growth, the near-term expenses. margins in due expanding prior the year the sequential have expect fourth scale our as quarter, of increasing growth moved through back and some macroeconomic we we expectations, we while half our gross through to see conditions. fiscal revenue due forward modest remain feel We upside

we forward a leverage driving the As exit we result, look year. operating to as

And with that, I'll Thank you. for open questions. it up

Operator

question from of The Tore that is Instructions] have coming Svanberg you. Stifel. Thank first we [Operator

is open. line Your

Tore Svanberg

kind guidance thinking? driving I QX assume far the will Yes. that BSP as if margin not, the be and comment, and with probably Thank regards me. IP. for correct please that Is growth the growth, question first of from given perhaps down gross my as in Or the AEC you. continue your to coming From sort correct of what's to

Dan Fleming

Dan. this is Tore, Hi,

profile QX lower was to on correct you're if of the - which gross product increase a margin our you our product that's - that AEC, really mix, look all So the overall in reflective favorable sequential of end from while at of contributed product was is down, as in margin mix. the our we QX, where know, revenue less

broadly other slack will so I across product trend really not all characterize singling line our specific really that's that as speak. one That lines, from product QX. out of taking AEC, the would And in up continue to

Tore Svanberg

good. was even just question I'm impacts with Bill, generative you. XXX-gig point? more thinking AI, Sounds a follow-up my I mentioned how yes, that clearly I pulled And at PAMX mean Thank could business. more you bit give is a you, of in So generative impact could changing. business cycle. granular talk sort I about the for things each - little could script, your as hoping about as you each four AI it are color of you mean, getting how little just in? this on how if us your bit units

Bill Brennan

Sure, sure, absolutely.

revenue opportunities us across generally, create think portfolio. that for So think I our AI applications will I

opportunity see AEC. the is with that think largest we'll I

a However, even will IP AI as Even get linecard SerDes chiplets, optical there opportunity DSPs, licensing definitely an PHYs deployments big will there. uplift be increase.

can with I maybe start first AEC. So

so important the leaf a identify of connection, tour it's to front-to-end use commonly of spine Now [ph] referred is to network, nick the basically - traditional network. the tour and which kind [ph] server compute up kind racks, the to between differences

the XX compute The for typical to rack, servers nick you from to per lane. AECs gig And would rack have leading-edge is connections these compute rack highlight meaning with in today connections tour. rates XX lane in XX

And a going the that is cluster, XXx AI to to map, back-end the back-end as addition cluster front-end networked together front-end And Within network. directly. to the appliances network the similar, as be start allows the bandwidth an RDMA in network, AI basically if within the a referred we has network. network to there's X which this through

these are well. the so important as And networks, leaf there spine to note racks other thing RDMA is within

a rack a example is working will at if Each track aggregated will And networks. of XX so itself if - look back-end deploying, XXX look the that end customer one we front which in have at fine we plant this and class of we're ADCs have the between AI chassis, or a ADCs. with at track the lease total

AEC, we for so volume. coincides this And look volume from overall it in a bandwidth. at an The when with opportunity is uplift the huge

Now will per lane applications move per go straight go at to XXX-gig lane rates others will quickly forward will certain lane. XX gig

opportunity if see to Xx so we number between were with versus server of compute a difference AI the - And say probably revenue plus the racks you cluster. typical apples-to-apples an

optical. typically of it's also there's So kind is a - There of extend same large large number of the AOCs extend a into in typically cluster.

So in racks, to connect be are these connections are racks, those ADCs. three spine that to connections are disaggregated These or the But these imagine meters. that be less. the going back-end meters greater three with you connections lease rack can to all Those will are short than of appliances the will done AOCs.

a traditional upside this, AOCs rack to if to, rack. say, connecting at compute all there's really this no so deployments we is And look where

overall at that as think large when twice AI many AEC cost-sensitive market. an but of opportunity, significant a will we for us the connections the as additional opportunity probably Okay? most opportunity the we optical cluster look the AOC AOCs, within represent be is twice AOCs as that the sense portion in So as

defined, well the and technology And connection hurdle cable. optical it's lower the so is a it's since also within

