Credo

Operator: Ladies and gentlemen, thank you for standing by. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session where we request that you please limit yourselves to one question only. At that time, if you have a question, you will need to press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star and then the number one again. I would now like to turn the conference over to Dan O’Neil. Please go ahead, sir.

Dan O’Neil, Investor Relations, Credo: Good afternoon. Thank you all for joining our fourth quarter fiscal 2026 earnings call. Today, I am joined by Bill Brennan, Credo’s Chief Executive Officer, and Dan Fleming, Credo’s Chief Financial Officer. During this call, we will make certain forward-looking statements. These forward-looking statements are subject to risks and uncertainties discussed in detail in our documents filed with the SEC. These documents can be found in the investor relations portion of the company’s website. It is not possible for the company’s management to predict all risks, nor can the company assess the impact of all factors on its business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statement.

Given these risks, uncertainties, and assumptions, the forward-looking events discussed during this call may not occur, and actual results could differ materially and adversely from those anticipated, implied, or inferred. The company undertakes no obligation to publicly update forward-looking statements for any reason after the date of this call to conform these statements to changes in the company’s expectations or to actual results, except as required by law. During this call, we will refer to certain non-GAAP financial measures, which we consider to be important measures of the company’s performance. These non-GAAP financial measures are provided in addition to, and not as a substitute for or superior to, financial performance prepared in accordance with the US GAAP.

A discussion of why we use non-GAAP financial measures and reconciliations between our GAAP and non-GAAP financial measures is available in the earnings release we issued today, which can be accessed using the investor relations portion of our website. I will now turn the call over to our CEO. Bill?

Bill Brennan, Chief Executive Officer, Credo: Thanks, Dan, and thank you all for joining our fourth quarter and full fiscal year 2026 earnings call. I’ll begin with a review of our fiscal 2026 performance, discuss the major developments across our business, and share our perspective on the opportunities ahead. Dan Fleming, our Chief Financial Officer, will then provide additional detail on our Q4 and fiscal year 2026 results, along with guidance for the first quarter of our fiscal 2027. We’ll then open the call for questions. Fiscal 2026 marked another defining year for Credo. Revenue exceeded $1.3 billion, more than tripling year-over-year, while non-GAAP net income increased more than five times to $662 million. Very few semiconductor companies have scaled at this pace while sustaining product leadership, strong margins, and operational execution. In the fourth quarter of fiscal 2026, revenue reached a record $437 million.

Notably, our revenue in the quarter exceeded our entire fiscal 2025 revenue. Q4 non-GAAP gross margin was 68.3%. Non-GAAP net income grew to $227 million and was more than 30% greater than our revenue in the year-ago quarter. Producing these results required incredible effort and expertise, and I want to sincerely thank team Credo for their continued stellar performance. These results reflect Credo’s ability to capitalize on a fundamental shift occurring across AI infrastructure. As AI clusters scale from tens of thousands to hundreds of thousands of GPUs, connectivity is no longer just about bandwidth. Reliability, power efficiency, signal integrity, and telemetry have become critical architectural requirements. Today’s AI infrastructure is increasingly constrained not by compute, but by the reliability and efficiency of the connectivity fabric tying these systems together. Over the past several years, AI network reliability has become Credo’s North Star.

Our roadmap, our product investments, our software architecture, and our system-level approach have all been built around helping customers accelerate cluster bring up, maximize GPU utilization, and maintain stable operation at unprecedented scale. Credo was purpose-built for this transition. Our strategy is centered on delivering connectivity solutions across the full spectrum of AI infrastructure, from die-to-die and chip-to-chip connectivity to multi-rack scale copper, and to row-scale and facility-wide optical interconnect. By extending both inward toward the silicon and outward across the data center, we’ve positioned Credo to become a foundational network architecture partner for our customers. Importantly, hyperscale and neo cloud operators increasingly want partners capable of delivering multiple generations of connectivity solutions with deep system-level integration. This is where Credo differentiates itself through our vertically integrated approach, spanning core SerDes technology, silicon and system-level solutions, firmware and telemetry software, and operational execution. I’ll now discuss our businesses in more detail.

