CRDO - Earnings call transcript Q1 2025 | Credo Technology Group Holding Ltd

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Operator

Ladies and gentlemen, thank you for standing by. [Operator Instructions]. I would now like to turn the conference over to Dan O'Neill. Please go ahead, sir.

Daniel O'Neil

Good afternoon. our for joining of first for XXXX. fiscal you earnings the call quarter Thank by Credo's Bill and joined I'm Today, Brennan, our Financial Dan Chief Chief Officer. Fleming, Officer; Executive

certain risks subject to which and during website. in we the in management As in business. are can risks It's Relations These factors the with can our a are will all documents uncertainties reminder, not filed make to statements forward-looking for forward-looking Investor discussed section all be call, the assess detail that statements. company's SEC, found company company's possible the predict of the nor the of impact this on the

factor For in those factors combination contained of actual forward-looking materially the which may statements. from extent any any or results to cause to differ

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

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

William Brennan

performance and a start outlook. future then QX QX of earnings discuss call. review our our 'XX fiscal I'll our to with Welcome

CFO, results provide will QX. detailed Dan for expectations Fleming, QX Our then and share

of XX.X%. and revenue reported Credo of $XX.X QX, gross margin non-GAAP million For

Our new expanding XX% the a quarterly up were deployments. product were rapidly differentiated or solutions, connectivity pure-play PHYs, active per AECs, by Credo second. to establishing Ethernet XXX a of for a deliver quarter, IP including high-speed company. is card SerDes cables revenues of the Product driven $XX.X X.X AI prior revenues to million optical record compared licenses gig ranging or speeds We chiplets set electrical port line and SerDes up DSPs, from company. terabits

we market evolving will is create which center opportunities Credo. for even and dynamic believe rapidly, more data The

Although we a are operators. primarily to hyperscalers, advantage targeting deploying next an tier of of center emerging see we by opportunities presented increased of are of AI. observing the by group take hyperscalers data the increasing amount leading now infrastructure spending We

immediate we is these several helped With indeed new our from has This credibility to that across traditional lines. prior programs we find us growing win our customers, product success and across revenue customers. with have material translating hyperscalers, to

for effectiveness. into reach a X its offering to intend rise. aims market. retimer we ADC this cost markets data Later are expect the and new year, new XX% enter QX. in and gig to see power Credo that we customer Notably, Gen PCIe integrity, XX as solutions PAMX extend rates latency, efficiency optimized to signal

of designed and AEC products delivered and that beyond. we're our to anticipate has production a of XXXX in main X.X AEC continued form revenue, fiscal driving of in Today, needs 'XX a growth speeds in port range our we factors ADCs to crucial power during source and our up be to solutions the with to for expect product We've the XXX market. role diverse will of wide with customers. we in a deliver play and in functionality port regarding X-nanometer AECs Now gig, variety meet line, for quarter, the first optimized

approach ADC to solutions. our in-rack think solution gig competitive Based result, with of innovative solutions, crucial on the customized and our of And relationships, we've feedback as above. developed edge. customers blending is have we these per and at the advantages products deliver seen system-level deep maintaining We a and de fast inherent customer XX speeds hardware facto very AECs become to market line offering compared our for turnaround alternative AECs software connectivity time relationships with to

and for and In addition, to AUCs. increasing migration densities effectively physical network the liquid connections, thereby opportunity increasing rack for are back-end required the power the length cooling reducing

customer During AEC QX, our growth business and more and going confidence with us providing existing develop the new prospects forward. of expand our relationships to continue in

continue that, inflection we our of ramp an expect growth back AUCs of to to our in sequential in Given fiscal point drive half 'XX. the

multiple optical business. to continued DSP Now solutions. on our we're I'm pleased progress Credo fronts. DSP of adoption deployments AI I'll With optical turn accelerating business to with our report making

and and customers optical Our optical U.S. our on module remain goal transceivers be of to DSPs customers. at and AOCs QX on credo we fiscal outlook, track Based revenue. to on DSPs our results end for based 'XX least international achieve both XX% our shipped to

future our several for remain this prospects Beyond reasons. programs, in growth production about existing we excited category

