Credo Technology Group (CRDO) Q1 2025 earnings summary

Executive summary

• Q1 FY25 revenue reached $59.7M, up 70% year-over-year, with record product revenue of $57.3M, driven by strong AEC adoption and AI infrastructure demand, including ramping at a second hyperscale data center customer.

• Net loss narrowed to $9.5M from $11.7M in the prior year quarter, reflecting improved gross margin and higher scale; non-GAAP net income was $7.0M.

• Product and engineering services comprised 96% of revenue, with IP license revenue at 4%, below the long-term 10%-15% target.

• Customer concentration remains high, with the top two customers accounting for 62% of revenue, but diversification is expected as adoption grows.

• Company is expanding into new markets, including PCIe Gen 6 retimers and AECs for higher port speeds, and expects continued momentum in optical and Line Card PHY segments.

Financial highlights

• Q1 revenue: $59.7M (up 70% YoY, down 2% QoQ); product revenue: $57.3M (up 77% YoY, up 30% QoQ); IP revenue: $2.4M (down 14% YoY, 4% of total).

• Non-GAAP gross margin: 62.9% (up from 59.8% YoY); GAAP gross margin: 62.4%; product non-GAAP gross margin: 61.5% (up 784 bps QoQ, up 472 bps YoY).

• Non-GAAP operating income: $2.2M (3.7% margin); non-GAAP net income: $7.0M; GAAP net loss: $9.5M.

• Free cash flow: -$13.1M; cash and equivalents: $398.6M (down $11.4M QoQ); inventory: $31.6M (up $5.7M QoQ); working capital: $472.9M.

• Operating expenses increased 56% to $51.7M, driven by higher R&D and SG&A, including share-based compensation.

Outlook and guidance

• Q2 FY25 revenue expected between $65M and $68M (up 11% sequentially at midpoint).

• Q2 non-GAAP gross margin guided at 62%-64%; non-GAAP OpEx expected at $36M-$38M.

• Sequential growth expected to accelerate in the second half of FY25, with OpEx growth at half the rate of revenue.

• Management expects continued high customer concentration but anticipates diversification as adoption grows.

• Existing cash and working capital are expected to be sufficient for at least the next 12 months.