Credo Technology Falls 15% on Q4 Margin Guidance Cut to 64–66%
Credo Technology shares fell 15% after management cut Q4 gross margin guidance to 64–66% from 68.6% despite Q3 revenue of $407.0 million (+201.5% YoY) and non-GAAP EPS of $1.07. The optics sector saw profit-taking following a surge driven by NVIDIA’s $4 billion Coherent investment.
1. Q3 Earnings Beat with Record Revenue and EPS
Credo Technology reported Q3 revenue of $407.0 million, up 201.5% year-over-year, surpassing the $387.6 million consensus by 5% and delivered non-GAAP EPS of $1.07 versus estimates of $0.94.
2. Q4 Gross Margin Guidance Reduction
Management guided Q4 gross margins down to 64–66% from 68.6%, citing the ramp of newer product lines such as ZeroFlap optics and Active Line Cards with lower initial margins.
3. Optics Sector Profit-Taking Pressures Shares
After a sector surge driven by NVIDIA’s $4 billion investment in Coherent, investors initiated profit-taking across photonics stocks, pushing Credo shares down 15%, Lumentum off 11% and Applied Optoelectronics down 7%.
4. Outlook and Growth Drivers
Credo anticipates over 50% revenue growth in 2027 driven by co-packaged optics trends, but investors remain cautious about the long-term mix shift from copper-based AEC connections and margin expansion timing.