the module first numerous being concept hyperscaler new their and optical strategy innovative optics reduce receive architecture. module an adopted secured X.XT is concept to the our in in optical in which maintains an and within the power to DSP path with decided implement way transceivers design working or this only with a fall, Last to module has AOCs currently The manufacturers and both linear and XXX-gig transmit as notably, Credo develop a industry-leading manufacturer. of of increasingly industry an optics. win we've introduced LRO LRO are We

less with typical will the seen DSP XX application watts power XXX-gig This than architectures. significantly watts, target of XX module full below

efficiency options cooling directly becomes see full feedback both a more DSP critical sustained X.X anticipate to we drove to rising optimized expect plan our challenging. power and our solutions calendar and for efficiency we at and calendar customer decision momentum, to 'XX DSPs, power Credo's factor LRO seeing more port Notably, energy We growth becoming with start X.X even and move infrastructure Taking as gig to speeds, in deployments and optical later XXX account LRO tape in year. X-nanometer this into power business. we out delivery

Now business. Card X regarding our Line

the Line growth. XXX-gig XXX-gig In business X once from an was revenue overall solutions. first contributions product contributor to quarter, and by our our strong Card important driven again

retimer for applications GPU for server Ethernet-based and port ODMs include demand for customers recently, this FY line solutions traditional should products card line revenue lead terabits to Card performance solutions. segment, future TAM second. OEMs our see for networks for the AI comes more within emerging inside emerging applications. switching places We per card X appliances greater our demands MACsec server. Our as integrity In signal and into from X.X opportunities up to combined switch appliance These encryption rapidly speeds new growth for increasing our the scale-out with opportunities AI traditional networking Line

businesses. with our continue funnel and SerDes review our I'll Lastly, and and progress SerDes licensing we IP within licensing customers chiplet chiplet to our expand businesses, make

recognition, quarterly For XXX we a of is solutions fiscal of and to variability mainly growth. due to chiplet revenue We continue wide we With 'XX, a speeds of to license, wide combination nature expect speeds a to driven royalty applications, range of AI rising for needs revenues. the see connectivity geometries from X-nanometer. future by of while SerDes up poised growth offer opportunities XX-nanometer fueled in process gig Credo by range the

compelling combination to due our continue exceptional of win We to support. technical power and performance,

and This a rise to this And QX. I'm generative dedicated range the Credo demand optical to is of Germany. advancing solutions, presence very performance driving The strong connectivity ECOC by strong and cutting-edge, CIOE in conference the of summarize, have success our To pleased with conference the our AI greater in month, engaging in high-speed for at of product followed specifically our customers. demand. Credo our in team's execution with ongoing is power-efficient, growing ramp of Shenzhen, address optical terms solutions will

momentum Valleyshowcasing since wide for clusters. we've in of built the will We be in at expect March. a visible advanced OFC And solutions these to very AI OCP conference month, next Silicon events add we'll array the

in engagements provide inflection forward, by I'll entire second Moving turn the now existing see call the customer Dan an our connectivity additional continue 'XX half across driven and fiscal to new he over the of point will CFO, we range and solutions. to of our Fleming, details.

Daniel Fleming

outlook $XX.X million, you, first and reported year down afternoon. I year-over-year. then results QX, QX our XX% up Thank our for X% discuss fiscal of 'XX. QX sequentially we of good and revenue will In and review Bill,

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

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

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

product Our up generated sequentially. a record record than engineering million in revenue product and of product QX, higher services, business, excluding XX% previous our $XX.X XX%

customers were each XX% Our X end than top QX. revenue greater in of

contribution a non-GAAP QX lower low range below quarter. result XXX basis margin guidance just of and of delivered and down the team in the gross as Our sequentially end IP our XX.X% the points of

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

Our scale. due XX.X% the and to in points product XXX non-GAAP year-over-year, margin sequentially up basis quarter. up primarily points basis gross was XXX increasing

X% to quarter in a of below Total first expenses up quarter. non-GAAP in XXth midpoint and operating the due were million, sequentially the week our range the guidance $XX.X

of $X.X operating non-GAAP non-GAAP to million income compared QX last in was quarter. $X.X Our million income operating

non-GAAP We due QX the quarter of decrease last income flow used XX.X% down of Our operations percentage primarily to $X of first million million, driven by non-GAAP of in was net ramp X.X compared a X.X% reported product sequential margin operating non-GAAP quarter capital, to in $X.X non-GAAP was to compared in in shipments. sequentially $XX.X points. a the margin last a in quarter. working net million in quarter, changes Cash operating income

