Credo Technology Group (CRDO) Mizuho Technology Conference 2024 summary

Industry trends and market evolution

• Exponential growth in data center bandwidth driven by generative AI is increasing demand for high-speed connectivity solutions, especially Ethernet-based architectures.

• AI clusters require significantly more connections per rack, with back-end networks now reaching up to 200 connections per rack as next-gen GPUs emerge.

• Hyperscalers are shifting long-term to Ethernet protocols for AI infrastructure, with InfiniBand used mainly in bundled GPU clusters.

• Power consumption and signal integrity are critical challenges as speeds move from 100G to 200G per lane, driving innovation in connectivity products.

• Edge AI and consumer device connectivity are emerging opportunities, with new USB protocols and SerDes technology targeting low-power, high-speed applications.

Product innovation and adoption

• Active electrical cables (AECs) have become the de facto standard for rack-scale connections at 100 Gbps per lane, offering lower power, cost, and higher reliability than optical solutions.

• Engagements with all five major hyperscalers are underway, with production already started for two and additional customers in the pipeline.

• Optical DSP innovation includes the Linear Receive Optics (LRO) product, which reduces module power from 15W to 10W by using a single DSP per connection.

• Next-generation DSPs for 1.6T ports are being developed on 3nm process nodes to further reduce power, targeting 10W or below, with LRO versions aiming for 5W.

• The company is also advancing PCIe Gen 6 and next-gen USB IP, with expected integration into consumer and edge AI devices.

Financial outlook and revenue drivers

• Optical products are targeted to reach 10% of revenue in fiscal 2025, with significant margin accretion expected as optical ramps up through fiscal 2026.

• Gross margin guidance for fiscal 2025 is 61%-63%, similar to the prior year, with long-term targets of 62%-65% as optical and IP revenue grow.

• 75% of Q4 fiscal 2024 revenue was AI-related, driven by hyperscaler deployments and chiplet sales for AI supercomputers.

• Revenue is expected to double year-over-year, with the ramp of a second AEC hyperscaler and increased front-end network cable volumes as key drivers.

• Top three customers accounted for 26%, 20%, and 15-16% of revenue in fiscal 2024, with long-term concentration expected among the five major hyperscalers.