XXX-gig to straight disruptive some with is this planning spot a Others AOCs. planning So AOCs. are us to market. deploying We natural be go really our for to on of see XXX-gig this in

overall sure is in we an for the get the opportunity. will Optical set. opportunity So uplift AEC largest - view DSPs

example thing to DOJoe chiplets AI nice that's going a things it's that deploy, example, we of I are think and a completely that view be [ph] Tesla, long we're of them supercomputer. how for for of for will at see term, our natural that we But to look And for us an example an from. doing we kind if really they opportunity applications benefit where, as as differently, this also, an did that

doing now And extend that Linecards cards licensing. the of IP that something are AI of that is forget the opportunity and line different ODMs also And for those switch on network course, can targeting are go also, Many are OEMs We don't licenses applications. we're that increasing. developed. Linecards, to the SerDes

AI lane really deployments, off. to going see So we're generally as more faster rates where And speaking, in go that's rates. very, hits I our we with AI think drive per business lane And consistent see lane. very taking that on message will the that we've been curve knee the to XXX-gig market quickly naturally our the

from but that a been XXX-gig similar thinking compared have acceleration applications, getting you this revenue Does especially when power the really are And our increase more we're nice others were start gig lane offer looking but... per to XX doing solutions lane all that see happens. advantages of really So we about that for, per than you things. might

Tore Svanberg

No, so Bill. you. That was that's Thank much, overview. Thank great. a great you

Bill Brennan

Sure.

Operator

. question. Thank from we And will of for next coming the & your Bolton be one moment Quinn for Needham question Company. while question the you prepare next And

line Your is open.

Quinn Bolton

very impact on to sort taking question. you follow-up generative maybe Tore's Thank just much the a for business. of Bill, AI the of my question,

Given term? the racks, potential racks compute you from expense rather the at AI today that deployments standard in racks the near these your of hyperscalers what AI compute again revenue prioritize term, of at the as than see of in cannibalization AEC comes least out do in the building most terms near potentially

Bill Brennan

first It the case rack. customer we're that compute I was with largest So how feel very our our about good is ramp positioned.

deployments. AI to as our very think we're transition I well with positioned customer they

of server in we've level. talked at different the the two So past types deployments about

between ratio AI. can to guess as will all compute be going what to compute and course, Of is and we continue,

covered compute. very the for road got map We've well

well we're think I set. So

our as we're in that been customer, on so that think And we've more working the going of to - resumes AI acceleration the a to I'm same shape. excited be year. actually program at I customer the good largest for about close with

that's a And both like well long-term I and and covered really we're feel AI for so compute statement.

So our the generally information, relate is same about making to back point with an on the bit to that a just and that that little new give customer, of that would hyperscale was then customer. update second I earlier say, I

the We are right track AEC with on ramp.

We rack through about. 'XX. ramp continued server program is saw expect shipments we we've talked fiscal see The in and compute a to a first that QX, small

However, a application during shape. the several months, past taken AI new has

So ago, days if talked we we - wouldn't would program. XXX have have talked about this wouldn't we seen have this

And configuration of the server computer the for so delivered designed we rack. quickly that a AEC different was

So recall, as configuration. as a straight did if we well you cable ex-cable an

us a delivered And benefit that's that to the needed deployment. configuration asked were for example within their they we're new the organized. that new to configuration which So how changes specific is we weeks, deliver - of another had

qualification schedule The to volume like standpoint But AI a It's and feel is be in time unclear us. from and for standpoint. is a to this appliance exact also our underway, this expect another rack to 'XX. second as we going we the ramp program fiscal significant

that think covering AI. hyperscale first compute And second and customer, our we're I so the spectrum I think think between both that for I our and

like we're feel in great I So really shape.

your answers question. that hopefully, So

the opportunity And take a is say, X that. the say, the opportunity similar it you because ratio if If is maybe compute, term, maybe larger further it's little in for XX% us AI, AI. okay, is XX% times long bit I like and think let's

from So perspective. equal AI AEC to compute might be an

goes AI the a that to goes, with If larger AEC I any larger associated that deployment. cluster we're given volume, us that's big with way for think it upside going dollars an fact there's that XX-XX, benefit.

another, since won't in think it last yes. way our affect the that or And update. us But the so for changed the us, quarters, near-term really situation at customer first I maybe one hasn't

So that 'XX, that we've revenue in we think FY for discussed the happen increase year-over-year as will before. in customer

Quinn Bolton

or the hyperscaler in first out at of AI the delay push term? reprioritization rack the to further no compute given But near potential the Okay.