First, regarding Active Electrical Cables, our AEC business remains a core growth engine for the company, and we continue to see substantial long-term opportunity ahead. As AI clusters scale, reliability and power efficiency have become primary design constraints. AECs have become the preferred solution for in-rack connectivity and for many multi-rack deployments up to seven meters. Credo ZeroFlap AECs deliver up to 1,000 times greater reliability than commodity laser-based optical modules, while consuming much less power. In environments where cluster downtime can cost millions of dollars and delay AI deployment schedules, network reliability matters more than ever. We continue to see strong customer adoption across hyperscaler and neo cloud operators, both at 100G per lane and emerging 200G per lane deployments. Our vertically integrated model positions us well for continued leadership as both lane speeds and cluster complexity increase.

We also remain on track with our PCIe 6.0 AEC family, where customer engagement and design activity continue to strengthen. Turning to optics. We believe fiscal 2027 represents an inflection point for Credo’s optical business. First, at an optical DSP component level, we see momentum in both design wins and revenue contribution. We’re looking forward to continued growth in this product family, and we’ve received excellent customer feedback on the solutions we announced last quarter, both Robin, a highly optimized DSP at 100G per lane, and Cardinal, a leading-edge DSP at 200G per lane. Next, the acquisition of DustPhotonics, which closed last week, significantly expands our optics position with highly differentiated silicon photonics PIC technology. Dust brings strong design win momentum and a portfolio spanning 800G and 1.6T solutions, along with a roadmap to 3.2 terabits per second and beyond.

Importantly, their architecture enables simplified optical designs with substantially fewer lasers. In addition to enabling better reliability, power efficiency, and cost, laser count reduction can ease the industry supply chain limitations. The DustPhotonics silicon photonics roadmap also provides a direct path to CPO and NPO architectures, allowing us to address a broad range of customer requirements as AI deployments evolve in the scale-up network domain. Based on current customer engagements, initial revenue for CPO and NPO designs is expected in our fiscal 2028. Our ZeroFlap Optics platform continues to gain strong traction as customers increasingly prioritize network reliability. With the addition of SiPho PIC technology to our ZeroFlap Optics platform, we can now control a significantly larger portion of the optical stack, extending visibility deeper into optical link behavior and performance. The tighter DSP to PIC integration enables richer telemetry, enhanced diagnostics, and more intelligent system-level optimization.

By combining optimized hardware and our PILOT software with switch-level SDK integration, ZeroFlap Optics continuously monitor link health and autonomously detect and mitigate link instability conditions before impacting the cluster. Results have shown a meaningful improvement in network reliability, time to cluster stability, and long-term uptime. In summary, we’re very enthusiastic about the prospects of our optical portfolio. In fiscal 2027, we expect our optical DSPs, SiPho PICs, and ZeroFlap Optics will each contribute more than $100 million of revenue. In total, more than $600 million of revenue, with this expected ramp accelerating in the second half of the year. Based on customer and market feedback, we believe this portfolio will deliver sustained, rapid growth in future years. Now regarding retimers. Our retimer business also continues to gain momentum.

We’re seeing strong growth for retimers at 100G and 200G per lane, as well as increasing traction for our PCIe 6.0 retimers. Our Blue Heron 200G per lane retimer was purpose-built for scale-out and emerging scale-out networks. We’re seeing increased interest and demand as the device combines support for the broad range of 200G per lane protocols, including Ethernet, UALink, and Ethernet SAN. As AI infrastructure becomes increasingly complex and protocol diversity expands, we believe our system-level expertise and software integration capabilities position us well for continued share gains. Moving to our emerging growth categories. We also continue to make strong progress across our newer growth vectors, including Active Electrical Cables and OmniConnect. Our AEC solutions will extend the reliability and power profile of AECs into row scale optical connectivity by replacing traditional lasers with microLED technology.

This creates a highly differentiated connectivity category capable of delivering AEC class reliability with optical reach of up to 30 meters. Our OmniConnect family expands our solutions inward towards the silicon. Our first gearbox solution, Weaver, will address growing memory bandwidth and density challenges by enabling substantially higher memory I/O density and more flexible architectures. Customer engagement remains strong, especially around next generation inference designs. We continue to expect production ramps for both AEC and OmniConnect solutions beginning in our fiscal 2028. In conclusion, the data center connectivity market continues to evolve. As AI scales toward gigawatt class deployments and increasingly dense architectures, network reliability becomes even more critical. Even isolated link instabilities can impact cluster bring-up times, GPU utilization, and overall system availability. That’s why reliability has been Credo’s North Star over the past several years.

