"In the third quarter Credo once again delivered record results with revenue of $407.0 million, an increase of more than 50% sequentially and 200% year over year. But buried in the guidance was a detail that gave investors pause. Q4 gross margin guidance came in at 64% to 66%, down from 68.6% in Q3, as newer product lines like ZeroFlap optics and Active Line Cards ramp with lower initial margins."
"Yesterday's euphoria has flipped into aggressive profit-taking. None of the three companies have released negative news today. This is the market doing what it does: run it up, then ring the register. Context matters here. CRDO is still up 93% over the past 12 months, even after today's beating."
"Investors are rotating into stocks in the optics space because of trends like co-packaged optics (CPO). Credo may be guiding to 50%+ revenue growth in 2027, but investors fear the company's AEC stronghold (build on copper cables) may have a tenuous future."
Credo Technology, Lumentum, and Applied Optoelectronics declined 15%, 11%, and 7% respectively on March 3rd following a sector-wide surge driven by NVIDIA's $4 billion investment announcement. Credo reported exceptional earnings with $407.01 million revenue, up 201.5% year-over-year, and non-GAAP EPS of $1.07 versus $0.94 estimate. However, Q4 gross margin guidance of 64-66%, down from 68.6% in Q3, spooked investors as newer product lines ramp with lower margins. The selloff reflects typical market behavior of profit-taking after significant gains. Despite today's decline, these stocks remain substantially higher over the past year, with LITE up 957% and AAOI up 438%.
Read at 24/7 Wall St.
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