Credo Technology (NASDAQ:CRDO) showed off a new optical cable last week that is designed to use roughly 30% less power than comparable copper cables, the kind Credo sells today. It won’t ship until 2027, so for now it is a promise rather than revenue. That matters because copper is still doing most of the work. In its fiscal first quarter, Credo’s revenue reached $479.0 million, up 114.7% from a year earlier, and its filing says copper cables drove over 90% of that increase. So the real question is whether optics can grow into a second engine before copper’s pace cools.
The company sells the cables and chips that move data between servers inside AI data centers, largely to giant cloud companies and newer AI cloud operators. Its copper cables carry built-in chips that keep signals clean over short distances. Optics looks like a credible second engine, but the stock’s price depends on it arriving on schedule. Investors who want more AI infrastructure stocks can find Credo in our recent list 10 Best Future Stocks to Buy for the Next 5 Years.
Optics Is Where Credo Is Building Next
To get there, Credo is paying real money. It bought DustPhotonics, which makes chips that turn electrical signals into light inside optical transceivers, for total consideration of $1.3 billion. The company says the goal is a full set of its own parts, from signal chips to finished systems.
Owning those parts matters because copper only reaches so far. The new light cable is aimed at mid-length links, which fills the gap between short copper runs and the higher power and cost of traditional optical modules. Credo’s gross margin was 67.04% over the past 12 months, which points to real pricing power, and revenue grew about 86.8% a year over the past five years. If you’re looking for more ways into the optical theme, check out 10 Best Fiber Optics Stocks to Buy for the AI Data Center Boom.
A Handful of Customers Drive the Sales
Customer concentration is the clearest risk, because Credo’s filing shows its largest end customer took 33% of revenue in the fiscal first quarter and the second largest took 28%. A year earlier, the top two took 35% and 33%. Credo is also spending ahead of demand, since inventory rose to $313.1 million to support backlog and new product ramps. It has agreed to pay more refundable deposits to reserve manufacturing capacity, so a pause from one large buyer would show up quickly in both sales and inventory.
That risk caps the view without breaking it. The filing says Credo expects concentration to fall as more customers adopt its products, and the top two shares are already lower than a year ago. If you own the stock, though, you own a growth story that still rides on a few purchasing departments.
Investors Pay a Premium for Credo’s Earnings
The forward price-to-earnings ratio compares the share price with expected profit over the coming year, so a higher figure means investors pay more for each dollar of profit. Credo’s stands at 26.91 on forward adjusted earnings, against a sector median of 21.01, a premium to the typical technology company.
Its own five-year average is 138.27, though, and that history covers a time when Credo earned far less. A year earlier, adjusted earnings were $0.52 a share, against $1.20 in the latest quarter, while reported earnings were $0.67. The multiple also leans on adjusted figures, which leave out stock pay and acquisition costs.
Hedge funds, the professionally managed pools that research stocks full time, add context. Their count rose to 86 holders in the second quarter of 2026 from 59 in the first quarter, so more managers chose to own the growth story. Filings arrive with a delay, so that shows where funds stood then, not today. For investors looking to follow that money, our list of 10 Best Fast Growth Stocks to Buy According to Hedge Funds is worth a look.
Short interest stands at 6.73% of the float, the shares available for public trading. Short sellers borrow shares, sell them, and hope to repurchase them at a lower price, so that figure shows how much of the tradable stock is wagered on a fall. It is a small minority, though it shows some investors expect growth to fall short.
Last week’s cable shows where management wants to take the business, and the filing shows how far copper has carried it so far. Optics looks like a credible second engine, though both the price and the short bets assume it arrives on time. The next report covers the quarter that ends this month. It will show whether revenue lands inside the guided $525 million to $535 million range and whether optical products start to appear.
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This article is originally published at Insider Monkey.