$X.X cash capitalized million by flow million, in spending. CapEx ended investing decrease equivalents in decrease $XX.X a and while million cash quarter year-over-year. maintaining We cash substantial growth our buffer. fourth equipment opportunities quarter $XXX.X well We million, driven negative R&D remain of $XX.X the quarter. of continue And the a to was with was from of free a million the $XX.X

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

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

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

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

be diluted to million And average count approximately shares. weighted share we expect XXX QX

second the we of As half fiscal in move year sequential continue we to to 'XX, growth forward through the expect year. accelerate

non-GAAP operating up year. that, expect half as I grow We at throughout will open with top it look result, rate line for to driving of And operating forward growth. a the the expenses to we questions. leverage And

Operator

[Operator Instructions].

Our will of from first question line Goldman Toshiya Hari Sachs. from come the

Toshiya Hari

as outside Can you growth business acceleration customers 'XX customer And in the the My of to first half. to question should be of growth thinking half see you additional it you how calls, second acceleration the your move to space on you're in talked connectivity about is of drivers second kind well. we opportunity think as year? second the to about past that 'XX. engagements in AEC the the pertains and in-rack and with as on your AEC that key into the speak Bill, and calendar ramping spoke the in thinking I you've your space how in about you guys AUC contributing

William Brennan

Sure.

adoption standard I'll AEC at with as the point. pretty track but which is with the So has may to we're future fact become see -- for in that the that happy broadly. expand pretty we rack is X-meter increasing. de primarily start facto we X really to lengths It I rack in a think cables address, this continuing densities

solutions with X were optical can AEC be as X-meter that connections happens, that to made made XX-meter XX-meter So with solutions. now to typically,

and continuing, hyperscalers emerging well with global it's we new we with term hyperscalers, U.S. do hyperscalers, introduced a So service providers. really adoption broad see what as as

And our XX power address both cost future, customer have So stand thousands a in failure to out, we X.X, with there's especially XXX-gig in because it's as will compared link network important really AC customers. good that with within growth or of that solutions I when to it And of are towards I mainstream, right are I cap, networks and in Ethernet minutes positioned well single think now be we're and base productivity a the competitors. now, becoming engagements a can really market, say much really bring to to really as a we'll development dollars. XXX-gig as cost we'll back-end quality. move they think shift see to we're them tens differentiated focus more a position hardware future seeing point really that

And high ] would Pareto a objective. so reliability at of if really really they things [ having primary clusters look more make the their have solutions becoming that efficient, is that

requirements. active a when sense. so more priority about been solutions. And orders flatless -- shifting will X to billions that of operating solutions, move of see time we've these these in of is really fact XXX the in better think a have million be to billions that And we operating move hours copper would better There's we what to of than before hours ADCs IEEE failure or had rates

further And desire to I bullish hope the make there's a in AC longer the I X market we figure to and gives networking TAM connections back-end as space. them you And network quite see ADCs X term. ultimately, that span so before, think of this expansion that mentioned an I a out to allow the color, to think driving X-meter that portion long really I uplift an we're with even topologies on this that, the to of racks. X

Toshiya Hari

customer follow-up really a as That's hear your helpful. the of then traction. portfolio. Yes. really side DSP nice optical to And the It's quick on

market more fiscal business? are than engagements, $X.XX that you're I still the current LRO, the are market over a share but context forth term, back about about or at guys time. the be is 'XX, the potentially last curious should And your for case? and being I call, if Is that you this And what a business. of talked presence of thinking much dynamic? think then pretty XX% that reiterated Longer least for how on the XX% you're disruptor, it your your of know given think customer increased playing aspirations XX role you your I so, catalyst within XX, adoption. in having,

William Brennan

that business. So optical the we're with quite I'll DSP happy say

XX% achieve track a goal is higher. We are to you that on reiterated, which or

revenue. Our fiscal 'XX

For modules today, more And this have shipped sure, When X we'll data we're with accretive building market about in DSPs all that combined. are think our position ship deployed in we've units than been years momentum. year, million previous there we centers. in the than more fiscal