It drives our system-level philosophy, our telemetry-first software architecture, and the investments across the full spectrum of our solutions. Fiscal 2026 was another transformative year for Credo. Yet we believe we are still in the early innings of the opportunity ahead. With that, I’ll turn the call over to Dan Fleming for a detailed financial review and our outlook for Q1 Fiscal 2027.

Dan Fleming, Chief Financial Officer, Credo: Thank you, Bill, and good afternoon. I will first provide a financial summary of our FY 2026, then review our Q4 results, and finally discuss our outlook for Q1 and provide some color on our expectations for FY 2027. Revenue for FY 2026 was another record at $1.3 billion, up 206% year-over-year. Gross margin for the year was 68.1%, up 310 basis points year-over-year. Our operating margin improved by 2,144 basis points as we continued to generate considerable top-line leverage driven by growth in our products while growing operating expenses considerably slower than revenue. That step up in profitability flowed through to the bottom line as we reported earnings per share of $3.46 for the year, a $2.76 improvement, or up 392% over the prior year.

In fiscal year 2026, Credo not only delivered the dramatic growth which we had forecast, we also demonstrated the considerable earnings power in our business model. Moving on to the fourth quarter. In Q4, we reported revenue of $437 million, up 7% sequentially and above the high end of our guidance range. Year-over-year, revenue grew 157%, notably, Q4 alone exceeded our total fiscal year 2025 revenue. Q4 marks another revenue record driven by substantial year-over-year growth across four domestic customers. Our top four end customers each came in at or greater than 10% of revenue in Q4. As a reminder, customer mix will vary from quarter to quarter.

We continue to expect that three to four customers will be greater than 10% of revenue in the coming quarters and fiscal year, and we continue to make progress in diversifying our revenue base across hyperscalers, neo clouds, and other customers. Our team delivered Q4 non-GAAP gross margin of 68.3%, above the high end of our guidance range. Total non-GAAP operating expenses in the fourth quarter were $81.7 million, above the high end of our guidance range due to our strong R&D investment and up 6% sequentially. Our non-GAAP operating income was $216.7 million in Q4, compared to non-GAAP operating income of $201.8 million in Q3. Our non-GAAP operating margin was 49.6% in the quarter, flat sequentially. Our bottom line once again demonstrated the substantial leverage we are delivering in the business.

Our non-GAAP net income was $226.7 million in the quarter, a record high and a 9% sequential increase compared to non-GAAP net income of $208.8 million in Q3. Our Q4 non-GAAP net income more than tripled year-over-year and was 33% higher than our revenue in the fourth quarter of last year, which most clearly demonstrates the magnitude of our top-line growth, strong gross margins, and disciplined approach to managing operating expenses. Our non-GAAP net margin was 51.9% in the quarter. Cash flow from operations in the fourth quarter was a record $182.2 million, up $16 million sequentially. CapEx was $4.8 million in the quarter, and free cash flow was $177.5 million, up more than $37.8 million from the third quarter. We ended the quarter with cash and equivalents of $1.4 billion, an increase of $141.8 million from the third quarter, driven by our strong free cash flow.

We remain well-capitalized to continue investing in our growth opportunities while maintaining a substantial cash buffer. Our Q4 ending inventory was $250.8 million, up $42.9 million sequentially. Turning to our guidance. We currently expect revenue in Q1 of fiscal 2027 to be between $465 million and $475 million. We expect Q1 non-GAAP gross margin to be within a range of 67%-69%. We expect Q1 non-GAAP operating expenses to be between $86 million and $90 million. We expect Q1 diluted weighted average share count to be approximately 199 million shares. These expectations are based on the current tariff regime, which remains fluid. We were pleased to see fiscal year 2026 play out better than we had expected.

The rapid shift to AI workloads continued to drive new and broad-based customer engagement, and we executed well to grow at more than twice the rate we expected at the beginning of the year. As we begin fiscal year 2027, we expect mid-single-digit sequential growth in the first half, with an inflection beginning in the second half. That inflection is bolstered by more than $600 million in optical revenue with ZeroFlap Optics, silicon photonics, PICs, and optical DSPs, each contributing more than $100 million, driving more than 80% year-over-year total revenue growth for the full year. We expect non-GAAP gross margin in fiscal year 2027 to be broadly consistent with fiscal year 2026 levels. We expect non-GAAP operating expenses to increase approximately 50% year-over-year, well below our revenue growth rate, as we continue to invest in R&D to support the new product development and address the significant growth opportunities ahead.

