Credo Technology has recently seen a significant surge in its stock price, jumping by 10% following the release of its second-quarter earnings report for the fiscal year 2026. The company, based in San Jose, California, has been a standout performer in the market this year, achieving multiple all-time highs and amassing an increase of over 180% in its stock value since January.
This surge can be attributed to the growing demands in the artificial intelligence (AI) and data center sectors, which are increasingly vital in today’s tech landscape. As AI continues to dominate market discussions, Credo is leveraging its technology to provide high-performance connectivity solutions for various applications, including data centers, 5G carriers, and high-performance computing.
Historically, Credo’s stock was valued under $50 per share until late 2024, when recognition of the potential growth in the data center and AI markets began to boost its value. According to Grand View Research, the AI market is projected to explode from $279 billion to approximately $3.5 trillion by 2033, while the data center market is expected to increase from $347.6 billion to $652 billion by 2030. Credo is well-positioned to benefit from these expansive growth opportunities.
Credo has developed critical products aimed at enhancing AI workloads that are not always in the spotlight. One of its key innovations, Active Electrical Cables (AECs), provides a more efficient alternative to traditional copper cables, enhancing connectivity for clusters of GPUs and CPUs in data centers. In addition, its next-generation OmniConnect architecture is specifically designed to address memory bottlenecks, thus improving the scalability of AI inference. The company also offers ZeroFlap optical transceivers to ensure network stability and efficiency in AI operations.
In its latest earnings report, Credo reported record revenue of $268 million for the second quarter, marking a staggering 272% increase from the previous year and a 20.2% rise from the first quarter of fiscal 2026. Gross margins stood at an impressive 67.5%, while operating expenses amounted to $102.4 million, leading to a net income of $86.2 million. The company reported earnings per share of $0.44 and concluded the quarter with a robust cash balance of $813.6 million.
CEO Bill Brennan highlighted the impressive results, noting that they reflect a substantial build-out of AI training and inference clusters worldwide. The management team has also provided optimistic guidance for the third quarter, predicting revenue between $335 million and $345 million—a 151% increase compared to the same quarter last year—along with projected gross margins between 63.8% and 65.8%.
Despite its rapid growth and soaring stock price, Credo’s current valuation presents a complex picture, featuring a price-to-earnings (P/E) ratio of 276 and a forward P/E of 90. While these figures are significant, they remain relatively reasonable compared to some other tech stocks, such as Palantir Technologies. Analysts remain bullish on Credo’s prospects, with several firms adjusting their price targets upward; Mizuho raised its target to $225, while Bank of America increased its forecast from $165 to $240.
As a pivotal player in the AI infrastructure space, Credo Technology is poised to become a vital contributor as data centers expand globally. Investors are advised to monitor the stock for potential buying opportunities, especially during market corrections, as its unique offerings position it favorably within the rapidly evolving tech landscape.