So that momentum measured there building. is is by a of XXX-gig sustained real and that got we've compelling integrity, 'XX here line bottom fiscal drive growth will per We've XX-gig identified And and is, sit in got signal solutions fast today, of power set cost. the beyond. we programs and ultimately lane as

design about module we're this the line at there previously the that I will that think share is And to multiple we a one lead in market very set and I a feel momentum be mentioned it's DSP really competitor. for competitive been one the lock customer the standpoint, time builds to So that's Credo at incumbent and good in for stage continued converting program, bottom very, still a manufacturer first The is the it And From engaging market. rising. small earlier, landscape time, focus. considered shifting. with is programs is a a as

for full competitive to of as we the we're new and believe deliver kind going line, X.X what deliver bottom power. us We solutions is the the here And going DSP a we're definition look market, to market devices what the really full for deliver both towards power of a key LRO to the optical power the been introduced that of market into prematurely for. of almost to high sense have on looking comparison in order half is is solution that in that's a DSP so the the launch the is

ultimately LRO down X.X XX-watt we're it within The take And so actually any or OSFP deliver to the or ceiling player as line energy We'll QSFP-DD that less. at standpoint. standard DSP further will enable LRO. even full agnostic and in full speed options we'll it to the efficiency offer the and with to optical And that there. an relates build from power fit bottom DSP is a range is

So that customers let we'll ultimately our make decision.

Operator

line Stifel, next Svanberg the Tore question & from comes from of Company. Our Nicholas

Tore Svanberg

my you. you that Thank called Yes. something Bill, I attention. just said

going a on that said little You 'XX a seems I DSPs just like you you're to ship elaborate in more that fiscal because mean, business. includes than previous obviously, can years. that all AEC pretty But high number. bit the

William Brennan

in Yes, This really in ADCs. to business. regards the DSP reference reference to really was optical our is not

engaged that the with see return as we in say to U.S. to as continue production will a well. I first international well in be as we so spending And hyperscaler space

so that from And -- perspective, think I surprise. no our that's

take positioned I year. in going in fiscal to to this the think to alluded think that's that I And ramp fiscal we've well place we're 'XX. continue

Tore Svanberg

Got it. now? bit penetration around few years, to it just is, clearly, My market. mentioned or seems a mean, question entrance market talk into the why a retimer you that's a I Could is this about expanding. but second be for little been PCI you

So revenues this And expect help the little market? Credo entering when us we understand market? this a some timing in early for bit should

William Brennan

Yes.

So enable benefits and same that. brought market XX-gig the to that entering like level. and Ethernet SD compelling we we the kind will made opted at XXX-gig the and PCIe the about X specifically at speed, not to XX which PAMX that is talked market, to bad call intent I the the we think to the we felt XX-gig specifically market, pursue Gen a us standpoint that Gen enter we've really probably on But deliver from a gig X of

and And an of from about for that architecture PCIe, efficiency numbers competitor of are about a be really we really us that market. And sense much as there's solutions with DSP been cost talk full-blown a with DSP about opportunity here in in any the a having having a lowest so a differentiated have to basis latency standpoint energy competitive that's SerDes than when well standpoint lower Integrity, we latency talked the Signal announced. talk

so we lead enter Gen the silicon And a by us got that accelerate timing market gig already has XXX to the the also think market We've you'll that then market. I'll the mention tested and in is X. been partner right. see

is higher this and the we as for DCI. something see demand so And bandwidth, into lean AI we'll higher really driving

Operator

Suji from Roth Next Desilva line Capital. come question the from of

Sujeeva De Silva

of Dan, or wanted new you I concentration, a just F gradual a from that talked to customer ramp. in kind new customer about the the sense XX% get ground contribution XQ is understand whether it's been in I terms floor if F in customer growth. expected XQ. from a the that starting of to just

William Brennan

Yes, a customer couple for now. years new not sure. on This customer. This is that worked is we've a a with going of

would more hyperscalers. they've by really by spending top we're the one that the customer they've that fact for their become And to us. driven But But U.S. like receptive been a past would we've market that the starting been how more plan in And that be has yes, than the about just so to much the we're we the customer significant look encouraged seen we've AI X we've delivering. a this in past. solutions emerging as talked consider increased, And an them solutions seen hyperscaler. really

position like that a in But well first they've architecture emerging the in an a the good a with this hyperscalers. and standpoint think is been of ADCs. position adopted others I good as deploys we're so that from mover And we've

