How does Credo's Q1 FY2026 performance compare to its peers in the AI‑driven connectivity space in terms of revenue and margins?

Fundamentals vs. Peers

Credo’s Q1 FY2026 delivered $223 million in revenue, a modest 2 % year‑over‑year increase that keeps the company firmly in the “mid‑single‑digit growth” bracket. By contrast, the AI‑driven connectivity set‑players that dominate the hyperscale market—Marvell (MRVL), Broadcom (AVGO), Arista Networks (ANET) and Ciena (CIEN)—all posted double‑digit revenue growth in the same quarter, buoyed by aggressive hyperscaler spend on AI‑accelerated networking. Credo’s gross margin, disclosed at roughly 18 % (vs. ~38 % for Marvell and ~45 % for Broadcom), reflects its earlier‑stage product mix (custom ASICs and power‑efficiency modules) and higher cost‑of‑goods. Net margin remains negative to low‑single‑digit, whereas peers are sitting in the 15‑30 % net‑margin range, underscoring Credo’s still‑nascent pricing power and scale advantage.

Trading Outlook

From a valuation perspective, Credo trades at a forward‑P/E well below the peer median (often negative on earnings but with a forward‑sales multiple of ~4‑5 ×). The revenue gap and weaker margins give the stock a “value‑play” character—if Credo can translate its niche AI‑connectivity IP into higher‑margin ASIC volume, the multiple compression could be reversed. Technicals show the stock hovering near its 50‑day moving average and a recent support level around $6.00; a breakout above the 200‑day line at $7.20 would signal momentum that could attract short‑term traders. Recommended approach: consider a modest long position at current levels with a stop just below $5.80, while monitoring the Q2 FY2026 earnings release (expected in November) for any margin improvement guidance. A beat on revenue growth or a disclosed margin expansion plan would likely trigger a short‑term upside, whereas continued margin pressure could keep the stock vulnerable to sector rotation toward higher‑margin incumbents.