We came across a bullish thesis on Credo Technology Group Holding Ltd (CRDO) on Substack by Nikhs. In this article, we will summarize the bulls’ thesis on CRDO. Credo Technology Group Holding Ltd (CRDO)’s share was trading at $46.49 as of March 20th. CRDO’s forward P/E was 41.32 according to Yahoo Finance.
Credo Technology’s Q3 FY2025 earnings report highlights its transformation from a promising connectivity provider to a dominant force in AI infrastructure. The company reported revenue of $135 million, marking a 154% year-over-year increase and an 87% sequential surge, alongside a non-GAAP gross margin of 63.8% and an operating margin of 31.4%, up from 11.5% in Q2. CEO Bill Brennan called this an “inflection point,” exceeding even internal projections. The dramatic acceleration in revenue growth underscores a fundamental shift in the AI connectivity landscape, driven by the need for reliable, high-speed data transfer between GPUs in AI clusters. Traditional networking solutions struggle with failures like “link flaps,” which can halt AI workloads for 30 minutes, costing enterprises tens of thousands of dollars. Credo’s Active Electrical Cables (AECs) solve this issue, offering 100 times the reliability of laser-based optics and eliminating disruptions that compromise AI efficiency.
A key highlight of Q3 was the extreme customer concentration, with a single hyperscaler—widely believed to be Amazon—accounting for 86% of revenue. While typically a risk, in infrastructure markets, early adoption by an industry leader can catalyze broader adoption. Management expects greater customer diversification, with 3-4 clients exceeding 10% of revenue in upcoming quarters. Beyond components, Credo’s system-level approach—encompassing hardware, firmware, and manufacturing control—creates a defensible competitive moat, setting it apart from commoditized suppliers. This shift is evident in the company’s rhetoric, transitioning from anticipation of growth in Q1 to confidently declaring leadership in Q3. Looking forward, Credo projects $155-165 million in Q4 revenue and over 50% year-over-year growth into FY2026, signaling not a one-off spike but sustained momentum. The AI revolution has created infrastructure bottlenecks, and Credo’s solutions position it to capture outsize value in this transformation.
Credo Technology Group Holding Ltd (CRDO) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 43 hedge fund portfolios held CRDO at the end of the fourth quarter which was 30 in the previous quarter. While we acknowledge the risk and potential of CRDO as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CRDO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article was originally published at Insider Monkey.