Credo Technology (CRDO)2024-12-03 01:35Financial Data and Key Metrics Changes - Credo generated revenue of 8.3 million in Q2, compared to 12.3 million, up from 10.3 million, with a decrease in cash and equivalents to 69.1 million in revenue for Q2, up 21% sequentially and 88% year-over-year [28] - AEC product line achieved record revenue driven by strong demand from top customers [14] - Optical DSP revenues also reached record levels, fueled by 50-gig and 100-gig per lane solutions [19][20] - Line card retimer business generated record revenue driven by 400-gig and 800-gig applications [24] Market Data and Key Metrics Changes - The company anticipates continued growth in the AEC market, driven by AI deployments and increasing customer relationships [27] - The optical DSP market is expected to present significant long-term growth opportunities, particularly with the introduction of 200-gig per lane solutions [22][20] - The company expects Q3 revenue to be between 125 million, indicating a strong market demand [35] Company Strategy and Development Direction - Credo is focused on delivering innovative Ethernet connectivity solutions and is well-positioned as a market leader in AECs [15][9] - The company aims to maintain a non-GAAP gross margin of 63% to 65% and an operating margin of 30% to 35% in the long term [31] - Credo is actively pursuing opportunities in the PCIe market, with plans to sample PCIe products to customers in calendar '25 [26] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the anticipated revenue inflection point in the second half of fiscal '25, with greater momentum than initially projected [27] - The company is seeing healthy design activity across several customers and expects continued growth over time [42] - Management noted that the competitive landscape for AECs remains stable, with a focus on delivering unique, differentiated products [46] Other Important Information - The company reported a significant increase in customer diversification, with seven end customers contributing more than 5% of revenue in Q2 [31] - The company is well-capitalized to continue investing in growth opportunities while maintaining a substantial cash buffer [34] Q&A Session Summary Question: What is driving the significant upside in Q3 guidance? - Management indicated that stronger project forecasts and increased visibility into customer programs contributed to the upside [41] Question: How is the competitive landscape for AECs evolving? - Management noted that while competition exists, the market is large enough to support multiple players, and Credo aims to be first in delivering unique products [46][47] Question: What are the growth drivers for fiscal '26? - Management expects AECs to be the main driver, with optical DSP and line card retimers also contributing to growth [58] Question: How does the company view inventory levels amid growth? - Management stated that there is a high consumption rate among customers, with no significant inventory build observed [80] Question: What percentage of AEC revenues is related to AI applications? - Management confirmed that the large majority of AEC shipments are based on AI applications [112] Question: How many customers are engaged in the Optical DSP side? - Management indicated that there is broader design activity at the optical module level, with increased activity from end customers for qualifications [118]