Bill Brennan

relatively qualified Well, frame we've scheduled future. from specific right? and that. little still track bit a two And ramp, program of we'll near standpoint. month, tough bit as qualifications to benefit talked course, them. about That's those it's in in see time a But get a the month too the little new of by They're

but we've not seen it's that slight concerned about. delay, So necessarily something we're a

Quinn Bolton

second Got clarification hyperscaler. it, then Bill. And just a the on

at a last I have said side. not you reliable think received more forecast needs now fiscal of that the for update, on that forecast business of may sort in from Have AEC sort or that a forecasting hard least a the yet you're hyperscalers you 'XX? you hard PO

Bill Brennan

will It's this exactly to And together. will I together. coming coming And talk saying not second be significant. comfortable think how by it's the I'm we Yes, be that revenue customer generated about feel that significant. able

we we view continue to to through the that is think all the material that because I positive. And indicators second as last lens shape half are don't referenced expect that - quite we've the really how QX, we up. fact this in a significant I we're going days revenue the over know conservative that XX starts. think But Dan heard

Quinn Bolton

Perfect. you. Thank

Operator

you. we for Capital. next Desilva And will while our next moment Thank One coming from question the Roth be of question. Suji prepare

is open. line Your

Suji Desilva

Hi, Bill. Dan. Hi,

Just products. about AEC, you want talk the the to

that applicable versus Or the know I are more are are IR rack there across certain relevant want all You have just a And ones they multiple board? to compute to rack? if products. traditional

Bill Brennan

opportunity would would much one of implement AEC lump I solutions, So customer-specific at I say to where that wouldn't we're classify as wouldn't looking all very the We're these positioned I I requests. together. really them

of very so most engaged what designs to of specific given part customer. something a is the that And have we're now that we're seeing

moving customers and seeing building so also appliances lane And XXX we're reconfiguring can AI we're NICs. say we're quickly, large there's different those - number but NICs customers that I a that per are to with gig that seeing of seeing existing

per to to XX gig ramp they're so going And with solutions. be able lane

the where into have on We customer [ph] opportunities. the had Now see as gig cable to ask on gig straight we just opportunities us XXX why a far opportunities. and one as of configurations see XX cable. We we cable other the see recently, end cable go,

be breakout the And different challenge because so of an time first interesting cable. that's it's But mixing we'll obviously, a ICs. this generations is

so internal It's And that's have qualifying so that single solutions. that's to these system that we sense responsible then party our designs dedicated the for we're and to Credo is in really because this collaborating unique developing, supporting responsible customer, a and delivering able delivering do again, something we're a organization with customers. designing, the with for

so give unmatched emphasize And uptake engineers these at is good hyperscalers, really something never can't enough they've course, that space by opportunity - the that our we're you of I AEC any in been getting to of And investment on. innovate the our it's in of. thought space the competition. And really

think I sense type the of offer this can we unique that we're in flexibility.

- that it's one is leaned point on. answer going I question, type couldn't to your really of So to cable be to not

Suji Desilva

remarks, ADCs that understand effort.? helpful. XX That's the prepared And that - heard that of you Paint here. I'm the qualified many then Mark, programs believe qualification many cable breadth just to I the I how in shipments, mentioned also, is the how being or customers being right. how deployed picture across many if how of is for curious

Bill Brennan

a had a a of service well large hyperscaler as also centers hyperscalers data say really we've AEC as as set that with capital success opportunity. Yes, the opportunity But with would that within are I for that industry the might not providers. lot of - -- the qualify there's large,

are SKUs look at in with that we've more there and delivered. even systems. And more so And several queue hyperscalers relationships directly, the the we for these next-generation there's advanced can

list think, the year they And million that per we've we to a has look at solidified announcing really to I quarter also But longer of really term. I lot are $X if category, of look The been increasing. - even X compete months. - we're if intend customers number the X think companies the last per got, see at you that product that over you because is

Suji Desilva

Bill. Right, okay. Thanks,

Operator

will our prepare be And next Thank the from Akerman Karl you. coming while next moment One of question question. for we BNP.

