Last Update 14 Dec 25

Fair value Increased 32%

CRDO: Future Returns Will Depend On Expanding AI Datacenter Connectivity

Analysts have nudged their average price target on Credo Technology Group Holding higher to about $214 from roughly $163, citing stronger expected revenue growth, improving profit margins and sustained AI related demand that supports premium yet slightly compressed forward valuation multiples.

Analyst Commentary

Recent research updates underscore a broadly constructive stance on Credo Technology, with multiple bullish analysts lifting price targets while framing the stock as a key beneficiary of structural AI and data center connectivity trends.

Bullish Takeaways

Several bullish analysts have raised price targets into the $160 to $175 range, arguing that higher sector multiples are justified by improving growth visibility and Credo's expanding role in AI centric networking.
The deepening relationship with a major cloud and enterprise software provider is viewed as strengthening Credo's position in next generation AI infrastructure builds and potentially improving long term revenue durability.
Participation in key industry events and management meetings has reinforced confidence in execution, with investors pointing to strong engagement across ecosystem partners as a sign that Credo can continue to capture outsized share in high speed connectivity.
The acquisition of Hyperlume is seen as strategically accretive, broadening Credo's product portfolio toward rack level solutions at 800G and 1.6T speeds and supporting a premium valuation on future AI related growth.

Bearish Takeaways

Even supportive analysts caution that near term results for the broader semiconductor and connectivity group may be only modestly ahead of expectations, leaving less room for error in Credo's execution against elevated growth assumptions.
Concerns around Chinese electric vehicle production cuts and shifting tariff dynamics introduce macro and end market uncertainty, which could weigh on parts of the broader connectivity complex and investor risk appetite for high multiple names like Credo.
The move to higher valuation multiples across peers raises the bar for future performance, with bearish analysts focused on whether Credo can consistently deliver above seasonal results to sustain its premium pricing.
As the total addressable market for networking silicon expands rapidly toward the end of the decade, competition and potential pricing pressure remain key risks to long term margin and return on invested capital assumptions embedded in current targets.

What's in the News

Issued third quarter fiscal 2026 revenue guidance of $335 million to $345 million, signaling strong expected top line growth (Corporate Guidance)
Announced Weaver, a memory fanout gearbox and first product in the OmniConnect family, designed to overcome AI memory bottlenecks and slated for availability in the second half of 2026 (Product Announcement)
Introduced the ZeroFlap optical transceiver line for 400G, 800G, and 1.6T networks, aimed at eliminating optical link flaps and improving AI cluster stability, with sampling underway and broader ecosystem engagement via the Open Compute Project (Product Announcement)
Filed a $750 million at the market follow on equity offering of ordinary shares, expanding financial flexibility to fund growth initiatives (Follow on Equity Offering)
Launched 224G PAM4 SerDes IP on TSMC N3 technology to support 1.6Tbps connectivity for next generation AI and cloud deployments, reinforcing its position in high speed networking silicon (Product Announcement)

Valuation Changes

The fair value estimate has risen meaningfully to about $214 from roughly $163, reflecting stronger growth and margin assumptions.
The discount rate has inched higher to approximately 10.42 percent from about 10.37 percent, signaling a modest uptick in perceived risk or required return.
Revenue growth has increased notably to roughly 46.8 percent from about 39.3 percent, indicating higher expectations for top line expansion.
The net profit margin has improved to around 34.9 percent from roughly 31.8 percent, signaling better anticipated operating leverage and profitability.
The future P/E has declined to about 72.7 times from roughly 81.1 times, suggesting a slightly lower multiple despite higher earnings growth expectations.

Reliance on major cloud customers and pulled-forward AI demand introduces significant volatility and revenue concentration risk if hyperscaler spending slows.
High expectations for future growth could face pressure from slower protocol adoption, rising expenses, intensifying competition, and possible product commoditization.
Secular demand growth, product innovation, customer diversification, and strategic industry positioning give Credo the potential for lasting sales expansion, margin gains, and reduced risk.

