Credo Technology Q4 Earnings Surge, Margins Slip

Credo Technology Group Holding Ltd (CRDO) reported Q4 earnings on June 1, 2026, with revenue rising 157.0% year over year to $437 million and a non-GAAP gross margin of 68.3%. Management guided to lower near-term margins, disclosed a CEO performance stock unit (PSU) plan, and shares fell after hours.

Quarter Results and Guidance

For the quarter ended May 2, 2026, Credo reported non-GAAP diluted earnings of $1.16 a share, exceeding consensus estimates near $1.02 to $1.03, and non-GAAP net income of $227 million. GAAP net income was $169 million, with GAAP diluted earnings of $0.88. Revenue rose 7.4% sequentially. Management said non-GAAP operating expenses were in line with or slightly better than guidance.

The accompanying Form 8-K summarized fiscal 2026 results, showing revenue of approximately $1.34 billion, more than triple the prior year. GAAP net income reached $472 million, and non-GAAP net income was $662 million. GAAP diluted earnings were $2.51, and non-GAAP diluted earnings were $3.46, with a non-GAAP operating margin of 47.8%. The balance sheet showed about $1.4 billion in cash and short-term investments, total assets near $2.3 billion, and liabilities around $232 million. Management attributed growth to strong demand for high-speed connectivity solutions in AI data centers and cloud infrastructure.

Margins and Outlook

GAAP gross margin for the quarter was 68.2%. Management said Q4 non-GAAP gross margin exceeded the high end of guidance but projected near-term normalization. For Q1 FY27, revenue guidance ranges from $465 million to $475 million, with non-GAAP gross margin expected between 64.0% and 66.0%. This implies sequential revenue growth of roughly 6% to 9%. Management described fiscal 2027 as another year of rapid growth driven by AI data-center demand and new design wins. Investors focused on the margin decline, and shares fell more than 12% in after-hours trading.

CEO PSU Award

A Form 8-K filed on June 1 disclosed a one-time, performance-based PSU award to CEO William Brennan for up to 1,437,000 ordinary shares. The award vests in six equal tranches of about 239,500 shares each, tied to revenue milestones from $2.5 billion to $7.5 billion and share-price hurdles ranging from $244.70 to $489.40. The performance period runs through June 30, 2031. The board described the grant as a special, long-term equity incentive aligned with its ambition to scale the business.

The combination of record results, explicit multi-year performance targets for senior leadership, and guidance for lower near-term margins highlights a trade-off between sustained AI-driven revenue growth and maintaining elevated profitability. Competition and customer concentration remain key risks to this balance.