Credo's Optical Inflection: From Copper Champion to Photonics Powerhouse
With Dust Photonics closed and a >$600M optical revenue guide for FY27, Credo is pivoting its growth engine from AECs to a diversified optical portfolio.
CRDO · Earnings Call · 2026-06-01
The Optical Inflection
Fiscal 26 was another defining year for Credo, with revenue exceeding $1.3 billion, tripling year over year, and non-GAAP net income increasing over 5x to $662 million. The fourth quarter alone generated $437 million in revenue, up 157% YoY, exceeding the entire fiscal 25 revenue. But the real headline is the company's confident pivot to optical.
We believe fiscal 27 represents an inflection point for Credo's optical business.
The acquisition of Dust Photonics, which closed last week, brings silicon photonics PIC technology, and Credo now expects its optical portfolio—comprising optical DSPs, silicon photonics PICs, and ZeroFlap optics—to collectively contribute more than $600 million in fiscal 27 revenue, with each leg exceeding $100 million. CFO Daniel Fleming noted: “About half of that growth in absolute dollars is coming from our optical portfolio.” — Daniel Fleming · 2026-06-01 This is a marked shift from the historical AEC-centric growth. In the Q&A, Bill Brennan gave a long-term vision: “I think that eventually, we could see optical and copper products in our portfolio. Eventually, we could get to 50 for sure.” — William J. Brennan · 2026-06-01
The company's own keyword trajectory shows silicon photonics surging to the top, alongside ZeroFlap optics platform and AI infrastructure engagements. The investment is clearly paying off.
From Copper to Photonics
Just a year ago, Credo was primarily an AEC company, with optical revenue representing a minor piece. The shift is dramatic. On the March call, when asked about ZeroFlap customers, Brennan said: “My expectation is that we'll run more than 4. We've got 4 in now.” — William Brennan, Chief Executive Officer · 2026-03-03 Back in fiscal 25, he was more muted on optical: “I think my belief is that over time, yes, we'll have 10% represented by optical, but I think that number will grow.” — Bill Brennan, Chief Executive Officer · 2025-06-02 Now the company is guiding to over $600M in optical revenue in a single year.
Bill Brennan also highlighted the emergence of the Neoclouds ecosystem as one of the biggest trends, and he expects these customers could collectively represent 20% of revenue over time. “This is 1 of the biggest trends that we are encouraged by.” — William J. Brennan · 2026-06-01
Financial Strength and Valuation
Credo's financials support the ambitious guidance. Total revenue hit $437M in Q4 FY26, up 157% YoY, with trend up-3y:+304% and up-1y:+444%. Gross margin remains robust at 68.2%, and operating margin expanded to 38.4%. Free cash flow generation is accelerating, with Q4 operating cash flow at $182M.
Despite the stock's 92.8% run in the last 90 days, it is still 23.8% below its June peak, suggesting the market is weighing the sustainability of the optical ramp. The supply chain, which Bill Brennan addressed at length, remains a key execution risk, but the company's deep relationships and commitment to owning the entire bill of materials give some confidence.
Credo's transition from copper to photonics is not just a product expansion—it is a strategic repositioning to capture the largest and fastest-growing segment of data center connectivity. If the optical ramp executes as guided, Credo's multiple will be re-rated on a much larger revenue base.