Catalysts

About Credo Technology Group Holding

Provides various high-speed connectivity solutions for optical and electrical Ethernet, and PCIe applications in the United States, Taiwan, Mainland China, Hong Kong, and internationally.What are the underlying business or industry changes driving this perspective?

The massive surge in AI-driven infrastructure buildouts has already led to extraordinary top-line growth and high expectations for further hyperscaler investment, but the accelerated pace of current deployments could reflect pulled-forward demand, creating risk of decelerating revenue as hyperscaler CapEx normalizes.
Despite strong revenue diversification efforts, the business remains heavily reliant on a handful of large cloud customers, creating significant revenue concentration risk-if any key hyperscaler slows AEC or optical adoption, future revenue and earnings could become more volatile than presently modeled.
While anticipated multi-year architecture upgrades and the shift toward 200G SerDes, PCIe Gen 6/7, and 1.6T solutions suggest ongoing market expansion, these trends are well-known and already priced into high revenue and margin expectations-any delay in industry adoption cycles or slower-than-expected protocol transitions could negatively impact future top-line growth and net margins.
Exceptional profitability and scaling have benefited from strong operating leverage amid surging revenues; if top-line growth moderates but R&D and operating expenses remain elevated to support expanding product lines, net margins-and thus future earnings-may come under pressure.
The market may be too aggressively discounting continued industry-wide growth in high-speed data infrastructure, underestimating risks from increased competition, potential commoditization of AEC and optical solutions, and hyperscalers' long-term in-house development-factors that could compress future gross margins and limit sustainable earnings expansion.

Credo Technology Group Holding Earnings and Revenue Growth

Credo Technology Group Holding Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Credo Technology Group Holding's revenue will grow by 33.8% annually over the next 3 years.
Analysts assume that profit margins will increase from 11.9% today to 30.1% in 3 years time.
Analysts expect earnings to reach $314.5 million (and earnings per share of $1.75) by about September 2028, up from $52.2 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 88.2x on those 2028 earnings, down from 413.6x today. This future PE is greater than the current PE for the US Semiconductor industry at 30.1x.
Analysts expect the number of shares outstanding to grow by 3.36% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 10.06%, as per the Simply Wall St company report.

Credo Technology Group Holding Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Ongoing, long-term secular growth in global data traffic from AI, cloud, and IoT is expanding Credo's total addressable market, fueling sustained, robust demand for high-performance connectivity solutions and potentially supporting continued revenue growth over multiple years.
The industry-wide transition towards energy-efficient, high-speed interconnects (such as AECs) in data centers and hyperscale infrastructure aligns directly with Credo's product strengths and market leadership, positioning the company to benefit from secular shifts and improving operating leverage and net margins.
Credo's successful diversification of its customer base-moving from initial reliance on three customers to ramping revenue from a fourth and beginning engagement with a fifth hyperscaler-reduces revenue concentration risk and supports more stable, recurring sales that can bolster top-line revenue and profitability.
Strong company investments in proprietary SerDes, optical DSP, PCIe retimer, and system-level IP enable differentiated offerings, a competitive moat, and the potential to build licensing or royalty streams in addition to product sales, supporting higher gross and net margins long term.
Hyperscale and AI infrastructure build-outs in both intra-rack and (increasingly) rack-to-rack applications are still in the early stages, with numerous growth waves anticipated across protocols and architectures; Credo's early mover advantage and active collaborations with leading cloud and GPU providers increase the likelihood of sustained earnings expansion.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $109.5 for Credo Technology Group Holding based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $140.0, and the most bearish reporting a price target of just $72.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.0 billion, earnings will come to $314.5 million, and it would be trading on a PE ratio of 88.2x, assuming you use a discount rate of 10.1%.
Given the current share price of $124.77, the analyst price target of $109.5 is 13.9% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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