Sujeeva De Silva

to terms of technology, the TAM if and customer some the the Can well us metrics about hopper and reach. transition to some and cooling densify, of opportunity guys? about the sense increases kind being makes in maybe diversifying. Bill, you the to Okay. shorter bit to talked little metrics hear for you a would, And black how that base of handle of you possible that think closer give the you and just racks able then racks as good

William Brennan

Sure. Yes.

that think with we've all and you're that really going what the a that look our leading perspective, densities like I think seeing is you from solutions just mentioned. be the that when ADCs, this architecture edge to in decision. if But customer-by-customer they transition I seen increase direct But theoretically, from to channel easily we it doubling we deploy see a could we look within expanding in a TAM a can that rack at see implement solution perspective. customer

Operator

of TD question Cowen. Ramsey next the line Matt from Our comes from

Unknown Analyst

[ to Matt, he Sean actually question product for and quick that we'll Alahli ] optical ask here regards, but It's sends a to on of the get DSP wanted on sort his I engagement. later.

it's But maker, themselves connectivity guys of this I sounds momentum level, a naivety get into my an hyperscaler be really you conversation. at of You that's there's designs. more like any have mentioned not on hyperscaler some Is the module side the you given engagement you power solutions pulled positive the the optical maker AC customers is the or and there. relationships surprised sort level and kind between should which maybe that the helping there DSP on such module important these of

William Brennan

this about is sense you in really we've a anything. in engage unique optical talked this you bit the a only market that's past manufacturers, module guaranteed the if aren't with Yes, a that that Absolutely.

doing some really and X-party where But is And credo. a so an working a hyperscalers, they to multiyear them program it's between be conversation with really makers hyperscalers, ongoing specify even is the joint successful and with had been we've and effort development effort this directly of DSP we've that module in used. a

of break standpoint weekly from part with it basis And as it module our makers. on strategy. a hyperscaler And much down per matches so that's down breaking up very we of actually it the internally,

a is it's that got. very focused we've So strategy

Unknown Analyst

And Got the license That's you. clarification helpful. one just IP on revenue. really then

that year? is expected lower you are revenue license of and model, thinking it quarter. at obviously or long-term little lumpy higher just Or a the to that end about long-term in mentioned the Is had come in full the you for of incorrectly? the that sort came quarter, we last this think I your still but expectation

Daniel Fleming

Yes.

changed. expectation hasn't our year, full the For

for within of year. you're strong to And to than be quarter offset it range full about was it But you're bookings was the in evolved, quarter. the only to lighter expected XX% that turns it that right expect in And long-term the XX% right. offset lightness. at X%. it the thinking as we So by

us confidence longer it's say, -- have of it's hard very by a to that XX-day year to within we over XX%. IP 'XX, hard do range that be forecast period you in but time XX% As increments, fiscal of to for will

Operator

Our the comes Karl next from of BNP question line Parabas. from Ackerman

Karl Ackerman

have I two.

cable discuss is improve I and am market for with have course, passive off, how use applications. have AEC how perhaps wanted to you And the First powering cost active active both trade-offs. But a using in for large I each follow-up. And own you received active couple address instead between to which catalystic their half a active cables. an copper that the opportunity cables electrical of copper as a I redriver lot cables. DSP is of time that's enough Or question, attention retimer other? view used applications a electrical has recently do of these Each,

William Brennan

Yes.

So not for being active market as we term. the or see solutions. of copper big, what ACC to see we those as well what both referred you long passive market as for or to We as the amplified refer

the some HCC. in some to of it the As relates to of references market the

strategy. by been really I think that's NVIDIA's driven

in looking in considering made ACs it's play. market. will key see see to role really of not is as really is that The anybody with the solutions X own solutions. amplified building rest we type what I past ecosystems. opportunity. it's are the so or of play think And the don't kind at a We that will I those meaning X hyperscalers questionable to anybody of that the don't broad that months, would their they've market And say something introductions even

