Last Update 18 Feb 26

Fair value Decreased 2.75%

CRDO: Future Returns Will Ride On AI Datacenter Connectivity Execution

The analyst price target for Credo Technology Group Holding has been reduced by about $6 to reflect updated fair value estimates, slightly adjusted discount rate assumptions, and revised expectations for revenue growth, profit margins, and future P/E multiples cited in recent research.

Analyst Commentary

Recent Street research on Credo Technology Group Holding has been mixed, with price target changes and a new neutral initiation pointing to both upside potential and execution risks. Here is how recent analyst commentary is framing the story.

Bullish Takeaways

Bullish analysts who raised their price targets see room for higher valuation multiples over time, tying this to updated fair value work rather than short term trading factors.
Positive commentary highlights long term growth potential that, in their view, could justify a higher forward P/E if management delivers on revenue and margin goals.
Supportive research points to improving confidence in the company’s ability to execute on its roadmap, which they see as important for sustaining premium valuation levels.
Some bulls interpret recent target increases as a sign that prior expectations may have been conservative relative to the company’s potential opportunities.

Bearish Takeaways

Bearish analysts who lowered their price targets are focused on reduced fair value estimates, suggesting that earlier assumptions for growth, profitability, or multiples were too optimistic.
The target cut reflects caution around revenue growth trajectories, with concern that execution against prior forecasts may prove challenging.
More cautious views also point to uncertainty around future profit margins, which could limit upside to earnings and justify more restrained valuation multiples.
The neutral initiation underscores that, while the story has appeal, current pricing may already reflect a meaningful portion of the growth case, leaving less room for error in execution.

What's in the News

Credo issued revenue guidance for the third quarter of fiscal 2026 in a range of $335.0 million to $345.0 million. (Company guidance)
The company later revised its third quarter fiscal 2026 revenue outlook to $404 million to $408 million, which is above the high end of its prior guidance range. (Company guidance)
Credo provided earnings guidance looking toward the end of fiscal 2026 and into fiscal 2027, indicating expectations for mid single digit sequential revenue growth and very large year over year revenue growth for the current fiscal year. (Company guidance)
The Toucan PCIe retimer earned PCI-SIG compliance at 32.0 GT/s, with validation at PCIe 5.0 speeds and positioning for PCIe 6.0 and future PCIe technology transitions in AI and high performance compute use cases. (Product announcement)
Credo introduced its Blue Heron 224G AI scale up retimer, designed for UALink, ESUN, and Ethernet protocols to support extended cable and backplane links in AI scale up platforms, using a 3nm process and 224G SerDes. (Product announcement)
The company entered a patent license and mutual covenant agreement with 3M Company and reached a separate license agreement with The Siemon Company, both related to Credo patents covering active electrical cable technology. (Client announcements)

Valuation Changes

Fair Value: trimmed from $214.27 to $208.38, a modest reduction of about 2.7% in the modelled estimate.
Discount Rate: adjusted slightly from 10.42% to 10.38%, reflecting only a small change in the required return assumption.
Revenue Growth: increased from 46.78% to 51.32%, indicating higher projected top line expansion in the updated work.
Profit Margin: raised from 34.86% to 35.55%, pointing to somewhat stronger expected profitability.
Future P/E: reduced from 72.65x to 62.01x, implying a lower assumed valuation multiple in the new framework.

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.

CRDO: Macro Headwinds And Customer Concentration Will Present Earnings Risks Ahead