As a result, we expect our non-GAAP net margin to be in the vicinity of 50%. With that, I will open it up for questions.

Operator: At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. As a reminder, we ask that you please limit yourselves to one question only, so we can get to as many people as possible. We’ll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Thomas O’Malley with Barclays. Your line is now open. Please go ahead.

Blayne Curtis, Analyst, Jefferies3: Hey, guys. Thanks for taking the question. Appreciate it. I just wanted to dive in into the guidance. Is there any optical revenue, ZeroFlap Optics, or DSP photonics in that guidance? If so, how much? You mentioned $100 million across a couple different vectors in the optics business for this year. One of them was over $100 million in DSPs. Have you seen a change in the attitude of the market with procuring discrete DSPs? I assume you mean discrete DSP sales versus in a module, and just that change over the last couple of months, if you see that accelerating, and just clarify if those are being sold to customers directly or inside of modules. Thank you.

Dan Fleming, Chief Financial Officer, Credo: Yeah, Tom, for the full year outlook that we provided, which is revenue growing at 80% plus year-over-year, a component of that is our entire optical portfolio, which we described three different legs of, which we expect to each be over $100 million. As you say, it’s the discrete optical DSPs, over $100 million in the year, and ZeroFlap Optics, over $100 million in the year, and the silicon photonics PICs, over $100 million per year. It is in the overall yearly guidance, and if you break that down or dive into that a little bit deeper, what you’ll see is, based on that guidance, if you look at absolute dollars year-over-year expectation for fiscal 2027, about half of that growth in absolute dollars is coming from our optical portfolio, and about half of that is coming from our existing copper portfolio, predominantly AECs, but also retimers.

Bill Brennan, Chief Executive Officer, Credo: Just to be clear, Tom, the three categories that Dan just described, in total, we are expecting more than $600 million of revenue contribution. Each one will contribute more than $100 million, but in total, it’ll be more than $600 million.

Operator: Your next question comes from the line of Tore Svanberg with Stifel. Your line is now open. Please go ahead.

Blayne Curtis, Analyst, Jefferies4: Congratulations on another record. To follow up on the optical revenue for fiscal 2027. Bill, I get it, right? $100 million plus, but you are guiding to $600 million total plus. Which one within the three segments skews higher? Obviously one of them is going to have to be significantly more than $100 million. Thanks.

Bill Brennan, Chief Executive Officer, Credo: I think the important message there is that we’re going to see growth broadly across the three segments. You’re right that there will be one that has the largest revenue, but I think that we can clearly state that all three categories are growing very quickly. In fact, more than the growth that Dan guided for the whole year, right? Each one of these categories independently is going to grow more than 80% year-over-year.

Operator: Your next question comes from the line of Joseph Cardoso with J.P. Morgan. Your line is now open. Please go ahead.

Joseph Cardoso, Analyst, J.P. Morgan: Hey, thanks for the questions. Maybe another one on the guidance. Thinking about it from a first half versus second half dynamic, how should we think about the largest contribution of growth from a portfolio perspective on a half over half basis, including AECs, the optical solutions, et cetera, as we progress into the second half? As a second part of that question, how should we be thinking about the implications to margins as these inflect into the back half? Thank you.

Dan Fleming, Chief Financial Officer, Credo: Similar to how I described the absolute dollar contribution of growth, in the first half of the year, we guided mid-single digits between our Q1 guide, and you can expect something similar in our Q2 guide when that comes. That’s largely driven by increases in our current portfolio that has ramped substantially, which is AEC predominant. But in the second half, as we described, a lot of that inflection is being driven by our optical portfolio, which is, again, just to reiterate, the ZeroFlap Optics ramp, plus silicon photonics ramp, plus our existing optical DSP portfolio gaining significant traction this year versus fiscal 2026.

Operator: Your next question comes from the line of Sean O’Loughlin with TD Cowen.

Blayne Curtis, Analyst, Jefferies0: Hey, guys. Congrats on the results and the guidance. Thanks for letting me on to ask a question. I wanted to ask about the supply side of things. I think it’s required that at least one of us ask about supply on every earnings call now. Back at OFC, we had talked about some of the work you were doing to secure some of the supply for the ZeroFlap Optics ramp. Maybe if you could just talk about any updates there, and then if there’s anything notable as well on the AEC side, would be great to hear about the supply situation there as well. Thanks.