Your open. line is

Karl Akerman

could hear to revenue off, from have I you. 'XX guess, And Dan that fiscal that, you to just 'XX? that If questions. you I guess, throughout I in it's would improvement existing fiscal be spoke on have outlook Thank sequential two confidence afternoon, see I about sequential visibility didn't your ago. first the that gives helpful. and great your you you could but on just Good growth confirm you your in speak touch the programs QX, days XX Bill. the fiscal you

Dan Fleming

Karl. Thanks, is This Yes. Dan.

speaking, still So - cautiously as back the half. but see - described, we bit the upside, But we're comfortable the yes, year. we of we've optimistic half generally so a estimates we very remain about back current ultimately we're the for some near-term with

remain for we're over We acceleration programs. AI with passes, do beyond, next have to updates certainly the what with very growth seeing, meaningful increasing we But we the hard 'XX upcoming and visibility of hope opportunities time and as FY encouraged and provide quarters. we're working especially to these expand

Karl Akerman

you gig your the offerings? on XXX Thanks remarks, for opportunities? the a DCI you. more you've Understood. highlighted that. opportunities follow-up, seeing of are it. as for DSP prepared seeing 'XX and XXX your are in in Or opportunity design Got primarily that fiscal in coherent Thank engagements I guess gig you

Dan Fleming

Yes.

and So we're opportunities it's that optical. the gig, that the XXX really strategies seeing, seeing gig different large the have I these we're say of XXX gig, board, deploying And all as they're that across can how hyperscalers the opportunities are XXX data to within center.

really in from position XXX. perspective And I think think time-to-market gig. and make to with a XXX XXX a on we're continue I progress good we

ourselves We're And in so we with cycles companies. the about every talk closely a optical select also module very can strategic with hyperscaler. go-to-market aligning that we're spending strategy

in coherent it take this see us. year second that gig, will first which for as DCI and place far we're that of we solution be follow-on second the that XXX first we're ZR is think like in throughout a specifically, that feel DCI 'XX. But half revenue as calendar XXX of opportunity really would we'll type And we as that for And relates development gig to that development [ph] pursuing, and

and Now to unique in optical the the DSP because market space, module ZR we'll makers. to be going we're sell

to to other makes we our and sense Photonics X that to module. the the so in intend And that are module in addition EFFECT somewhat unique X ZR us makers competitors engage to directly market with partner, going

power here. an thing ceiling can fit which enabler XXX-gig highlight we and ZR watts. roughly key under connector, power do the module standard a X.X I for is really And the is QSFP is

So in deployments also there's from new XX addition. a gig but enable, that will cycle upgrade large modules there's

a you more little really So our that within center. gives opportunities but kind I of of the the bit see coherent, data flavor about

Karl Akerman

you. right. All Thank

Operator

you. moment will the while from next Vivek Bank question. be One Thank And our Arya for prepare we next America. of of coming question

open. Your is line

Vivek Arya

Thanks curious for get do the Is in One your Bill, role of I'm changes. technology some situation? is situation? Is getting that's question.. these to that a more that of AI to competitive on does taking What clusters. opportunity? these a share complementary that my InfiniBand your perspective AEC

the pledgibles linear of technology [ph] customers about to have and What direct to the is question type then other their co-packaged drive your And that need some desire spoken for of right does consider architectures. and partners do optics stand-alone

Bill Brennan

Generally, because said the about we been there's appreciate to see lot a opportunity about I InfiniBand versus coexistence. Thanks. that. Ethernet talk

in how look depending for soon AI you I point InfiniBand Ethernet with there the forecast the is information, at a market future on think specifically. exceeds

Beyond AI, already. over think game it's I

Ethernet out InfiniBand in to you the forecasted exceed in is years. or ports TAM far Whether dollars, the measure

beyond. and calendar So 'XX

dollars think Ethernet are they're that we perspective, from XXXX. InfiniBand if forecasters surpasses absolute so perspective. showing about by an Ethernet showing TAM And

for XX%. so greater while Ethernet the a InfiniBand, And show less showing CAGR CAGR than of of they're than forecast a XX%,

times this talk at per so And who depending is you on to also Ethernet, the where ASP a perspective compared X look port X from to. port to InfiniBand cost can you

a in cost-effective it's world from so pursue will secret very do to the think that world so what they're similar. And does, the technology standpoint, And sense, continue they'll we a decisions.

the in X port. So think Xx cost justify apples-to-apples, of those port you to X a could Ethernet if that from is InfiniBand if to of that you ports an cost if are X In a comparison of think you Ethernet you look free to perspective, sense, InfiniBand. an

position so that single is prevail. is of working Every our AI many one is really them that here that think So Ethernet we going I to Ethernet. programs. on We're believe

