Credo Technology Group soared on its fiscal second-quarter quarter earnings report and strong guidance as the company adds new cloud computing customers. Credo stock won a double upgrade from Bank of America.
On the stock market today, Credo stock surged 33% to 63.77. Heading into the Credo earnings report, shares had advanced 145% in 2024. IBD profiled Credo as a New America feature in June.
In the October quarter, Credo said it earned 7 cents on an adjusted basis, up 600% from a year earlier. Revenue rose 64% to $72 million.
For the current quarter ending in January, Redo forecast revenue of $120 million, blasting past estimates of $85 million.
Credo Stock: Revenue Inflection
"For the past few quarters, we have anticipated an inflection point in our revenues during the second half of fiscal 2025," said Chief Executive Bill Brennan, in the earnings release. "I am pleased to share that this turning point has arrived, and we are experiencing even greater demand than initially projected, driven by artificial intelligence deployments and deepening customer relationships."
Amid the strong guidance, Bank of America on Tuesday double upgraded Credo stock to buy from under-perform. Also, Barclays analyst Tom O'Malley hiked his price target on Credo stock to 80 from 32.
Computer servers in data centers equipped with artificial intelligence chips need connections to network infrastructure. Credo's products speed up communications among racks of computer servers and storage devices packed into data centers.
Among its products are active electrical cables. AECs connect computer servers to networking equipment such as switches or routers. Further, Credo makes both AEC chips and cabling.
Amazon New Credo Customers
Credo's biggest customer for AECs has been Microsoft. Some analysts have expected Amazon.com to join Microsoft as a top customer for AECs.
"Credo's outlook suggests the start of a multi-year adoption cycle for its AEC product that enables power efficient AI clusters," said BofA analyst Vivek Arya in a report. "Our prior cautious view was based on limited TAM (total addressable market) assumptions for AEC, but Credo's earnings call addressed those concerns nicely, with three 10% customers (Microsoft, Amazon, Tesla)."
At Mizuho Securities, analyst Gregg Moskowitz said in a report that Oracle is also a new customer.
"Credo is significantly expanding AEC capacity into 2025, adding new production in Malaysia," Moskowitz said in a report. "But we believe it could further expand its supply chain and AEC production capacity by 50% to 100% as demand remains strong with AI server ramps."
In the AEC chip market, rivals include Marvell Technologies, Broadcom and Astera Labs.
Meanwhile, the Relative Strength Rating of Credo stock is 97 out of a best-possible 99, according to IBD Stock Checkup. The best stocks tend to have an RS rating of 80 or better.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