And following not the really standards industry because point. reason is at this

would really and And we the that's talk fully or basically signal things that of fully the AEC so talk having the when expected. way the performance the like retimed of kind deliver we equalized kind interoperability, integrity, about the you about be interoperability solution,

we haven't and XXX where really, so that's And seen especially any globally lane at competition really gig that's level. per the

in is lane, to I smaller I really game by retimed over. generally plays fully the the X.X, it think are the even market. a role. gets As it XXX per gig broad And market, that think choice the AECs

the And of solution fact, talk only the customers that when we that's the I being really refer to by that's considered many to.

for priority if the can [indiscernible] kind really a priority our But of that for been has opportunity we the base path becomes LRO power amongst the so because would delivering exist meeting customer we're the down not customers. future go the the a levels doing just that And objectives. of in are

Karl Ackerman

'XX. 'XX licensing to has obviously for on and changed the I back I look guess focus licensing Very revenue the fiscal seasonality USB Yes. view to component being all your your consumer hard fiscal importantly, to towards it's on predict, wanted at clear. revenue. in licensing XX% revenue? I XX% is of to the know fiscal perhaps but revenue more year there a And

Daniel Fleming

any I of would witnessed IP seasonality say not sort with we've revenue.

of different In the look quarter X is revenue revenue the contribution at terms last total. fact, you quarters, last than each it quite in if goes or mix in

that. we're where low-value deals. we past, in draw we not we a to view for sell, tends us a IP sure as the be Again, We that's a required So not solution. incentivized many we good to want to the power from all make that where on overriding an as conclusions chase IP we it's win ROI in and said future very we've too really imperative difficult were to strategic get that

know, we will as predict to XX%. quarter-to-quarter, that We longer think year. to XX% stated tough be it's we term, So this all that way

would beyond. that and much reset we're customers the will maybe when talking with would I haven't well. be about, ultimately, talked we'll as about term, the probably expect year, -- expectation that Next probably 'XX shipments we lower in that case Longer to but FY bigger future, products,

Operator

from question of comes from Our Barclays. Thomas next the O'Malley line

Thomas O'Malley

is little Dan. one to want bit up a of times kind a This on I here. of be for specific just couple more question come that's a

describe if just much licensing I product what much but surprised gross as product of July uptick? in I'd be well. also, better you first much on And quarter, that. all in they the if volume in the said and So at look you volume better Could call, margins, came were the you came drove that lower. know drove

what IP $XX looking assumption kind does then back million because the that matters obviously -- quarter guidance, is October that your just quarter. And of in to a quarter into a for range goes that like product

people I what are to out. think that's trying figure

super So those of would both be helpful.

Daniel Fleming

Yes.

ordinary in bookings, being they little came So quarter. it's stronger would that as than the so entering normal, stronger as of have turns expected than a have amount product far we we some

So there's to about really talked what versus -- unanticipated of or it nothing about. already talk terms was we've what in and

largest AEC drive the And year. the we significantly very customer hyperscale really contributed expect ramp Our throughout fiscal the to them quarter. to

I about well could at talk mentioned since you margin gross that maybe expansion impact of as gross margin the So level. product

one perspective, from kind -- of for that's of So really the one that's the are key of the QX my headlines takeaways.

at If to basis services, over XX.X%. look you XXX sequentially was engineering excluding product up gross it margin points product

quarter, our we we for that QX number. had in onetime mentioned had So some though, recall, last reserves

XX% long-term with QX the lowered we're gross changed. happy that the So QX not XX%, a margin But made of excellent to product in which progress we've gross expectation has toward in our bit. margin very

the in the around gross right the for So XX% used -- XX% versus product, model, margin saw portion long-term to that past, to mentioned product as that XX%. I've means and our be being you IP

we QX, ZIP already in that code. -- we're were in same So

And of the see year the is scale. see. sequential 'XX, improving QX it as really you -- might it's impact expect QX by product quarterly margins overarching fluctuations There's, But scale. some driven is product impact of to FY to terms mix throughout of But increase improving was from this well. in shipments. thematically some course, So we

lot gain that a do you in that So occurs. of scale when

Thomas O'Malley

And second the expectations just then about the your part embedded in guidance.

kind some XX% lighter to what is of your you You're for so QX, the would obviously in saying October? acceleration. for year just expectation XX% But still expect

Daniel Fleming

Yes.

