Credo Technology Group Holding Ltd. Q2 FY2025 earnings call

• Q2 was the most successful quarter to date with record revenue across three main product lines and an uptick in shipments marking revenue inflection. • Credo offers a suite of Ethernet connectivity solutions and is developing PCIe connectivity solutions. • AI cluster architectures' evolution creates opportunities for high-speed connectivity solutions, and Credo's AECs address link lapse, power, and cost management. • Participated in industry conferences to demonstrate solutions. • Strong execution in Q2 with record revenues, innovation, and increased customer traction.

In the second quarter, Credo generated revenue of $72 million. The three main product lines all marked record revenue. The AEC product line achieved another record quarter for revenue, driven by strong demand from top two customers and an emerging hyperscaler. The optical DSP business had record revenues fueled by 50-gig and 100-gig per lane solutions. The line card retimer business generated record quarterly revenue driven by 400-gig and 800-gig applications. Revenue contribution details: AEC, optical DSP, and line card retimers each contributed to the overall revenue growth.

• Expect Q3 revenue to be between $115 million and $125 million, up 67% sequentially at midpoint. • Q3 non-GAAP gross margin expected to be within 61% to 63%. • Q3 non-GAAP operating expenses expected to be between $42 million and $44 million. • Double-digit sequential revenue growth from Q3 to Q4. • Anticipate year-over-year revenue growth of 100% or more from FY '24 to FY '25. • Non-GAAP operating expenses to grow at less than half the rate of revenue from FY '24 to FY '25.

• Forward-looking statements are subject to risks and uncertainties discussed in SEC filings. • Uncertainties in supply chain visibility and geopolitical climate impacts on inventory and business operations.

Q: Toshiya Hari asked about the significant upside in Q3, driving factors.

A: Bill Brennan said in the last 90 days, a couple of projects came together with stronger forecasts than expected, especially with AEC products, and healthy design activity across products.

Q: Thomas O'Malley asked about splitting out growth drivers.

A: Bill Brennan said growth driven by all product lines, with AECs being the largest market, optical DSP as second largest, and copper solutions also contributing, with great design activity across all.

Q: Quinn Bolton asked about AEC attach ratio and growth confidence.

A: Bill Brennan said seeing different architectures, trend towards higher AEC per GPU ratio, but growth confidence based on great design and qualification activity across products.

Q: Tore Svanberg asked about inventory visibility.

A: Bill Brennan said they have good view into actual deployments and consumption, with high consumption rate currently, but constantly looking for better supply chain visibility.

Q: Vivek Arya asked about 10% customers and demand growth.

A: Dan Fleming said three 10% customers, including Microsoft, a hyperscaler with a warrant, and an emerging hyperscaler, with revenue diversification from customer and product perspectives.

Q: Suji Desilva asked about hyperscale customer penetration breadth.

A: Bill Brennan said seeing design activity with multiple customers, focusing on U.S. hyperscalers and emerging ones, with progress in working with several customers.

Q: Vijay Rakesh asked about AEC revenue to AI servers and new 10% customers in 2025.

A: Bill Brennan said large majority of AEC shipments to AI applications; Dan Fleming said no additional 10% customers expected in 2025 calendar year.

Q: Joshua Buchalter asked about optical DSP go-to-market and competitive position.

A: Bill Brennan said near-term growth driven by 50-gig and 100-gig per lane designs, 200-gig per lane optical DSPs to play out longer term.

Q: Karl Ackerman asked about licensing revenue contribution and customer breadth.

A: Bill Brennan said licensing revenue not expected to be over 10% in current quarter, and customers for greater than 5% revenue are broad-based across product lines.