What Has The Market Missed In Credo Technology Stock’s Drop?

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Optical products are Credo Technology’s (CRDO) fastest-growing business. Short cables known as AECs remain the company’s largest business. Yet the stock fell 24.9% between July 22 and October 20, 2026, while the S&P 500 gained 3.1%. So how big is Credo’s optical business set to become?

Credo Expects Optical Revenue Above $600 Million

Management said on a September 1, 2026 call that it expects more than $600 million in optical revenue during fiscal 2027. Executives expect growth to pick up in the second half of the year on the back of that business.

The optical target is spread across three product lines: zero-flap optics, silicon-photonics PICs and optical DSPs. Management expects each to contribute more than $100 million. That ramp has started. Credo’s optical DSP business delivered record revenue in fiscal Q1 2027, and the company recognized its first silicon photonics PIC revenue following its Dust Photonics acquisition. Management says optical is now its fastest-growing business, so Credo’s growth comes from more than its cables.

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Credo Stock Is Priced For Growth That Has Slowed

Credo stock trades at 59.3 times its earnings over the last four quarters, compared with 23.0 for the S&P 500. Buyers at that price are paying for fast growth, yet Credo’s revenue grew 114.7% from a year earlier in fiscal Q1 2027, down from 273.6% in fiscal Q1 2026. Profit on each dollar of sales has also slipped. The company posted a 25.2% operating margin in fiscal Q1 2027, down from 35.7% in fiscal Q4 2026.

Management points to the optical ramp in response. The company expects revenue of $525 million to $535 million in fiscal Q2 2027, compared with $479 million in fiscal Q1. Executives expect full-year revenue growth of more than 85%, with optics behind the second-half step up.

Not every doubt is settled. Credo was asked on the same call whether a target built mostly on optics implies slower growth for AECs, its largest business. Management said AECs will keep growing, but conceded that their growth is slower overall, since optics is growing faster from a smaller base. For now, though, the optical ramp is the main reason the company gives for faster growth.

What Could Go Wrong For A Credo Holder?

Credo depends on a small number of customers. Management said on the September 1 call that the company’s largest customer accounted for 33% of fiscal Q1 2027 revenue and its second largest for 28%, so a pause at either one would show up quickly in sales.

Tariffs present another risk. Management said its guidance is based on the current tariff regime, which remains fluid. Credo stock fell 54.0% during the 2025 US tariff shock, compared with 19.0% for the S&P 500.

Within the optical business, much rides on timing: management expects its first 1.6T DSP revenue only later in fiscal 2027. Optical revenue is the number to watch in the company’s next report, expected on or around November 30, 2026.

Is Too Much Of Your Wealth Riding On One Stock?

A stock like Credo Technology can look very different depending on which part of the business you watch. When one position grows into a large part of your wealth, a sharp fall can hurt your whole plan, and selling to spread the money out can bring a large tax bill. Our partner advisory firm offers a free strategy review of ways to protect a concentrated position and unwind it with less tax.

Request A Free Strategy Review

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