Dan Fleming, Chief Financial Officer, Credo: Generally speaking, I think that supply chain discussions are going to become or stay popular throughout the next year or even longer. There is a significant tightness in the supply chain. That’s why it’s important to understand just the capability and the depth that we’ve got, both on the silicon operations team as well as our systems operations team, and that includes AECs and ZeroFlap Optics. Starting with ZeroFlap Optics, owning the entire bill of materials, basically, and being responsible for sourcing that and being able to lean in and basically get capacity commitments based on us leaning forward, leaning in to making an investment in each area. We feel confident that we’re going to achieve a very aggressive ramp in the second half of our fiscal year and even more than double or triple that the following year.

Bill Brennan, Chief Executive Officer, Credo: We feel very good about the commitments that we’ve got in place across the board from the supply chain that contributes to ZeroFlap Optics. Of course, that’s beyond the silicon that we’re building. Now, from a silicon side, we have a very diverse set of products from a perspective of process geometry. Right now, 12 nm is a workhorse. A lot of the AECs that we’re shipping are using 12 nm for all the 100G per lane. We also are transitioning for optical DSPs into 7 nm for 100G per lane. We’ve got a program in flight in 5 nm that will be significant volume. For all of our 200G per lane products across the portfolio, we’re using 3 nm.

Dan Fleming, Chief Financial Officer, Credo: I can say that’s probably pretty consistent throughout the industry that if we talk about the 1.6T market, I don’t think we’re going to see anybody in 5 nm. We’ll see the bulk of the production happen in three and possibly a shift to two over time to respond to the need for lower power. For us, we’re going to deliver very low power in 3 nm, as you would expect. Now, there’s been a lot of discussion about 3 nm overall capacity and supply chain issues. We’ve got an extremely close relationship with our supply chain partners, and I think there’s a strong understanding that clusters don’t get built without the small complementary connectivity chips that we build and that we embed into our system-level products as well. I feel quite good.

I mentioned on the last call that I feel good about our position, and it’s really.

Bill Brennan, Chief Executive Officer, Credo: Based on the fact that this is something that over the last five years, we’ve invested heavily in not just in resources, but also dollars in making sure our supply chain partners understand our commitment.

Operator: Your next question comes from the line of Quinn Bolton with Needham. Your line is now open. Please go ahead.

Quinn Bolton, Analyst, Needham: Hey, guys. Thanks for taking my question. I just wanted to ask, maybe cut the revenue a different way. Do you guys expect any meaningful revenue in fiscal 2027 from scale up, or do you expect the vast majority still to be scale out? And if scale up is beyond 2027, when would you think scale up becomes potentially a meaningful contributor to revenue?

Bill Brennan, Chief Executive Officer, Credo: I would say fiscal 2027, there is scale-up revenue. It is going to represent the beginning of the round. I think we see fiscal 2028 as being more substantial, but it really boils down to the different architectures that are being considered. It boils down to each customer and their own individual strategy around how do they solve that bandwidth opportunity or that bandwidth challenge for scale up. We very much view that all of the hyperscalers and neo clouds for that really represent their own individual markets. We’re very focused customer by customer, and our portfolio is going to be deployed differently for each one.

Operator: Your next question comes from the line of Karl Ackerman with BNP Paribas. Your line is now open. Please go ahead.

Karl Ackerman, Analyst, BNP Paribas: Great. Thank you. Hey, Bill. Thinking about the demand opportunity for CPU-based AI servers for inferencing tasks, should we assume a similar NIC to ToR attach rate for custom ASICs and agentic CPU servers relative to the GPU-based servers you addressed today? Thank you.

Bill Brennan, Chief Executive Officer, Credo: I think from an expectation standpoint, when we talk about training and we’ve talked about inference, and now we’re talking about agentic, all of them are deployed in different ways, and all of them represent a great connectivity opportunity for us. I think from the standpoint of agentic, I think it is really a great opportunity from the standpoint of more front-end connections. Depending on architectures, it could go beyond that as well.

Operator: Your next question comes from the line of Sebastien Naji with William Blair. Your line is now open. Please go ahead.

