Betting on AI, where the risk isn't the technology but a handful of customers
Revenues of one American tech firm rose by more than two hundred percent year-over-year to $1.3 billion, and net profit increased ninefold. The company has virtually no debt and holds over $1.4 billion in cash. Yet its stock has lost almost a third of its value over a few weeks and has yet to fully recover from that drop.
Key points
Revenues tripled in one year. Credo closed fiscal 2026 with $1.34 billion in revenue and an accounting profit of $472 million, up from $52 million a year earlier, while gross margin rose to 68 percent.
Customer concentration is decreasing, but won't disappear. The share of the largest customer fell from 61 to 34 percent over the year, but four customers still account for 87 percent of quarterly revenue, and there are only a handful of firms building large AI clusters worldwide.
Momentum is breaking sooner than the annual figures suggest. Quarter-on-quarter growth dropped from 51.9 to 7.4 percent, and management expects revenue growth of over 80 percent for fiscal 2027, less than half the rate of the just-closed year.
Optics is the main task for the coming year. After acquiring Israeli DustPhotonics for roughly $1.3 billion, the optical portfolio is expected to contribute over $600 million, about a quarter of planned revenues.
Valuation leaves no room for error. The stock trades at about 94 times accounting earnings; banks' price targets range from $250 to $350, and four top executives sold shares during a six-week window around the all-time high in the stock price.
The explanation is simple — but uncomfortable. Ten customers account for about ninety percent of revenues, and the two largest have driven most of the turnover in recent quarters. When such a concentrated business faces a wave of insider stock sales by management and a broader sell-off in risky tech names, it takes very little to shake the stock price far more than the revenues.
The company doesn't make anything a regular consumer would see or read about. It makes cables and chips that connect servers inside AI data centers so that hundreds of graphics cards can exchange data fast enough without wasting electricity.
We're talking about Credo Technology Group, $CRDO. Since its IPO in 2022, it has evolved from a marginal supplier into a key component provider for the world's largest AI infrastructure operators. The stock currently trades around $236, with a market cap of roughly $44 billion.
SerDes and DSP: the building blocks of Credo's four product lines
The company's entire offering rests on two technologies: SerDes (serializer/deserializer, a circuit converting parallel data streams to serial and back) and DSP, digital signal processing. From these building blocks, Credo assembles its portfolio: integrated circuits for optical and line cards (retimers and DSP for Ethernet and PCIe), active electrical cables under the ZeroFlap brand, SerDes chiplets, and OmniConnect memory solutions. Additionally, the company licenses its SerDes IP to other manufacturers, though this remains marginal: according to the quarterly report, licensing fees represented only 2.5 percent of revenue in the second quarter of fiscal 2026, with the rest coming from product sales.
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