TLDR
- Credo Technology stock dropped over 8% in premarket trading after reporting Q1 FY2027 earnings Tuesday evening.
- Adjusted EPS came in at $1.20, beating the $1.17 estimate; revenue hit $479 million, topping the $473 million consensus.
- GAAP gross margin fell to 64.5% from 68.2% the prior quarter, alarming investors expecting margin expansion.
- Q2 revenue guidance of $525 million to $535 million was viewed as thinner than previous quarters.
- The stock had rallied roughly 43.6% year-to-date through Tuesday, leaving it exposed to profit-taking.
Credo Technology stock was down more than 8% in premarket trading Wednesday, hitting $191.37, after the company posted earnings that beat Wall Street estimates but fell short of the bar investors had set.
Credo Technology Group Holding Ltd, CRDO
The company reported Q1 FY2027 revenue of $479 million, above the analyst estimate of around $471.8 million. Adjusted earnings came in at $1.20 per share, topping the $1.17 consensus.
Revenue was up 10% from the prior quarter and 115% year-over-year. On the surface, those numbers look strong.
But the market focused on something else entirely: margins.
CREDO $CRDO Q1’27 EARNINGS HIGHLIGHTS
🔹 Revenue: $479.0M (Est. $472M) 🟢; +114.7% YoY
🔹 Adj. EPS: $1.20 (Est. $1.17) 🟢
🔹 Non-GAAP Gross Margin: 68.0%
🔹 Non-GAAP Net Income: $236.3M (Est. $230M) 🟢; +140% YoYQ2 Guide:
🔹 Revenue: $525M-$535M (Est. $516M) 🟢
🔹 Non-GAAP… pic.twitter.com/Bf5od4iO8r— Wall St Engine (@wallstengine) September 1, 2026
GAAP gross margin dropped to 64.5% from 68.2% in the previous quarter. That compression, combined with guidance that points to a further step-down, was enough to trigger selling.
Mizuho analyst Jordan Klein described the results as “solid and good,” but noted the revenue beat and forward guidance “seems a bit skinnier” than what investors have come to expect from Credo in recent quarters.
Q2 Guidance Falls Flat
For the fiscal second quarter ending in October, Credo guided revenue of between $525 million and $535 million. While that represents continued growth, traders wanted more after a year in which the stock had run nearly 44%.
When a stock prices in perfection, a solid quarter is not always enough.
The broader market did little to help. The S&P 500 was flat, the Dow was fractionally higher, and the Nasdaq edged lower, giving Credo no sector tailwind to lean on.
Long-Term Picture Stays Intact
Credo is targeting more than $600 million in total optical revenue for fiscal 2027, with its ZeroFlap Optics, silicon photonics PICs, and optical DSPs each expected to contribute over $100 million. Full-year revenue growth is guided above 85%.
Of the 19 analysts covering CRDO, the average rating remains “Strong Buy” with a consensus 12-month price target of $283.23. That suggests the analyst community sees Tuesday’s pullback as a reaction to short-term margin pressure rather than any fundamental problem with the business.
Credo’s copper active electrical cables connect AI servers to networking switches. The chips embedded in the cables boost signal strength, reducing copper usage and energy consumption compared to optical cables.
The stock had gained roughly 43.6% year-to-date through Tuesday’s close, which left it vulnerable when the results landed with any hint of disappointment.
The average 12-month price target from analysts stands at $283.23, with a “Strong Buy” consensus across 19 covering analysts.
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