Blayne Curtis, Analyst, Jefferies1: Good afternoon. Thanks for taking the question. You guys have announced a number of partnerships with smaller neo clouds. It seems like Credo is diversifying even beyond your core five hyperscaler customers. Could you maybe help frame for investors how big an opportunity these tier 2 cloud customers could be for Credo? Could they represent 10% or even 20% of total revenue over the next few years, or is that too aggressive, just given how strong hyperscaler demand is? Any color there would be great.

Bill Brennan, Chief Executive Officer, Credo: Absolutely. This is one of the biggest trends that we’re encouraged by, this emergence of the neo cloud ecosystem. Historically, as you mentioned, a lot of the AI infrastructure investment was concentrated within five and now six hyperscalers. We’re seeing a great growth in the number of neo cloud providers that are building AI infrastructure platforms to support a broad range of applications, from model developers to enterprises to sovereign AI, and inference workloads, even agentic. These operators are maybe the perfect customer for Credo in a sense that they move very quickly. They are deploying very optimized architectures, and they put a huge emphasis on network performance, reliability, and also time to deployment. All of these things make them financially more successful if they could do a good job of it.

We think that the neo clouds are going to represent a growing and more meaningful opportunity for Credo over the coming years. I do think you’re right that if we looked at that group of customers collectively, I definitely think it could be on the order of 20%.

Operator: Your next question comes from the line of Suji de Silva with ROTH Capital. Your line is now open. Please go ahead.

Blayne Curtis, Analyst, Jefferies2: Hi, Bill. Hi, Dan. Congrats on the strong results here. Trying to get some understanding of the relative growth maybe of the copper-based products versus optical. Copper’s still a large part of the mix, optical’s coming on strong here. The next few years, just wanted to ask maybe, would you expect that possibly optical with all the tailwinds can cross over into the half of the revenues, half-half? Is that not the right expectation for a multi-year growth path?

Bill Brennan, Chief Executive Officer, Credo: I think that eventually we could see optical and copper products in our portfolio. Eventually, we could get to 50/50 for sure. I think if you look at the market size in general, and we’re doing extremely well in AECs, and as I mentioned earlier, I think there’s a long-term growth case to be made. We feel very strongly about where the market’s going and our.

Dan Fleming, Chief Financial Officer, Credo: position in the market and the products that we’re bringing forward, especially as the market transitions from 800G to 1.6T. It’s going to be a lot of great dynamics within the AEC market. Look, if we look at the overall market size for opticals, just with pluggables alone, and we can have that pluggable versus CPO or NPO long-term discussion. If we look at the long-term market for pluggables, it’s significantly larger than the AEC pluggable market. Yes, I think we can make a case where we will achieve 50/50, and I could make the case just based on market size and penetration with the market that optical could actually exceed copper in the upcoming years.

Operator: Your next question comes from the line of Blayne Curtis with Jefferies. Your line is now open. Please go ahead.

Blayne Curtis, Analyst, Jefferies: Hey, good afternoon, guys. Thanks for taking my question. Wanted to ask about the four 10% customers. I don’t know if you’re willing to give the numbers, but maybe just speak to some of the lumpiness that you’ve seen in the past and whether that’ll impact the first half of this year. If you can also address just those customers moving to the next products and kind of the growth trajectory. You said three or four would contribute. Just relative confidence on that would be great.

Dan Fleming, Chief Financial Officer, Credo: Yeah. As we mentioned in our prepared remarks, we had four 10% customers in Q4. They ranged from a high of 34% down to 10%. The three largest customers in Q4 were the same customers that were the largest in Q3 as well. It’s 34% for the largest, 27% for the second largest, 16% for the third, and notably the fourth customer, which was at 10%, they were not previously a 10% customer during fiscal 2026. As you mentioned, Blayne, there is some quarter-over-quarter variability with any given customers. This quarter, I would say it wasn’t huge variability that was driven. There could be some of that going forward. We have seen that certainly in the past.

One of the key takeaways is we expect increasing diversification in fiscal 2027, and it’s really based on our current customer engagements, and we continue to diversify with multiple large hyperscale customers, and as Bill just described with NeoClouds, we expect them to become an important and sizable contributor in revenue in the upcoming quarters and years.

Operator: Your next question comes from the line of Vijay Rakesh with Mizuho.

