Credo's Optical Bet: Is a $600M+ Revenue Opportunity Taking Shape?
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Credo's Optical Bet: Is a $600M+ Revenue Opportunity Taking Shape? Shreya Majumder Wed, September 2, 2026 at 8:40 AM EDT 3 min read CRDO MRVL ALAB Credo Technology Group Holding Ltd. CRDO recently generated $479 million in first-quarter fiscal 2027 revenue, up 9.6% sequentially and a massive 114.7% year over year. Management highlighted that its portfolio now spans connectivity from millimeters to kilometers, covering both optical and copper solutions. The potential opportunity is substantial because AI infrastructure is moving toward increasingly dense computing environments. Every additional generation of AI accelerators can require more bandwidth between systems, creating additional connectivity requirements. If the number of servers or accelerators grows at a moderate pace, the connectivity content per system can rise significantly. Credo's optical business is gaining momentum across optical DSPs, silicon photonics PICs and ZeroFlap optical transceivers. Optical DSP revenue hit a record in the fiscal first quarter, with strong demand for 50G and 100G-per-lane solutions. The optical business is expanding, with its system-level approach becoming increasingly important as AI networks shift to 1.6T and 3.2T solutions and scale-up architectures drive greater adoption of Near-Package Optics (NPO). Following the DustPhotonics acquisition, Credo also recognized its first silicon photonics PIC revenue, with 800G and 1.6T products expected to ramp throughout the year. The integrated DSP-PIC platform could improve reliability, power efficiency and diagnostics while positioning Credo for the shift toward near-package optics. It now expects an inflection in the second half of fiscal 2027, with optical revenue topping $600 million and ZeroFlap Optics, silicon photonics PICs and optical DSPs each contributing more than $100 million, driving over 85% full-year revenue growth. Management expects second-quarter revenue of $525-$535 million, implying the company continues to grow at an exceptional rate. Marvell Technology MRVL optical DSP, switching and broadband businesses remain strong, with 800G demand solid and 1.6T ramping rapidly, expected to accelerate in fiscal 2028. Customers are initially using copper for scale-up networks, but as AI clusters expand, copper's limited reach and bandwidth are pushing them toward optical interconnects and dedicated UALink, ESUN and NVLink switches. It is therefore investing heavily in next-generation optical interconnect and switching technologies. Marvell continues to see strong demand across optical DSPs, broadband analog, DCI modules and switching, with each tracking toward a $1 billion annualized revenue run rate. The scale-up opportunity remains large, with NPO, CPO and purpose-built switches supporting future growth. Astera Labs ALAB is benefiting from rising demand for high-speed connectivity as AI infrastructure shifts toward larger rack-scale systems. Taurus, CXL, UALink, optical and custom connectivity programs broaden the longer-term content opportunity. Management plans to deliver UALink-enabled Scorpio X-Series switches in 2027, alongside signal conditioning solutions for copper and optical links. Its optical roadmap targets high-density fiber attach and near-packaged optics production in 2027, followed by co-packaged optical engines in 2028 and beyond. Third-quarter revenue is expected to be $540-$560 million, implying roughly 40% sequential growth, driven by Scorpio X-Series, Aries PCIe 6 and Taurus 800G shipments. CRDO's shares have gained 43.6% year to date compared with the Electronics-Semiconductors industry's growth of 26.1%. In terms of the forward 12-month price/sales ratio, CRDO is trading at 14.24, higher than the Electronics-Semiconductors industry's multiple of 4.96. The Zacks Consensus Estimate for CRDO earnings for fiscal 2027 has been marginally revised upward over the past 60 days. CRDO currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 (Strong Buy) Rank stocks here. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Credo Technology Group Holding Ltd. (CRDO) : Free Stock Analysis Report Marvell Technology, Inc. (MRVL) : Free Stock Analysis Report Astera Labs, Inc. (ALAB) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com).
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