Vivek Arya

direct some fiscal have a Bill by customers then co-packaged ask on me and on 'XX. to the think and [indiscernible] about follow-up maybe just move And optics the your drive Dan of let

right I are still you with I expectations think back a Dan, you the comfortable are half. implies think where suggested very steep into now. ramp That

trying the through square confidence to that full macro of the kind your of some comments. caution just came just year I'm with in in the So

Dan Fleming

with Vivek, confident If estimates. the Yes, FY have we as guided. as there's comfortable mentioned, I in we we see - how 'XX, current alluded very we're you to, at And look us numbers. are strong at it's sequential line to Microsoft happened in top growth year. of kind order what's well - year to those the to And for fiscal the achieve this get throughout documented, - we

that And recently of all the So programs. reiterate seen based confident I'll that we've if that. that of XXX% those some course, traction Microsoft, of we'll in we one growth customers, key on excess we're is product again, from very what the year-on-year drivers is other achieve of be just in exclude which, AI able means of of to revenue other have we

So 'XX. hopefully, that gives color on you for FY our confidence some additional

Bill Brennan

direct about that the how object idea OFC. linear think, drive to move the regarding I I optical - power it's basically - do question to really this DSP. Yes, really that shiny idea the from address the is year's at challenges away the was, think your that

move a this think this none that I that idea. drive when towards the existence. in really I And emerging. drug the big not is in fact linear think gig a that there new was space XX is There was

close think that to chosen system. really has the that critical DSP I is

see is of the we'll that same think much this year. feeling I Our

correctly. a well. did kind right session job in OFC They setting great of did expectations Marvell think I that it quite a think addressed I long after

every you'll But is see think system typically of deployments the very I terms very, small these overall link are the very, overall in - TAM. controlled. in small where very the

goal is where power, real Now play. exactly we're that's If we fully up. the signed

the compelling we're as dismissing of perspective. that it's at able So differently. power approaches behind problem concept looking potential solving We're was things in the the really actually opportunity future from up viewing a And like to fully linear signed unique for not I'm a drug drive. to in that the to offer us be idea completely

measured looking But prior. trying That's that that, generally many, direct don't in think kind money think is that any if big that see people in embrace. that speaking, that's smaller I for was is not customers prove I of is many you'll I And you'll was, It's think ultimately aren't - significant it was it where in don't that But way. say to years linear a see base deployments like yes, something that the talked CPO, kind was something customer world on think drive the spending what not also way. that future for. I of a to now see you'll right out And happening. some about simply a regarding

Vivek Arya

Thank you.

Operator

the question David go [Technical next Wu Thank be next One question. from moment And of Please you. for will Difficulty] our coming ahead...

Unidentified Analyst

Vijay This question and improves for genome of can is any operating improve? data ramps. set on puts type AI color you provide the Yes. is there leverage more the you you new [ph] for see first and fiscal Mizu. on My David assuming Can 'XX, and in the that takes demand continued

Bill Brennan

to framed what 'XX. guidance FY FY forward But the that's we We now 'XX to what Well, robust you're ingredient But of like. carry that not should leverage would pretty leverage. right we based operating expect 'XX. ultimately specific going that giving exit with yet, to yet operating exist haven't fiscal we know and course, into we're where on certainly in look

Unidentified Analyst

your hyperscalers exploring kind sort question, [ph] applications, solution? Okay. you're And maximum important performance when I Or is they just and currently their how getting deployments AI for advantage there? these primarily with out of focused on talking guess new on are second AI when time-to-market your Sure. of TCO just they're my and

Bill Brennan

just make said cost you total to of sure ownership? want I So

Unidentified Analyst

yes. Yes,

Bill Brennan

in Yes. AEC. think favor It's hands I down it's - of

think deploy two to there's market at ways the rates, is that look AOC. we or really I conclusion AEC lane throughout the if XXX So gig short cable It's solutions.

about are cost. apples-to-apples the we half look at about we CapEx solution. half an an - the a AUCs the it standpoint, standpoint, cost, power, type OpEx about at for ASP the look If If from half also from half

the think benefit significant. is I TCO So

racks, consider racks these urgent The with are sense when other a a different especially failure that a item. to becomes down in server very your thing that, having it than is you've cable switch got you're in solution is

And the of - from ACs third the XX-year life. a sell are that to is when product one about about so reliability talked anywhere we AOCs think in terms probably it years, tenth, we one of we number

said And so being matches - of exceeds it or kind the of the be cannot is it of deployed true same kind any optical solution. life for the rack in be for that cannot

across the TCO favorable board, down, it the more So AEC. much I is think for hands

Unidentified Analyst

Thank you. Okay.