Blayne Curtis, Analyst, Jefferies5: Hi, guys. Good to see a strong continued ramp here in AEC. Just a question back on the 1.6T. Obviously, that should drive a good content increase, ASP increase for you with the 200G per lane. When do you see that ramping? Is that more like into next year? Can I get some color on that? On the ZeroFlap Optics side, do you see that also gaining traction on the 1.6T? If you can give us some color on how many customers in ZeroFlap Optics now. Thanks.

Dan Fleming, Chief Financial Officer, Credo: First on the transition from 800G to 1.6T, of course, the timing is going to shift a lot about the deployment of Robin and really each of the customers’ individual strategies. Some will be very delayed. Some will be first to deploy. I think the exact timing of the transition will move somewhat as the platforms evolve. The underlying bandwidth requirements, I don’t think change. It’s important to recognize that customers are designing for flexibility. In many cases, system architectures that support 1.2T bandwidth when they come to market, typically we’ll see customers build in flexibility on the rest of the ecosystem of connectivity. We see a lot of our customers designing two physical ports for each GPU. In the case of 1.6T, one option would be to deploy in each port four lanes of 200G signaling.

Bill Brennan, Chief Executive Officer, Credo: Another risk-averse way of going to market would be to deploy 2 ports with 8 lanes of 100G. For us, that allows customers to manage deployment timing while preserving future upgrade paths. Not everything has to come at once. There’s a huge trade-off on overall supply chain as well as maturity as it relates to different connectivity products. For our perspective, we participate in both. We have strong positions on 100G per lane deployments today, and we can continue supplying that at very high volume. We are also invested heavily in 200G per lane. We’re ready to go from the standpoint of AECs and ZeroFlap Optics. Now, as it relates to optical DSPs, yes, we’ve got several customer engagements. From a cycle pick perspective, same thing. We don’t ultimately control the outcome of when those transceivers go to market.

Dan Fleming, Chief Financial Officer, Credo: It’s hard to talk about the precise timing of the transition, but we’re bullish on the long-term opportunity, whether it’s 800G or 1.6T. The dynamics as we go to 1.6T, as we’ve talked about, is as the rest of the industry will experience an uplift in ASPs. Hopefully that answers your question. If I could just summarize at a high level, I think our fiscal 2027 will have relatively light revenue as it relates to 200G per lane, and that is just a function of the fact that the industry hasn’t seemed to get there quite yet. There’s always a rumor about delays. If we are going to make a shift and the industry is ready, we’re ready right now.

Bill Brennan, Chief Executive Officer, Credo: We’re absolutely confirmed from the standpoint of being ready for production on all of our copper as well as optical system-level products, as well as component-level products.

Operator: Your next question comes from the line of Janco Venter with Arete Research. Your line is now open. Please go ahead.

Janco Venter, Analyst, Arete Research: Hi, gents. Thanks for taking my question. You’re very well capitalized right now, as you presented in the prepared remarks. You’ve undergone strategic investments with DustPhotonics. You’ve added Cypher to the portfolio. It’s being integrated into your ZF Optics portfolio, as well as being a standalone opportunity, which you’re putting to work in the coming fiscal year. Can you perhaps help us understand how you’re thinking about putting the capital on the balance sheet to work, and how you will be approaching further strategic investments?

Dan Fleming, Chief Financial Officer, Credo: Yeah, let me first state that we have no current plans to raise any additional capital at this point, nor do we plan to do a share buyback. It goes without saying. One of our goals that we laid out in the past, particularly when we did an ATM a couple of quarters ago, is that we want to maximize our strategic flexibility for things such as now we’ve done three acquisitions. Just to note, the DustPhotonics acquisition closed last week, as I’m sure you saw. The net cash amount that you’ll see in Q1 that went out the door in Q1 was about $750 million. Of course, we ended Q4 with $1.4 billion in cash. That’s against the backdrop of being in a very strong cash flow position, where cash flow from operations is approaching $200 million per quarter now.

As we exit Q1, we’re very comfortable in our cash position, and we expect there will be times where there will be opportunistic acquisitions that we may entertain from this point forward. Nothing immediately that we’re looking at.

Operator: A reminder, if you would like to ask a question, please press star, then the number 1 on your telephone keypad. Our next question comes from the line of Tore Svanberg with Stifel. Your line is now open. Please go ahead.