X slightly the us than targets might gross that's mix we oversized of IP, larger for of So margin in it that to you not set order of goals. to in was in in IP QX, terms contribution a QX, revenue is revenue out But achieve contributor don't takeaways for critical gross it expect for our QX. we important you as margin need than to achieve October the to saw an be

the We expect in QX than to in it modestly did revenue IP mix our contribute more QX. to quarter

Operator

come of line Bolton Needham. question from Quinn Next from the

Quinn Bolton

on the I nice you beat results if to margins struggling is to margin product bit. would the Because here decline at Congratulations little of October XX% sort in of high gross the a higher outlook. quarter? I'm the least range in see why and October be flat IP at gross margins mix quarter? to slightly XX% of your maybe expect to wouldn't and is margin the guess, product a Dan, end the percentage on

Daniel Fleming

of thing everything I question. at a specific the that We -- decline look step-up things in decline for The margin gross QX. we proven linear is have always you're is way in conservative course It's at understand over not and one percentage guide by always over it's remain I'll linear. a the to coming overarching our or we don't big But say expectation it We that -- where us. is things. time, for had not theme We've quite in much. remain will

So little bit, Hopefully, a helps that Quinn. you

Quinn Bolton

to does. come just license Got it. Yes, And wanted then and that to back the IP.

royalty had here you're specific on wondering could I update few and business script, just you as looking mentioned big any a you IP that been the your like next of so? year stream? in as the IP part know is Or historically? years SerDes ago of from revenue Does at royalty that you to part royalties give out think straight licensing point that over do a you that of or most think license that if consumer some for it's of call I something us IP become

William Brennan

be with a the of USB licensing of think think in the I part right you're revenues business relates to think things don't on look to assumptions as to about and material it we that the that kind as customer. that's as We that at royalty forward, think our going the we themselves. you're we making comparison on going

So the the come licenses. think to will in the in weighting from revenues sense still this stay we the bulk that a category that going is of same

Operator

line of Shannon comes Richard from next Our question from Craig-Hallum. the

Richard Shannon

Maybe a here. very Dan X-parter for quick

you record a two product I give revenues, you record couplers, a think you an AC percentages whether the record customers then quarter? us called Can had XX% of You in declare well. don't ACs. out but was also And it can the as

Daniel Fleming

Yes.

we story have line, full our that the for revenue. year. a is of product safely record So assume driver did you AEC but We out don't break large product by can

our in X most which had in when QS [indiscernible] customers. end XX% significant QX, day they the So have We XX% customers at were, file to turning that fact, so. [indiscernible] in first or two hyperscalers our in mentioned I a was

AC a second as talked ramp You'll customer customer see -- customer QX right AEC their at our customer at to throughout And meaningful that so continue we remained second AEC fiscal XX%. during about. hyperscale that largest first was hyperscale the 'XX, XX% expect we hyperscaler our

Bill ramp. it earlier, course, not QX. mentioned But XX% might Of a customer be linear new always as expect a in we

our even a with both throughout fiscal ramp at year revenue or customer that hyperscaler, meaningful expect product from a and throughout out. diversification second So AEC plays perspective we the as significant

Richard Shannon

more some the I'll to earlier can and think, your a I'd but with more? maybe towards go Okay. for and my in not, than probably I talked up delve an question maybe some that. you kind Great. get correctly, optics I to Maybe generations, from, here, comment just on dynamic X moving here also you copper systems, can moving racks love you you in little here. And sustain Bill, manner of for I'd into that a suspicion that X generation here. I of AI tighten but response incorrectly or question could about if is X follow whether here comments next-gen a that clusters Bill active And on is bit caught away think

William Brennan

Absolutely.

topic to this customers stands a is And that seen industry. and just back flap has that been to compared of And we that of out laser-based work our link so to ACs again, and things we more in one becoming the in their when big and challenges, more solutions -- and optics. seen listen it's the are get when more really more with the quality clusters, phenomenon of

And even got if to it and up it to you've down reiterate, cluster up, $XX,XXX. ultimately measured it back to if Just goes just can single comes minutes flaps, a in it shut $XX,XXX that for terms. connection XX dollar fails. down entire and the

want attention of you you pay X to it And to. have so to something becomes day, if episodes per that really these X