Operator

Thank our Company. Quinn coming you. question will be next of from And & Bolton Needham

Your open. line is

Quinn Bolton

was follow-ups. Thanks. the Dan, any Quick quarter? April One, control in two there revenue

Dan Fleming

to That's our Quinn. longer QX GAAP release that. caught that in that our and an was, non-GAAP see will past, excellent to and we In I'm in XX-K. we're revenue from you able press Actually, you've you financials. excluding non-GAAP But going the question, our no there file been so that glad from when contra forward, see reconciliation. our

through but the about Amazon And have warrant warrant has Amazon comment signaling suppliers who Credo, SEC, not a them. of from this all or out really actually came a with a

positive things difference bit forward. straightforward It make change historically, expense not just warrant our - calculation Q-on-Q. there's ultimately really really a basis. material, are when was a little it that is, doesn't of reporting what more file but the be non-GAAP on you'll track a So difference. this still the makes And And not it going able looking we to

the really compensation. Our only just share-based at going item is reconciling forward, non-GAAP least future, for foreseeable

Quinn Bolton

it. Got

of sort going won't for the revenue the forward? be adjustments non-GAAP the and gross you the So contra margin making calculation - revenue doesn't change, you'll just

Dan Fleming

That's revenue. revenue of is which exactly a portion Revenue the down obviously It contra-revenue, correct. brings bit. is which little it, still Yes. has a

Quinn Bolton

it. Got

XXX Okay. ramp DSPs? Or would XXX really of And the fiscal 'XX, ramp of sort expect at would to Bill, for then encourage meaningful optical beyond is 'XX investors a think initial or that point? fiscal the event you you optical this DSP continue in gig a

Bill Brennan

think place to of about fiscal think significant, stories when talk going China. success in to a My quarters. the XXX-gig next U.S. a the we revenue but year, those 'XX. will likely optical to we throughout see shipping that crossing expectation ramps of hyperscaler about, threshold, XX% And DSPs most see the take We we're within about that I as we're have is think life now. until signs said, X not we lot more and I don't do

'XX fiscal this a point. really it's at So target

Quinn Bolton

you're starts it not it's just But it. XX% doesn't because threshold? meaningful it Got to year, this going hit

Bill Brennan

exactly. Right,

Quinn Bolton

okay. you. it, Got Thank

Operator

moment. One you. Thank

a have will question that follow-up Tore we Stifel. Svanberg be coming While from question. And of

open. is line Your

Tore Svanberg

any maybe with XXX versus cannibalization you're XXX Bill, pull-in would XXX these all year. calendar that next all seeing Are Tore gigawats a seeing Yes. XXX-gig there half gig. of and lines expectation here. bit off to curious maybe gig? to just was the question changes if little wondering second trends, some AI more new about the take follow-up But gig I time think previous at market there? maybe any activity a the you about seeing or XXX the even

Bill Brennan

And type off. first calendar imply in really 'XX take fact the that AI success that given is - be whether expectation I like we, first would second would or of there this my of it half the think that, in would half, in course, year that market half, the a to programs. that is it's pulling see

a so with business. implication benefit has there's And the and of that AEC comes XXX lot our it modules that gig on

deploying. think optical got the see be in AI, real network a for I which very are look that again, And going definitely clusters the gig. AI size and these Everybody's opportunity anything - in in port that in really the it as really old frame. to deployment, is it I XXX on see tour. begin And It's above XXX-gig going those of kind I calendar really don't lieu we that before, unless AOCs. And unique could But a XXX I to that, is be market the like you where with new to it related said Typically, hyperscaler see own is strategy of I plan I at architecture. be of their when the 'XX. leafy technology. think has a every think, large they deployments it, cannibalization time But the typically.

the So I appreciate question, though.

Tore Svanberg

Thank you.

Operator

Thank the to back Q&A closing go to the ahead. turn would Please Brennan you. like I for That concludes remarks. Bill over call today. for

Bill Brennan

the appreciate today, really participation We backs. call look and up the following forward to on we

very thanks much. So

Operator

joining, concludes of everyone, enjoy This + and call. today's the Thank evening. for all you rest conference your

Credo Technology Group Holding (CRDO) 31 May 232023 Q4 Earnings call transcript