Blayne Curtis, Analyst, Jefferies4: Yes, thank you. Just a follow-up, Bill. If you think about the three optical businesses in fiscal 2027, two of them, the PIC and the DSP, they’ve been ramping, but ramping over time, whereas ZeroFlap Optics obviously is more of a hockey stick ramp. At least that’s the way I would position it. When you think about Weaver and AEC starting to ramp in fiscal 2028, how should we think about those ramps in relation to the other three, just so we sort of get a feel for the trajectory of both those new product categories in fiscal 2028?

Bill Brennan, Chief Executive Officer, Credo: Sure. I will say that to give a little more color on your first question earlier, the ASPs on the discrete components, optical DSPs, and SiPho PICs, those ASPs are typically two-digit ASPs. On the ZeroFlap Optics, we’re going to see three-digit ASPs. I didn’t mean to be a bit elusive or not answer your question, but I think the math clearly says that as we ramp ZeroFlap Optics, that’s going to be clearly our largest revenue contributor for our optical portfolio. Just the potential there is great. What we’re delivering is a solution to network reliability, which is something that is absolutely higher and higher priority with the customers that we work with. Now, No, of course, I forgot the rest of the question. Fill me in.

Blayne Curtis, Analyst, Jefferies4: Yeah, Omni and AEC, how should we think about those ramps?

Bill Brennan, Chief Executive Officer, Credo: Oh, yes. Yeah, I got too focused on the near term. Sorry about that. Let me put things in perspective for AECs. That is a system-level pluggable product, just like an AEC or just like a ZF optic. What it does is it brings the same AEC dynamics of power efficiency, cost efficiency. It’s got a better form factor than AECs, and it’s got a much longer length. For certain customers, that’s going to be a really natural product to get from a design and beginning of production. The dynamic there can be very much similar to AECs and ZeroFlap Optics in the sense that we could see large revenue quickly. Now, as it relates to Weaver, let’s use our first customer, Positron, as an example. They are redefining memory attachment and bandwidth for inference. They’ve announced their first product with a total memory

A LPDDR size of 2 terabytes. That’s more than 10 times any other inference engine that’s been announced in the market. Game-changing from the standpoint of performance. If 2 terabytes are deployed, that requires many Weaver chips. What I’ve said in the past is that the revenue contribution per GPU can be between $2,000 and $3,000. You can see that product category will ramp very quickly as well, as we’ve got customers that go into volume with their inference GPUs that utilize that solution.

Blayne Curtis, Analyst, Jefferies4: Just the clar I needed. Thank you.

Operator: Your next question comes from the line of James Schneider with Goldman Sachs. Your line is now open. Please go ahead.

James Schneider, Analyst, Goldman Sachs: Good evening. Thanks for taking my question. Given the accelerating growth you expect sequentially in the back half of this year, presumably driven by the optical portfolio, can you talk about any kind of changes you’re expecting to see in terms of how your customers deploy AECs in the environments, or is that growth just going to remain very strong off of an elevated base? Thank you.

Bill Brennan, Chief Executive Officer, Credo: From the standpoint of, say, AEC customer diversity or growth, we’re definitely seeing that AEC adoption is broadening across the industry. We very much feel like we’re in the early innings or stages of penetration. We’re seeing a broad breadth of adoption. We’ve mentioned neo clouds as a new customer category. It’s really a perfect solution for those players that have architectures that will enable in-rack and multi-rack deployments. There is a trend towards more density, there is definitely a trend towards more neo clouds being able to use AECs. I think that as we talk about that category growing, I think we can definitely say neo clouds will be growing for the foreseeable future. Also, if we look at the hyperscalers, of course, we’ve mentioned we’re deployed and we’re high volume with five of six now.

I think that with all of them, we’ve still got the ability to penetrate further into their networks. I don’t think we can point to one where we’re fully deployed other than xAI. We see great growth opportunity for both hyperscalers and neo clouds. I think it’s really going to be a long-term growth that we expect. I don’t think it’s going to be as fast growth from a % standpoint as what we’re going to see in optical, but it’s going to be a continued growth driver for the company.

Operator: There are no further questions at this time. Mr. Brennan, I turn the call back over to you.

Bill Brennan, Chief Executive Officer, Credo: Thanks so much for the questions. I really appreciate the ongoing interest and support, and look forward to the next time we talk.

Operator: This concludes today’s conference call. You may now disconnect.