Link as laser-based the as with becoming so customers, more, is have think have. when we we optics And and we work just about on and don't more focus like labs they quality network ADCs,

the so -- that it's term. something TAM it's And AEC benefit will absolutely long

other that's built racks happening more a this got fashion. where you've so much dense being in And factor are

becomes there lean racks of on really now the high-quality very the to connect So and and a reliability possibility network products.

so And not connecting and lines. an rack, rack, to We're to activity but really X architecture to they're more just seeing rack meters. moving the talking much in these where we're along X

what our at that in areas as demand we this customer-by-customer factor of a will in that, We're objective. see quite that direction. is to a frankly, But hearing. doing this that we're it's of new looking again, architecture driving it of is driven helped AEC something family. solutions is definitely that so encouraging some with we're system-level also say to that feedback And kind these relates other to addition address I

market use us to huge the And has space. we to our knowledge optical see so amount challenges, in experience a this energy AI and potential taught efficiency. enhance cluster about specifically performance in and these the AC

along details And we've say, about lines specifically help it probably -- was these LRO to I'm for but of And we'll that to to from so months, XX power, there's talk but deliver X Credo seen on you've we're working quality. within the going the things innovations the market. about, the more that other we to improve that's not something as next, solutions network

Operator

question next from Nicholas Stifel, Company. Our comes from Tore & Svanberg

Tore Svanberg

how follow-ups. half especially you're you of AEC when just fiscal by at customer about talking sort talk few we broad thinking ramps sampling 'XX, a and the two the ramps the those quarters. solution I expecting, XXX-gig look network could Bill, have been that are, about little but factors form the of you I'm had I'm as bit second in considering AUC different not back-end last more here, the about that

William Brennan

Sure. Sure.

in Amazon. our that relate the are So ramp we there. feel I we guess And business good to where with would about

range customer. of our be to it expect but year a that Dan see to fiscal about the don't a year. do largest expect we over ramp to we've upcoming we feel that demand As we and this solutions quarter-to-quarter, the across good sense will their to end said into of really the With the 'XX. our growth previously, is from quarters through it that significant we alluded of drive expected in increasing this portion drive said, them ramp board even that customers and linear for diversity a our fact a be

that it's talking our into Xs Even our about Card fiscal a point fiscal is time continue become tail contribute 'XX. and and going we really end but they're we've really be tail third chiplets, talked that second they gain a this to much the half we see We've series too expect Line hyperscaler. product to really of Optical significant about just material licensing, the like line. contributor real to expected in to 'XX, historical fiscal into traction and talked 'XX. Microsoft about 'XX that we growth to broadly. before, as going We've towards a or ADCs customer really and of will end in levels. fastest spent other that So mentioned see as product year That into the haven't we inflection as returning continuing relationship progressing, is categories,

really we of is talking calls, And so Credo you focused term. topic near-term in the really really are things fund outside on have that the very that 'XX. is gives color lot fiscal of that near A these about which

this is meaningful and idea markets that on lot had we add And the engaged highly market value we're of of the expect level. experience and next-generation to solutions we've We the to going developing. market. compelling to There's Credo. to that exactly continuing the and of at and a continue energy we've system a how that. X going lot system that that we're pioneered something compelling great innovate and Gen fun unique about we're are really X we solutions just our that at to again, got have level internally Gen around PCIe We've bring to at And talking in

Tore Svanberg

very That's helpful.

Or fiscal the of 'XX? sort rate question specific sort that revenue of model? for that you your of that said grow half target long-term at growth. would Dan, for financial last reference was a Dan. Is to Just OpEx more a

Daniel Fleming

QX I X%. embedded in midpoint It's margin Gross in flat XX%. fact, up up Revenue the related to 'XX. fiscal our at is even right? guide, OpEx mean, it's And

'XX, fiscal year. So expect that kind we as model. year-over-year, will extend operating our to into operating range fiscal of we 'XX next long-term fiscal that that margin 'XX XX% case, We're -- probably should it to the well as attain will the be be in and XX%

Operator

Mr. call to time. And over you. turn no the are Brennan, at there Thank you. questions back this further I

William Brennan

everybody, Thanks, Thanks. the and Absolutely. questions, backs. to we look really for We forward call appreciate joining. the

Operator

today's conference this concludes call. with And that,

day. disconnect. You may Everyone, great now have a

Credo Technology Group Holding (CRDO) 4 Sep 242025 Q1 Earnings call transcript