Credo Stock Surges After Earnings. Why It’s a Red-Hot AI Play.

Credo stock is up more than 150% this year heading into Tuesday’s trading. (Dreamstime)

Key Points

• Credo’s stock rose 17.5% to $201.06, bringing its year-to-date gain to over 200% following strong earnings.
• The company reported adjusted earnings per share of 67 cents and revenue of $268 million, exceeding analyst estimates.
• Credo forecasts current quarter revenue between $335 million and $345 million, surpassing Wall Street expectations of $331 million.

Credo stock jumped in Tuesday as the company’s earnings gave investors further reason to believe in its growth story and continue its impressive rally.

Shares in the company, which makes high-speed connections used in artificial intelligence data centers, rose 17.5% to $201.06 in early trading and are now up more than 200% so far this year.

The latest catalyst pushing the stock higher was its quarterly earnings result released late Monday. The company swung to a profit in the last quarter with revenue more than tripling, beating Wall Street’s expectations for its performance.

Credo reported adjusted earnings per share of 67 cents, ahead of analysts’ estimates of 49 cents per share, according to a FactSet survey. Revenue grew 272% year-over-year to $268 million, also topping expectations of $235 million.

It now expects revenue of between $335 million and $345 million in the current quarter, ahead of Wall Street expectations of $331 million.

“These are the strongest quarterly results in Credo’s history, and they reflect the continued build-out of the world’s largest AI training and inference clusters,” the company’s CEO Bill Brennan said.

The earnings report has been well-received on Wall Street.

Susquehanna analyst Christopher Rolland described it as “another blowout quarter,” hiking his price target to $230 from $175—that implies a 34% jump from Monday’s closing price.

“This was another remarkable report from Credo as the beat and raise was far larger than we anticipated,” he said.

Stifel Research analyst Tore Svanberg maintained a Buy rating on the stock with a $225 price target, implying 31% upside from Monday’s closing price.

“While recent weeks have presented investor skepticism around the sustainability of AI spend and elevated valuation levels, we continue to believe that the proliferation of rack level AI infrastructure is still in its early innings,” he said.

“Further, we believe networking is the most important part of this market, and we view Credo as a clear leader in multiple subsegments of this market,” Svanberg added.

Write to Callum Keown at callum.keown@barrons.com